The US Securities and Exchange Commission (SEC) has charged James Velissaris, the former founder and chief investment officer of Infinity Q Capital Management, with overvaluing assets by more than $1bn while pocketing tens of millions of dollars in fees.
It alleges that between 2017 and February 2021, Velissaris engaged in a fraudulent scheme to overvalue assets held by Infinity Q Diversified Alpha mutual fund and the Infinity Q Volatility Alpha private fund.
According to the compliant Velissaris executed the overvaluation scheme by altering inputs and manipulating the code of a third-party pricing service used to value the funds’ assets. It claims Velissaris collected over $26m in profit distributions through his fraudulent conduct and without disclosing his activities to investors.
Gurbir S. Grewal, director of the SEC’s Division of Enforcement, said, “We allege that, while Velissaris marketed the mutual fund as a way for retail investors to access investment strategies typically reserved for high-net-worth clients, what he actually offered them were fraudulent documents, altered performance results, and manipulated valuations.
“This case affirms our commitment to using all our tools to root out misconduct in the $18trn private fund arena, a growing market attracting more and more institutional investors, including public pension funds, university endowments, and charitable foundations.”
Also speaking on the case, Adam S. Aderton, co-chief of the SEC’s Asset Management Unit, alleged Velissaris tried to cover the scheme by deceiving staff by creating backdated minutes of valuation meetings that never occurred and altered documents that described Infinity Q’s valuation policies.
The regulator also claims that by masking actual performance, Velissaris aimed to thwart redemptions by investors who likely would have requested a return of their money had they known the funds’ actual performance.
Velissaris was removed from his role in 2021 after the SEC confronted the firm with information suggesting Velissaris had been adjusting the third-party pricing model.
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