A former venture capital fund manager who fled to India to avoid fraud charges was ordered by a US appeals court to surrender $64 million to the SEC, though the regulator will need to determine if assets like real estate, jewelry and a Hermès handbag are actually owned by him or his wife.
(Bloomberg) — A former venture capital fund manager who fled to India to avoid fraud charges was ordered by a US appeals court to surrender $64 million to the SEC, though the regulator will need to determine if assets like real estate, jewelry and a Hermès handbag are actually owned by him or his wife.
Iftikar Ahmed, a former Oak Investment Partners executive, and his wife, Shalini Ahmed, have been fighting the Securities and Exchange Commission disgorgement order, claiming it was improperly enlarged from the original $42 million after a 2021 change in the law and that many of their assets can’t be seized because they belong to her and not him.
The Manhattan federal appeals court on Wednesday ruled that the increase in the disgorgement order was permissible. But the three-judge panel said the SEC needed to conduct an asset-by-asset inquiry to determine whether the couple’s two Park Avenue apartments, Harry Winston jewelry and other luxury goods were actually owned by Iftikar Ahmed, even if they were nominally owned by his wife.
The decision is the latest twist in a long-running and wide-ranging legal saga that’s embroiled the couple, both Harvard Business School and Goldman Sachs Group Inc. alums, since his 2015 arrest on insider trading charges. Ahmed’s subsequent flight to India led Oak Partners to conduct an internal investigation that found he embezzled around $65 million from the firm and its portfolio companies. Shalini Ahmed, who remains in the US with their three children, hasn’t been charged with any crime.
Diverted Funds
Lawyers for the Ahmeds and the SEC didn’t immediately respond to requests for comment on Wednesday.
Iftikar Ahmed, who joined Oak Partners in 2004, opened bank accounts in the name of the firm and the companies that he actually personally controlled, according to the court. He diverted funds into those accounts and submitted fraudulent invoices and other documents to try to cover his tracks. In 2013, he negotiated his firm’s investment in one company, adding a condition that the company redeem shares in an entity that he actually controlled.
Two criminal cases remain pending against Ahmed in federal court in Boston, one for his fraud at Oak Partners and the other over his trading on inside information about Cooper Tire & Rubber Co.’s planned 2013 announcement of a $2.5 billion acquisition of India’s Apollo Tyres Ltd. The deal later fell apart. The SEC was granted summary judgment against Ahmed in 2018 in Connecticut federal court.
In addition to the $64 million disgorgement, Ahmed was also ordered to pay $21 million in civil penalties, more than $17 million in interest and appreciation on ill-gotten assets. The couple’s assets were frozen and placed in a receivership, which contained around $118 million last year, less than the $126 million estimated for the total judgment.
‘Carried Interest’
Ahmed had challenged the disgorgement order’s enlargement after Congress extended the statute of limitations applying to such orders. He also argued that the amount should be reduced by the amount of the carried interest he forfeited through his departure from Oak Partners. The judges ruled that the new law applied to his case and also rejected his carried-interest argument.
“Ahmed’s forfeited ‘carried interest’ is not an ill-gotten gain from his fraud but rather was his expectancy to a portion of Oak’s profits conferred by the general partnership agreement,” the appeals court said. “But disgorgement does not protect the wrongdoer’s expectancy interests.”
But the court said the SEC’s contention that Ahmed equitably owned all of the couple’s frozen assets went too far. Shalini Ahmed had argued that it was “absurd” that she would not be considered the owner of her jewelry and handbags. The judges said the SEC needed to prove that Iftikar Ahmed was the true owner of those items.
That determination may be complicated by yet another legal proceeding. The couple are currently seeking a divorce and have asked the court to halt liquidation of their assets as they determine who gets what.
The appeals court case is SEC v Ahmed, 21-1686, US Court of Appeals, Second Circuit. The lower court case is SEC v Ahmed, 15-cv-675, US District Court, District of Connecticut (New Haven.)
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