Federal Court Enters Judgment Against Former Hedge Fund Trader

A federal court has entered a final consent judgment against hedge fund trader Jeremy Shor of the now-defunct New York-based investment adviser Premium Point Investments. The case involved Premium Point fraudulently inflating the value of private funds it advised by hundreds of millions of dollars.

Under the judgment, Shor is ordered not to violate several sections of the Securities Exchange Act of 1934, Securities Act of 1933, and the Investment Advisers Act of 1940. He was not assessed any monetary penalties beyond restitution already completed in other proceedings.

According to the SEC’s complaint, filed in U.S. District Court for the Southern District of New York, Premium Point had a secret deal with “at least one friendly registered representative” at a brokerage firm to receive inflated broker quotes for mortgage-backed securities in exchange for sending trades to the broker/dealer. According to the regulator, Premium Point engaged in the plot in order to hide poor fund performance and attract and retain investors.

To value the securities in its portfolios, Premium Point used a price halfway between the bid price and the ask price, which it had disclosed to investors. However, “unbeknownst to at least most investors,” the SEC alleged Premium Point routinely derived, or “imputed,” the mid-point prices of securities, even when it could easily obtain a midpoint price from a broker.

The SEC further claimed that Premium Point took a bid price for a particular security and added half the spread between the bid and ask prices on a broad sector of securities—not the spread on that particular security—to “impute” a midpoint price for that security.

“The fraudulent valuation scheme resulted in Premium Point’s reporting inflated month-end net asset values and inflated month-end and annual performance for the funds to existing and potential investors,” according to the SEC complaint. “These inflated valuations enabled Premium Point to receive excess fees.”

According to the SEC, the scheme eventually collapsed because Premium Point had trouble meeting investors’ redemptions, as it was unable to sell securities in the funds’ portfolios at the inflated prices, and because the funds’ auditor had begun questioning those valuations. Premium Point later revised the valuation of the funds’ securities and determined that it had previously overvalued the funds. According to the SEC, based on the revised valuations, the firm had overvalued the funds by an average of more than 14% per month.

Shor and Premium Point co-founder Anilesh Ahuja were found guilty of conspiring to overvalue the hedge fund’s assets and were sentenced to prison in 2019, but both were later granted a new trial. That led to plea agreements in U.S. v. Ahuja et al. that did not include prison time or a fine, approved by U.S. District Judge Katherine Polk Failla in April 2022. Ahuja’s final consent judgment was entered in September 2022.