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Two From Westchester Among Four Charged With 'Cooking Books' For Hedge Fund

Manhattan Federal Court.
Manhattan Federal Court. Photo Credit: File

A pair of Westchester residents were among those charged in federal court to their roles in an alleged securities scam that saw them overstate their investment firm’s worth by hundreds of millions of dollars to bilk investors.

U.S. Attorney Audrey Strauss announced on Wednesday that White Plains resident Ashish Dole, 34, and Armonk resident Amin Majidi, 52, have been involved in an elaborate scheme that saw them mismark funds they managed by more than $200 million.

According to Strauss, Majidi, Dole and New York City residents Jeremy Shor and Frank Dinucci, Jr. from 2014 through 2016, they conspired to “commit securities fraud and wire fraud relating to the mismarking of certain securities held in hedge funds that the Firm managed, thus fraudulently inflating the net asset value of those funds as reported to investors and potential investors.”

At its peak, the mismarking of all the funds managed by their firm exceeded more than $200 million. Dole, a former chief risk officer and trader at the firm, and Dinucci have pleaded guilty and are working with the government, Strauss added.

“Investors rely on a hedge fund’s performance numbers when deciding whom to trust with their capital,” Strauss said in a statement. “To compete with other peer funds, Neil Ahuja, founder of an investment firm, allegedly manipulated the firm’s performance numbers, using fraudulently inflated values for the firm’s securities holdings and lying to investors about how the firm would mark its positions.

“By allegedly cooking the books, Ahuja and his co-defendants made the fund appear more attractive to would-be investors and dissuaded current investors from withdrawing their investments.  We will continue to work with our law enforcement and regulatory partners to ensure that investors are provided accurate information when making important investment decisions.”

Majidi, a former partner and portfolio manager at the firm, was arrested at his home in Armonk on Wednesday. The others were taken into arrested at their homes or surrendered themselves into custody. The SEC has also filed civil charges against Majidi.

The indictment states that the firm was started in 2008 by Ahuja, managing hedge funds focused on structured credit products, including residential mortgage-backed securities. At various times between 2008 and 2016, the firm managed billions of dollars in assets, more than $5 billion at its peak.

By overstating the firm’s net asset value, they were able to charge investors higher management and performance fees. The firm was also able to forestall redemptions by investors who would have requested a return of their funds if they knew the actual net asset value.

Strauss said that the scheme evolved as a result of demands by Ahuja and Majidi., set “an inflated ‘target’ return for the Hedge Fund at the end of each month, which was based in part on the performance of peer funds.”  As part of the scheme, Majidi allegedly frequently in the presence of Ahuja, directed the members of the trading desk, including Shore, Dole, and others, that the firm must meet its “target” performance number for the month.  The traders at the firm were then tasked with “reverse engineering” marks to meet the “targets,” according to the indictment.

Ahuja, Majidi and Shor were each charged with individual counts of conspiracy to commit securities fraud, conspiracy to commit wire fraud, securities fraud and wire fraud. They face decades in prison if convicted, and they may be subject to a $5 million fine.

Dinucci has pleaded guilty to individual counts of conspiracy to commit securities fraud and wire fraud, securities fraud, wire fraud and making false statements. Dole has pleaded guilty to counts of conspiracy to commit securities fraud and wire fraud and securities fraud. They also face a maximum fine of $5 million.

“The defendants’ alleged practice of intentionally misleading investors and mismarking securities held in the funds they managed allowed them to charge higher fees and hold captive money that would have likely been withdrawn had their clients been aware of the hedge fund’s actual value,” FBI Assistant Director William Sweeney, Jr. said in a statement. “Their initial success was based on self-imposed target returns, supported by reverse engineering tactics, but in the end, they missed their mark.”

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