Please E-mail suggested additions, comments and/or corrections to Kent@MoreLaw.Com.
Help support the publication of case reports on MoreLaw
United States of America v. Ahmad Naqvi
Case Number: 1:16-cr-00356-ER-2
Judge: Edgardo Ramos
Court: United States District Court for the Southern District of New York (New York County)
Plaintiff's Attorney: United States District Attorney’s Office
Call 918-582-6422 for help finding a great criminal defense lawyer in New York, New York
MoreLaw ReceptionistsVOIP Phone and Virtual Receptionist Services
Call 918-582-6422 Today
New York, NY - The United States of America charged Ahmad Naqvi with securities fraud.
AHMAD NAQVI, the chief operating officer of Elm Tree Investment Advisors LLC (“ETIA”), pled guilty before U.S. District Judge Edgardo Ramos to securities fraud charges stemming from his role in a scheme to defraud investors in multiple investment funds created and controlled by NAQVI and Fred Elm, a/k/a “Frederic Elmaleh,” the founder and manager. Among other illicit activity, Elm and NAQVI fraudulently induced more than 50 investors to invest over $18 million based on the false representation that Elm and NAQVI would invest that money, through the funds, in the shares of privately held technology companies, like Twitter, Alibaba, Uber, and Square, before their initial public offerings (“IPOs”).
U.S. Attorney Geoffrey S. Berman said: “As he has now admitted in court, Ahmad Naqvi deceived investors with claims that the Elm Tree Funds would generate huge profits from investments in privately-held technology companies. In fact, the funds never invested in these pre-IPO companies and never returned a profit, and the fraction of investor money actually invested in securities resulted in massive losses. Now Naqvi awaits sentencing for his crime, and faces the loss of his freedom.”
According to the Superseding Indictment charging Elm and NAQVI, and other filings in the case:
From at least June 2013 through December 2014, Elm and NAQVI engaged in a scheme to defraud investors in funds that Elm and NAQVI created and controlled at ETIA, where Elm was the founder and manager, and NAQVI was the chief operating officer. Elm and NAQVI raised more than $18 million from over 50 investors in four limited partnerships for which ETIA acted as the fund manager: Elm Tree Investment Fund, LP; Elm Tree Emerging Growth Fund, LP; Elm Tree ‘e’Conomy Fund, LP; and Elm Tree Motion Opportunity, LP (collectively the “Elm Tree Funds”).
Elm and NAQVI falsely represented that the Elm Tree Funds used investor capital to purchase shares in privately held technology companies before their IPOs. These companies included Twitter, Inc., Alibaba Group Holding Limited, Uber Technologies, Inc., Square, Inc., Pinterest, Inc., and GoDaddy Group, Inc. Moreover, Elm and NAQVI falsely represented that they had access to these pre-IPO shares because of their relationships with leading venture capital firms, such as Kleiner Perkins Caufield & Byers, Benchmark Capital, and Silver Lake Management, L.L.C. In truth and in fact, Elm and NAQVI did not invest in the pre-IPO shares of these companies and did not have relationships with these venture capital firms.
Elm and NAQVI comingled the approximately $18 million that was invested in the Elm Tree Funds in a single investment account and then invested only a portion of the money, approximately $7.1 million. At no point did any of the Elm Tree Funds return a profit. Instead, for example, between January 2014 and November 2014, the Elm Tree Funds lost approximately $3.9 million in trading.
Moreover, of the investor funds that Elm and NAQVI did not lose in securities trading, Elm routinely converted investor funds to his own use in the form of cash withdrawals and to pay personal expenses, including to purchase a multimillion-dollar home, high-end furnishings, and other personal items, such as jewelry, daily living expenses, and luxury automobiles, including a Bentley, a Maserati, and a Range Rover.
The conversion of investors’ funds was contrary to the representations that Elm and NAQVI made to investors concerning their and ETIA’s fees. Elm and NAQVI falsely represented that they and ETIA would take a two percent annual management fee plus a performance fee of 20 percent of any profits that the Elm Tree Funds earned. In truth and in fact, Elm converted investor money that far exceeded the two percent management fee. Moreover, because the Elm Tree Funds never returned a profit, Elm, NAQVI, and ETIA were not entitled to a percentage of any profits.
Elm and NAQVI also used approximately $5.2 million of new investor funds to make payments to earlier investors in a Ponzi-like fashion. To prevent or forestall redemptions, and continue to raise money to fund their scheme, Elm and NAQVI also generated fictitious account statements and made oral and written misrepresentations that their trading strategies were generating consistently positive returns.
For example, beginning in mid-2013, Elm and NAQVI began to solicit Victim-1 to invest with ETIA in the Elm Tree Funds. On June 11, 2013, NAQVI sent Victim-1 a series of emails regarding the Elm Tree Emerging Growth Fund, in which he falsely represented, among other things, that the fund would invest in pre-IPO Twitter shares, and that Elm, NAQVI, and ETIA had “key contacts” with venture capital firms like Kleiner Perkins Caufield & Byers and Benchmark Capital. Elm and NAQVI subsequently had in-person meetings and telephone calls with Victim-1 about this investment. On October 9, 2013, Victim-1 invested approximately $52,500 in the Elm Tree Emerging Growth Fund. Following Twitter’s IPO on November 6, 2013, Twitter’s stock price rose, and NAQVI subsequently told Victim-1 that Elm, NAQVI, and ETIA had used an options strategy to lock in Victim-1’s profits in Twitter. Because the fund had not invested in pre-IPO Twitter shares, there were no profits to lock in. Thereafter, Elm and NAQVI sent fraudulent account statements to Victim-1, including one sent on March 7, 2014. The statement falsely indicated that Victim-1’s investment in the fund was valued at $274,550 (up from $52,500), and that the Elm Tree Emerging Growth Fund was valued at $68,115,855.
Elm and NAQVI made similar misrepresentations with respect to Victim-1’s subsequent investments in the Elm Tree ‘e’Conomy Fund and Elm Tree Motion Opportunity, falsely indicating that those funds invested in Alibaba, Uber, Square, Pinterest, and GoDaddy, and that Victim-1’s investments were growing. Elm and NAQVI also falsely represented that the value of the Elm Tree ‘e’Conomy Fund as of December 12, 2014, was $125,484,750 and that the value of Elm Tree Motion Opportunity as of December 18, 2014, was $77,286,220 – falsely claiming that the total value of the Elm Tree Funds was more than $270 million.
NAQVI, who had been a fugitive since his indictment in 2016, was arrested in Canada and extradited to the United States in November 2019. Elm was initially arrested in April 2016 and released on bail. In June 2017, approximately one week before his then-scheduled guilty plea, Elm fled to Canada. Elm was subsequently arrested in Canada and extradited to the United States in January 2020.
* * *
NAQVI, 51, pled guilty to one count of securities fraud conspiracy, which carries a maximum sentence of five years in prison. The charge also carries a maximum fine of $250,000, or twice the gross gain or loss from the offenses. The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge. NAQVI is scheduled to be sentenced by Judge Ramos on June 29, 2020, at 10:30 a.m.
Mr. Berman praised the work of Homeland Security Investigations and the U.S. Department of Justice’s Office of International Affairs, and thanked the U.S. Securities and Exchange Commission for its assistance. Mr. Berman also thanked Canadian law enforcement for its support and assistance.
This case is being handled by the Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorney Joshua A. Naftalis is in charge of the prosecution.
The allegations contained in the Superseding Indictment against Elm are merely accusations, and the defendant is presumed innocent unless and until proven guilty.
18:371.F CONSPIRACY TO DEFRAUD THE UNITED STATES (SECURITIES FRAUD CONSPIRACY)
18:371.F SECURITIES FRAUD CONSPIRACY
15:78J.F MANIPULATIVE AND DECEPTIVE DEVICES (SECURITIES FRAUD)
15:78J.F SECURITIES FRAUD
18:1349.F ATTEMPT AND CONSPIRACY TO COMMIT WIRE FRAUD
18:1349.F WIRE FRAUD CONSPIRACY
18:1343.F FRAUD BY WIRE, RADIO, OR TELEVISION
18:1343.F WIRE FRAUD
Outcome: A change of plea hearing as to defendant Ahmad Naqvi is scheduled for Monday, May 4, 2020, at 10:30 AM. The hearing will proceed as a CourtCall video conference. Members of the public and the press can use the following dial-in information: Dial-In Number: 855-268-7844, Access Code: 32091812#, PIN: 9921299#. It is SO ORDERED ( Change of Plea Hearing set for 5/4/2020 at 10:30 AM before Judge Edgardo Ramos.) (Signed by Judge Edgardo Ramos on 5/1/2020)(jw) (Entered: 05/01/2020)