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WASHINGTON (Reuters) -U.S. markets regulators on Thursday sued the founder and former chief investment officer of investment adviser Infinity Q Capital Management LLC, alleging he engaged in a fraudulent scheme to inflate the value of assets the firm advised.
Infinity Q was forced last year to liquidate its mutual funds after the U.S. Securities and Exchange Commission found that James Velissaris made potentially unreasonable adjustments to a pricing model used to value fund investments.
The SEC on Thursday said in a filing with the Southern District of New York (SDNY) that Velissaris inflated the value of the funds by $1 billion. As a result, he received management and performance fee — totaling at least approximately $26.9 million since 2019 — to which he was not entitled.
According to the SEC, Velissaris inflated the valuations by manipulating computer code in the third-party pricing service valuation models the company used to value the funds; he entered inputs he knew were incorrect into the pricing service; selected certain valuation models that he knew could not properly value the relevant positions; and knowingly cherry-picked one of the key valuation inputs.
The Commodity Futures Trading Commission (CFTC) also filed a complaint in SDNY on Thursday similarly alleging Velissaris manipulated the pricing model to overvalue derivatives held by pooled funds.
Reuters could not immediately reach Velissaris for comment. A lawyer for Velissaris’s told Reuters last year that he did not manipulate the pricing model.
