The Cornerstone Report: Volume 4, Issue 2

Hedge Fund High Jinks

ECM’s brochure included this chart showing the rate of return by ECM was 218% as compared to the NASDAQ (16.3%) and Dow Jones Industrial Average (30.8%) in the same time frame.

In August of 2004, employees of an express courier service discovered undeclared U.S. currency in two packages, shipped by Amit Mathur from Shrewsbury, MA to New Delhi, India. The information was provided to ICE’s SAC Boston and the FBI for further investigation. Through the SEC, ICE learned that Mathur was fired from a prominent investment firm for making questionable/unethical stock trades. Massachusetts’s corporate records indicated that Mathur and his partner, Rajeev Johar, co-owned and operated a private investment fund or hedge fund known as Entrust Capital Management (ECM).

Scheme

Through further investigation ICE agents identified and interviewed 16 ECM investors. The investors revealed that they were all victimized by Mathur and Johar as part of this investment scheme. Victims provided agents with ECM brochures that purported a rate of growth that outperformed the Dow Jones and NASDAQ averages. Agents discovered that these brochures were copied from a nationally recognized investment firm’s Web site.

Victims of this scheme were also provided with monthly account statements and false tax forms showing gains consistent with fictitious ECM account statements created by Mathur and Johar. Based on the gains represented on these frivolous documents, the victims continued to invest more money into ECM and even paid taxes on their supposed gains. In reality, ECM was losing money due to poor trades and gross misappropriations of the money by Mathur for personal use. Mathur would wire money out of the investment account to his personal account and spend the money gambling and living the high life.

The principle ECM investor, a prominent Massachusetts businessman, invested approximately $15 million (USD). This businessman received a “return” on his investment of just over $2 million that was characterized as dividend disbursements. In actuality, the disbursements were a return of the invested funds and it further induced him to continue to invest in the scheme. 15 additional investors each contributed between $100,000 to $500,000. One of these investors also received approximately $350,000 back then grew suspicious of the legitimacy of the Entrust investment fund.

The investors suffered a total loss of over $13.5 million. The government intervention prevented the loss of an additional $2.5 million.

Investigative Results

Mathur was indicted on 18 counts of mail fraud and 2 counts of wire fraud and surrendered to U.S. Marshals on October 4, 2006. ICE agents seized and forfeited a 2004 Porsche Cayenne valued at $65,000. Proceeds from the sale of the vehicle will be remitted back to ECM victims.

Back to Top

ICE’s Role in Securities and Investment Fraud

European Investors Scammed

Hedge Fund High Jinks

Cornerstone is U.S. Immigration and Customs Enforcement's (ICE) comprehensive investigative initiative for fighting financial crime, trade fraud and intellectual property crime.

The Cornerstone Report is a quarterly bulletin highlighting key issues related to ICE financial and trade investigations.

The Cornerstone Report covers a broad range of topics related to financial investigations and potential vulnerabilities in the financial and trade sectors.

We strive to present clear thinking by knowledgeable observers that can be read with ease and pleasure by both professionals and a general audience, and we’re happy to review unsolicited submissions for potential publication in the newsletter.

If you would like to submit an article for publication or simply find out more about how you can participate in the Cornerstone initiative, drop us an e-mail at cornerstone@dhs.gov.