U.S. authorities allege that a former partner at a New York private equity firm defrauded institutional investors in a scheme that involved fictitious fund investments.

The U.S. attorney for the Southern District of New York, Preet Bharara announced Monday that Andrew Caspersen, 39, formerly of PJT Partners Inc., has been arrested and charged with securities fraud and wire fraud in connection with the alleged scheme.

The complaint alleges that from July 2015 through March of this year, Caspersen fraudulently solicited institutional investors by posing as though he was soliciting investors for a private equity fund. Authorities allege that the investments were never made, and that instead the funds were converted for his own use.

Separately, the U.S. Securities and Exchange Commission (SEC) filed civil charges against Caspersen alleging that he used a shell, Irving Place III SPV LLC, with a similar name as a legitimate private equity fund, Irving Place Capital Partners III SPV, to facilitate the fraud. The SEC is seeking a permanent injunction, return of allegedly ill-gotten gains with interest, and monetary penalties.

The complaints alleges that Caspersen actually obtained US$25 million from one institutional investor, and later sought an additional US$20 million from that investor, along with another US$50 million from a second investor (those investments were not made).

The allegations have not been proven in either case.

“As alleged, Caspersen engaged in a brazen fraud by raising money under false pretenses and simply stealing the funds,” says Andrew Calamari, director of the SEC’s New York office. “This action amply demonstrates that even sophisticated institutional investors are not immune to financial scams.”

U.S. attorney, Preet Bharara, adds, “Andrew Caspersen, a partner at a major financial advisory firm, allegedly scammed his clients into investing tens of millions in sham private equity investments. To advance his US$95 million fraud scheme, Caspersen allegedly put on a shameful charade — creating fake email addresses, setting up misleading domain names, and inventing fictional financiers. When confronted by a suspicious client who had invested US$25 million, Caspersen had no good answers. He will now have to answer to federal securities and wire fraud charges.”

In a statement, PJT Partners says it is “stunned and outraged to learn of the fraudulent circumvention and violation of the firm’s compliance policies and ethical standards by Andrew Caspersen”, who has been with the firm since January 2013.

The firm says that it reported the alleged fraud to the U.S. attorney in the wake of an internal investigation led by outside counsel, Paul, Weiss, Rifkind, Wharton & Garrison. “We have co-operated fully with law enforcement, and we will continue to do so. We have terminated Mr. Caspersen for cause,” it says.

Any potential liability for the company stemming from the US$25 million that was fraudulently obtained by Caspersen “has not been determined”, the firm says, and it has insurance coverage that it believes, “would substantially mitigate any potential liability it might have.”