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https://www.justice.gov/usao-sdny/pr/founder-and-former-chief-investment-officer-infinity-q-pleads-guilty-securities-fraud

https://archive.ph/NwKoW

Department of Justice

U.S. Attorney’s Office

Southern District of New York

FOR IMMEDIATE RELEASE

Monday, November 21, 2022

Founder And Former Chief Investment Officer Of Infinity Q Pleads Guilty To Securities Fraud

James Velissaris Inflated the Values of Numerous Positions in the Investment Funds Managed by Infinity Q and Falsified Documents to Infinity Q’s Auditors and the SEC in order to Hide the Fraud

Damian Williams, the United States Attorney for the Southern District of New York, announced that JAMES VELISSARIS, the founder and former chief investment officer of Infinity Q Capital Management (“Infinity Q”), a New York based investment adviser that ran a mutual fund and a hedge fund that purported to have approximately $3 billion in assets under management, pled guilty to securities fraud. VELISSARIS made false and misleading statements to investors and others concerning Infinity Q’s process for valuing certain over-the-counter (“OTC”) derivative positions that made up a substantial portion of the holdings of the mutual and hedge funds and also fraudulently mismarked those securities in ways that did not reflect their fair value. VELISSARIS committed the mismarking scheme in order to inflate the value of the investment funds as reported to investors, to attract and retain capital, and to increase his own compensation. In order to avoid detection of the scheme, VELISSARIS provided both Infinity Q’s auditor and the Securities and Exchange Commission (“SEC”) with falsified or altered documents, including providing the auditor with altered term sheets that served to provide fabricated support for the fraudulently inflated values. Today’s plea was taken by U.S. District Court Judge Denise Cote.

U.S. Attorney Damian Williams said: “Today’s guilty plea demonstrates this Office’s resolve to pursue even the most sophisticated of financial crimes. James Velissaris thought he could get away with mismarking some of the most esoteric derivative products on Wall Street by manipulating sophisticated financial models and computer code. This case has exposed that fraud and shown that Velissaris lied to his investors in order to line his own pockets with inflated fees. Velissaris will now be held accountable for his actions.”

According to the allegations contained in the Indictment, other publicly available information, and statements made in court:

Background

VELISSARIS was the founder and chief investment officer of Infinity Q, an investment adviser that ran both a mutual fund (the “Mutual Fund”), started in about 2014, and a hedge fund (the “Hedge Fund,” and collectively the “Investment Funds”), started in about 2017. As of 2021, the two funds purported to have approximately $3 billion in assets under management. Infinity Q was headquartered in New York, New York, and employed a small staff, including a chief compliance and chief risk officer (“Employee-1”). A major component of both the Mutual Fund and the Hedge Fund’s holdings were over-the-counter (“OTC”) derivative positions that involved customized contracts that allowed the counterparties to take positions on the volatility, or price movement, of underlying assets or indices. VELISSARIS, through Infinity Q, represented to its investors that it valued these OTC derivative positions based on fair value, and that in order to do so, it utilized the services of an independent third-party provider. In particular, Infinity Q represented to investors and other stakeholders that it used Bloomberg Valuations Service (“BVAL”) to independently calculate the fair value of these positions, in accordance with the terms of the underlying derivative contracts. These OTC derivative positions comprised hundreds of millions of dollars of the Investment Funds’ portfolios.

VELISSARIS’ Scheme to Lie to Investors and Inflate Derivative Swap Positions In fact, however, VELISSARIS defrauded Infinity Q’s investors by taking an active role in the valuation of Infinity Q’s positions and by modeling the positions in ways that were not based on the actual terms of the underlying contracts and were inconsistent with fair value. VELISSARIS’ input into the BVAL valuation process was inconsistent with Infinity Q’s representations about the independence of the process and allowed VELISSARIS to fraudulently mismark positions in BVAL. VELISSARIS engaged in the mismarking of positions in BVAL by making false entries in BVAL’s system including by secretly altering the computer code employed by BVAL that caused BVAL to alter and disregard certain critical terms. Altering and disregarding terms in this fashion caused BVAL to report values that were artificially inflated and, often, much higher than fair value.

By manipulating OTC derivative positions in BVAL in this way, VELISSARIS caused numerous positions in the Investment Funds to have anomalous and, at times, impossible valuations. For example, at times, VELISSARIS made manipulations in either the Mutual Fund and/or the Hedge Fund that caused certain identical positions that were held by both the Mutual Fund and the Hedge Fund (namely, a position where all the material terms are the same) to have substantially divergent values. In other cases, some of VELISSARIS’ manipulations caused certain positions held by the Investment Funds to have impossible values, such as where, under the true terms of the swap, the value adopted by VELISSARIS could only be true if volatility were negative – a condition which is mathematically impossible. Ultimately, after VELISSARIS’ mismarking scheme was uncovered in or about February 2021, Infinity Q liquidated the Investment Funds and sold its OTC derivative positions. These positions were sold for hundreds of millions of dollars less than their purported market values in BVAL, thereby resulting in substantial losses to the investors in the Investment Funds.

VELISSARIS Lies to Auditors and Obstructs the SEC’s Investigation

In order to hide this scheme and prevent its detection, VELISSARIS lied to numerous outside stakeholders and regulators. First, in order to prevent Infinity Q’s outside auditor (the “Auditor”) from discovering the fraud, VELISSARIS provided the Auditor with falsified term sheets from counterparties that he had altered to change the true terms of certain OTC derivative positions. In particular, in connection with a number of audits, the Auditor selected certain OTC positions that it would independently value in order to confirm the reasonableness of Infinity Q’s values from BVAL. In order to ensure that the Auditor would not arrive at materially different results when independently valuing positions that VELISSARIS had manipulated in BVAL, VELISSARIS altered the terms of certain deal documents and provided them to the Auditor. After receiving these falsified documents and relying on them in its independent evaluation, the Auditor confirmed the reasonableness of VELISSARIS’ valuations in BVAL.

Furthermore, beginning in May 2020, the SEC opened an inquiry and later an investigation into Infinity Q’s valuation practices. In connection with that investigation, VELISSARIS provided false and misleading information to the SEC. For example, when the SEC asked for original documents that had been provided to investors, VELISSARIS altered the documents before providing them to the SEC, including certain alterations that would help hide his mismarking scheme. For example, Infinity Q’s original investor materials stated that “[o]nce a price is established for a portfolio security, it shall be used for all Funds that hold the security.” As explained above, this was untrue, and on numerous occasions, manipulations in BVAL made by VELISSARIS caused the same positions in the Mutual Fund and the Hedge Fund to have substantially different values. To conceal the falsity of Infinity Q’s disclosures, VELISSARIS, along with Employee-1, removed this line from investor documents that were provided to the SEC.

In June 2020, the SEC requested that Infinity Q provide additional materials, including documents regarding Infinity Q’s valuation committee and all of its meeting minutes. Infinity Q’s investor materials had represented that Infinity Q had a valuation committee, including VELISSARIS, that the committee would meet monthly or more often, and that VELISSARIS would be responsible for preparing minutes of such meetings. In fact, however, VELISSARIS had not kept notes of any such meetings. Accordingly, days before responding to the SEC, VELISSARIS made up notes purporting to be from valuation committee meetings in 2019 and 2020 and submitted them to the SEC.


VELISSARIS, 38, of Atlanta, Georgia, pled guilty to one count of securities fraud, which carries a maximum sentence of 20 years in prison.

The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only. Sentencing has been scheduled for March 3, 2023, in front of Judge Cote.

Mr. Williams praised the work of the Federal Bureau of Investigation. He further thanked the SEC and the Commodity Futures Trading Commission for their cooperation and assistance in this investigation.

This case is being handled by the Office’s Securities and Commodities Fraud Task Force.

Assistant U.S. Attorneys Margaret Graham, Daniel Loss, and Daniel Tracer are in charge of the prosecution.

Topic(s): Securities, Commodities, & Investment Fraud Component(s):

USAO - New York, Southern

Contact:

Nicholas Biase (212) 637-2600

Press Release Number:

22-359

Updated November 21, 2022


i was doing a google news search for Q, and this story popped up.

interesting name...

the timing is convenient, right in the same time frame as FTX and 100+ other companies collapsing


http://news.google.com/search?q=Q

https://archive.ph/zZzba


http://twitter.com/search?q=Infinity+Q

https://archive.ph/dm9Vv


https://greatawakening.win/search?params=FTX&community=GreatAwakening

https://archive.ph/dOmNu

1 year ago
5 score
Reason: None provided.
1 year ago
4 score
Reason: Original

https://www.justice.gov/usao-sdny/pr/founder-and-former-chief-investment-officer-infinity-q-pleads-guilty-securities-fraud

https://archive.ph/NwKoW

i was doing a google news search for Q, and this story popped up.

the timing is convenient, right in the same time frame as FTX and 100+ other companies collapsing

http://news.google.com/search?q=Q

https://archive.ph/zZzba

http://twitter.com/search?q=Infinity+Q

1 year ago
1 score