Star witness in US hedge fund trial admits he stole from mum

[NEW YORK] The star prosecution witness in the alleged fraud at Premium Point Investments described in US federal court how he helped the now-defunct hedge fund overvalue its assets with false bond valuations every month.

But first, he had to admit he stole from his mum.

Frank DiNucci Jr., a former trader and salesman at various broker-dealers, took the stand Thursday in the trial of Anilesh "Neil" Ahuja, Premium Point's co-founder, and former trader Jeremy Shor. Ahuja and Shor are accused of conspiring to artificially inflate the firm's holdings in order to attract new investments and keep current investors from leaving.

DiNucci told jurors he would provide inflated valuations for Premium Point securities at the end of each month from 2014 to 2016. The firm would use the information to boost the net-asset value of its holdings - a number that was reported to investors that reflected the performance of the firm's assets.

But prosecutors, anticipating the defence cross-examination, also asked how he looted thousands of dollars from a joint savings account with his mother in 2016.

"Why did you do that?" assistant US attorney Joshua Naftalis asked.

"I had no other money to pay for living expenses at that point," DiNucci told jurors in Manhattan federal court, adding that he never told his mother he had taken the money because he was embarrassed and upset.

DiNucci previously disclosed the thefts from his mother when he testified in a 2017 Connecticut trial of three former Nomura traders, who were accused of lying to their customers about bond prices. It was during that testimony that the investigation into mismarking at Premium Point first came to light, when Mr DiNucci admitted under cross-examination from defence lawyers that he had pleaded guilty and agreed to cooperate with prosecutors in New York in their probe of the firm.

Defence attorneys should have plenty of ammunition to undermine DiNucci's credibility on cross-examination.

In addition to stealing from his mother, he admitted that he was forced to plead guilty to conspiracy in April 2017. DiNucci had violated a previous agreement in the Nomura case by working in finance despite a parallel settlement with securities regulators that barred him from the industry.

Lawyers for Ahuja and Shor have attempted to portray the men as unwitting victims of a scheme by Amin Majidi, a former portfolio manager at Premium Point, and Ashish Dole, a former trader, to inflate the value of holdings so they could keep their lucrative jobs.

Like DiNucci, both Dole and Majidi pleaded guilty and agreed to cooperate with prosecutors. Both testified earlier in the trial, which is in its fourth week.

DiNucci, 36, who is currently unemployed and lives with his parents, testified on Thursday that he helped Shor overvalue assets so DiNucci could retain brokerage business from Premium Point, which was his biggest client at two of the firms where he worked.

DiNucci said he started valuing the firm's assets properly, by evaluating them independently, but eventually just started giving Shor higher marks in order to satisfy him and keep the business flowing.

"Premium Point was my biggest client, and I was just trying to keep them happy," DiNucci said. "That's what they asked of me, so I did it."

BLOOMBERG