SEC v. Infinity Q Capital Management, LLC; and Wildcat Partner Holdings, LP, No. 1:23-cv-05081, Southern District of New York (June 16, 2023) — Complaint

Andrew Dean
Osman Nawaz*
Joshua Brodsky
Preethi Krishnamurthy
Alistaire Bambach
Neal Jacobson
Zachary Sturges
Ariana Torchin
Attorneys for Plaintiff
SECURITIES AND EXCHANGE COMMISSION
New York Regional Office
100 Pearl Street
Suite 20-100
New York, New York 10004
(212) 336-0095 (Jacobson)
Email: [email protected]

*Not admitted to U.S. District Court for the S.D.N.Y.

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

SECURITIES AND EXCHANGE
COMMISSION,

   Plaintiff,

  -against-

INFINITY Q CAPITAL MANAGEMENT, LLC,

   Defendant,

                        -and-

WILDCAT PARTNER HOLDINGS, LP,

                                    Relief Defendant.

COMPLAINT

23-Civ. ____ (    )

ECF CASE
JURY TRIAL DEMANDED

Plaintiff Securities and Exchange Commission (“SEC”), for its Complaint against
Defendant Infinity Q Capital Management, LLC (“Infinity Q” or “Defendant”), and Relief
Defendant, Wildcat Partner Holdings, LP (“WPH”) (F/K/A Bonderman Family Limited

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Partnership), against which the SEC seeks to recover distributions made to it by Infinity Q,
alleges as follows:
SUMMARY
1. SEC-registered investment adviser Infinity Q engaged in a fraudulent scheme that
inflated by more than $1 billion the value of assets held by a mutual fund (the “Mutual Fund”)
and a hedge fund (the “Private Fund”) Infinity Q advised (collectively, the “Infinity Q Funds” or
the “Funds”).
2. Infinity Q’s fraudulent scheme was conducted through acts committed by James
Velissaris (“Velissaris”), Infinity Q’s founder and former chief investment officer (“CIO”), who
pleaded guilty to securities fraud in connection with the scheme on November 21, 2022 and was
sentenced to 180 months imprisonment on April 7, 2023.
3. From at least February 2017 through February 2021 (the “Relevant Period”),
Infinity Q represented to investors and others that certain holdings of the Infinity Q Funds were
valued by an “independent” third party pricing service (the “Pricing Service”). In fact, Infinity Q
was actively manipulating the valuation models available from the Pricing Service and altering
inputs to mask the poor performance of the Funds.
4. Unbeknownst to investors,  Infinity Q knowingly inflated the Funds’ stated
valuations in at least four ways during the Relevant Period. Infinity Q manipulated computer
code to cause the valuation models to disregard certain information, entered inputs it knew were
incorrect into the Pricing Service, selected certain valuation models in the Pricing Service that it
knew could not properly value the relevant positions, and knowingly cherry-picked one of the
key valuation inputs.

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5. Despite inflating the Infinity Q Funds’ valuations by manipulating the Pricing
Service, Infinity Q repeatedly told investors, the Mutual Fund’s board of trustees (the “Board”),
and the Funds’ auditor during the Relevant Period that Infinity Q had no role in the Pricing
Service valuation process, that the Pricing Service and the values it produced were independent
from Infinity Q, and that the Infinity Q Funds’ administrator (the “Administrator”) obtained
values directly from the Pricing Service with no Infinity Q involvement.
6. Infinity Q’s pricing manipulations
materially inflated the Mutual Fund’s net asset
values (“NAVs”) and the Private Fund’s total assets, as well as the Funds’ reported performance
, and
Infinity Q disseminated false and misleading information about the Infinity Q Funds’ valuations,
performance, and investment terms to investors.
7. Infinity Q’s manipulations of the Funds’ valuations were pervasive. At times,
Infinity Q had different valuations for the same position held by different Funds, and the Mutual
Fund reported positions at mathematically impossible valuations. Infinity Q w as also aware that
the Funds’ counterparties were valuing the very same positions at massively different amounts.
8. By March 2020, when faced with market volatility caused by the COVID-19
pandemic, Infinity Q knew that its Funds were poorly positioned for increasing market turmoil
and that they were at risk of failing. Infinity Q sought a $100 million cash infusion from affiliates
of its partial owner, but the proposed loan was never made. In response and to try to stave off the
Infinity Q Funds’ failure, Infinity Q stepped up the manipulation of the valuations of positions
held by the Funds, resulting in the overvaluation of the Funds’ net assets by hundreds of millions
of dollars, as much as 42% in the Mutual Fund and 137% in the Private Fund. This overvaluation
attracted hundreds of millions of dollars in additional investments and forestalled investor
redemptions, all while some funds with similar investment strategies struggled or failed.

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9. As of the end of March 2020, as a result of Infinity Q’s mismarking, Infinity Q
reported year-to-date returns for institutional class shares in the Mutual Fund of 8.95%, one-year
returns of 10.61%, three-year returns of 8.72%, and five-year returns of 7.28%. By contrast, the
Infinity Q’s principal benchmark—a hedge fund index—reported year-to-date returns of  -8.98%
(that is, a loss of 8.98%), one-year returns of -4.32%, three-year returns of 0.36%, and five-year
returns of 0.24%.
10. Meanwhile, Infinity Q tried to conceal the mismarking scheme, including from
the Infinity Q Funds’ independent auditor.  For example, in connection with the Infinity Q Funds’
audits, Infinity Q forged transaction confirmation documents by changing the actual transaction
terms in order to deceive the auditor into thinking that the Funds’ valuations were reasonable.
11. By September 2020, Infinity Q’s fraudulent scheme had resulted in an
overvaluation of the Infinity Q Funds by over $1 billion.
12. By February 2021, when Infinity Q removed Velissaris from its management, the
Infinity Q Funds remained overvalued by at least hundreds of millions of dollars.
13. As a result of the Infinity Q Funds’ overvaluation, Infinity Q received
management and performance fees to which it was not entitled.
VIOLATIONS
14. By virtue of the foregoing conduct and as alleged further herein:
a. Infinity Q violated Section 17(a) of the Securities Act of 1933 (“Securities Act”)
[15 U.S.C. § 77q(a)], Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”)
[15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], Sections 204(a),
206(1), 206(2), 206(4) and 207 of the Investment Advisers Act of 1940 (“Advisers Act”) [15
U.S.C. §§ 80b-4(a), 80b-6(1), 80b-6(2), 80b-6(4), and 80b-(7)], and Rules 204-2(a), 206-4(7),

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and 206(4)-8 thereunder [17 C.F.R. §§ 275.204-2(a), 275.206(4)-7, and 275.206(4)-8], and
Section 34(b) of the Investment Company Act of 1940 (“Investment Company Act”) [15 U.S.C.
§§ 80a-33,], and aided and abetted violations of Rule 22c-1 under the Investment Company Act
[17 C.F.R. § 270.22c-1].
15. Unless Infinity Q is restrained and enjoined, it will engage in the acts, practices,
transactions, and courses of business set forth in this Complaint or in acts, practices, transactions,
and courses of business of similar type and object.
NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
16. The SEC brings this action pursuant to the authority conferred upon it by Section
20(b) of the Securities Act [15 U.S.C. §§ 77t(b)], Section 21(d) of the Exchange Act [15 U.S.C.
§ 78u(d)], Section 209(d) of the Advisers Act [15 U.S.C. § 80b-9(d)], and Section 42(d) of the
Investment Company Act [15 U.S.C. § 80a-41(d)].
17. The SEC seeks a final judgment: (a) permanently enjoining Infinity Q from
violating the federal securities laws and rules this Complaint alleges it has violated; (b) ordering
Infinity Q to disgorge all ill-gotten gains it received as a result of the violations alleged herein
and to pay prejudgment interest thereon; (c) ordering Infinity Q to pay civil money penalties
pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)], Section 21(d) of the
Exchange Act [15 U.S.C. § 78u(d)], Section 209(e) of the Advisers Act [15 U.S.C. § 80b-9(e)],
and Section 42(e) of the Investment Company Act [15 U.S.C. § 80a-41(e)]; (d) ordering the
appointment of an independent Monitor to oversee a claims and distribution process for the
Private Fund; and (e) ordering any other and further relief the Court may deem appropriate or
necessary for the benefit of investors.

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18. The SEC also seeks a final judgment ordering WPH to pay disgorgement and
prejudgment interest.
JURISDICTION AND VENUE
19. This Court has jurisdiction over this action pursuant to Section 22(a) of the
Securities Act [15 U.S.C. § 77v(a)], Section 27 of the Exchange Act [15 U.S.C. § 78aa], Section
214 of the Advisers Act [15 U.S.C. § 80b-14], and Section 44 of the Investment Company Act
[15 U.S.C. § 80a–43].
20. Infinity Q has, directly and indirectly, made use of the means or instrumentalities
of interstate commerce or of the mails in connection with the transactions, acts, practices, and
courses of business alleged herein.
21. Venue lies in this District under Section 22(a) of the Securities Act [15 U.S.C.
§ 77v(a)], Section 27 of the Exchange Act [15 U.S.C. § 78aa], Section 214 of the Advisers Act
[15 U.S.C. § 80b-14], and Section 44 of the Investment Company Act [15 U.S.C. § 80a–43].
Certain of the acts, practices, transactions, and courses of business alleged occurred in this
District, where Infinity Q had its offices during the Relevant Period, and at least one of Infinity
Q’s victims has its principal place of business in this District.
DEFENDANT
22. Infinity Q Capital Management, LLC is a registered investment adviser
headquartered in New York, New York. Infinity Q was organized as a Delaware limited liability
company in 2014. Infinity Q’s principal owners are Infinity Q Management Equity, LLC (60%)
and WPH (40%). Infinity Q Management Equity, LLC, is owned 85% by Velissaris and 15% by
Scott Lindell. Infinity Q advised the Mutual Fund, the Infinity Q Diversified Alpha Fund mutual
fund (Ticker: IQDNX), and the Private F und, the Infinity Q Volatility Alpha Fund, L.P.

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RELIEF DEFENDANT
23. Wildcat Partner Holdings, LP (F/K/A Bonderman Family Limited
Partnership) is a family limited partnership that owns 40% of Infinity Q, and which received
distributions from Infinity Q on account of its investment in Infinity Q .
RELATED INDIVIDUAL AND ENTITIES
24. James R. Velissaris, age 38, was the founder and CIO of Infinity Q and majority
owner of Infinity Q Management Equity, LLC, which was the majority owner of Infinity Q. On
February 17, 2022, the Commission charged and the Department of Justice unsealed an
indictment against Velissaris for his role in the fraudulent scheme. On November 21, 2022,
Velissaris pleaded guilty to one count of securities fraud in violation of Section 10(b) of the
Exchange Act and Rule 10b-5 thereunder, and on April 7, 2023, he was sentenced to 180 months
imprisonment.
25. Scott Lindell, age 44, was the chief compliance officer (“CCO”), chief risk
officer, head of operations, and a portfolio manager of Infinity Q. Lindell is also a minority
owner of Infinity Q Management Equity, LLC, which is an owner of Infinity Q. On October 6,
2022, the U.S. District Court for the Southern District of New York enjoined Lindell, on consent,
from violations of certain provisions of the federal securities laws.
26. An audit, accounting, advisory, and consulting firm (the “Auditor”) served as the
Mutual Fund’s and the Private Fund’s auditor since 2018.

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FACTS
I. Background
A. Mutual Funds, Private Funds, and Investment Advisers
1. Mutual Funds
27. A mutual fund is a type of SEC-registered investment company, or series thereof.
Investment companies pool money from many investors and invest the money in stocks, bonds,
short-term money-market instruments, other securities or assets, or some combination of these
investments. The combined securities and assets the investment company owns are known as its
portfolio. A mutual fund’s portfolio is managed by an SEC-registered investment adviser. A
mutual fund’s investment adviser owes a fiduciary duty to the fund. Each mutual fund share
represents an investor’s proportionate ownership of the mutual fund’s portfolio and the income
and capital gains the portfolio generates.
28. Investors in mutual funds buy their shares from, and sell/redeem their shares to,
the mutual funds themselves. Mutual fund shares are typically purchased from the fund directly
or through investment professionals like brokers. Mutual funds are required by law to price their
shares each business day and they typically do so after the major U.S. exchanges close. This
price—the per-share value of the mutual fund’s assets minus its liabilities—is called the per
share net asset value or “per share NAV.” Mutual funds must sell and redeem their shares at the
per share NAV that is next calculated after the investor places a purchase or redemption order.
This means that, when an investor places a purchase or redemption order for mutual fund shares
during the day, the investor will not know what the purchase or redemption price is until the next
per share NAV is calculated.

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29. A mutual fund is required under the Investment Company Act to calculate its
NAV using the market value of its portfolio securities when market quotations for those
securities are “readily available.” If a market quote for a security is not readily available, the fair
value of that security, as determined in good faith by the fund’s board, must be used in order to
calculate the NAV. A mutual fund’s prospectus, available to investors, often describes its
valuation procedures.
30. Mutual funds must comply with various disclosure requirements under the
Investment Company Act and, if they publicly offer shares, the Securities Act. For example,
Sections 30(a), (b), and (e) of Investment Company Act, and rules adopted thereunder, require
registered investment companies to file and/or transmit annual and semiannual reports to their
shareholders. Such shareholder reports generally must include portfolio holdings information and
more detailed financial statements than registration statements.
2. Private Funds
31. Other investment pools may rely on one of the exclusions from the definition of
investment company set forth in Section 3 of the Investment Company Act. Investment pools
that rely on the exclusions set forth in Section 3(c)(1) and Section 3(c)(7) of the Investment
Company Act
0F
1
 are often referred to as “private funds.” Some private funds are commonly known
as “hedge funds.”
32. Like mutual funds, private funds pool investors’ money and invest the money in

1
 Section 3(c)(1) excepts from the definition of investment company any issuer whose outstanding securities (other
than short-term paper) are beneficially owned by not more than one hundred persons and that is not making and does
not at that time propose to make a public offering of such securities. Section 3(c)(7) excepts from the definition of
investment company any issuer whose outstanding securities are owned exclusively by persons who, at the time of
acquisition of such securities, are qualified purchasers and that is not making and does not at that time propose to
make a public offering of such securities. The term “qualified purchaser” is defined in Section 2(a)(51) of the
Investment Company Act.

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an effort to make a positive return.
33. Private funds are not subject to some of the regulations applicable to mutual
funds. Private funds, however, and their advisers, are subject to the same prohibitions against
fraud as are other market participants, and, like investment advisers to mutual funds, investment
advisers to private funds owe a fiduciary duty to the funds that they manage and are also subject
to anti-fraud prohibitions with respect to the private fund’s investors and prospective investors.
34. A private fund often discloses its valuation procedures in communications with
investors or prospective investors.
35. Whereas the mutual fund advisory fee structure is often based on a percentage of
assets under management, the private fund advisory fee structure typically includes both a
management fee (based on assets under management) and a performance fee (based on the
profits of the fund).
3. Investment Advisers
36. An investment adviser, under the Advisers Act, is any person that, for
compensation, engages in the business of providing investment advice to others, including a
mutual fund or private fund, about the value of or about investing in securities. Advisers that
manage portfolios provide ongoing advice about buying, selling and/or holding investments and,
in the context of an ongoing advisory relationship with a client and unless agreed otherwise, will
monitor the performance of the client’s investments and their alignment with the client’s overall
investment objectives and best interest.
B. Derivatives and Variance Swaps, Generally
37. Derivatives are financial instruments whose performance is derived, at least in
part, from the performance of an underlying asset, security, or index, among other things.

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38. Over-the-counter (“OTC”) derivatives are contracts that are privately negotiated
between two counterparties without going through an exchange.
39. A swap is a type of derivative in which two counterparties agree to exchange or
“swap” payments with each other as a result of such things as changes in a stock price, interest
rate, commodity price, or even the volatility or variance of a financial instrument.
40. Volatility is a measure of the magnitude of price movement, either up or down, of
a financial instrument or another financial measure such as an index. Variance is the square of
volatility.
41. Generally, in a variance swap, at the time of the expiration of a position, the buyer
of the swap receives the amount of realized variance (i.e., the square of the realized volatility)
over a certain period, subject to certain conditions, multiplied by a notional dollar amount, if that
amount of realized variance is above the initially agreed upon price level (known as the strike
price).  If the amount of realized variance is below the initially agreed upon level determined by
the strike price, then the buyer of the swap must pay the seller the difference.
C. Infinity Q and the Infinity Q Funds
42. In approximately 2014, Velissaris, having worked at several well-known asset
managers and a prominent family office, sought to strike out on his own and started Infinity Q
with the goal of putting into practice his own investment approach.
43. Infinity Q is an investment adviser within the meaning of Section 202(a)(11) of
the Advisers Act, 15 U.S.C. § 80b-2(a)(11) and has been registered as an investment adviser with
the SEC since May 6, 2014.
44. Velissaris is also an investment adviser within the meaning of Section 202(a)(11)
of the Advisers Act. As the founder, indirect majority owner, and CIO of Infinity Q, Velissaris

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had control over the firm, and his actions and state of mind are imputed to Infinity Q. Velissaris
also acted as an investment adviser to the Infinity Q Funds in his individual capacity and
received compensation for his services through the management fees paid by the Infinity Q
Funds. Velissaris was promoted on Infinity Q’s website and other marketing materials as the
CIO of Infinity Q and held himself out as being in the business of advising the Infinity Q Funds
on investing in securities. Velissaris was also primarily responsible for hiring Infinity Q
personnel.
45. Infinity Q and Velissaris, as investment advisers to the Infinity Q Funds, owed a
fiduciary duty to the Infinity Q Funds.
46. At all relevant times through at least February 21, 2021, the date that he was
placed on administrative leave, Velissaris was responsible for all investment decisions of Infinity
Q.
47. During the Relevant Period, Infinity Q offered two main products, which held the
majority of the assets advised by Infinity Q: (a) the Mutual Fund (launched in 2014); and (b) the
Private Fund (launched in 2017).
48. Through its Mutual Fund, Infinity Q sought to attract retail investors. The Mutual
Fund had thousands of investors, including at least one investor located in this District.
49. Through its Private Fund, Infinity Q sought to attract institutional investors,
which included public pension funds, university endowments, and charitable foundations, among
others. The Private Fund had over 150 investors, including at least one investor located in this
District.
50. Infinity Q represented in marketing materials that it offered retail investors
“access to the top tier investment strategies typically reserved for elite high net worth clients.”

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51. Infinity Q further represented to investors in both the Mutual Fund and the Private
Fund that its “mandate” was “to provide positive absolute returns while having full liquidity and
low average correlation to equity and credit markets.”
52. The Mutual Fund’s and the Private Fund’s portfolios consisted primarily of cash
and a variety of equity and derivative positions, including swaps. The swaps held by the Infinity
Q Funds were predominately variance swaps, the value of which was tied to measures of
volatility.
53. Velissaris operated as the head trader at Infinity Q and was one of three members
of the Infinity Q valuation committee. In practice,  there were no formal valuation committee
meetings since at least approximately 2018. Velissaris was the sole decision-maker at Infinity Q
for the valuation of the Mutual Fund’s and the Private Fund’s positions.
II. Infinity Q’s Purported Valuation Process
A. Valuation Policies and Use of Pricing Service
54. In order to price the OTC derivative positions that constituted a significant portion
of the Funds’ assets, Infinity Q through Velissaris, starting in approximately 2016, identified,
retained, and started using the Pricing Service—a well-known premium service that marketed
itself as providing a comprehensive platform to structure and price derivatives, among other
complex financial instruments.
55. By 2017, the Infinity Q Funds’ administrator (the “Administrator”) directly
accessed from the Pricing Service the values generated through Velissaris’s use of the Pricing
Service and used the reported values to calculate and publish the Mutual Fund’s daily NAV and
to calculate the Private Fund’s monthly profit and loss report.
56. In offering documents, prospectuses, valuation policies, and other documents,

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Velissaris and Infinity Q represented to the Funds’ current and prospective investors how they
would value the Funds’ assets, including how they would seek to “fair value” assets and use an
independent pricing service.
57. For example, Infinity Q represented that Infinity Q Funds’ assets were valued in
accordance with U.S. Generally accepted Accounting Principles (“GAAP”).
58. Accounting Standards Codification Topic 820 (“Topic 820”), Fair Value
Measurement, provides a framework for determining fair value in accordance with GAAP.
59. Topic 820 defines fair value (with the emphasis in the original) as “the price at
which an orderly transaction to sell the asset or to transfer the liability would take place between
market participants at the measurement date under current market conditions (that is, an exit
price at the measurement date from the perspective of a market participant that holds the asset or
owns the liability).”
60. Infinity Q further represented to current and prospective investors in the Mutual
Fund that Infinity Q and the Board of trustees (the “Board”) had established valuation policies
and procedures to purportedly “fair value” portfolio holdings in accordance with the Infinity Q
Funds’ offering documents.
61. In the Mutual Fund’s 2017 and 2018 prospectuses, for example, Infinity Q
represented that “[w]hen market quotations are not readily available, a security or other asset is
valued at its fair value as determined under procedures approved by the Board.”
62. In the Mutual Fund’s prospectus dated December 31, 2019, for example, Infinity
Q represented:
Generally, the Fund’s investments are valued at market value or, in the
absence of a market value, at fair value as determined in good faith by
[Infinity Q] with oversight by the [valuation committee of the Trust]
pursuant to procedures approved by or under the direction of the Board.

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Pursuant to those procedures, [Infinity Q] considers, among other things:
(1) the last sales price on the securities exchange, if any, on which a
security is primarily traded; (2) the mean between the bid and asked
prices; (3) price quotations from an approved pricing service; and (4) other
factors as necessary to determine a fair value under certain circumstances.
63. Many of the Infinity Q Funds’ OTC derivative positions, which constituted a
significant portion of the Funds, did not have readily available market prices. While the
settlement values of such positions are generally agreed upon by the parties at termination (i.e.,
because at that point volatility is fully realized, or known, to the parties), the Mutual Fund still
needed to value its OTC derivative positions on a daily basis to calculate the Mutual Fund’s
NAV, and the Private Fund needed to value the positions on at least a monthly basis to determine
its profit and loss report. As a result, Infinity Q’s valuation process would play a critical role in
valuing these positions prior to their termination.
64. The Infinity Q valuation policy was contained in its compliance manual and in the
Private Fund private placement memorandum (“PPM”) that Infinity Q sent to and used to raise
funds from investors, from 2017 through May 2020.
1F
2
 In its valuation policy, Infinity Q stated
that it utilized “independent sources, such as brokers or pricing services” to value the Private
Fund’s positions.
65. For the OTC derivatives held by the Private Fund, the Infinity Q valuation policy
further represented prior to May 2020, when Velissaris surreptitiously revised the policy, that it
“utilizes [the Pricing Service], Broker Quotes, and Counterparty Valuations to provide a fair
value for these securities.”
66. The Infinity Q valuation policy further provided prior to May 2020, when

2
 Generally, a PPM is an offering document that introduces the investment and discloses information about the
securities offering and the issuer.

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Velissaris surreptitiously revised the policy,  that “[a]t each month end, valuations are compared
to the values provided by counterparties for reasonableness,” and that “[o]nce a price is
established for a portfolio security, it shall be used for all Funds that hold the security.”
67. In its 2019 compliance manual, Infinity Q stated that it utilized “[p]ricing services
and broker dealers” in an “attempt to obtain a minimum of two independent prices” when trying
to “determine the fair value of the instrument,” and “[t]he final price for each position is
typically obtained by calculating the average of the external prices received.” The policy further
stated that “[w]hen multiple independent marks are available, Infinity Q does not mark any
securities higher than the average of the prices obtained.” To the extent the pricing service or
broker quotes “may not provide a reliable indication of fair value, Infinity Q will value such
[p]osition based on relevant information,” including internal or external models or other
appropriate factors. In these circumstances, “[a] written valuation memo/model shall be provided
for model-based prices explaining why the price used reflects fair value of the [p]osition,” unless
the position had “nominal value.” These provisions were also altered when Velissaris
surreptitiously revised the Infinity Q valuation policy in May 2020.
68. In the Mutual Fund’s 2019 and 2020 annual reports and semi-annual reports,
Infinity Q further represented that the Mutual Fund “uses a pricing service to model price the
variance swap trades” and that the Pricing Service “uses quotes from brokers to estimate implied
volatility levels as an input to these models.”
69. In its required reporting on private funds on Form ADV for 2017 through 2020,
Infinity Q represented that 100% of the Private Fund’s assets were valued by a person who was

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not a “related person” of Infinity Q.2F
3

70. In or around March 2018, Velissaris was asked to review a draft of Infinity Q’s
Form ADV, which contained the statement that 100% of the Private Fund’s assets were valued
by a person who was not a “related person” of Infinity Q. On March 29, 2018, Velissaris replied
by email to that request and wrote: “Looks great. I have no updates.” After Velissaris’s sign-off,
the Form ADV was submitted the same day.
B. Infinity Q, through Velissaris, Makes Additional Representations About
Infinity Q’s Valuation Process

71. Velissaris and others at Infinity Q repeatedly referred to Pricing Service-generated
valuations as “independent” prices in communications with, among others, investors, the Board,
and the Auditor.
72. For example, in response to an August 2016 Board inquiry about Infinity Q’s use
of the Pricing Service to price OTC derivatives, Velissaris explained that Infinity Q “provide[s]
the term sheet, and [the Pricing Service] created the pricing model. We have not had any input
into [the Pricing Service’s] models, and they independently provide the values. [The Pricing
Service] also provided the code for the model at the onset for us to have a full understanding of
the methodology.”
73. In other correspondence with the Board in October 2016, Velissaris claimed that
the Mutual Fund’s “positions were valued independently by [the Pricing Service] team,” and
“[w]e were not involved in the valuation process.”
74. In April 2018, Velissaris edited a draft response for the CCO to send to

3
 Form ADV is the uniform form used by investment advisers to register with both the SEC and state securities
authorities.

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representatives of the Administrator, who had inquired about Infinity Q’s valuation process. The
draft response, after Velissaris’s edits, represented: “Infinity Q does not price any securities
ourselves. Prices are either provided by [the Pricing Service] directly to [the Administrator] for
non-vanilla OTC instruments or we forward [Pricing Service] values to [the Administrator] for
positions not requiring [Pricing Service] valuation.” This response was then sent by the CCO to
representatives of the Administrator with Velissaris copied. Representatives of the Administrator
replied to the CCO, with Velissaris copied, that the approach was acceptable to them as long as
Infinity Q was “complete and thorough in your summary.” The Administrator further stated that
“anything that is not downloaded directly from [the Pricing Service] is adviser priced even if you
use models on [the Pricing Service] to complete the valuations. This is due to Infinity Q still
having the ability to change inputs or calibrate any of the models.”
75. In April 2018, Velissaris informed the Auditor that Infinity Q’s variance and
correlation swaps “are modeled independently by [the Pricing Service] and [the Pricing Service]
independently obtains broker implied volatility values (with no input from our team).” In
October 2018, Velissaris informed the Auditor that “[t]he [Pricing Service] team uses a
stochastic model to price these securities.”
76. Velissaris and Infinity Q also repeatedly told investors and provided them with
documents that indicated that Infinity Q had no role in the Pricing Service valuation process, that
the Pricing Service was independent from Infinity Q, and that the Administrator obtained values
directly from the Pricing Service with no Infinity Q involvement. For example, a 2019 due
diligence report prepared by a third-party diligence consultant on behalf of a potential investor in
the Private Fund, reported that Infinity Q represented that, “[i]n practice,” the Administrator, not
Infinity Q, “price[d] the book independently using [the Pricing Service].” According to Infinity

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Q, “[w]hen trades are completed, [Infinity Q] sends [the Pricing Service] the details and [the
Pricing Service] will model the securities independent of [Infinity Q],” and Infinity Q “do[es] not
override [the Pricing Service].” The potential investor subsequently invested in the Private Fund.
77. Similarly, in May 2020, Velissaris told an investor that “[t]he valuation and
reporting for the mutual fund is conducted by [the Administrator].”
III. The Mismarking Scheme
78. The statements made by Velissaris and Infinity Q during the Relevant Period
about Infinity Q’s valuation process, including about the use of the Pricing Service, were false or
misleading. Velissaris knew or recklessly disregarded that he was, in fact, manipulating the
valuations of the Infinity Q Funds’ positions in the Pricing Service and was able to effectively set
the terms and edit computer code to produce valuations of positions at whatever level he desired.
79. There were three primary steps for Velissaris to price an OTC derivative position
held by the Infinity Q Funds through the Pricing Service.
80. First, Velissaris was required to select, from among numerous models available
from the Pricing Service, a model appropriate for the position. For example, the Pricing Service
offered a basic valuation model for a “vanilla” variance swap and a different model for a
“corridor” variance swap, which model would take into account the corridors.
81. Second, upon selecting the appropriate model, Velissaris was required to enter the
terms of the transaction, as reflected in the term sheet or confirmation between Infinity Q and the
broker-dealer counterparty, into a user interface (“User Interface”). The User Interface for a
particular model included fields for the entry of the terms of the transaction. Once the terms were
entered into the fields, they then appeared in the Pricing Service’s User Interface.
82. After the terms of the transaction were entered into the available fields of the User

20
Interface, those terms were automatically mapped, or copied, onto the model’s underlying
computer code that ultimately calculated a valuation for the position ( the “Underlying Valuation
Code”).
83. Finally, to the extent applicable for the position, Velissaris could select a
volatility surface or snapshot from a drop down menu of options available from the Pricing
Service. Volatility, which was derived from the volatility surface, was also a key input for many
of the OTC derivative positions, a significant portion of the holdings of the Infinity Q Funds.
84. After these steps were performed, the model’s Underlying Valuation Code then
calculated a value for the position.
85. In selecting the appropriate model, the Pricing Service provided guidance to
clients, including Velissaris, about the correct model to use for a particular type of derivative
position.
86. For certain OTC derivative transactions, the Pricing Service did not initially have
a standard model, and so Pricing Service engineers would sometimes, at a customer’s request,
derive a custom model to value those positions (a “Custom Model”).
87. Like regular models, Custom Models also allowed a user to enter terms of the
swap transaction into fields in the User Interface. For example, a Custom Model for a corridor
variance swap model provided entry fields for the position’s strike price (a fixed price,
determined at the transaction’s inception), vega notional (the amount paid per 1 percentage point
shift in variance), effective date (when variance begins accruing), termination date (when
variance stops accruing), underlying reference asset (typically an index), corridor boundaries (the
boundaries within which the reference asset must remain to accrue variance), and “scaling
factor” (or “annualization factor, discussed below).

21
88. The Underlying Valuation Code for Custom Models was only viewable to a user
by clicking on a small box on the User Interface, which would then show the underlying code in
a separate window on the user’s screen.
89. Velissaris had the ability to view the Underlying Valuation Code for all Pricing
Service models used by the Infinity Q Funds. Velissaris additionally had the ability to both view
and edit the Underlying Valuation Code in Custom Models that he selected for use by the
Infinity Q Funds. The ability to edit the Underlying Valuation Code was not available on the
standard models available from the Pricing Service.
90. To that end, the Pricing Service included a warning at the bottom of the
Underlying Valuation Code in the Custom Models, which stated that it was the customer’s
responsibility to ensure that the code being used matched the terms of the transaction. The
warning stated: “(*** This [] script is used as an example for illustration purposes. Clients must
make sure that the input parameters entered into the script faithfully represent the term sheet that
they would like to price. ***).”
91. Velissaris saved the initial Custom Models provided by the Pricing Service and
reused them to value new positions as they were added to the Infinity Q Funds’ portfolios.
92. Given the functionality of the Pricing Service, Velissaris had the ability to adjust
inputs and terms entered into the User Interface’s fields on a transaction-by-transaction basis.
Velissaris also had the ability to alter the Underlying Valuation Code in the Custom Models in
order to price positions at more desirable valuations.
93. Velissaris’s scheme to mismark and inflate the Infinity Q Funds’ values included
(a) making changes to the Underlying Valuation Code; (b) entering or changing inputs into the
Pricing Service models that did not match the terms sheets for the positions; (c) selecting

22
improper valuation models for positions; and (d) cherry picking a desirable volatility surface for
pricing.
94. Through most of 2021, when his scheme began to unravel, Velissaris did not
disclose to anyone else at Infinity Q, the Board, the Administrator, the Auditor, or investors the
extent to which he had the ability to, and did, manipulate the Pricing Service, including that he
was editing the Underlying Valuation Code, such that he could effectively determine valuations
for positions himself.
A. Velissaris Manipulated Underlying Valuation Code
95. Velissaris manually accessed and altered the Underlying Valuation Code of the
Custom Models for certain positions, effectively changing the terms of the transactions for
valuation purposes.
96. From at least February 2017 through approximately January 2021, Velissaris was
the only person at Infinity Q who made any edits or changes to any of the Infinity Q Funds’
positions loaded in the Pricing Service.
97. Velissaris knowingly made multiple modifications to the Underlying Valuation
Code of the Custom Models. These modifications had the effect of artificially increasing the
value of certain of the Infinity Q Funds’ variance swap positions as alleged below through at
least mid-February 2021, when Infinity Q revoked Velissaris’s access to the Pricing Service.
1. Alterations to Corridors
98. Generally, corridor variance swaps are derivative products that only pay out if
specified index values remain within a “corridor” defined by an upper and lower bound. For
example, if a variance swap that references the S&P 500 had corridors of 4,250 and 4,750, it
would accrue variance so long as the index remained within that range. If the index, for example,

23
decreased to 4,249 or increased to 4,751, variance would no longer accrue so long as the index
level remained outside of the corridor.
99. When Velissaris purchased a “long” corridor variance swap from a broker-dealer
counterparty, the price paid was determined in part by the corridor boundaries agreed to by the
parties—the wider the corridor, the more likely the reference asset would remain in the corridor,
and the swap would have a greater pay out.
100. In this scheme, Velissaris opened and edited the Underlying Valuation Code of
the Custom Models used for a number of the Infinity Q Funds’ corridor variance swaps.
Velissaris’s edits included widening or even eliminating the effect of the corridors in the
Underlying Valuation Code, and thereby inflating the value of the long corridor variance swaps.
101. Because the corridor ordinarily limits the payout on those swaps (i.e., variance
only accrues to the extent the index remains within the corridor), the effect of these code
modifications was to improperly increase the swaps’ values for a long position (meaning Infinity
Q was the buyer of variance). That is, the wider the corridor, the more likely the index would
remain within its boundaries and, as a result, the higher value the Pricing Service would ascribe
to the position.
102. These inflated values were then included in the Mutual Fund’s daily NAV and
Private Fund’s monthly profit and loss report and otherwise disseminated to investors.
103. When Velissaris made changes to the Underlying Valuation Code, those changes
did not automatically map onto the terms entered into and displayed in the User Interface. By
proceeding in this manner, the Underlying Valuation Code was actually valuing the position with
terms that differed from the terms being displayed in the User Interface.
104. In some instances, Velissaris improperly altered the Underlying Valuation Code

24
by writing into the code an additional amount to be added to an upper corridor and/or subtracted
from a lower corridor, thus widening the corridors. By widening the corridors for long positions,
Velissaris increased the likelihood of the position being in the corridor and thus accruing
additional variance, as well as its value for the Infinity Q Funds.
105. For example, the Private Fund held a certain corridor variance swap that
referenced the EURO STOXX 50 index (“SX5E”) with a strike price of 16.85%, an effective
date of 1/10/20, and a termination date of 12/17/20. The “corridor” for this position was defined
as having a lower bound of 2,652.66 and an upper bound of 4,168.47. According to the
position’s term sheet, the position only accrued variance (that is, payout related to the movement
of the SX5E index) for the Private Fund when the price of the index was within the boundaries of
the corridor from the effective date to the termination date.
106. Velissaris edited the Underlying Valuation Code for this position by writing into
the code a “-2650” to modify the low corridor parameter, which was reflected in the User
Interface as 2650 (already differing from the term sheet lower boundary of 2652.66). As a result
of Velissaris’s edit to the Underlying Valuation Code, the lower corridor of this position was
effectively reduced to zero. As alleged more fully below, when this very position was selected by
the Auditor for independent re-valuation by a third-party expert on or about February 2021,
Velissaris provided the Auditor with a forged term sheet in an attempt to cover-up and perpetuate
his mismarking scheme.
107. An image of the Underlying Valuation Code for this position (taken in March
2021), as altered by Velissaris, appears below in Figure 1. Velissaris’s edit of “-2650” to the
position’s lower bound (“corridor_low” in the code) appears in line 23 of the Underlying
Valuation Code.

25

Figure 1: Extracted Image of Private Fund Position in Pricing Service as of March 2021

108. Velissaris knew or recklessly disregarded that these alterations were
inappropriate. For example, in April 2020, a risk analyst at Infinity Q sent Velissaris a risk
analysis of all of the Infinity Q Funds’ corridor variance swap positions. That analysis indicated
that this position, taking into account the corridors reflected on the term sheet, would be below
the lower bound 34% of the remaining time for the life of the position, meaning that it would not

26
accrue value for that period. By disregarding the lower bound in the code, then, Velissaris
effectively eliminated this possibility and ensured that the position’s value would be inflated.
109. In many instances, Velissaris altered the Underlying Valuation Code to disregard
the corridors altogether. For example, the Mutual Fund held a certain corridor variance swap that
referenced the SX5E index with a strike price of 17%, an effective date of 12/18/20, and a
termination date of 12/16/22. The “corridor” for this position was defined as having a lower
bound of 2,333.8 and an upper bound of 3667.4. According to the position’s term sheet, the
number of “days in range” when the position would accrue variance was defined as when the
price of the index was above the lower bound and below the upper bound (that is, within the
boundaries of the corridor). Velissaris edited the Underlying Valuation Code for this position to
replace a coded “and” with a coded “or.” After Velissaris’s edit, the “days in range” were
triggered on any day the underlying index was either above the lower bound or below the upper
bound—effectively, disregarding the corridor entirely. On or about January 15, 2021, after
obtaining read-only access to the Infinity Q Funds’ portfolios from the Pricing Service, SEC staff
identified this particular coding change and simulated the correct valuation by changing the “or”
back to an “and” in the code. Using the correct valuation code resulted in a reduction of the value
of the position by approximately $5 million.
110. In other instances, Velissaris altered the Underlying Valuation Code to make
worthless positions appear to have value. For example, the Mutual Fund held a certain SX5E
index “up” corridor variance swap position with a strike price of 9.7%, an effective date of
1/14/20, and an expiration date of 6/19/20. Pursuant to the terms of this position, variance would
only accrue if the index was above the lower bound, which was defined as 3,849.97 (the term
sheet did not include an upper bound, which is why it is referred to as an “up” corridor variance

27
swap). On January 14, 2020, the SX5E index closed at 3,774.88, so the position was out of the
money, meaning it was not accruing a payout. However, in the Underlying Valuation Code for
this position, Velissaris wrote into the code a “-200,” so that for valuation purposes the lower
bound became 3,649.97 instead of 3,849.97. The result of this edit was to immediately place the
position in the money, meaning it was accruing a payout. Accordingly, when the position was
added to the Mutual Fund’s portfolio on January 15, 2020, it was marked as having a value of
approximately $274,000, and it was listed in the Mutual Fund’s semi-annual report as having a
value of approximately $342,000 as of 2/29/2020. In fact, the index never actually exceeded the
real lower bound of 3,849.97, the position never accrued any payout, and it expired worthless in
June 2020.
111. Velissaris made these changes to the Underlying Valuation Code frequently for
positions where the changes increased the value of positions and infrequently for positions where
they would have decreased the value of positions.
112. Velissaris acted knowingly or recklessly in connection with the conduct set forth
above.
2. Alterations to Annualization Factors
113. Velissaris also knowingly or recklessly edited Underlying Valuation Code to
improperly alter the “annualization factor” for certain OTC derivatives.
114. Generally, an annualization factor is a standard convention for multiplying
variance by the number of business days in an index’s underlying calendar year. For a U.S .-
based calendar, term sheets typically use an annualization factor or “scaling factor” of 252 days,

28
corresponding to the number of business days in a year.3F
4

115. In numerous instances for both the Mutual Fund and Private Fund, Velissaris
altered the default 252-day annualization factor, including to change the annualization factors
such that they were coded as being greater than 365 days—an impossibility—and even as high as
430 days.
116. As a result of Velissaris’s changes to the annualization factors, the valuation
models did not reflect the actual terms of the transactions. For positions that have a positive
value, increasing the annualization factor will inflate the amount of variance and the value of the
position will also be improperly increased.
117. Velissaris made these code changes frequently for positions where the changes
increased the value of positions and infrequently for positions where they would have decreased
the value of positions.
118. Velissaris acted knowingly or recklessly in connection with the conduct set forth
above.
3. Alterations to Correlation Strike Prices
119. Velissaris also knowingly or recklessly edited Underlying Valuation Code to
improperly alter the strike price for certain correlation swaps (as well as for other swaps held by
the Infinity Q Funds).
120. In a correlation swap, payment to or from a counterparty is based on the realized
correlation between each pair of underlying reference assets listed in the swap’s description,
from effective date until termination date. To calculate the payout for a correlation swap, the

4
 Other regions may vary by a few days from 252, depending on holidays.

29
notional amount of the swap (a reference amount agreed between the parties) is multiplied by the
amount of realized correlation minus the strike price. For a long correlation swap, if the amount
of correlation exceeds the strike, the position has a positive payout. For a short correlation swap,
if the amount of correlation exceeds the strike, the position has a negative payout.  For example, a
correlation swap with a notional amount of $100,000 that had realized correlation of 0.5 and a
strike price of .25 would be worth $25,000 ($100,000 * (.5-.25) = $25,000) for the party holding
the long position at the termination date; the party holding the short position would owe $25,000.
121. For at least two dozen correlation swaps as of December 2020, Velissaris
modified the U nderlying Valuation Code such that the strike price used for valuation purposes
was “shifted,” that is increased or decreased by a certain amount, which had the effect of
inflating the valuation of the swaps held by the Infinity Q Funds.
122. The result of these changes was to improperly increase the value of the positions,
which again resulted in valuation models that did not reflect the actual terms of the transactions.
123. Velissaris made these changes to the Underlying Valuation Code frequently for
positions where the changes increased the value of positions and infrequently for positions where
they would have decreased the value of positions.
124. Velissaris acted knowingly or recklessly in connection with the conduct set forth
above.
B. Velissaris Entered Incorrect Inputs into the Pricing Service
125. Velissaris personally entered the terms of Infinity Q’s OTC derivative positons
into the Pricing Service with virtually no oversight or contemporaneous record.
126. As reflected in the Pricing Service’s audit trail, Velissaris regularly altered the
terms of positions held by the Infinity Q Funds that he had previously loaded into the Pricing

30
Service. Velissaris’s updates included making changes to positions’ notional values, effective
dates, and expiration dates after the positions were initially loaded.
127. At times, Velissaris knowingly or recklessly inputted transaction terms that did
not match the terms of the position’s term sheet.
128. For example, a certain variance swap trade that referenced the iShares MSCI
EAFE ETF with a strike price of 18.4%, an effective date of 3/15/19, and a termination date of
12/17/21, was equally allocated to the Mutual Fund and the Private Fund portfolios in the Pricing
Service. This position was altered hundreds of times by Velissaris in the Mutual Fund’s portfolio
in the Pricing Service, including three different changes to its effective date (3/15/19 changed to
12/17/19; then changed to 2/27/20; then changed to 3/14/19). The same position allocated to the
Private Fund was altered at least a dozen times by Velissaris in the Pricing Service, including
two changes to its effective date after being loaded with an incorrect effective date (3/14/19
changed to 12/13/19; then changed to 3/14/19).
129. Similarly, a certain variance swap that referenced the Russell 2000 index with a
strike price of 22.40%, was added to the Mutual Fund’s portfolio in the Pricing Service with an
effective date of February 18, 2020, rather than the correct December 18, 2020 effective date.
The position was valued by Infinity Q as being worth more than $13 million in May and June
2020 and more than $15 million in July 2020; when the incorrect entry was reversed and the
correct date was entered, the value of the position was reduced to approximately $5 million as of
the end of August 2020.
130. As the terms of any position should have been inputted in accordance with the
position’s term sheet when initially loaded, any changes or updates would be inappropriate
unless the terms of the underlying agreement had also changed (which was not the case for the

31
positions discussed above).
131. Velissaris acted knowingly or recklessly in connection with the conduct set forth
above.
C. Velissaris Chose Improper Models in the Pricing Service
132. Velissaris also selected improper models to value OTC derivative positions held
by the Infinity Q Funds, which inflated the value of those positions.
133. In June 2019, a representative of the Pricing Service Company informed
Velissaris by email that the Pricing Service had “several new and approved” standard models to
value swaps, including a model specifically for corridor variance swaps named “Corridor
Varswap.” The representative stated that Infinity Q should “use these going forward.” In other
words, Velissaris was supposed to stop using the Custom Models that he had been using to price
the corridor variance swaps held by the Infinity Q Funds. But these new standard models
included a feature that would frustrate Velissaris’s scheme: The Underlying Valuation Code
could not be edited by Velissaris.
134. After receiving this email, Velissaris used the new corridor variance swap model
in some instances. However, he primarily continued to utilize and manipulate the Custom
Models, for which he had the ability to alter the Underlying Valuation Code, to value existing
and new corridor variance swaps.
135. For certain corridor variance swap positions, Velissaris went so far as to select
models for a “vanilla” variance swap to value the corridor variance swap. Because a vanilla
variance swap does not have corridor limitations to its payout, the vanilla model did not have the
ability to take the corridors into account.
136. For example, as of November 30, 2020, Velissaris used the correct “Corridor

32
Varswap” model to value 24 corridor variance swaps held by the Mutual Fund; however, at the
same time, Velissaris used Custom Models to value 78 other corridor variance swaps held by the
Mutual Fund, “vanilla” variance swap models to value 19 corridor variance swaps held by the
Mutual Fund, and other improper models to value an additional 35 corridor variance swaps held
by the Mutual Fund.
137. As a result of Velissaris’s improper model selections, the value of positions were
inflated.
138. Velissaris acted knowingly or recklessly in connection with the conduct set forth
above.
D. Velissaris Cherry-Picked Model Assumptions
139. Velissaris also inflated the value of the Infinity Q Funds by cherry-picking
implied volatility—a key input for valuing volatility or variance swaps, which constituted a
significant percentage of the holdings of the Infinity Q Funds.
140. At inception and prior to the effective date of a position, the value of a vanilla
variance swap is primarily derived from the calculation of implied volatility. Within the Pricing
Service models, implied volatility is derived from volatility surfaces. The volatility surfaces are
generated by the Pricing Service based on estimates of observed and simulated option prices for
options of various maturities and strike prices.
141. Over time, the value of a position is increasingly derived from the realized, or
actual, volatility once the effective date of the position has occurred and realized volatility begins
to accrue. Realized volatility is calculated based on the returns of the underlying index or
security and increases as a percentage of the market value of a position as time passes.
142. As Infinity Q stated in the Mutual Fund’s 2020 annual report, “[a] significant

33
change in implied volatility could have a significant impact on the value of a position.”
143. Infinity Q’s contract with the Pricing Service granted it access to market data,
which included as many as 90 different volatility surfaces that could be used to price individual
positions. These different volatility surfaces contained hourly snapshots of option prices (e.g.,
New York 2:00 p.m.; New York 3:00 p.m.; New York 4:00 p.m.;  London 2:00 p.m.; London
3:00 p.m.; London 4:00 p.m., etc.) that were used to derive the implied volatility input.
144. Velissaris could and did select among the volatility surfaces via a pull-down menu
within a Pricing Service interface for each position (i.e., this was not a change the user would
make to the Underlying Valuation Code).
145. Velissaris used this virtually unfettered ability to make and change such selections
to cherry-pick volatility surfaces, which inflated the value of the Funds.
146. The cherry-picking manifested itself in Velissaris making inconsistent volatility
surface selections for similarly situated positions, which had the effect of inflating the value of
the Funds.
147. For any two positions that reference the same underlying index and that have the
same or a similar maturity date, the volatility surface selection should be the same regardless of
whether Infinity Q was long or short in the position.
148. However, in a number of instances, it appears that Velissaris selected different
volatility surfaces depending on whether the positions were long or short. For example, the
Mutual Fund held two variance swaps that referenced the SX5E index, each with a maturity date
of 12/18/2020. As of August 31, 2020, however, the short position used a London 4:00 p.m.
volatility surface and the long position used a London 10:00 a.m. volatility surface.
149. Such inconsistent selections were made by Velissaris in order to improperly affect

34
the valuations of the positions to the Infinity Q Funds’ benefit.
150. Velissaris acted knowingly or recklessly in connection with the conduct set forth
above.
E. In Real Time, Velissaris Knew That He Was Massively Overvaluing
Positions
151. Velissaris knew or at least was reckless and should have known that his changes
to the valuation code, entry of incorrect terms, selection of improper models, and cherry-picking
of volatility surfaces led to a massive and material overvaluation of each of the Infinity Q Funds
by hundreds of millions of dollars. See infra Tables 1 & 2.
152. Velissaris’s manipulation of the Pricing Service generally increased in
conjunction with various reporting deadlines of the Infinity Q Funds. As Velissaris explained to
the CCO in an August 2018 communication, which coincided with the Mutual Fund’s fiscal
year-end: “I have to tighten all of [the Pricing Service] this week . . . So there will be some larger
than normal moves.”
153. Velissaris further ignored numerous red flags indicating that his valuations were
inappropriate,  as alleged below.
1. Disparate Marks between Infinity Q Funds
154. Infinity Q’s disparate valuations of the same position allocated to the Mutual
Fund and the Private Fund are indicative of Velissaris’s mismarking.
155. Generally, Velissaris would negotiate a single variance swap trade with one of
Infinity Q’s counterparties, and upon the confirmation of the trade Velissaris would allocate a
portion of the single trade to the Mutual Fund and a portion to the Private Fund.
156. Accordingly, in Infinity Q’s compliance manual, Private Fund PPMs, and
standard Due Diligence Questionnaire—which was disseminated to potential investors in the

35
Mutual Fund and the Private Fund, counterparties, and others—Infinity Q represented that
“[o]nce a price is established for a portfolio security, it shall be used for all Funds that hold the
security.”
157. In fact, the Mutual Fund (which was required to strike a NAV on a daily basis)
and the Private Fund (where the financial results were calculated on a monthly basis) had widely
disparate marks for some of the same overlapping positions on the same valuation date.
158. For example, a variance swap trade that referenced the iShares MSCI EAFE ETF,
with a strike price of 18.4%, an effective date of 3/15/19, and a termination date of 12/17/21,
discussed supra ⁋ 128, was equally allocated to the Mutual Fund and the Private Fund; however,
this trade was marked at approximately $8.5 million in the Mutual Fund and approximately
$10.7 million in the Private Fund each at end of November 2020. The disparate valuation of this
position between the Infinity Q Funds was contrary to the representations made to investors in
the Private Fund PPMs and the Funds’ Due Diligence Questionnaire and was contrary to Infinity
Q’s compliance manual.
159. These differences were generally a result of Velissaris’s manipulations within the
Pricing Service, as the positions were loaded in separate portfolios in the Pricing Service for the
two Infinity Q Funds.
160. Velissaris did not follow the policy that “[o]nce a price is established for a
portfolio security, it shall be used for all Funds that hold the security.”
161. Velissaris acted knowingly or recklessly in connection with the conduct set forth
above.
2. Mathematically Impossible Valuations
162. As a registered investment company, the Mutual Fund was required to report

36
information about its portfolio holdings to the SEC, which here were available to the public on
the EDGAR system (EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system,
performs automated collection, validation, indexing, acceptance, and forwarding of submissions
by companies and others who are required by law to file forms with the SEC).
163. Certain positions reported by the Mutual Fund were reported at mathematically
impossible valuations, among other problems and inconsistencies.
164. Generally, the potential gain on a vanilla volatility or variance swap is inherently
limited for the party holding the short position because the realized volatility metric cannot be
less than zero. Market volatility is the magnitude or range of price change in a given period of
time. In a hypothetical scenario, it may be zero if the price of the referenced asset or index does
not change over time, but it cannot be negative.
165. Infinity Q, however, reported multiple swaps in the Mutual Fund’s EDGAR
filings that appear to have been valued assuming that volatility would be negative, and, thus, the
reported gain by the Mutual Fund was higher than the maximum possible payout (or the reported
amount was less of a loss than the minimum amount of loss).
166. For example, in the Mutual Fund’s February 29, 2020 semi-annual report, the
Mutual Fund reported two short MXWO variance swaps, one with an effective date of 3/15/19
(marked at over $5.6 million) and the other with an effective date of 3/18/19 (marked at over
$2.8 million). These valuations for the two positions were mathematically impossible because
they required that the implied volatility metric be less than zero, an impossibility.
167. By at least May 2020, Velissaris was made aware of these and other reporting
problems in the Mutual Fund’s EDGAR filings.
168. Velissaris acted knowingly or recklessly in connection with the conduct set forth

37
above.
3. Divergent Counterparty Marks, Margin Call Disputes, and
Settlements
169. Divergent Counterparty Marks. The divergent valuations of these same OTC
derivative positions by Infinity Q’s swap counterparties, which were known to Velissaris, is a
further indication of Infinity Q’s mismarking.
170. Infinity Q and Velissaris were aware that certain of the Infinity Q Funds’
counterparties were ascribing vastly different marks from Infinity Q to the same positions. For
example, in December 2019 the CCO undertook to compare (i) the end-of-day position values
for the Mutual Fund and the Private Fund, obtained from the daily margin reports received from
a certain counterparty, with (ii) the marks of the Infinity Q Funds. The CCO emailed Velissaris
that the marks sourced from the counterparty’s margin reports “differ from [the Pricing Service]
substantially. Please have a look.”
171. Margin Calls. Velissaris was also aware of tens of millions of dollars of margin
calls from Infinity Q’s counterparties related to their divergent valuations of the OTC derivative
positions at issue. Generally, the agreements between the Infinity Q Funds and their
counterparties provided that the counterparties could issue “margin calls” if the market value of a
position fell below a certain amount. Generally, margin calls can occur when a counterparty to a
particular swap trade is able to demand additional cash from Infinity Q when they determine the
value of a particular swap trade decreased. When notified of a margin call by a counterparty,
Infinity Q was required to post additional margin.
172. In March 2020, the Infinity Q Funds were faced with increased market volatility
caused by the COVID-19 pandemic.
173. Beginning in at least March 2020, Infinity Q and multiple of its counterparties

38
engaged in extensive discussions regarding margin call disputes after the counterparties
requested tens of millions of dollars of additional margin from the Infinity Q Funds related to the
OTC derivative positions at issue. These margin calls were based on counterparty marks that
showed the positions were losing value, and which Infinity Q admitted were substantially
different from its own marks.
174. Velissaris acknowledged that the Infinity Q Funds’ and their counterparties had
widely different marks for the OTC derivative positions at issue. For example, on March 13,
2020, Velissaris sent the CCO a communication instructing, “[i]n an environment like this, I
want to partially dispute big [margin] calls,” but acknowledging “[o]ur value deviates from theirs
by 3-7mm [million] per line item.”
175. Even after the March 2020 market volatility event, the disparate marks persisted.
For example, Infinity Q and one of its counterparties entered into multiple “up” corridor variance
swaps referencing the U.S.’s Russell 2000 Index (“RTY”) (that is, the position only accrued
variance when the reference index remained above a certain amount). Infinity Q reported these
positions as having unrealized positive valuations of $15,820,432 and $15,725,293 for Infinity Q
as of May 31, 2020, whereas those same positions were marked by the counterparty as having
unrealized positive valuations of only $71,968 and $65,726, respectively, for Infinity Q as of
June 1, 2020. Similarly, the Mutual Fund’s public filings show an unrealized loss of
($4,682,520) for Infinity Q as of May 31, 2020, for an RTY variance swap with a June 19, 2020,
maturity date; the counterparty marked this position as having an unrealized loss for Infinity Q of
($15,613,979) as of June 1, 2020.
176. Settlements. In addition, certain positions that Infinity Q valued as having a
positive value just days before their termination date expired worthless or at significantly lower

39
values than Velissaris generated through the Pricing Service. For example, in July 2020
Velissaris approved the settlement of a certain correlation swap that expired on July 7, 2020,
despite being informed by the CCO that the “settlement amount is [$]430k worse than
yesterday’s [Pricing Service valuation].”
177. As a result, in order to conceal the losses (i.e., between the marked values and
settlement values when positions matured), Velissaris added new OTC derivative positions and
inflated the valuations as alleged above.
178. Velissaris acted knowingly or recklessly in connection with the conduct set forth
above.
F. Scope of the Mismarking
179. In 2016, Velissaris began using the Pricing Service, and by at least February
2017, Velissaris was knowingly manipulating the Pricing Service in order to inflate the values of
the positions held by the Mutual Fund and the Private Fund.
180. Separate re-valuations of the historical positions held by the Mutual Fund and the
positions held by the Private Fund were conducted by two third-party valuation firms (retained
by the Board and Infinity Q’s new management, respectively). According to those findings,
Velissaris mismarked the Mutual Fund’s and the Private Fund’s positions by more than $1
billion dollars combined as of the end of September 2020.
181. The mismarking over time in the Mutual Fund was material. The mismarking is
reflected in the table below, based on a third-party valuation firm’s recalculation of the Mutual
Fund’s month-end NAV. As reflected in Table 1, at times the Mutual Fund was more than 42%
overvalued.

40
Table 1: Recalculated Mutual Fund NAV
Month End IQ Reported
Mutual Fund NAV
Recalculated
Mutual Fund NAV
Difference Percent
Overvalued
3/31/2017 $156,433,465 $150,494,337 ($5,939,128) 3.80%
6/30/2017 $159,886,216 $150,863,386 ($9,022,830) 5.64%
9/30/2017 $165,306,959 $159,481,674 ($5,825,285) 3.52%
12/31/2017 $173,098,348 $170,922,508 ($2,175,841) 1.26%
3/31/2018 $210,240,557 $207,624,579 ($2,615,978) 1.24%
6/30/2018 $234,320,148 $226,903,459 ($7,416,689) 3.17%
9/30/2018 $310,450,929 $305,244,214 ($5,206,715) 1.68%
12/31/2018 $428,724,464 $407,733,741 ($20,990,723) 4.90%
3/31/2019 $549,812,778 $522,587,676 ($27,225,102) 4.95%
6/30/2019 $626,243,979 $577,016,402 ($49,227,576) 7.86%
9/30/2019 $702,332,704 $637,903,976 ($64,428,728) 9.17%
12/31/2019 $770,265,076 $675,803,617 ($94,461,458) 12.26%
3/31/2020 $1,051,949,041 $604,102,066 ($447,846,975) 42.57%
6/30/2020 $1,367,755,693 $871,450,690 ($496,305,004) 36.29%
9/30/2020 $1,634,510,959 $1,142,723,614 ($491,787,344) 30.09%
12/31/2020 $1,807,630,993 $1,396,584,503 ($411,046,490) 22.74%
2/18/2021 $1,727,194,949 $1,334,262,392 ($392,932,557) 22.75%

182. The mismarking over time in the Private Fund was material. The mismarking is
reflected in the table below, based on a third-party valuation firm’s recalculation of the Private
Fund’s month-end total assets. As reflected in Table 2, at times the Private Fund was more than
137% overvalued.

Table 2: Recalculated Private Fund Total Assets
Month End IQ Reported
Private Fund Assets
Recalculated
Private Fund Assets
Difference Percent
Overvalued
3/31/2017 $15,804,643 $15,073,573 ($731,070) 4.85%
6/30/2017 $22,329,236 $21,424,835 ($904,401) 4.22%
9/30/2017 $25,374,163 $22,209,342 ($3,164,821) 14.25%
12/31/2017 $25,997,988 $21,604,391 ($4,393,596) 20.34%
3/31/2018 $61,234,674 $54,262,369 ($6,972,305) 12.85%
6/30/2018 $64,872,235 $54,978,327 ($9,893,907) 18.00%

41
9/30/2018 $142,796,073 $131,803,572 ($10,992,501) 8.34%
12/31/2018 $199,931,440 $178,721,393 ($21,210,047) 11.87%
3/31/2019 $254,842,728 $221,705,632 ($33,137,096) 14.95%
6/30/2019 $351,156,337 $292,807,701 ($58,348,636) 19.93%
9/30/2019 $401,002,746 $328,179,700 ($72,823,045) 22.19%
12/31/2019 $739,891,190 $635,995,332 ($103,895,858) 16.34%
3/31/2020 $894,138,173 $377,048,061 ($517,090,112) 137.14%
6/30/2020 $1,088,347,495 $584,142,466 ($504,205,029) 86.32%
9/30/2020 $1,136,106,710 $618,013,331 ($518,093,379) 83.83%
12/31/2020 $1,183,716,570 $697,707,143 ($486,009,427) 69.66%
1/31/2021 $1,224,776,684 $737,038,694 ($487,737,990) 66.18%

183. The Infinity Q Funds’ marketing materials claimed that its “risk managed
investment approach” could “underperform equity benchmarks during bull markets,” but its
volatility investment strategy “seeks to offer protection during volatile market environments”
and, thus, “may outperform during global equity market sell-offs” (emphasis in original).
184. In fact, as a result of Velissaris’s overvaluation of the portfolio, Infinity Q
reported strong (albeit fake) returns in all markets.
185. As of the end of March 2020, as a result of Velissaris’s mismarking, Infinity Q
reported year-to-date returns for institutional class shares in the Mutual Fund of 8.95%, one-year
returns of 10.61%, three-year returns of 8.72%, and five-year returns of 7.28%. By contrast, the
hedge fund index to which Infinity Q compared itself (i.e., its benchmark) reported year-to-date
returns of negative 8.98% (that is, a loss of 8.98%), one-year returns of negative 4.32%, three-
year returns of 0.36%, and five-year returns of 0.24%.
186. As of the end of March 2020, as a result of Velissaris’s mismarking, Infinity Q
reported year-to-date returns in the Private Fund of 5.63%, one-year returns of 17.57%, and two-
year returns of 18.35%. By contrast, the hedge fund index that Infinity Q compared itself to
reported year-to-date returns of negative 8.98%, one-year returns of negative 4.32%, and two-

42
year returns of negative 2.09%.
187. The Mutual Fund grew steadily in the first few years from its launch in 2014,
from a reported NAV of $173 million at the end of 2017, to $428 million at the end of 2018, and
to $770 million at the end of 2019.
188. Similarly, the Private Fund, launched in 2017, also grew steadily from a reported
total assets of $25 million at the end of 2017, to $199 million at the end of 2018, and to $739
million at the end of 2019.
189. By the end of 2020, the Mutual Fund’s reported NAV had more than doubled to
$1.8 billion, and the Private Fund’s reported total assets had increased by more than $440 million
to $1.183 billion.
190. On February 18, 2021, the day before the Mutual Fund suspended redemptions,
its reported NAV was approximately $1.727 billion.
4F
5
 The Private Fund reported approximately
$1.224 billion of total assets as of January 31, 2021.
G. Velissaris Mismarked Positions to Attract Subscriptions, Forestall
Redemptions, and Enrich Himself and Infinity Q

191. Velissaris’s knowing manipulation of the Infinity Q Funds’ OTC derivative
positions in the Pricing Service led to Infinity Q Funds’ reporting illusory performance, which
resulted in additional subscriptions and significant additional fees to Infinity Q and to Velissaris.
192. Velissaris’s mismarking was at all times material and greatly increased after the
March 2020 market volatility event related to the COVID-19 pandemic.
193. During this time period, while multiple competitors of Infinity Q failed or

5
 The Mutual Fund had been closed to new investment since December 31, 2020, due to the identification of certain
variance swap valuation issues related to the SEC’s investigation.

43
struggled, the Mutual Fund and Private Fund faced tens of millions of dollars of margin calls
concerning OTC derivative positions that were losing value, and the Infinity Q Funds began to
run out of cash. See supra Section III.E.3.
194. On March 13, 2020, Velissaris admitted to the CCO in a communication that “we
just didn’t structure the book optimally for a scenario like this.”
195. Velissaris, concerned about the ability of the Infinity Q Funds to continue,
initially tried to obtain a $100 million loan from affiliates of its partial owner in order to meet
tens of millions of dollars of margin calls from multiple Infinity Q counterparties.
196. On March 18, 2020, the CCO sent a communication to Velissaris regarding the
proposed loan and asked: “[H]ow much do we need . . . in your opinion[?]” Velissaris
immediately responded: “100 mm,”  meaning $100 million.
197. In response to the CCO’s inquiry, Velissaris further replied that Infinity Q’s
business development employee was “pushing to get [$]120 [million] in the door on 4/1” as an
alternative.
198. On March 23, 2020, Velissaris sent the CCO a communication regarding the
ongoing margin calls and dire cash situation, and stated: “The problem is we don’t have enough
cash to do more than 30-40 mm [million] i[n] settlements in day.”
199. The $100 million loan did not materialize, and Velissaris increased his
mismarking to attract additional investor inflows and forestall investor redemptions.
200. The mismarking allowed the Infinity Q Funds to attract hundreds of millions of
dollars of additional funds from investors. These funds helped the Mutual Fund and Private Fund
survive tens of millions of dollars of margin calls, which threatened to cause Infinity Q to fail.
201. Velissaris’s mismarking, in turn, caused the Infinity Q Funds to pay excess

44
management and performance fees to Infinity Q.
202. Both the Mutual Fund and the Private Fund paid Infinity Q management fees
based on the entities’ respective assets under management, and the Private Fund paid Infinity Q
performance fees as a percentage of the fund’s annual returns.
203. Profits from these excessive management and performance fees were distributed
to Infinity Qs owners including Infinity Q Management Equity, which was majority owned by
Velissaris.
H. Misrepresentation of Performance and Other Information to Investors and
the Board

204. In addition to the misrepresentations alleged above concerning valuation policies,
Infinity Q and Velissaris also knowingly disseminated false and misleading information about
the Infinity Q Funds’ NAV or total assets, performance, and the terms of investment to current
and prospective investors and the Board. For example, from at least 2017, Infinity Q and
Velissaris marketed the Mutual Fund and, later, the Private Fund, by creating and disseminating
marketing materials, fact sheets, presentations, and risk reports that were sent to prospective
investors touting the inflated values as alleged above.
205. These marketing materials also conspicuously displayed tables and charts
reflecting the Mutual Fund’s and the Private Fund’s inflated quarterly and/or monthly track-
record of returns and purported outperformance of certain benchmark indices.
206. The inflated performance was also touted in Infinity Q’s letter to investors at the
beginning of the Mutual Fund’s annual report.
207. Infinity Q also provided the Mutual Fund’s and the Private Fund’s investors and
the Board with materially misstated audited financial statements for at least the years ended
August 31, 2019 and 2020, for the Mutual Fund, and December 31, 2019, for the Private Fund.

45
208. Infinity Q also disseminated Private Fund PPMs containing misrepresentations
regarding its valuation policy and, later, the valuation policy Velissaris had altered to mislead the
SEC, as further alleged below.
209. Velissaris acted knowingly or recklessly in connection with the conduct set forth
above.
IV. Attempts to Conceal the Mismarking Scheme

A.  Velissaris’s Attempts to Mislead the Auditor
210. Velissaris altered key documents in an attempt to mislead the Auditor about
certain positions selected for re-valuation by the Auditor’s third-  party valuation expert.
211. In connection with the Mutual Fund’s 2020 year-end audit, as part of its testing
procedures, the Auditor selected a certain corridor variance swap position to be revalued by an
independent valuation expert. The selected position was a corridor variance swap that referenced
the SX5E index with an effective date of 2/4/20 and a termination date of 12/18/20, which was
reported as having a value of more than $22 million in the Mutual Fund’s annual report.
Velissaris had manipulated the Underlying Valuation Code for this position such that the
corridors were not being properly taken into consideration in the Mutual Fund’s valuation.
212. Velissaris was informed of the selection of this position for independent valuation
in an email from the Auditor on the morning of Friday, September 18, 2020.
213. Velissaris, in order to conceal the mismarking of this position, then edited the
term sheet for the position by deleting the actual lower corridor and replacing it with a reduced
lower corridor, such that in the new, forged version of the term sheet, the index would have been
within the corridor for almost the entire life of the position.
214. Infinity Q had previously uploaded this position’s term sheet to the Auditor’s
client portal. Upon learning of the selection, Velissaris instructed other individuals at Infinity Q

46
to remove the original term sheet for the position and upload in its place Velissaris’s forged
version of the term sheet (in the format of a .pdf file).
215. Also on September 18, 2020, after the original term sheet was replaced with the
altered term sheet, Velissaris emailed the Auditor: “We noticed several [term sheets] that needed
to be updated. [Infinity Q employees] just updated and the current files should be correct.”
216. The Auditor then provided the altered version of the term sheet to their valuation
expert who was thus able to calculate a valuation close to Infinity Q’s for that position.
217. Based on the recent re-valuation of this position by a third-party valuation firm
retained by the Board, which was based on the actual term sheet, the value of the position as of
8/31/2020 was, in fact, only $4.569 million, not more than $22 million as valued by Infinity Q.
In December 2020, the realized value of the position at settlement was only approximately $4
million.
218. According to the Pricing Service audit log, Velissaris also updated and repriced
this position in the Pricing Service on Monday, September 21, 2020.
219. In February 2021, Velissaris engaged in similar conduct in connection with the
Private Fund’s 2020 year-end audit. For example, the Auditor selected for independent re-
valuation another corridor variance swap position, which referenced the SX5E index with a
1/10/20 effective date and 12/17/20 termination date to be re-valued by an independent valuation
expert.
220. Infinity Q  had previously uploaded this position’s term sheet to the Auditor’s
client portal. Upon learning of the selection, Velissaris himself deleted the original term sheet for
the position from the Auditor’s client portal. Velissaris   once again edited the term sheet for the
position by deleting the actual lower bound for the position and replacing it with a reduced lower

47
bound. According to the Auditor’s audit log for the client portal, Velissaris himself then
uploaded the new, forged term sheet (in the form of a .pdf file) to the Auditor’s client portal.
221. The Auditor noticed that new versions of term sheets had been uploaded to the
client portal and wrote to Velissaris: “I noticed that the trade confirms that were originally
provided on our Client Portal were deleted and replaced with new versions yesterday. Just
wanted to check with you to see if there were any issues with the trade confirms that were
deleted?”
222. In response, Velissaris did not disclose that he had removed the correct term sheet
and replaced it with a forged term sheet. Instead, Velissaris replied: “We were finalizing our
review and wanted to make sure the final versions were uploaded.”
223. Velissaris submitted the forged term sheet with a reduced lower bound to the
Auditor because he had previously manipulated the Underlying Valuation Code for this very
position, as alleged above. As alleged above, Velissaris had coded an additional “-2650” to the
lower corridor in the Underlying Valuation Code, which meant that the valuation would
effectively disregard the lower corridor. If the Auditor had received the actual term sheet, its
valuation expert would have arrived at a much different valuation than Infinity Q.
224. Velissaris acted knowingly or recklessly out of a concern that, i  f the Auditor
properly tested these positions, his scheme may have been uncovered.
B. Velissaris’s Attempts to Mislead the SEC
225. During the SEC’s investigation, Velissaris also attempted to mislead the SEC
about his use of the Pricing Service to value the positions at issue.
226. In response to the SEC’s initial requests for valuation policies and procedures and
offering materials in May 2020, Velissaris did not produce the documents that had been sent to

48
investors by Infinity Q. Instead, Velissaris edited the valuation policy sections of the policies and
procedures and PPMs, while keeping the as-of dates on the documents and without indicating
that he had made changes. Velissaris’s edits placed additional emphasis on Infinity Q’s use of the
Pricing Service (while not disclosing his control and active manipulation of its models) and
eliminated the role of counterparty marks and broker quotes, which were widely divergent from
Infinity Q’s marks, in the valuation process. Velissaris also removed the provision that “[o]nce a
price is established for a portfolio security, it shall be used for all Funds that hold the security.”
227. In response to a subsequent request by the SEC for valuation committee minutes,
Velissaris drafted and backdated committee minutes for meetings that had not occurred and
submitted them to the staff without indicating he had recently created the minutes.
228. The SEC staff interviewed Velissaris on two occasions in November 2020.
Despite multiple questions posed to Velissaris during the two interviews about how he valued
positions and his use of the Pricing Service, Velissaris did not tell the SEC staff that he could and
did change the Underlying Valuation Code in the Pricing Service, that he selected models that
were not appropriate for the transactions at  issue, or that he entered terms into the Pricing
Service that differed from actual terms sheets.
229. In connection with the second interview, Infinity Q also produced to the SEC
what purported to be screenshots of the standard and custom models it was using in the Pricing
Service to value certain positions identified by the SEC staff. These screenshots, however, were
only of the Pricing Service’s User Interface and, thus, included the fields that showed the terms
of the transactions that Velissaris entered into the model. These screenshots misleadingly omitted
the Underlying Valuation Code, which would have revealed that the position was actually being
valued using terms that differed from the terms reflected in the User Interface. For a certain

49
corridor variance swap position, the terms of the corridors as reflected in the screenshots
submitted to the SEC staff were different from what were actually being used in calculation by
the Underlying Valuation Code. In fact, Velissaris had altered the Underlying Valuation code to
disregard the corridors.
230. On February 11, 2021, after obtaining read-only access to the Infinity Q Funds’
portfolios from the Pricing Service, SEC staff informed Infinity Q’s counsel that it had identified
certain changes made by Velissaris to the Underlying Valuation Code for positions held by the
Infinity Q Funds.
231. In February 2021, when Velissaris knew his scheme was about to be discovered,
he took an unprecedented profits distribution from Infinity Q. On February 11, 2021, Velissaris
effectively transferred to Infinity Q Management Equity, which Velissaris controlled, $7.2
million in fees that had been generated from the inflated valuations of the Mutual Fund and
Private Fund. In the days preceding the distribution, Velissaris forged and then submitted term
sheets to the Auditor, in an attempt to mislead the Auditor about certain positions selected for re-
valuation by the Auditor’s third-party valuation expert, as alleged supra. On February 8,
Velissaris was also informed by a representative of the Board that they had been asked by the
Auditor to “test that the inputs for the models in [the Pricing Service] match the term sheets
across a sampling of positions,” and to “represent that we have also tested and not found any
exceptions,” which Velissaris tried to resist. The February 2021 distribution came as a surprise to
others at Infinity Q, and it was the first time that Velissaris had ever effected a distribution in the
month of February.
232. On February 12, 2021, Infinity Q’s counsel told SEC staff for the first time that
Infinity Q could view and change the Underlying Valuation Code. Infinity Q’s counsel further

50
stated that, from its understanding: (a) changes were made to positions as part of a normal daily
process; (b) it was believed that Velissaris made the changes; (c) the changes did not have a
material impact on valuations; and (d) Infinity Q was putting into place remediation around code
changes.
233. On February 18, 2021, SEC staff were informed by Velissaris’s personal counsel
that his client did in fact make alterations to the Underlying Valuation Code used to value
Infinity Q’s corridor variance swaps. According to Velissaris’s counsel, Velissaris made such
changes in order to achieve a valuation his client thought appropriate.
234. On February 19, 2021, Infinity Q’s counsel informed SEC staff that Infinity Q
had identified that Velissaris was trying to make an unauthorized change in the Pricing Service
to the Infinity Q Funds’ portfolios.
235. On February 19, 2021, Infinity Q revoked Velissaris’s ability to access the Pricing
Service.
236. On February 22, 2021, the SEC approved Infinity Q’s application to suspend
redemptions in the Mutual Fund. In that application, Infinity Q and the Board stated:
Based on information learned by the Commission staff and shared
with Infinity Q, Infinity Q informed the [Mutual] Fund that Infinity
Q’s Chief Investment Officer had been adjusting certain
parameters within the third-party pricing model that affected the
valuation of the Swaps. Applicants state that on February 19, 2021,
Infinity Q informed the [Mutual] Fund that at such time it was
unable to conclude that these adjustments were reasonable, and,
further, that it was unable to verify that the values it had previously
determined for the Swaps were reflective of fair value. Applicants
state further that Infinity Q also informed the [Mutual] Fund that it
would not be able to calculate a fair value for any of the Swaps in
sufficient time to calculate an accurate NAV for at least several
days.
237. Velissaris acted knowingly or recklessly in connection with the conduct set forth
above.

51

V. Velissaris’s Criminal Conviction
238. On February 17, 2022, the U.S. Attorney’s Office for the Southern District of
New York unsealed an indictment against Velissaris for his role in the mismarking scheme
affecting the Infinity Q Funds. United States v. Velissaris, 22 cr. 105 (S.D.N.Y.) ( DLC).
239. On November 21, 2022, Velissaris pleaded guilty to one count of securities fraud
in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. At his plea
hearing, Velissaris admitted to his conduct in an allocution under oath, including as follows:
“I made false statements of material fact to investors in the Infinity Q funds that I
managed, and I did so knowingly, willfully, and with the intent to defraud.
Specifically, I told investors that I was using an independent Bloomberg system to
value the fund’s over-the-counter derivatives. However, I was making manual
adjustments in the system which increased the values of over-the-counter derivative
positions that were reported. I knew that if I disclosed what I was doing, investors
might have decided to redeem their investments or maybe would not have made the
investments in the first place. . . . I acknowledge that my actions caused investors to
lose money.”

240. On April 7, 2023, Velissaris was sentenced to 180 months imprisonment for his
role in the mismarking scheme.
VI. WPH
241. When Infinity Q was formed in 2014, WPH provided it with $2 million in seed
capital. Between 2014 and 2019, WPH also advanced to Infinity Q approximately $10 million to
pay certain Infinity Q employee compensation and expense reimbursements and other expenses.
242. Between 2019 and 2021, Infinity Q made distributions to WPH of $19,152,899 in
cash and $2.4 million in paid in kind shares in the Private Fund (the “PIK Shares”), for a total of
$21,552,899 in connection with WPH’s ownership interest in Infinity Q. The distributions were
derived from Infinity Qs management and performance fees received from the Funds.

52
243. WPH has deposited into escrow $15,650,000 into a class action settlement fund in
the consolidated class action titled In re Infinity Q Diversified Alpha Fund Securities Litigation,
Index No. 651295/2021 (N.Y. Sup.), and has relinquished its right to obtain any distribution on
account of its PIK shares.
FIRST CLAIM FOR RELIEF
(Against Defendant Only)
Violations of Section 17(a) of the Securities Act
244. The SEC realleges and incorporates by reference here the allegations in
paragraphs 1 through 243.
245. By engaging in the acts and conduct described in this Complaint, Defendant,
directly or indirectly, singly or in concert with others, in the offer or sale of securities and by
use of the means or instruments of transportation or communication in interstate commerce or
by use of the mails: (a) knowingly or recklessly employed devices, schemes, and artifices to
defraud; (b) knowingly, recklessly or negligently obtained money or property by means of
untrue statements of a material fact or omissions of a material fact necessary in order to make
the statements made, in light of the circumstances under which they were made, not misleading;
and/or (c) knowingly, recklessly, or negligently engaged in transactions, practices, or courses of
business which operated or would operate as a fraud or deceit upon purchasers of such
securities..
246. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert,
has violated and, unless enjoined, will again violate Securities Act Section 17(a) [15 U.S.C.
§ 77q(a)].
SECOND CLAIM FOR RELIEF
(Against Defendant Only)
Violations Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder

247. The SEC realleges and incorporates by reference here the allegations in

53
paragraphs 1 through 243.
248. By engaging in the acts and conduct described in this Complaint, Defendant,
directly or indirectly, singly or in concert, in connection with the purchase or sale of securities
and by the use of the means or instrumentalities of interstate commerce, or the mails, or the
facilities of a national securities exchange, knowingly or recklessly (1) employed one or more
devices, schemes, or artifices to defraud; (2) made one or more untrue statements of a material
fact or omitted to state one or more material facts necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading; and/or (3)
engaged in one or more acts, practices, or courses of business which operated or would have
operated as a fraud or deceit upon other persons.
249. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert,
has violated and, unless enjoined, will again violate Exchange Act Section 10(b) [15 U.S.C.
§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
THIRD CLAIM FOR RELIEF
(Against Defendant Only)
Violations of Advisers Act Section 204(a) and Rule 204-2 Therunder

250. The SEC realleges and incorporates by reference here the allegations in
paragrapsh 1 through 243.
251. At all relevant times, Defendant was an investment adviser under Advisers Act
Section 202(11) [15 U.S.C. § 80b-2(a)(11)].
252. By engaging in the acts and conduct described in this Complaint, Defendant
directly or indirectly, while acting as an investment adviser, by use of the mails or the means and
instrumentalities of interstate commerce, (1) failed to make and keep required books and records
related to Defendant’s advisory business; and failed to furnish to the SEC copies of books and

54
records that Infinity Q was required to make, keep, and provide to representatives of the SEC
upon request.
253. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert,
has violated and, unless enjoined, will again violate Advisers act Section 204(a) [15 U.S.C. § 80-
b-  4(a)] and Rule 204-2 thereunder [17 C.F.R. § 275.204-2].
FOURTH CLAIM FOR RELIEF
(Against Defendant Only)
Violations of Advisers Act Sections 206(1) and (2)

254. The SEC realleges and incorporates by reference here the allegations in
paragraphs 1 through 243.
255. Defendant owed the Infinity Q Funds a fiduciary duty of utmost good faith and
had an affirmative duty to make full and fair disclosure of all material facts, as well as a duty to
act in the fund’s best interests.
256. By engaging in the acts and conduct described in this Complaint, Defendant,
directly or indirectly, singly or in concert, while acting as an investment adviser, by use of the
mails or the means and instrumentalities of interstate commerce, has: (i) knowingly or recklessly
employed devices, schemes, or artifices to defraud clients or prospective clients, and/or (ii)
knowingly, recklessly, or negligently engaged in transactions, practices, and courses of business
which operated or would have operated as a fraud or deceit upon clients or prospective clients.
257. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert,
has violated and, unless enjoined, will again violate Advisers Act Sections 206(1) and (2) [15
U.S.C. §§ 80b-6(1) and 80b-6(2)].

55
FIFTH CLAIM FOR RELIEF
(Against Defendant Only)
Violations of Advisers Act Section 206(4) and Rule 206(4)-7

258. The SEC realleges and incorporates by reference here the allegations in
paragraphs 1 through 243.
259.  By engaging in the acts and conduct described in this Complaint, Defendant,
knowingly, recklessly, and/or negligently, provided investment advice to its clients without
adopting and implementing written policies and procedures reasonably designed to prevent
violation, by Defendant and Defendant’s supervised persons, of the Advisers Act and the rules
promulgated under the Advisers Act.
260. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert,
has violated, and unless enjoined, will again violate Section 206(4) of the Advisers Act [15
U.S.C. § 80b-6(4)] and Rule 206(4)-7 thereunder [17 C.F.R. § 275.206(4)-7].
SIXTH CLAIM FOR RELIEF
(Against Defendant Only)
Violations of Advisers Act Section 206(4) and Rule 206(4)-8 Thereunder

261. The SEC realleges and incorporates by reference here the allegations in
paragraphs 1 through 243.
262. Each of the Infinity Q Funds was a pooled investment vehicle within the meaning
of Rule 206(4)-8(b) of the Advisers Act [17 C.F.R. § 275.206(4)-8(b)]. Each of the Funds was
engaged in, held itself out as being engaged primarily, and proposed to engage itself primarily in
the business of investing, reinvesting, and/or trading in securities, and thus was an investment
company as defined in Section 3(a) of the Investment Company Act of 1940 [15 U.S.C. § 80a-
3(a)] or would have been an investment company under that provision but for the exclusion
provided from that definition under either Section 3(c)(1) or Section 3(c)(7) of the Investment

56
Company Act of 1940 [15 U.S.C. § 80a-3(c)(1) & (7)].
263. By engaging in the acts and conduct described in this Complaint, Defendant,
directly or indirectly, singly or in concert, while acting as an investment adviser to a pooled
investment vehicle, knowingly, recklessly, or negligently (i) made an untrue statement of
a material fact or omitted to state a material fact necessary to make the statements made, in the
light of the circumstances under which they were made, not misleading, to any investor or
prospective investor in the pooled investment vehicle; and/or (ii) engaged in acts, practices, or
courses of business which were fraudulent, deceptive, or manipulative, with respect to an
investor or prospective investor in the pooled investment vehicle.
264. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert,
has violated and, unless enjoined, will again violate Advisers Act Section 206(4) [15 U.S.C. §
80b-6(4)] and Rule 206(4)-8(a) thereunder [17 C.F.R. § 275.206(4)8].
SEVENTH CLAIM FOR RELIEF AGAINST DEFENDANT
(Against Defendant Only)
Violations of Advisers Act Section 207

265. The SEC realleges and incorporates by reference here the allegations in
paragraphs 1 through 243.
266. By engaging in the acts and conduct described in this Complaint, Defendant,
directly or indirectly, singly or in concert, by use of the mails, and the means and
instrumentalities of interstate commerce, willfully made untrue statements of material fact in,
and omitted to state material facts required to be stated in, reports required to be filed with the
SEC under Section 203 of the Advisers Act. A Form ADV is a registration application or report
filed with the Commission pursuant to Section 203 of the Advisers Act.
267. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert,

57
has violated and, unless enjoined, will again violate Advisers Act Section 207 [15 U.S.C. § 80b-
7].
EIGHTH CLAIM FOR RELIEF
(Against Defendant Only)
Violations of Investment Company Act Section 34(b)

268. The SEC realleges and incorporates by reference here the allegations in
paragraphs 1 through 243.
269. The Mutual Fund is an “investment company” as defined by Section 3(a)(1) of the
Investment Company Act [15 U.S.C. § 80a-3].
270. By engaging in the acts and conduct described in this Complaint, Defendant,
directly or indirectly, singly or in concert, made untrue statements of material fact in a
registration statement or filing under the Investment Company Act, and/or filed, transmitted, or
kept documents which omitted to state any fact necessary in order to prevent the statements
made, in the light of the circumstances under which they were made, from being materially
misleading.
271. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert,
has violated and, unless enjoined, will again violate Investment Company Act Section 34(b) [15
U.S.C. § 80a-33].
NINTH CLAIM FOR RELIEF
(Against Defendant Only)
Aiding and Abetting Violations of Investment Company Act Rule 22c-1

272. The SEC realleges and incorporates by reference here the allegations in
paragraphs 1 through 243.
273. The Mutual Fund is an “investment company” as defined by Section 3(a)(1) of the
Investment Company Act [15 U.S.C. § 80a-3].

58
274. By engaging in the acts and conduct described in this Complaint, the Mutual Fund
sold, redeemed, or repurchased its redeemable security at a price other than the price based on the
current net asset value of such security that is next computed after receipt of a tender of the
security for redemption or of an order to purchase or sell the security.
275. By reason of the foregoing, Defendant, directly or indirectly, singly or in
concert, aided and abetted the Mutual Fund’s violations of Investment Company Act Rule 22c-1
[17 C.F.R. § 270.22c-1] by knowingly or recklessly providing substantial assistance to the Mutual
Fund’s violations pursuant to Section 48(b) of the Investment Company Act [15 U.S.C. § 80a-
47(b)], and unless enjoined, will again aid and abet violations of this provision.
PRAYER FOR RELIEF
 WHEREFORE, the SEC respectfully requests that the Court enter a Final Judgment:
I.
Permanently enjoining Defendant and its agents, servants, employees and attorneys and
all persons in active concert or participation with any of them from violating, directly or
indirectly, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)], Section 10(b) of the
Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], Sections
204(a), 206(1), 206(2), 206(4) and 207 of the Advisers Act [15 U.S.C. §§ 80b-4(a), 80b-6(1),
80b-6(2), 80b-6(4), 7 80b-6(7)], and Rules 204-2(a), 206(4)-7, and 206(4)-8 thereunder [17
C.F.R. § 275.206(4)8], and Section 34(b) of the Investment Company Act [15 U.S.C. §§ 80a-33,
80a-36], and from aiding and abetting violations of Rule 22c-1 under the Investment Company
Act [17 C.F.R. § 270.22c-1];
II.

59
Ordering Defendant to disgorge all ill-gotten gains it received directly or indirectly, with
pre-judgment interest thereon, as a result of the alleged violations;
III.
Ordering Defendant to pay civil monetary penalties under Securities Act Section 20(d)
[15 U.S.C. § 77t(d)], Exchange Act Section 21(d)(3) [15 U.S.C. § 78u(d)(3)], Advisers Act
Section 209(e) [15 U.S.C. § 80b-9(e)], and Investment Company Act Section 42(e) [15 U.S.C. §
80a-41(e)];
IV.
Ordering the appointment of an independent Monitor to oversee a claims and distribution
process for the Private Fund.
         V.
Ordering Relief Defendant to pay disgorgement and prejudgment interest.
VI.
 Granting any other and further relief that may be appropriate and necessary for the
benefit of investors.

JURY DEMAND

 The SEC demands a trial by jury.
Dated:  New York, New York
 June 16, 2023

     ___________________
     Andrew Dean
     Osman Nawaz*
     Joshua Brodsky
     Preethi Krishnamurthy

60
     Alistaire Bambach
     Neal Jacobson
     Zachary Sturges
     Ariana Torchin
     Attorneys for Plaintiff
     SECURITIES AND EXCHANGE COMMISSION
     100 Pearl Street
     Suite 20-100
     New York, New York 10004
     (212) 336-0095 (Jacobson)
     Email:[email protected]
     *Not admitted to U.S.D.C for the S.D.N.Y.

Andrew Dean 
Osman Nawaz* 
Joshua Brodsky 
Preethi Krishnamurthy  
Alistaire Bambach 
Neal Jacobson 
Zachary Sturges 
Ariana Torchin 
Attorneys for Plaintiff 
SECURITIES AND EXCHANGE COMMISSION 
New York Regional Office 
100 Pearl Street 
Suite 20-100 
New York, New York 10004 
(212) 336-0095 (Jacobson)  
Email: [email protected] 
*Not admitted to U.S. District Court for the S.D.N.Y. 
 
UNITED STATES DISTRICT COURT 
SOUTHERN DISTRICT OF NEW YORK 
 
SECURITIES AND EXCHANGE 
COMMISSION, 
 
   Plaintiff, 
 
  -against- 
 
INFINITY Q CAPITAL MANAGEMENT, LLC,  
  
   Defendant, 
 
                        -and- 
 
WILDCAT PARTNER HOLDINGS, LP, 
 
                                    Relief Defendant. 
 
 

 
 
COMPLAINT 

   
23-Civ. ____ (    ) 

 
ECF CASE 
JURY TRIAL DEMANDED 
  

 
  

 
Plaintiff Securities and Exchange Commission (“SEC”), for its Complaint against 

Defendant Infinity Q Capital Management, LLC (“Infinity Q” or “Defendant”), and Relief 

Defendant, Wildcat Partner Holdings, LP (“WPH”) (F/K/A Bonderman Family Limited 

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mailto:[email protected]


 
 

2 

Partnership), against which the SEC seeks to recover distributions made to it by Infinity Q, 

alleges as follows: 

SUMMARY 

1. SEC-registered investment adviser Infinity Q engaged in a fraudulent scheme that 

inflated by more than $1 billion the value of assets held by a mutual fund (the “Mutual Fund”)  

and a hedge fund (the “Private Fund”) Infinity Q advised (collectively, the “Infinity Q Funds” or 

the “Funds”). 

2. Infinity Q’s fraudulent scheme was conducted through acts committed by James 

Velissaris (“Velissaris”), Infinity Q’s founder and former chief investment officer (“CIO”), who 

pleaded guilty to securities fraud in connection with the scheme on November 21, 2022 and was 

sentenced to 180 months imprisonment on April 7, 2023. 

3. From at least February 2017 through February 2021 (the “Relevant Period”), 

Infinity Q represented to investors and others that certain holdings of the Infinity Q Funds were 

valued by an “independent” third party pricing service (the “Pricing Service”). In fact, Infinity Q 

was actively manipulating the valuation models available from the Pricing Service and altering 

inputs to mask the poor performance of the Funds.  

4. Unbeknownst to investors, Infinity Q knowingly inflated the Funds’ stated 

valuations in at least four ways during the Relevant Period. Infinity Q manipulated computer 

code to cause the valuation models to disregard certain information, entered inputs it knew were 

incorrect into the Pricing Service, selected certain valuation models in the Pricing Service that it 

knew could not properly value the relevant positions, and knowingly cherry-picked one of the 

key valuation inputs. 

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5. Despite inflating the Infinity Q Funds’ valuations by manipulating the Pricing 

Service, Infinity Q repeatedly told investors, the Mutual Fund’s board of trustees (the “Board”), 

and the Funds’ auditor during the Relevant Period that Infinity Q had no role in the Pricing 

Service valuation process, that the Pricing Service and the values it produced were independent 

from Infinity Q, and that the Infinity Q Funds’ administrator (the “Administrator”) obtained 

values directly from the Pricing Service with no Infinity Q involvement.  

6. Infinity Q’s pricing manipulations materially inflated the Mutual Fund’s net asset 

values (“NAVs”) and the Private Fund’s total assets, as well as the Funds’ reported performance, and 

Infinity Q disseminated false and misleading information about the Infinity Q Funds’ valuations, 

performance, and investment terms to investors. 

7. Infinity Q’s manipulations of the Funds’ valuations were pervasive. At times, 

Infinity Q had different valuations for the same position held by different Funds, and the Mutual 

Fund reported positions at mathematically impossible valuations. Infinity Q was also aware that 

the Funds’ counterparties were valuing the very same positions at massively different amounts.  

8. By March 2020, when faced with market volatility caused by the COVID-19 

pandemic, Infinity Q knew that its Funds were poorly positioned for increasing market turmoil 

and that they were at risk of failing. Infinity Q sought a $100 million cash infusion from affiliates 

of its partial owner, but the proposed loan was never made. In response and to try to stave off the 

Infinity Q Funds’ failure, Infinity Q stepped up the manipulation of the valuations of positions 

held by the Funds, resulting in the overvaluation of the Funds’ net assets by hundreds of millions 

of dollars, as much as 42% in the Mutual Fund and 137% in the Private Fund. This overvaluation 

attracted hundreds of millions of dollars in additional investments and forestalled investor 

redemptions, all while some funds with similar investment strategies struggled or failed. 

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9. As of the end of March 2020, as a result of Infinity Q’s mismarking, Infinity Q 

reported year-to-date returns for institutional class shares in the Mutual Fund of 8.95%, one-year 

returns of 10.61%, three-year returns of 8.72%, and five-year returns of 7.28%. By contrast, the 

Infinity Q’s principal benchmark—a hedge fund index—reported year-to-date returns of  -8.98% 

(that is, a loss of 8.98%), one-year returns of -4.32%, three-year returns of 0.36%, and five-year 

returns of 0.24%. 

10. Meanwhile, Infinity Q tried to conceal the mismarking scheme, including from 

the Infinity Q Funds’ independent auditor. For example, in connection with the Infinity Q Funds’ 

audits, Infinity Q forged transaction confirmation documents by changing the actual transaction 

terms in order to deceive the auditor into thinking that the Funds’ valuations were reasonable.  

11. By September 2020, Infinity Q’s fraudulent scheme had resulted in an 

overvaluation of the Infinity Q Funds by over $1 billion.  

12. By February 2021, when Infinity Q removed Velissaris from its management, the 

Infinity Q Funds remained overvalued by at least hundreds of millions of dollars.  

13. As a result of the Infinity Q Funds’ overvaluation, Infinity Q received 

management and performance fees to which it was not entitled.  

VIOLATIONS 

14. By virtue of the foregoing conduct and as alleged further herein:  

a. Infinity Q violated Section 17(a) of the Securities Act of 1933 (“Securities Act”) 

[15 U.S.C. § 77q(a)], Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) 

[15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], Sections 204(a), 

206(1), 206(2), 206(4) and 207 of the Investment Advisers Act of 1940 (“Advisers Act”) [15 

U.S.C. §§ 80b-4(a), 80b-6(1), 80b-6(2), 80b-6(4), and 80b-(7)], and Rules 204-2(a), 206-4(7), 

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and 206(4)-8 thereunder [17 C.F.R. §§ 275.204-2(a), 275.206(4)-7, and 275.206(4)-8], and 

Section 34(b) of the Investment Company Act of 1940 (“Investment Company Act”) [15 U.S.C. 

§§ 80a-33,], and aided and abetted violations of Rule 22c-1 under the Investment Company Act 

[17 C.F.R. § 270.22c-1].  

15. Unless Infinity Q is restrained and enjoined, it will engage in the acts, practices, 

transactions, and courses of business set forth in this Complaint or in acts, practices, transactions, 

and courses of business of similar type and object. 

NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT 

16. The SEC brings this action pursuant to the authority conferred upon it by Section 

20(b) of the Securities Act [15 U.S.C. §§ 77t(b)], Section 21(d) of the Exchange Act [15 U.S.C. 

§ 78u(d)], Section 209(d) of the Advisers Act [15 U.S.C. § 80b-9(d)], and Section 42(d) of the 

Investment Company Act [15 U.S.C. § 80a-41(d)]. 

17. The SEC seeks a final judgment: (a) permanently enjoining Infinity Q from 

violating the federal securities laws and rules this Complaint alleges it has violated; (b) ordering 

Infinity Q to disgorge all ill-gotten gains it received as a result of the violations alleged herein 

and to pay prejudgment interest thereon; (c) ordering Infinity Q to pay civil money penalties 

pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)], Section 21(d) of the 

Exchange Act [15 U.S.C. § 78u(d)], Section 209(e) of the Advisers Act [15 U.S.C. § 80b-9(e)], 

and Section 42(e) of the Investment Company Act [15 U.S.C. § 80a-41(e)]; (d) ordering the 

appointment of an independent Monitor to oversee a claims and distribution process for the 

Private Fund; and (e) ordering any other and further relief the Court may deem appropriate or 

necessary for the benefit of investors. 

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6 

18. The SEC also seeks a final judgment ordering WPH to pay disgorgement and 

prejudgment interest. 

JURISDICTION AND VENUE 

19. This Court has jurisdiction over this action pursuant to Section 22(a) of the 

Securities Act [15 U.S.C. § 77v(a)], Section 27 of the Exchange Act [15 U.S.C. § 78aa], Section 

214 of the Advisers Act [15 U.S.C. § 80b-14], and Section 44 of the Investment Company Act 

[15 U.S.C. § 80a–43]. 

20. Infinity Q has, directly and indirectly, made use of the means or instrumentalities 

of interstate commerce or of the mails in connection with the transactions, acts, practices, and 

courses of business alleged herein. 

21. Venue lies in this District under Section 22(a) of the Securities Act [15 U.S.C. 

§ 77v(a)], Section 27 of the Exchange Act [15 U.S.C. § 78aa], Section 214 of the Advisers Act 

[15 U.S.C. § 80b-14], and Section 44 of the Investment Company Act [15 U.S.C. § 80a–43]. 

Certain of the acts, practices, transactions, and courses of business alleged occurred in this 

District, where Infinity Q had its offices during the Relevant Period, and at least one of Infinity 

Q’s victims has its principal place of business in this District.  

DEFENDANT 

22. Infinity Q Capital Management, LLC is a registered investment adviser 

headquartered in New York, New York. Infinity Q was organized as a Delaware limited liability 

company in 2014. Infinity Q’s principal owners are Infinity Q Management Equity, LLC (60%) 

and WPH (40%). Infinity Q Management Equity, LLC, is owned 85% by Velissaris and 15% by 

Scott Lindell. Infinity Q advised the Mutual Fund, the Infinity Q Diversified Alpha Fund mutual 

fund (Ticker: IQDNX), and the Private Fund, the Infinity Q Volatility Alpha Fund, L.P.  

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RELIEF DEFENDANT 

23. Wildcat Partner Holdings, LP (F/K/A Bonderman Family Limited 

Partnership) is a family limited partnership that owns 40% of Infinity Q, and which received 

distributions from Infinity Q on account of its investment in Infinity Q.  

RELATED INDIVIDUAL AND ENTITIES 

24. James R. Velissaris, age 38, was the founder and CIO of Infinity Q and majority 

owner of Infinity Q Management Equity, LLC, which was the majority owner of Infinity Q. On 

February 17, 2022, the Commission charged and the Department of Justice unsealed an 

indictment against Velissaris for his role in the fraudulent scheme. On November 21, 2022, 

Velissaris pleaded guilty to one count of securities fraud in violation of Section 10(b) of the 

Exchange Act and Rule 10b-5 thereunder, and on April 7, 2023, he was sentenced to 180 months 

imprisonment.  

25. Scott Lindell, age 44, was the chief compliance officer (“CCO”), chief risk 

officer, head of operations, and a portfolio manager of Infinity Q. Lindell is also a minority 

owner of Infinity Q Management Equity, LLC, which is an owner of Infinity Q. On October 6, 

2022, the U.S. District Court for the Southern District of New York enjoined Lindell, on consent, 

from violations of certain provisions of the federal securities laws.  

26. An audit, accounting, advisory, and consulting firm (the “Auditor”) served as the 

Mutual Fund’s and the Private Fund’s auditor since 2018. 

 

 

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FACTS 

I. Background  

A. Mutual Funds, Private Funds, and Investment Advisers 

1. Mutual Funds 

27. A mutual fund is a type of SEC-registered investment company, or series thereof. 

Investment companies pool money from many investors and invest the money in stocks, bonds, 

short-term money-market instruments, other securities or assets, or some combination of these 

investments. The combined securities and assets the investment company owns are known as its 

portfolio. A mutual fund’s portfolio is managed by an SEC-registered investment adviser. A 

mutual fund’s investment adviser owes a fiduciary duty to the fund. Each mutual fund share 

represents an investor’s proportionate ownership of the mutual fund’s portfolio and the income 

and capital gains the portfolio generates.  

28. Investors in mutual funds buy their shares from, and sell/redeem their shares to, 

the mutual funds themselves. Mutual fund shares are typically purchased from the fund directly 

or through investment professionals like brokers. Mutual funds are required by law to price their 

shares each business day and they typically do so after the major U.S. exchanges close. This 

price—the per-share value of the mutual fund’s assets minus its liabilities—is called the per 

share net asset value or “per share NAV.” Mutual funds must sell and redeem their shares at the 

per share NAV that is next calculated after the investor places a purchase or redemption order. 

This means that, when an investor places a purchase or redemption order for mutual fund shares 

during the day, the investor will not know what the purchase or redemption price is until the next 

per share NAV is calculated. 

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29. A mutual fund is required under the Investment Company Act to calculate its 

NAV using the market value of its portfolio securities when market quotations for those 

securities are “readily available.” If a market quote for a security is not readily available, the fair 

value of that security, as determined in good faith by the fund’s board, must be used in order to 

calculate the NAV. A mutual fund’s prospectus, available to investors, often describes its 

valuation procedures. 

30. Mutual funds must comply with various disclosure requirements under the 

Investment Company Act and, if they publicly offer shares, the Securities Act. For example, 

Sections 30(a), (b), and (e) of Investment Company Act, and rules adopted thereunder, require 

registered investment companies to file and/or transmit annual and semiannual reports to their 

shareholders. Such shareholder reports generally must include portfolio holdings information and 

more detailed financial statements than registration statements. 

2. Private Funds 

31. Other investment pools may rely on one of the exclusions from the definition of 

investment company set forth in Section 3 of the Investment Company Act. Investment pools 

that rely on the exclusions set forth in Section 3(c)(1) and Section 3(c)(7) of the Investment 

Company Act0F

1 are often referred to as “private funds.” Some private funds are commonly known 

as “hedge funds.” 

32. Like mutual funds, private funds pool investors’ money and invest the money in 

                                                 
 
1 Section 3(c)(1) excepts from the definition of investment company any issuer whose outstanding securities (other 
than short-term paper) are beneficially owned by not more than one hundred persons and that is not making and does 
not at that time propose to make a public offering of such securities. Section 3(c)(7) excepts from the definition of 
investment company any issuer whose outstanding securities are owned exclusively by persons who, at the time of 
acquisition of such securities, are qualified purchasers and that is not making and does not at that time propose to 
make a public offering of such securities. The term “qualified purchaser” is defined in Section 2(a)(51) of the 
Investment Company Act. 
 

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10 

an effort to make a positive return.  

33. Private funds are not subject to some of the regulations applicable to mutual 

funds. Private funds, however, and their advisers, are subject to the same prohibitions against 

fraud as are other market participants, and, like investment advisers to mutual funds, investment  

advisers to private funds owe a fiduciary duty to the funds that they manage and are also subject 

to anti-fraud prohibitions with respect to the private fund’s investors and prospective investors. 

34. A private fund often discloses its valuation procedures in communications with 

investors or prospective investors. 

35. Whereas the mutual fund advisory fee structure is often based on a percentage of 

assets under management, the private fund advisory fee structure typically includes both a 

management fee (based on assets under management) and a performance fee (based on the 

profits of the fund).  

3. Investment Advisers 

36. An investment adviser, under the Advisers Act, is any person that, for 

compensation, engages in the business of providing investment advice to others, including a 

mutual fund or private fund, about the value of or about investing in securities. Advisers that 

manage portfolios provide ongoing advice about buying, selling and/or holding investments and, 

in the context of an ongoing advisory relationship with a client and unless agreed otherwise, will 

monitor the performance of the client’s investments and their alignment with the client’s overall 

investment objectives and best interest.  

B. Derivatives and Variance Swaps, Generally 

37. Derivatives are financial instruments whose performance is derived, at least in 

part, from the performance of an underlying asset, security, or index, among other things.  

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38. Over-the-counter (“OTC”) derivatives are contracts that are privately negotiated 

between two counterparties without going through an exchange. 

39. A swap is a type of derivative in which two counterparties agree to exchange or 

“swap” payments with each other as a result of such things as changes in a stock price, interest 

rate, commodity price, or even the volatility or variance of a financial instrument. 

40. Volatility is a measure of the magnitude of price movement, either up or down, of 

a financial instrument or another financial measure such as an index. Variance is the square of 

volatility.  

41. Generally, in a variance swap, at the time of the expiration of a position, the buyer 

of the swap receives the amount of realized variance (i.e., the square of the realized volatility) 

over a certain period, subject to certain conditions, multiplied by a notional dollar amount, if that 

amount of realized variance is above the initially agreed upon price level (known as the strike 

price). If the amount of realized variance is below the initially agreed upon level determined by 

the strike price, then the buyer of the swap must pay the seller the difference. 

C. Infinity Q and the Infinity Q Funds 

42. In approximately 2014, Velissaris, having worked at several well-known asset 

managers and a prominent family office, sought to strike out on his own and started Infinity Q 

with the goal of putting into practice his own investment approach.  

43. Infinity Q is an investment adviser within the meaning of Section 202(a)(11) of 

the Advisers Act, 15 U.S.C. § 80b-2(a)(11) and has been registered as an investment adviser with 

the SEC since May 6, 2014.  

44. Velissaris is also an investment adviser within the meaning of Section 202(a)(11) 

of the Advisers Act. As the founder, indirect majority owner, and CIO of Infinity Q, Velissaris 

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had control over the firm, and his actions and state of mind are imputed to Infinity Q. Velissaris 

also acted as an investment adviser to the Infinity Q Funds in his individual capacity and 

received compensation for his services through the management fees paid by the Infinity Q 

Funds. Velissaris was promoted on Infinity Q’s website and other marketing materials as the 

CIO of Infinity Q and held himself out as being in the business of advising the Infinity Q Funds 

on investing in securities. Velissaris was also primarily responsible for hiring Infinity Q 

personnel. 

45. Infinity Q and Velissaris, as investment advisers to the Infinity Q Funds, owed a 

fiduciary duty to the Infinity Q Funds.  

46. At all relevant times through at least February 21, 2021, the date that he was 

placed on administrative leave, Velissaris was responsible for all investment decisions of Infinity 

Q. 

47. During the Relevant Period, Infinity Q offered two main products, which held the 

majority of the assets advised by Infinity Q: (a) the Mutual Fund (launched in 2014); and (b) the 

Private Fund (launched in 2017). 

48. Through its Mutual Fund, Infinity Q sought to attract retail investors. The Mutual 

Fund had thousands of investors, including at least one investor located in this District.  

49. Through its Private Fund, Infinity Q sought to attract institutional investors, 

which included public pension funds, university endowments, and charitable foundations, among 

others. The Private Fund had over 150 investors, including at least one investor located in this 

District. 

50. Infinity Q represented in marketing materials that it offered retail investors 

“access to the top tier investment strategies typically reserved for elite high net worth clients.”  

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51. Infinity Q further represented to investors in both the Mutual Fund and the Private 

Fund that its “mandate” was “to provide positive absolute returns while having full liquidity and 

low average correlation to equity and credit markets.”  

52. The Mutual Fund’s and the Private Fund’s portfolios consisted primarily of cash 

and a variety of equity and derivative positions, including swaps. The swaps held by the Infinity 

Q Funds were predominately variance swaps, the value of which was tied to measures of 

volatility.  

53. Velissaris operated as the head trader at Infinity Q and was one of three members 

of the Infinity Q valuation committee. In practice, there were no formal valuation committee 

meetings since at least approximately 2018. Velissaris was the sole decision-maker at Infinity Q 

for the valuation of the Mutual Fund’s and the Private Fund’s positions. 

II. Infinity Q’s Purported Valuation Process 

A. Valuation Policies and Use of Pricing Service 

54. In order to price the OTC derivative positions that constituted a significant portion 

of the Funds’ assets, Infinity Q through Velissaris, starting in approximately 2016, identified, 

retained, and started using the Pricing Service—a well-known premium service that marketed 

itself as providing a comprehensive platform to structure and price derivatives, among other 

complex financial instruments. 

55. By 2017, the Infinity Q Funds’ administrator (the “Administrator”) directly 

accessed from the Pricing Service the values generated through Velissaris’s use of the Pricing 

Service and used the reported values to calculate and publish the Mutual Fund’s daily NAV and 

to calculate the Private Fund’s monthly profit and loss report.   

56. In offering documents, prospectuses, valuation policies, and other documents, 

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Velissaris and Infinity Q represented to the Funds’ current and prospective investors how they 

would value the Funds’ assets, including how they would seek to “fair value” assets and use an 

independent pricing service. 

57. For example, Infinity Q represented that Infinity Q Funds’ assets were valued in 

accordance with U.S. Generally accepted Accounting Principles (“GAAP”).  

58. Accounting Standards Codification Topic 820 (“Topic 820”), Fair Value 

Measurement, provides a framework for determining fair value in accordance with GAAP.  

59. Topic 820 defines fair value (with the emphasis in the original) as “the price at 

which an orderly transaction to sell the asset or to transfer the liability would take place between 

market participants at the measurement date under current market conditions (that is, an exit 

price at the measurement date from the perspective of a market participant that holds the asset or 

owns the liability).” 

60. Infinity Q further represented to current and prospective investors in the Mutual 

Fund that Infinity Q and the Board of trustees (the “Board”) had established valuation policies 

and procedures to purportedly “fair value” portfolio holdings in accordance with the Infinity Q 

Funds’ offering documents. 

61. In the Mutual Fund’s 2017 and 2018 prospectuses, for example, Infinity Q 

represented that “[w]hen market quotations are not readily available, a security or other asset is 

valued at its fair value as determined under procedures approved by the Board.”  

62. In the Mutual Fund’s prospectus dated December 31, 2019, for example, Infinity 

Q represented:  

Generally, the Fund’s investments are valued at market value or, in the 
absence of a market value, at fair value as determined in good faith by 
[Infinity Q] with oversight by the [valuation committee of the Trust] 
pursuant to procedures approved by or under the direction of the Board. 

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Pursuant to those procedures, [Infinity Q] considers, among other things: 
(1) the last sales price on the securities exchange, if any, on which a 
security is primarily traded; (2) the mean between the bid and asked 
prices; (3) price quotations from an approved pricing service; and (4) other 
factors as necessary to determine a fair value under certain circumstances. 

63. Many of the Infinity Q Funds’ OTC derivative positions, which constituted a 

significant portion of the Funds, did not have readily available market prices. While the 

settlement values of such positions are generally agreed upon by the parties at termination (i.e., 

because at that point volatility is fully realized, or known, to the parties), the Mutual Fund still 

needed to value its OTC derivative positions on a daily basis to calculate the Mutual Fund’s 

NAV, and the Private Fund needed to value the positions on at least a monthly basis to determine 

its profit and loss report. As a result, Infinity Q’s valuation process would play a critical role in 

valuing these positions prior to their termination. 

64. The Infinity Q valuation policy was contained in its compliance manual and in the 

Private Fund private placement memorandum (“PPM”) that Infinity Q sent to and used to raise 

funds from investors, from 2017 through May 2020.1F

2 In its valuation policy, Infinity Q stated 

that it utilized “independent sources, such as brokers or pricing services” to value the Private 

Fund’s positions. 

65. For the OTC derivatives held by the Private Fund, the Infinity Q valuation policy 

further represented prior to May 2020, when Velissaris surreptitiously revised the policy, that it 

“utilizes [the Pricing Service], Broker Quotes, and Counterparty Valuations to provide a fair 

value for these securities.”  

66. The Infinity Q valuation policy further provided prior to May 2020, when 

                                                 
 
2 Generally, a PPM is an offering document that introduces the investment and discloses information about the 
securities offering and the issuer. 

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Velissaris surreptitiously revised the policy,  that “[a]t each month end, valuations are compared 

to the values provided by counterparties for reasonableness,” and that “[o]nce a price is 

established for a portfolio security, it shall be used for all Funds that hold the security.” 

67. In its 2019 compliance manual, Infinity Q stated that it utilized “[p]ricing services 

and broker dealers” in an “attempt to obtain a minimum of two independent prices” when trying 

to “determine the fair value of the instrument,” and “[t]he final price for each position is 

typically obtained by calculating the average of the external prices received.” The policy further 

stated that “[w]hen multiple independent marks are available, Infinity Q does not mark any 

securities higher than the average of the prices obtained.” To the extent the pricing service or 

broker quotes “may not provide a reliable indication of fair value, Infinity Q will value such 

[p]osition based on relevant information,” including internal or external models or other 

appropriate factors. In these circumstances, “[a] written valuation memo/model shall be provided 

for model-based prices explaining why the price used reflects fair value of the [p]osition,” unless 

the position had “nominal value.” These provisions were also altered when Velissaris 

surreptitiously revised the Infinity Q valuation policy in May 2020. 

68. In the Mutual Fund’s 2019 and 2020 annual reports and semi-annual reports, 

Infinity Q further represented that the Mutual Fund “uses a pricing service to model price the 

variance swap trades” and that the Pricing Service “uses quotes from brokers to estimate implied 

volatility levels as an input to these models.”  

69. In its required reporting on private funds on Form ADV for 2017 through 2020, 

Infinity Q represented that 100% of the Private Fund’s assets were valued by a person who was 

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not a “related person” of Infinity Q.2 F

3  

70. In or around March 2018, Velissaris was asked to review a draft of Infinity Q’s 

Form ADV, which contained the statement that 100% of the Private Fund’s assets were valued 

by a person who was not a “related person” of Infinity Q. On March 29, 2018, Velissaris replied 

by email to that request and wrote: “Looks great. I have no updates.” After Velissaris’s sign-off, 

the Form ADV was submitted the same day.  

B. Infinity Q, through Velissaris, Makes Additional Representations About 
Infinity Q’s Valuation Process 
 

71. Velissaris and others at Infinity Q repeatedly referred to Pricing Service-generated 

valuations as “independent” prices in communications with, among others, investors, the Board, 

and the Auditor. 

72. For example, in response to an August 2016 Board inquiry about Infinity Q’s use 

of the Pricing Service to price OTC derivatives, Velissaris explained that Infinity Q “provide[s] 

the term sheet, and [the Pricing Service] created the pricing model. We have not had any input 

into [the Pricing Service’s] models, and they independently provide the values. [The Pricing 

Service] also provided the code for the model at the onset for us to have a full understanding of 

the methodology.”  

73. In other correspondence with the Board in October 2016, Velissaris claimed that 

the Mutual Fund’s “positions were valued independently by [the Pricing Service] team,” and 

“[w]e were not involved in the valuation process.”  

74. In April 2018, Velissaris edited a draft response for the CCO to send to 

                                                 
 
3 Form ADV is the uniform form used by investment advisers to register with both the SEC and state securities 
authorities. 

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representatives of the Administrator, who had inquired about Infinity Q’s valuation process. The 

draft response, after Velissaris’s edits, represented: “Infinity Q does not price any securities 

ourselves. Prices are either provided by [the Pricing Service] directly to [the Administrator] for 

non-vanilla OTC instruments or we forward [Pricing Service] values to [the Administrator] for 

positions not requiring [Pricing Service] valuation.” This response was then sent by the CCO to 

representatives of the Administrator with Velissaris copied. Representatives of the Administrator 

replied to the CCO, with Velissaris copied, that the approach was acceptable to them as long as 

Infinity Q was “complete and thorough in your summary.” The Administrator further stated that 

“anything that is not downloaded directly from [the Pricing Service] is adviser priced even if you 

use models on [the Pricing Service] to complete the valuations. This is due to Infinity Q still 

having the ability to change inputs or calibrate any of the models.” 

75. In April 2018, Velissaris informed the Auditor that Infinity Q’s variance and 

correlation swaps “are modeled independently by [the Pricing Service] and [the Pricing Service] 

independently obtains broker implied volatility values (with no input from our team).” In 

October 2018, Velissaris informed the Auditor that “[t]he [Pricing Service] team uses a 

stochastic model to price these securities.” 

76. Velissaris and Infinity Q also repeatedly told investors and provided them with 

documents that indicated that Infinity Q had no role in the Pricing Service valuation process, that 

the Pricing Service was independent from Infinity Q, and that the Administrator obtained values 

directly from the Pricing Service with no Infinity Q involvement. For example, a 2019 due 

diligence report prepared by a third-party diligence consultant on behalf of a potential investor in 

the Private Fund, reported that Infinity Q represented that, “[i]n practice,” the Administrator, not 

Infinity Q, “price[d] the book independently using [the Pricing Service].” According to Infinity 

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Q, “[w]hen trades are completed, [Infinity Q] sends [the Pricing Service] the details and [the 

Pricing Service] will model the securities independent of [Infinity Q],” and Infinity Q “do[es] not 

override [the Pricing Service].” The potential investor subsequently invested in the Private Fund. 

77. Similarly, in May 2020, Velissaris told an investor that “[t]he valuation and 

reporting for the mutual fund is conducted by [the Administrator].” 

III. The Mismarking Scheme 

78. The statements made by Velissaris and Infinity Q during the Relevant Period 

about Infinity Q’s valuation process, including about the use of the Pricing Service, were false or 

misleading. Velissaris knew or recklessly disregarded that he was, in fact, manipulating the 

valuations of the Infinity Q Funds’ positions in the Pricing Service and was able to effectively set 

the terms and edit computer code to produce valuations of positions at whatever level he desired. 

79. There were three primary steps for Velissaris to price an OTC derivative position 

held by the Infinity Q Funds through the Pricing Service.  

80. First, Velissaris was required to select, from among numerous models available 

from the Pricing Service, a model appropriate for the position. For example, the Pricing Service 

offered a basic valuation model for a “vanilla” variance swap and a different model for a 

“corridor” variance swap, which model would take into account the corridors.  

81. Second, upon selecting the appropriate model, Velissaris was required to enter the 

terms of the transaction, as reflected in the term sheet or confirmation between Infinity Q and the 

broker-dealer counterparty, into a user interface (“User Interface”). The User Interface for a 

particular model included fields for the entry of the terms of the transaction. Once the terms were 

entered into the fields, they then appeared in the Pricing Service’s User Interface.  

82. After the terms of the transaction were entered into the available fields of the User 

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Interface, those terms were automatically mapped, or copied, onto the model’s underlying 

computer code that ultimately calculated a valuation for the position (the “Underlying Valuation 

Code”).  

83. Finally, to the extent applicable for the position, Velissaris could select a 

volatility surface or snapshot from a drop down menu of options available from the Pricing 

Service. Volatility, which was derived from the volatility surface, was also a key input for many 

of the OTC derivative positions, a significant portion of the holdings of the Infinity Q Funds.  

84. After these steps were performed, the model’s Underlying Valuation Code then 

calculated a value for the position.  

85. In selecting the appropriate model, the Pricing Service provided guidance to 

clients, including Velissaris, about the correct model to use for a particular type of derivative 

position. 

86. For certain OTC derivative transactions, the Pricing Service did not initially have 

a standard model, and so Pricing Service engineers would sometimes, at a customer’s request, 

derive a custom model to value those positions (a “Custom Model”).  

87. Like regular models, Custom Models also allowed a user to enter terms of the 

swap transaction into fields in the User Interface. For example, a Custom Model for a corridor 

variance swap model provided entry fields for the position’s strike price (a fixed price, 

determined at the transaction’s inception), vega notional (the amount paid per 1 percentage point 

shift in variance), effective date (when variance begins accruing), termination date (when 

variance stops accruing), underlying reference asset (typically an index), corridor boundaries (the 

boundaries within which the reference asset must remain to accrue variance), and “scaling 

factor” (or “annualization factor, discussed below).  

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88. The Underlying Valuation Code for Custom Models was only viewable to a user 

by clicking on a small box on the User Interface, which would then show the underlying code in 

a separate window on the user’s screen.  

89. Velissaris had the ability to view the Underlying Valuation Code for all Pricing 

Service models used by the Infinity Q Funds. Velissaris additionally had the ability to both view 

and edit the Underlying Valuation Code in Custom Models that he selected for use by the 

Infinity Q Funds. The ability to edit the Underlying Valuation Code was not available on the 

standard models available from the Pricing Service. 

90. To that end, the Pricing Service included a warning at the bottom of the 

Underlying Valuation Code in the Custom Models, which stated that it was the customer’s 

responsibility to ensure that the code being used matched the terms of the transaction. The 

warning stated: “(*** This [] script is used as an example for illustration purposes. Clients must 

make sure that the input parameters entered into the script faithfully represent the term sheet that 

they would like to price. ***).” 

91. Velissaris saved the initial Custom Models provided by the Pricing Service and 

reused them to value new positions as they were added to the Infinity Q Funds’ portfolios. 

92. Given the functionality of the Pricing Service, Velissaris had the ability to adjust 

inputs and terms entered into the User Interface’s fields on a transaction-by-transaction basis. 

Velissaris also had the ability to alter the Underlying Valuation Code in the Custom Models in 

order to price positions at more desirable valuations.  

93. Velissaris’s scheme to mismark and inflate the Infinity Q Funds’ values included 

(a) making changes to the Underlying Valuation Code; (b) entering or changing inputs into the 

Pricing Service models that did not match the terms sheets for the positions; (c) selecting 

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improper valuation models for positions; and (d) cherry picking a desirable volatility surface for 

pricing. 

94. Through most of 2021, when his scheme began to unravel, Velissaris did not 

disclose to anyone else at Infinity Q, the Board, the Administrator, the Auditor, or investors the 

extent to which he had the ability to, and did, manipulate the Pricing Service, including that he 

was editing the Underlying Valuation Code, such that he could effectively determine valuations 

for positions himself.  

A. Velissaris Manipulated Underlying Valuation Code  

95. Velissaris manually accessed and altered the Underlying Valuation Code of the 

Custom Models for certain positions, effectively changing the terms of the transactions for 

valuation purposes.  

96. From at least February 2017 through approximately January 2021, Velissaris was 

the only person at Infinity Q who made any edits or changes to any of the Infinity Q Funds’ 

positions loaded in the Pricing Service.  

97. Velissaris knowingly made multiple modifications to the Underlying Valuation 

Code of the Custom Models. These modifications had the effect of artificially increasing the 

value of certain of the Infinity Q Funds’ variance swap positions as alleged below through at 

least mid-February 2021, when Infinity Q revoked Velissaris’s access to the Pricing Service. 

1. Alterations to Corridors 

98. Generally, corridor variance swaps are derivative products that only pay out if 

specified index values remain within a “corridor” defined by an upper and lower bound. For 

example, if a variance swap that references the S&P 500 had corridors of 4,250 and 4,750, it 

would accrue variance so long as the index remained within that range. If the index, for example, 

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decreased to 4,249 or increased to 4,751, variance would no longer accrue so long as the index 

level remained outside of the corridor. 

99. When Velissaris purchased a “long” corridor variance swap from a broker-dealer 

counterparty, the price paid was determined in part by the corridor boundaries agreed to by the 

parties—the wider the corridor, the more likely the reference asset would remain in the corridor, 

and the swap would have a greater pay out.  

100. In this scheme, Velissaris opened and edited the Underlying Valuation Code of 

the Custom Models used for a number of the Infinity Q Funds’ corridor variance swaps. 

Velissaris’s edits included widening or even eliminating the effect of the corridors in the 

Underlying Valuation Code, and thereby inflating the value of the long corridor variance swaps. 

101. Because the corridor ordinarily limits the payout on those swaps (i.e., variance 

only accrues to the extent the index remains within the corridor), the effect of these code 

modifications was to improperly increase the swaps’ values for a long position (meaning Infinity 

Q was the buyer of variance). That is, the wider the corridor, the more likely the index would 

remain within its boundaries and, as a result, the higher value the Pricing Service would ascribe 

to the position. 

102. These inflated values were then included in the Mutual Fund’s daily NAV and 

Private Fund’s monthly profit and loss report and otherwise disseminated to investors. 

103. When Velissaris made changes to the Underlying Valuation Code, those changes 

did not automatically map onto the terms entered into and displayed in the User Interface. By 

proceeding in this manner, the Underlying Valuation Code was actually valuing the position with 

terms that differed from the terms being displayed in the User Interface.  

104. In some instances, Velissaris improperly altered the Underlying Valuation Code 

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by writing into the code an additional amount to be added to an upper corridor and/or subtracted 

from a lower corridor, thus widening the corridors. By widening the corridors for long positions, 

Velissaris increased the likelihood of the position being in the corridor and thus accruing 

additional variance, as well as its value for the Infinity Q Funds.  

105. For example, the Private Fund held a certain corridor variance swap that 

referenced the EURO STOXX 50 index (“SX5E”) with a strike price of 16.85%, an effective 

date of 1/10/20, and a termination date of 12/17/20. The “corridor” for this position was defined 

as having a lower bound of 2,652.66 and an upper bound of 4,168.47. According to the 

position’s term sheet, the position only accrued variance (that is, payout related to the movement 

of the SX5E index) for the Private Fund when the price of the index was within the boundaries of 

the corridor from the effective date to the termination date.  

106. Velissaris edited the Underlying Valuation Code for this position by writing into 

the code a “-2650” to modify the low corridor parameter, which was reflected in the User 

Interface as 2650 (already differing from the term sheet lower boundary of 2652.66). As a result 

of Velissaris’s edit to the Underlying Valuation Code, the lower corridor of this position was 

effectively reduced to zero. As alleged more fully below, when this very position was selected by 

the Auditor for independent re-valuation by a third-party expert on or about February 2021, 

Velissaris provided the Auditor with a forged term sheet in an attempt to cover-up and perpetuate 

his mismarking scheme.  

107. An image of the Underlying Valuation Code for this position (taken in March 

2021), as altered by Velissaris, appears below in Figure 1. Velissaris’s edit of “-2650” to the 

position’s lower bound (“corridor_low” in the code) appears in line 23 of the Underlying 

Valuation Code. 

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Figure 1: Extracted Image of Private Fund Position in Pricing Service as of March 2021 

 

108. Velissaris knew or recklessly disregarded that these alterations were 

inappropriate. For example, in April 2020, a risk analyst at Infinity Q sent Velissaris a risk 

analysis of all of the Infinity Q Funds’ corridor variance swap positions. That analysis indicated 

that this position, taking into account the corridors reflected on the term sheet, would be below 

the lower bound 34% of the remaining time for the life of the position, meaning that it would not 

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accrue value for that period. By disregarding the lower bound in the code, then, Velissaris 

effectively eliminated this possibility and ensured that the position’s value would be inflated. 

109. In many instances, Velissaris altered the Underlying Valuation Code to disregard 

the corridors altogether. For example, the Mutual Fund held a certain corridor variance swap that 

referenced the SX5E index with a strike price of 17%, an effective date of 12/18/20, and a 

termination date of 12/16/22. The “corridor” for this position was defined as having a lower 

bound of 2,333.8 and an upper bound of 3667.4. According to the position’s term sheet, the 

number of “days in range” when the position would accrue variance was defined as when the 

price of the index was above the lower bound and below the upper bound (that is, within the 

boundaries of the corridor). Velissaris edited the Underlying Valuation Code for this position to 

replace a coded “and” with a coded “or.” After Velissaris’s edit, the “days in range” were 

triggered on any day the underlying index was either above the lower bound or below the upper 

bound—effectively, disregarding the corridor entirely. On or about January 15, 2021, after 

obtaining read-only access to the Infinity Q Funds’ portfolios from the Pricing Service, SEC staff 

identified this particular coding change and simulated the correct valuation by changing the “or” 

back to an “and” in the code. Using the correct valuation code resulted in a reduction of the value 

of the position by approximately $5 million. 

110. In other instances, Velissaris altered the Underlying Valuation Code to make 

worthless positions appear to have value. For example, the Mutual Fund held a certain SX5E 

index “up” corridor variance swap position with a strike price of 9.7%, an effective date of 

1/14/20, and an expiration date of 6/19/20. Pursuant to the terms of this position, variance would 

only accrue if the index was above the lower bound, which was defined as 3,849.97 (the term 

sheet did not include an upper bound, which is why it is referred to as an “up” corridor variance 

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swap). On January 14, 2020, the SX5E index closed at 3,774.88, so the position was out of the 

money, meaning it was not accruing a payout. However, in the Underlying Valuation Code for 

this position, Velissaris wrote into the code a “-200,” so that for valuation purposes the lower 

bound became 3,649.97 instead of 3,849.97. The result of this edit was to immediately place the 

position in the money, meaning it was accruing a payout. Accordingly, when the position was 

added to the Mutual Fund’s portfolio on January 15, 2020, it was marked as having a value of 

approximately $274,000, and it was listed in the Mutual Fund’s semi-annual report as having a 

value of approximately $342,000 as of 2/29/2020. In fact, the index never actually exceeded the 

real lower bound of 3,849.97, the position never accrued any payout, and it expired worthless in 

June 2020.  

111. Velissaris made these changes to the Underlying Valuation Code frequently for 

positions where the changes increased the value of positions and infrequently for positions where 

they would have decreased the value of positions. 

112. Velissaris acted knowingly or recklessly in connection with the conduct set forth 

above. 

2. Alterations to Annualization Factors 

113. Velissaris also knowingly or recklessly edited Underlying Valuation Code to 

improperly alter the “annualization factor” for certain OTC derivatives.  

114. Generally, an annualization factor is a standard convention for multiplying 

variance by the number of business days in an index’s underlying calendar year. For a U.S.-

based calendar, term sheets typically use an annualization factor or “scaling factor” of 252 days, 

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corresponding to the number of business days in a year.3F

4  

115. In numerous instances for both the Mutual Fund and Private Fund, Velissaris 

altered the default 252-day annualization factor, including to change the annualization factors 

such that they were coded as being greater than 365 days—an impossibility—and even as high as 

430 days.  

116. As a result of Velissaris’s changes to the annualization factors, the valuation 

models did not reflect the actual terms of the transactions. For positions that have a positive 

value, increasing the annualization factor will inflate the amount of variance and the value of the 

position will also be improperly increased. 

117. Velissaris made these code changes frequently for positions where the changes 

increased the value of positions and infrequently for positions where they would have decreased 

the value of positions.  

118. Velissaris acted knowingly or recklessly in connection with the conduct set forth 

above. 

3. Alterations to Correlation Strike Prices 

119. Velissaris also knowingly or recklessly edited Underlying Valuation Code to 

improperly alter the strike price for certain correlation swaps (as well as for other swaps held by 

the Infinity Q Funds). 

120. In a correlation swap, payment to or from a counterparty is based on the realized 

correlation between each pair of underlying reference assets listed in the swap’s description, 

from effective date until termination date. To calculate the payout for a correlation swap, the 

                                                 
 
4 Other regions may vary by a few days from 252, depending on holidays. 

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notional amount of the swap (a reference amount agreed between the parties) is multiplied by the 

amount of realized correlation minus the strike price. For a long correlation swap, if the amount 

of correlation exceeds the strike, the position has a positive payout. For a short correlation swap, 

if the amount of correlation exceeds the strike, the position has a negative payout. For example, a 

correlation swap with a notional amount of $100,000 that had realized correlation of 0.5 and a 

strike price of .25 would be worth $25,000 ($100,000 * (.5-.25) = $25,000) for the party holding 

the long position at the termination date; the party holding the short position would owe $25,000. 

121. For at least two dozen correlation swaps as of December 2020, Velissaris 

modified the Underlying Valuation Code such that the strike price used for valuation purposes 

was “shifted,” that is increased or decreased by a certain amount, which had the effect of 

inflating the valuation of the swaps held by the Infinity Q Funds.  

122. The result of these changes was to improperly increase the value of the positions, 

which again resulted in valuation models that did not reflect the actual terms of the transactions.  

123. Velissaris made these changes to the Underlying Valuation Code frequently for 

positions where the changes increased the value of positions and infrequently for positions where 

they would have decreased the value of positions. 

124. Velissaris acted knowingly or recklessly in connection with the conduct set forth 

above. 

B. Velissaris Entered Incorrect Inputs into the Pricing Service 

125. Velissaris personally entered the terms of Infinity Q’s OTC derivative positons 

into the Pricing Service with virtually no oversight or contemporaneous record.  

126. As reflected in the Pricing Service’s audit trail, Velissaris regularly altered the 

terms of positions held by the Infinity Q Funds that he had previously loaded into the Pricing 

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Service. Velissaris’s updates included making changes to positions’ notional values, effective 

dates, and expiration dates after the positions were initially loaded.  

127. At times, Velissaris knowingly or recklessly inputted transaction terms that did 

not match the terms of the position’s term sheet.  

128. For example, a certain variance swap trade that referenced the iShares MSCI 

EAFE ETF with a strike price of 18.4%, an effective date of 3/15/19, and a termination date of 

12/17/21, was equally allocated to the Mutual Fund and the Private Fund portfolios in the Pricing 

Service. This position was altered hundreds of times by Velissaris in the Mutual Fund’s portfolio 

in the Pricing Service, including three different changes to its effective date (3/15/19 changed to 

12/17/19; then changed to 2/27/20; then changed to 3/14/19). The same position allocated to the 

Private Fund was altered at least a dozen times by Velissaris in the Pricing Service, including 

two changes to its effective date after being loaded with an incorrect effective date (3/14/19 

changed to 12/13/19; then changed to 3/14/19).  

129. Similarly, a certain variance swap that referenced the Russell 2000 index with a 

strike price of 22.40%, was added to the Mutual Fund’s portfolio in the Pricing Service with an 

effective date of February 18, 2020, rather than the correct December 18, 2020 effective date. 

The position was valued by Infinity Q as being worth more than $13 million in May and June 

2020 and more than $15 million in July 2020; when the incorrect entry was reversed and the 

correct date was entered, the value of the position was reduced to approximately $5 million as of 

the end of August 2020. 

130. As the terms of any position should have been inputted in accordance with the 

position’s term sheet when initially loaded, any changes or updates would be inappropriate 

unless the terms of the underlying agreement had also changed (which was not the case for the 

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positions discussed above).  

131. Velissaris acted knowingly or recklessly in connection with the conduct set forth 

above. 

C. Velissaris Chose Improper Models in the Pricing Service 

132. Velissaris also selected improper models to value OTC derivative positions held 

by the Infinity Q Funds, which inflated the value of those positions.  

133. In June 2019, a representative of the Pricing Service Company informed 

Velissaris by email that the Pricing Service had “several new and approved” standard models to 

value swaps, including a model specifically for corridor variance swaps named “Corridor 

Varswap.” The representative stated that Infinity Q should “use these going forward.” In other 

words, Velissaris was supposed to stop using the Custom Models that he had been using to price 

the corridor variance swaps held by the Infinity Q Funds. But these new standard models 

included a feature that would frustrate Velissaris’s scheme: The Underlying Valuation Code 

could not be edited by Velissaris.  

134. After receiving this email, Velissaris used the new corridor variance swap model 

in some instances. However, he primarily continued to utilize and manipulate the Custom 

Models, for which he had the ability to alter the Underlying Valuation Code, to value existing 

and new corridor variance swaps. 

135. For certain corridor variance swap positions, Velissaris went so far as to select 

models for a “vanilla” variance swap to value the corridor variance swap. Because a vanilla 

variance swap does not have corridor limitations to its payout, the vanilla model did not have the 

ability to take the corridors into account.  

136. For example, as of November 30, 2020, Velissaris used the correct “Corridor 

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Varswap” model to value 24 corridor variance swaps held by the Mutual Fund; however, at the 

same time, Velissaris used Custom Models to value 78 other corridor variance swaps held by the 

Mutual Fund, “vanilla” variance swap models to value 19 corridor variance swaps held by the 

Mutual Fund, and other improper models to value an additional 35 corridor variance swaps held 

by the Mutual Fund. 

137. As a result of Velissaris’s improper model selections, the value of positions were 

inflated. 

138. Velissaris acted knowingly or recklessly in connection with the conduct set forth 

above. 

D. Velissaris Cherry-Picked Model Assumptions 

139. Velissaris also inflated the value of the Infinity Q Funds by cherry-picking 

implied volatility—a key input for valuing volatility or variance swaps, which constituted a 

significant percentage of the holdings of the Infinity Q Funds.  

140. At inception and prior to the effective date of a position, the value of a vanilla 

variance swap is primarily derived from the calculation of implied volatility. Within the Pricing 

Service models, implied volatility is derived from volatility surfaces. The volatility surfaces are 

generated by the Pricing Service based on estimates of observed and simulated option prices for 

options of various maturities and strike prices.  

141. Over time, the value of a position is increasingly derived from the realized, or 

actual, volatility once the effective date of the position has occurred and realized volatility begins 

to accrue. Realized volatility is calculated based on the returns of the underlying index or 

security and increases as a percentage of the market value of a position as time passes. 

142. As Infinity Q stated in the Mutual Fund’s 2020 annual report, “[a] significant 

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change in implied volatility could have a significant impact on the value of a position.”   

143. Infinity Q’s contract with the Pricing Service granted it access to market data, 

which included as many as 90 different volatility surfaces that could be used to price individual 

positions. These different volatility surfaces contained hourly snapshots of option prices (e.g., 

New York 2:00 p.m.; New York 3:00 p.m.; New York 4:00 p.m.; London 2:00 p.m.; London 

3:00 p.m.; London 4:00 p.m., etc.) that were used to derive the implied volatility input. 

144. Velissaris could and did select among the volatility surfaces via a pull-down menu 

within a Pricing Service interface for each position (i.e., this was not a change the user would 

make to the Underlying Valuation Code).  

145. Velissaris used this virtually unfettered ability to make and change such selections 

to cherry-pick volatility surfaces, which inflated the value of the Funds.  

146. The cherry-picking manifested itself in Velissaris making inconsistent volatility 

surface selections for similarly situated positions, which had the effect of inflating the value of 

the Funds.  

147. For any two positions that reference the same underlying index and that have the 

same or a similar maturity date, the volatility surface selection should be the same regardless of 

whether Infinity Q was long or short in the position.  

148. However, in a number of instances, it appears that Velissaris selected different 

volatility surfaces depending on whether the positions were long or short. For example, the 

Mutual Fund held two variance swaps that referenced the SX5E index, each with a maturity date 

of 12/18/2020. As of August 31, 2020, however, the short position used a London 4:00 p.m. 

volatility surface and the long position used a London 10:00 a.m. volatility surface. 

149. Such inconsistent selections were made by Velissaris in order to improperly affect 

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the valuations of the positions to the Infinity Q Funds’ benefit.  

150. Velissaris acted knowingly or recklessly in connection with the conduct set forth 

above. 

E. In Real Time, Velissaris Knew That He Was Massively Overvaluing 
Positions 

151. Velissaris knew or at least was reckless and should have known that his changes 

to the valuation code, entry of incorrect terms, selection of improper models, and cherry-picking 

of volatility surfaces led to a massive and material overvaluation of each of the Infinity Q Funds 

by hundreds of millions of dollars. See infra Tables 1 & 2.  

152. Velissaris’s manipulation of the Pricing Service generally increased in 

conjunction with various reporting deadlines of the Infinity Q Funds. As Velissaris explained to 

the CCO in an August 2018 communication, which coincided with the Mutual Fund’s fiscal 

year-end: “I have to tighten all of [the Pricing Service] this week . . . So there will be some larger 

than normal moves.”  

153. Velissaris further ignored numerous red flags indicating that his valuations were 

inappropriate, as alleged below.  

1. Disparate Marks between Infinity Q Funds 

154. Infinity Q’s disparate valuations of the same position allocated to the Mutual 

Fund and the Private Fund are indicative of Velissaris’s mismarking.  

155. Generally, Velissaris would negotiate a single variance swap trade with one of 

Infinity Q’s counterparties, and upon the confirmation of the trade Velissaris would allocate a 

portion of the single trade to the Mutual Fund and a portion to the Private Fund.  

156. Accordingly, in Infinity Q’s compliance manual, Private Fund PPMs, and 

standard Due Diligence Questionnaire—which was disseminated to potential investors in the 

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Mutual Fund and the Private Fund, counterparties, and others—Infinity Q represented that 

“[o]nce a price is established for a portfolio security, it shall be used for all Funds that hold the 

security.”  

157. In fact, the Mutual Fund (which was required to strike a NAV on a daily basis) 

and the Private Fund (where the financial results were calculated on a monthly basis) had widely 

disparate marks for some of the same overlapping positions on the same valuation date.  

158. For example, a variance swap trade that referenced the iShares MSCI EAFE ETF, 

with a strike price of 18.4%, an effective date of 3/15/19, and a termination date of 12/17/21, 

discussed supra ⁋ 128, was equally allocated to the Mutual Fund and the Private Fund; however, 

this trade was marked at approximately $8.5 million in the Mutual Fund and approximately 

$10.7 million in the Private Fund each at end of November 2020. The disparate valuation of this 

position between the Infinity Q Funds was contrary to the representations made to investors in 

the Private Fund PPMs and the Funds’ Due Diligence Questionnaire and was contrary to Infinity 

Q’s compliance manual. 

159. These differences were generally a result of Velissaris’s manipulations within the 

Pricing Service, as the positions were loaded in separate portfolios in the Pricing Service for the 

two Infinity Q Funds. 

160. Velissaris did not follow the policy that “[o]nce a price is established for a 

portfolio security, it shall be used for all Funds that hold the security.” 

161. Velissaris acted knowingly or recklessly in connection with the conduct set forth 

above. 

2. Mathematically Impossible Valuations   

162. As a registered investment company, the Mutual Fund was required to report 

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information about its portfolio holdings to the SEC, which here were available to the public on 

the EDGAR system (EDGAR, the Electronic Data Gathering, Analysis, and Retrieval system, 

performs automated collection, validation, indexing, acceptance, and forwarding of submissions 

by companies and others who are required by law to file forms with the SEC).  

163. Certain positions reported by the Mutual Fund were reported at mathematically 

impossible valuations, among other problems and inconsistencies.  

164. Generally, the potential gain on a vanilla volatility or variance swap is inherently 

limited for the party holding the short position because the realized volatility metric cannot be 

less than zero. Market volatility is the magnitude or range of price change in a given period of 

time. In a hypothetical scenario, it may be zero if the price of the referenced asset or index does 

not change over time, but it cannot be negative.  

165. Infinity Q, however, reported multiple swaps in the Mutual Fund’s EDGAR 

filings that appear to have been valued assuming that volatility would be negative, and, thus, the 

reported gain by the Mutual Fund was higher than the maximum possible payout (or the reported 

amount was less of a loss than the minimum amount of loss).  

166. For example, in the Mutual Fund’s February 29, 2020 semi-annual report, the 

Mutual Fund reported two short MXWO variance swaps, one with an effective date of 3/15/19 

(marked at over $5.6 million) and the other with an effective date of 3/18/19 (marked at over 

$2.8 million). These valuations for the two positions were mathematically impossible because 

they required that the implied volatility metric be less than zero, an impossibility.  

167. By at least May 2020, Velissaris was made aware of these and other reporting 

problems in the Mutual Fund’s EDGAR filings. 

168. Velissaris acted knowingly or recklessly in connection with the conduct set forth 

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above. 

3. Divergent Counterparty Marks, Margin Call Disputes, and 
Settlements 

169. Divergent Counterparty Marks. The divergent valuations of these same OTC 

derivative positions by Infinity Q’s swap counterparties, which were known to Velissaris, is a 

further indication of Infinity Q’s mismarking.  

170. Infinity Q and Velissaris were aware that certain of the Infinity Q Funds’ 

counterparties were ascribing vastly different marks from Infinity Q to the same positions. For 

example, in December 2019 the CCO undertook to compare (i) the end-of-day position values 

for the Mutual Fund and the Private Fund, obtained from the daily margin reports received from 

a certain counterparty, with (ii) the marks of the Infinity Q Funds. The CCO emailed Velissaris 

that the marks sourced from the counterparty’s margin reports “differ from [the Pricing Service] 

substantially. Please have a look.” 

171. Margin Calls. Velissaris was also aware of tens of millions of dollars of margin 

calls from Infinity Q’s counterparties related to their divergent valuations of the OTC derivative 

positions at issue. Generally, the agreements between the Infinity Q Funds and their 

counterparties provided that the counterparties could issue “margin calls” if the market value of a 

position fell below a certain amount. Generally, margin calls can occur when a counterparty to a 

particular swap trade is able to demand additional cash from Infinity Q when they determine the 

value of a particular swap trade decreased. When notified of a margin call by a counterparty, 

Infinity Q was required to post additional margin. 

172. In March 2020, the Infinity Q Funds were faced with increased market volatility 

caused by the COVID-19 pandemic. 

173. Beginning in at least March 2020, Infinity Q and multiple of its counterparties 

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engaged in extensive discussions regarding margin call disputes after the counterparties 

requested tens of millions of dollars of additional margin from the Infinity Q Funds related to the 

OTC derivative positions at issue. These margin calls were based on counterparty marks that 

showed the positions were losing value, and which Infinity Q admitted were substantially 

different from its own marks. 

174. Velissaris acknowledged that the Infinity Q Funds’ and their counterparties had 

widely different marks for the OTC derivative positions at issue. For example, on March 13, 

2020, Velissaris sent the CCO a communication instructing, “[i]n an environment like this, I 

want to partially dispute big [margin] calls,” but acknowledging “[o]ur value deviates from theirs 

by 3-7mm [million] per line item.” 

175. Even after the March 2020 market volatility event, the disparate marks persisted. 

For example, Infinity Q and one of its counterparties entered into multiple “up” corridor variance 

swaps referencing the U.S.’s Russell 2000 Index (“RTY”) (that is, the position only accrued 

variance when the reference index remained above a certain amount). Infinity Q reported these 

positions as having unrealized positive valuations of $15,820,432 and $15,725,293 for Infinity Q 

as of May 31, 2020, whereas those same positions were marked by the counterparty as having 

unrealized positive valuations of only $71,968 and $65,726, respectively, for Infinity Q as of 

June 1, 2020. Similarly, the Mutual Fund’s public filings show an unrealized loss of 

($4,682,520) for Infinity Q as of May 31, 2020, for an RTY variance swap with a June 19, 2020, 

maturity date; the counterparty marked this position as having an unrealized loss for Infinity Q of 

($15,613,979) as of June 1, 2020. 

176. Settlements. In addition, certain positions that Infinity Q valued as having a 

positive value just days before their termination date expired worthless or at significantly lower 

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values than Velissaris generated through the Pricing Service. For example, in July 2020 

Velissaris approved the settlement of a certain correlation swap that expired on July 7, 2020, 

despite being informed by the CCO that the “settlement amount is [$]430k worse than 

yesterday’s [Pricing Service valuation].” 

177. As a result, in order to conceal the losses (i.e., between the marked values and 

settlement values when positions matured), Velissaris added new OTC derivative positions and 

inflated the valuations as alleged above. 

178. Velissaris acted knowingly or recklessly in connection with the conduct set forth 

above. 

F. Scope of the Mismarking 

179. In 2016, Velissaris began using the Pricing Service, and by at least February 

2017, Velissaris was knowingly manipulating the Pricing Service in order to inflate the values of 

the positions held by the Mutual Fund and the Private Fund. 

180. Separate re-valuations of the historical positions held by the Mutual Fund and the 

positions held by the Private Fund were conducted by two third-party valuation firms (retained 

by the Board and Infinity Q’s new management, respectively). According to those findings, 

Velissaris mismarked the Mutual Fund’s and the Private Fund’s positions by more than $1 

billion dollars combined as of the end of September 2020.  

181. The mismarking over time in the Mutual Fund was material. The mismarking is 

reflected in the table below, based on a third-party valuation firm’s recalculation of the Mutual 

Fund’s month-end NAV. As reflected in Table 1, at times the Mutual Fund was more than 42% 

overvalued.  

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Table 1: Recalculated Mutual Fund NAV 

Month End IQ Reported         
Mutual Fund NAV 

Recalculated  
Mutual Fund NAV 

Difference Percent 
Overvalued 

3/31/2017 $156,433,465 $150,494,337 ($5,939,128) 3.80% 
6/30/2017 $159,886,216 $150,863,386 ($9,022,830) 5.64% 
9/30/2017 $165,306,959 $159,481,674 ($5,825,285) 3.52% 
12/31/2017 $173,098,348 $170,922,508 ($2,175,841) 1.26% 
3/31/2018 $210,240,557 $207,624,579 ($2,615,978) 1.24% 
6/30/2018 $234,320,148 $226,903,459 ($7,416,689) 3.17% 
9/30/2018 $310,450,929 $305,244,214 ($5,206,715) 1.68% 
12/31/2018 $428,724,464 $407,733,741 ($20,990,723) 4.90% 
3/31/2019 $549,812,778 $522,587,676 ($27,225,102) 4.95% 
6/30/2019 $626,243,979 $577,016,402 ($49,227,576) 7.86% 
9/30/2019 $702,332,704 $637,903,976 ($64,428,728) 9.17% 
12/31/2019 $770,265,076 $675,803,617 ($94,461,458) 12.26% 
3/31/2020 $1,051,949,041 $604,102,066 ($447,846,975) 42.57% 
6/30/2020 $1,367,755,693 $871,450,690 ($496,305,004) 36.29% 
9/30/2020 $1,634,510,959 $1,142,723,614 ($491,787,344) 30.09% 
12/31/2020 $1,807,630,993 $1,396,584,503 ($411,046,490) 22.74% 
2/18/2021 $1,727,194,949 $1,334,262,392 ($392,932,557) 22.75% 

 

182. The mismarking over time in the Private Fund was material. The mismarking is 

reflected in the table below, based on a third-party valuation firm’s recalculation of the Private 

Fund’s month-end total assets. As reflected in Table 2, at times the Private Fund was more than 

137% overvalued. 

 
Table 2: Recalculated Private Fund Total Assets 

Month End IQ Reported         
Private Fund Assets 

Recalculated  
Private Fund Assets 

Difference Percent 
Overvalued 

3/31/2017 $15,804,643 $15,073,573 ($731,070) 4.85% 
6/30/2017 $22,329,236 $21,424,835 ($904,401) 4.22% 
9/30/2017 $25,374,163 $22,209,342 ($3,164,821) 14.25% 
12/31/2017 $25,997,988 $21,604,391 ($4,393,596) 20.34% 
3/31/2018 $61,234,674 $54,262,369 ($6,972,305) 12.85% 
6/30/2018 $64,872,235 $54,978,327 ($9,893,907) 18.00% 

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9/30/2018 $142,796,073 $131,803,572 ($10,992,501) 8.34% 
12/31/2018 $199,931,440 $178,721,393 ($21,210,047) 11.87% 
3/31/2019 $254,842,728 $221,705,632 ($33,137,096) 14.95% 
6/30/2019 $351,156,337 $292,807,701 ($58,348,636) 19.93% 
9/30/2019 $401,002,746 $328,179,700 ($72,823,045) 22.19% 
12/31/2019 $739,891,190 $635,995,332 ($103,895,858) 16.34% 
3/31/2020 $894,138,173 $377,048,061 ($517,090,112) 137.14% 
6/30/2020 $1,088,347,495 $584,142,466 ($504,205,029) 86.32% 
9/30/2020 $1,136,106,710 $618,013,331 ($518,093,379) 83.83% 
12/31/2020 $1,183,716,570 $697,707,143 ($486,009,427) 69.66% 
1/31/2021 $1,224,776,684 $737,038,694 ($487,737,990) 66.18% 
   

183. The Infinity Q Funds’ marketing materials claimed that its “risk managed 

investment approach” could “underperform equity benchmarks during bull markets,” but its 

volatility investment strategy “seeks to offer protection during volatile market environments” 

and, thus, “may outperform during global equity market sell-offs” (emphasis in original). 

184. In fact, as a result of Velissaris’s overvaluation of the portfolio, Infinity Q 

reported strong (albeit fake) returns in all markets.  

185. As of the end of March 2020, as a result of Velissaris’s mismarking, Infinity Q 

reported year-to-date returns for institutional class shares in the Mutual Fund of 8.95%, one-year 

returns of 10.61%, three-year returns of 8.72%, and five-year returns of 7.28%. By contrast, the 

hedge fund index to which Infinity Q compared itself (i.e., its benchmark) reported year-to-date 

returns of negative 8.98% (that is, a loss of 8.98%), one-year returns of negative 4.32%, three-

year returns of 0.36%, and five-year returns of 0.24%. 

186. As of the end of March 2020, as a result of Velissaris’s mismarking, Infinity Q 

reported year-to-date returns in the Private Fund of 5.63%, one-year returns of 17.57%, and two-

year returns of 18.35%. By contrast, the hedge fund index that Infinity Q compared itself to  

reported year-to-date returns of negative 8.98%, one-year returns of negative 4.32%, and two-

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year returns of negative 2.09%. 

187. The Mutual Fund grew steadily in the first few years from its launch in 2014, 

from a reported NAV of $173 million at the end of 2017, to $428 million at the end of 2018, and 

to $770 million at the end of 2019.  

188. Similarly, the Private Fund, launched in 2017, also grew steadily from a reported 

total assets of $25 million at the end of 2017, to $199 million at the end of 2018, and to $739 

million at the end of 2019. 

189. By the end of 2020, the Mutual Fund’s reported NAV had more than doubled to 

$1.8 billion, and the Private Fund’s reported total assets had increased by more than $440 million 

to $1.183 billion. 

190. On February 18, 2021, the day before the Mutual Fund suspended redemptions, 

its reported NAV was approximately $1.727 billion.4F

5 The Private Fund reported approximately 

$1.224 billion of total assets as of January 31, 2021. 

G. Velissaris Mismarked Positions to Attract Subscriptions, Forestall 
Redemptions, and Enrich Himself and Infinity Q 
 

191. Velissaris’s knowing manipulation of the Infinity Q Funds’ OTC derivative 

positions in the Pricing Service led to Infinity Q Funds’ reporting illusory performance, which 

resulted in additional subscriptions and significant additional fees to Infinity Q and to Velissaris.  

192. Velissaris’s mismarking was at all times material and greatly increased after the 

March 2020 market volatility event related to the COVID-19 pandemic.  

193. During this time period, while multiple competitors of Infinity Q failed or 

                                                 
 
5 The Mutual Fund had been closed to new investment since December 31, 2020, due to the identification of certain 
variance swap valuation issues related to the SEC’s investigation.  

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struggled, the Mutual Fund and Private Fund faced tens of millions of dollars of margin calls 

concerning OTC derivative positions that were losing value, and the Infinity Q Funds began to 

run out of cash. See supra Section III.E.3.  

194. On March 13, 2020, Velissaris admitted to the CCO in a communication that “we 

just didn’t structure the book optimally for a scenario like this.” 

195. Velissaris, concerned about the ability of the Infinity Q Funds to continue, 

initially tried to obtain a $100 million loan from affiliates of its partial owner in order to meet 

tens of millions of dollars of margin calls from multiple Infinity Q counterparties.  

196. On March 18, 2020, the CCO sent a communication to Velissaris regarding the 

proposed loan and asked: “[H]ow much do we need . . . in your opinion[?]” Velissaris 

immediately responded: “100 mm,” meaning $100 million.  

197. In response to the CCO’s inquiry, Velissaris further replied that Infinity Q’s 

business development employee was “pushing to get [$]120 [million] in the door on 4/1” as an 

alternative.  

198. On March 23, 2020, Velissaris sent the CCO a communication regarding the 

ongoing margin calls and dire cash situation, and stated: “The problem is we don’t have enough 

cash to do more than 30-40 mm [million] i[n] settlements in day.” 

199. The $100 million loan did not materialize, and Velissaris increased his 

mismarking to attract additional investor inflows and forestall investor redemptions.  

200. The mismarking allowed the Infinity Q Funds to attract hundreds of millions of 

dollars of additional funds from investors. These funds helped the Mutual Fund and Private Fund 

survive tens of millions of dollars of margin calls, which threatened to cause Infinity Q to fail.  

201. Velissaris’s mismarking, in turn, caused the Infinity Q Funds to pay excess 

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management and performance fees to Infinity Q.  

202. Both the Mutual Fund and the Private Fund paid Infinity Q management fees 

based on the entities’ respective assets under management, and the Private Fund paid Infinity Q 

performance fees as a percentage of the fund’s annual returns.  

203. Profits from these excessive management and performance fees were distributed 

to Infinity Qs owners including Infinity Q Management Equity, which was majority owned by 

Velissaris. 

H. Misrepresentation of Performance and Other Information to Investors and 
the Board 
 

204. In addition to the misrepresentations alleged above concerning valuation policies, 

Infinity Q and Velissaris also knowingly disseminated false and misleading information about 

the Infinity Q Funds’ NAV or total assets, performance, and the terms of investment to current 

and prospective investors and the Board. For example, from at least 2017, Infinity Q and 

Velissaris marketed the Mutual Fund and, later, the Private Fund, by creating and disseminating 

marketing materials, fact sheets, presentations, and risk reports that were sent to prospective 

investors touting the inflated values as alleged above.  

205. These marketing materials also conspicuously displayed tables and charts 

reflecting the Mutual Fund’s and the Private Fund’s inflated quarterly and/or monthly track-

record of returns and purported outperformance of certain benchmark indices.  

206. The inflated performance was also touted in Infinity Q’s letter to investors at the 

beginning of the Mutual Fund’s annual report.  

207. Infinity Q also provided the Mutual Fund’s and the Private Fund’s investors and 

the Board with materially misstated audited financial statements for at least the years ended 

August 31, 2019 and 2020, for the Mutual Fund, and December 31, 2019, for the Private Fund.  

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208. Infinity Q also disseminated Private Fund PPMs containing misrepresentations 

regarding its valuation policy and, later, the valuation policy Velissaris had altered to mislead the 

SEC, as further alleged below. 

209. Velissaris acted knowingly or recklessly in connection with the conduct set forth 

above. 

IV. Attempts to Conceal the Mismarking Scheme 
 

A.  Velissaris’s Attempts to Mislead the Auditor 

210. Velissaris altered key documents in an attempt to mislead the Auditor about 

certain positions selected for re-valuation by the Auditor’s third-party valuation expert.  

211. In connection with the Mutual Fund’s 2020 year-end audit, as part of its testing 

procedures, the Auditor selected a certain corridor variance swap position to be revalued by an 

independent valuation expert. The selected position was a corridor variance swap that referenced 

the SX5E index with an effective date of 2/4/20 and a termination date of 12/18/20, which was 

reported as having a value of more than $22 million in the Mutual Fund’s annual report. 

Velissaris had manipulated the Underlying Valuation Code for this position such that the 

corridors were not being properly taken into consideration in the Mutual Fund’s valuation.  

212. Velissaris was informed of the selection of this position for independent valuation 

in an email from the Auditor on the morning of Friday, September 18, 2020.  

213. Velissaris, in order to conceal the mismarking of this position, then edited the 

term sheet for the position by deleting the actual lower corridor and replacing it with a reduced 

lower corridor, such that in the new, forged version of the term sheet, the index would have been 

within the corridor for almost the entire life of the position.  

214. Infinity Q had previously uploaded this position’s term sheet to the Auditor’s 

client portal. Upon learning of the selection, Velissaris instructed other individuals at Infinity Q 

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46 

to remove the original term sheet for the position and upload in its place Velissaris’s forged 

version of the term sheet (in the format of a .pdf file).  

215. Also on September 18, 2020, after the original term sheet was replaced with the 

altered term sheet, Velissaris emailed the Auditor: “We noticed several [term sheets] that needed 

to be updated. [Infinity Q employees] just updated and the current files should be correct.” 

216. The Auditor then provided the altered version of the term sheet to their valuation 

expert who was thus able to calculate a valuation close to Infinity Q’s for that position.  

217. Based on the recent re-valuation of this position by a third-party valuation firm 

retained by the Board, which was based on the actual term sheet, the value of the position as of 

8/31/2020 was, in fact, only $4.569 million, not more than $22 million as valued by Infinity Q. 

In December 2020, the realized value of the position at settlement was only approximately $4 

million.  

218. According to the Pricing Service audit log, Velissaris also updated and repriced 

this position in the Pricing Service on Monday, September 21, 2020. 

219. In February 2021, Velissaris engaged in similar conduct in connection with the 

Private Fund’s 2020 year-end audit. For example, the Auditor selected for independent re-

valuation another corridor variance swap position, which referenced the SX5E index with a 

1/10/20 effective date and 12/17/20 termination date to be re-valued by an independent valuation 

expert.  

220. Infinity Q had previously uploaded this position’s term sheet to the Auditor’s 

client portal. Upon learning of the selection, Velissaris himself deleted the original term sheet for 

the position from the Auditor’s client portal. Velissaris once again edited the term sheet for the 

position by deleting the actual lower bound for the position and replacing it with a reduced lower 

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bound. According to the Auditor’s audit log for the client portal, Velissaris himself then 

uploaded the new, forged term sheet (in the form of a .pdf file) to the Auditor’s client portal.  

221. The Auditor noticed that new versions of term sheets had been uploaded to the 

client portal and wrote to Velissaris: “I noticed that the trade confirms that were originally 

provided on our Client Portal were deleted and replaced with new versions yesterday. Just 

wanted to check with you to see if there were any issues with the trade confirms that were 

deleted?” 

222. In response, Velissaris did not disclose that he had removed the correct term sheet 

and replaced it with a forged term sheet. Instead, Velissaris replied: “We were finalizing our 

review and wanted to make sure the final versions were uploaded.” 

223. Velissaris submitted the forged term sheet with a reduced lower bound to the 

Auditor because he had previously manipulated the Underlying Valuation Code for this very 

position, as alleged above. As alleged above, Velissaris had coded an additional “-2650” to the 

lower corridor in the Underlying Valuation Code, which meant that the valuation would 

effectively disregard the lower corridor. If the Auditor had received the actual term sheet, its 

valuation expert would have arrived at a much different valuation than Infinity Q. 

224. Velissaris acted knowingly or recklessly out of a concern that, if the Auditor 

properly tested these positions, his scheme may have been uncovered. 

B. Velissaris’s Attempts to Mislead the SEC 

225. During the SEC’s investigation, Velissaris also attempted to mislead the SEC 

about his use of the Pricing Service to value the positions at issue.  

226. In response to the SEC’s initial requests for valuation policies and procedures and 

offering materials in May 2020, Velissaris did not produce the documents that had been sent to 

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investors by Infinity Q. Instead, Velissaris edited the valuation policy sections of the policies and 

procedures and PPMs, while keeping the as-of dates on the documents and without indicating 

that he had made changes. Velissaris’s edits placed additional emphasis on Infinity Q’s use of the 

Pricing Service (while not disclosing his control and active manipulation of its models) and 

eliminated the role of counterparty marks and broker quotes, which were widely divergent from 

Infinity Q’s marks, in the valuation process. Velissaris also removed the provision that “[o]nce a 

price is established for a portfolio security, it shall be used for all Funds that hold the security.” 

227. In response to a subsequent request by the SEC for valuation committee minutes, 

Velissaris drafted and backdated committee minutes for meetings that had not occurred and 

submitted them to the staff without indicating he had recently created the minutes.  

228. The SEC staff interviewed Velissaris on two occasions in November 2020. 

Despite multiple questions posed to Velissaris during the two interviews about how he valued 

positions and his use of the Pricing Service, Velissaris did not tell the SEC staff that he could and 

did change the Underlying Valuation Code in the Pricing Service, that he selected models that 

were not appropriate for the transactions at issue, or that he entered terms into the Pricing 

Service that differed from actual terms sheets.  

229. In connection with the second interview, Infinity Q also produced to the SEC 

what purported to be screenshots of the standard and custom models it was using in the Pricing 

Service to value certain positions identified by the SEC staff. These screenshots, however, were 

only of the Pricing Service’s User Interface and, thus, included the fields that showed the terms 

of the transactions that Velissaris entered into the model. These screenshots misleadingly omitted 

the Underlying Valuation Code, which would have revealed that the position was actually being 

valued using terms that differed from the terms reflected in the User Interface. For a certain 

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corridor variance swap position, the terms of the corridors as reflected in the screenshots 

submitted to the SEC staff were different from what were actually being used in calculation by 

the Underlying Valuation Code. In fact, Velissaris had altered the Underlying Valuation code to 

disregard the corridors.  

230. On February 11, 2021, after obtaining read-only access to the Infinity Q Funds’ 

portfolios from the Pricing Service, SEC staff informed Infinity Q’s counsel that it had identified 

certain changes made by Velissaris to the Underlying Valuation Code for positions held by the 

Infinity Q Funds.  

231. In February 2021, when Velissaris knew his scheme was about to be discovered, 

he took an unprecedented profits distribution from Infinity Q. On February 11, 2021, Velissaris 

effectively transferred to Infinity Q Management Equity, which Velissaris controlled, $7.2 

million in fees that had been generated from the inflated valuations of the Mutual Fund and 

Private Fund. In the days preceding the distribution, Velissaris forged and then submitted term 

sheets to the Auditor, in an attempt to mislead the Auditor about certain positions selected for re-

valuation by the Auditor’s third-party valuation expert, as alleged supra. On February 8, 

Velissaris was also informed by a representative of the Board that they had been asked by the 

Auditor to “test that the inputs for the models in [the Pricing Service] match the term sheets 

across a sampling of positions,” and to “represent that we have also tested and not found any 

exceptions,” which Velissaris tried to resist. The February 2021 distribution came as a surprise to 

others at Infinity Q, and it was the first time that Velissaris had ever effected a distribution in the 

month of February.  

232. On February 12, 2021, Infinity Q’s counsel told SEC staff for the first time that 

Infinity Q could view and change the Underlying Valuation Code. Infinity Q’s counsel further 

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stated that, from its understanding: (a) changes were made to positions as part of a normal daily 

process; (b) it was believed that Velissaris made the changes; (c) the changes did not have a 

material impact on valuations; and (d) Infinity Q was putting into place remediation around code 

changes. 

233. On February 18, 2021, SEC staff were informed by Velissaris’s personal counsel 

that his client did in fact make alterations to the Underlying Valuation Code used to value 

Infinity Q’s corridor variance swaps. According to Velissaris’s counsel, Velissaris made such 

changes in order to achieve a valuation his client thought appropriate. 

234. On February 19, 2021, Infinity Q’s counsel informed SEC staff that Infinity Q 

had identified that Velissaris was trying to make an unauthorized change in the Pricing Service 

to the Infinity Q Funds’ portfolios.  

235. On February 19, 2021, Infinity Q revoked Velissaris’s ability to access the Pricing 

Service. 

236. On February 22, 2021, the SEC approved Infinity Q’s application to suspend 

redemptions in the Mutual Fund. In that application, Infinity Q and the Board stated: 

Based on information learned by the Commission staff and shared 
with Infinity Q, Infinity Q informed the [Mutual] Fund that Infinity 
Q’s Chief Investment Officer had been adjusting certain 
parameters within the third-party pricing model that affected the 
valuation of the Swaps. Applicants state that on February 19, 2021, 
Infinity Q informed the [Mutual] Fund that at such time it was 
unable to conclude that these adjustments were reasonable, and, 
further, that it was unable to verify that the values it had previously 
determined for the Swaps were reflective of fair value. Applicants 
state further that Infinity Q also informed the [Mutual] Fund that it 
would not be able to calculate a fair value for any of the Swaps in 
sufficient time to calculate an accurate NAV for at least several 
days. 

237. Velissaris acted knowingly or recklessly in connection with the conduct set forth 

above. 

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V. Velissaris’s Criminal Conviction  

238. On February 17, 2022, the U.S. Attorney’s Office for the Southern District of 

New York unsealed an indictment against Velissaris for his role in the mismarking scheme 

affecting the Infinity Q Funds. United States v. Velissaris, 22 cr. 105 (S.D.N.Y.) (DLC).   

239. On November 21, 2022, Velissaris pleaded guilty to one count of securities fraud 

in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. At his plea 

hearing, Velissaris admitted to his conduct in an allocution under oath, including as follows: 

“I made false statements of material fact to investors in the Infinity Q funds that I 
managed, and I did so knowingly, willfully, and with the intent to defraud. 
Specifically, I told investors that I was using an independent Bloomberg system to 
value the fund’s over-the-counter derivatives. However, I was making manual 
adjustments in the system which increased the values of over-the-counter derivative 
positions that were reported. I knew that if I disclosed what I was doing, investors 
might have decided to redeem their investments or maybe would not have made the 
investments in the first place. . . . I acknowledge that my actions caused investors to 
lose money.” 

 
240. On April 7, 2023, Velissaris was sentenced to 180 months imprisonment for his 

role in the mismarking scheme. 

VI. WPH 

241. When Infinity Q was formed in 2014, WPH provided it with $2 million in seed 

capital. Between 2014 and 2019, WPH also advanced to Infinity Q approximately $10 million to 

pay certain Infinity Q employee compensation and expense reimbursements and other expenses.  

242. Between 2019 and 2021, Infinity Q made distributions to WPH of $19,152,899 in 

cash and $2.4 million in paid in kind shares in the Private Fund (the “PIK Shares”), for a total of 

$21,552,899 in connection with WPH’s ownership interest in Infinity Q. The distributions were 

derived from Infinity Qs management and performance fees received from the Funds. 

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243. WPH has deposited into escrow $15,650,000 into a class action settlement fund in 

the consolidated class action titled In re Infinity Q Diversified Alpha Fund Securities Litigation, 

Index No. 651295/2021 (N.Y. Sup.), and has relinquished its right to obtain any distribution on 

account of its PIK shares.  

FIRST CLAIM FOR RELIEF 
(Against Defendant Only) 

Violations of Section 17(a) of the Securities Act 

244. The SEC realleges and incorporates by reference here the allegations in 

paragraphs 1 through 243. 

245. By engaging in the acts and conduct described in this Complaint, Defendant, 

directly or indirectly, singly or in concert with others, in the offer or sale of securities and by 

use of the means or instruments of transportation or communication in interstate commerce or 

by use of the mails: (a) knowingly or recklessly employed devices, schemes, and artifices to 

defraud; (b) knowingly, recklessly or negligently obtained money or property by means of 

untrue statements of a material fact or omissions of a material fact necessary in order to make 

the statements made, in light of the circumstances under which they were made, not misleading; 

and/or (c) knowingly, recklessly, or negligently engaged in transactions, practices, or courses of 

business which operated or would operate as a fraud or deceit upon purchasers of such 

securities.. 

246. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, 

has violated and, unless enjoined, will again violate Securities Act Section 17(a) [15 U.S.C. 

§ 77q(a)]. 

SECOND CLAIM FOR RELIEF 
(Against Defendant Only) 

Violations Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder 
 

247. The SEC realleges and incorporates by reference here the allegations in 

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paragraphs 1 through 243. 

248. By engaging in the acts and conduct described in this Complaint, Defendant, 

directly or indirectly, singly or in concert, in connection with the purchase or sale of securities 

and by the use of the means or instrumentalities of interstate commerce, or the mails, or the 

facilities of a national securities exchange, knowingly or recklessly (1) employed one or more 

devices, schemes, or artifices to defraud; (2) made one or more untrue statements of a material 

fact or omitted to state one or more material facts necessary in order to make the statements 

made, in light of the circumstances under which they were made, not misleading; and/or (3) 

engaged in one or more acts, practices, or courses of business which operated or would have 

operated as a fraud or deceit upon other persons.  

249. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, 

has violated and, unless enjoined, will again violate Exchange Act Section 10(b) [15 U.S.C. 

§ 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]. 

THIRD CLAIM FOR RELIEF 
(Against Defendant Only) 

Violations of Advisers Act Section 204(a) and Rule 204-2 Therunder 
 

250. The SEC realleges and incorporates by reference here the allegations in 

paragrapsh 1 through 243. 

251. At all relevant times, Defendant was an investment adviser under Advisers Act 

Section 202(11) [15 U.S.C. § 80b-2(a)(11)]. 

252. By engaging in the acts and conduct described in this Complaint, Defendant 

directly or indirectly, while acting as an investment adviser, by use of the mails or the means and 

instrumentalities of interstate commerce, (1) failed to make and keep required books and records 

related to Defendant’s advisory business; and failed to furnish to the SEC copies of books and 

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records that Infinity Q was required to make, keep, and provide to representatives of the SEC 

upon request. 

253. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, 

has violated and, unless enjoined, will again violate Advisers act Section 204(a) [15 U.S.C. § 80-

b-4(a)] and Rule 204-2 thereunder [17 C.F.R. § 275.204-2]. 

FOURTH CLAIM FOR RELIEF 
(Against Defendant Only) 

Violations of Advisers Act Sections 206(1) and (2) 
 

254. The SEC realleges and incorporates by reference here the allegations in 

paragraphs 1 through 243. 

255. Defendant owed the Infinity Q Funds a fiduciary duty of utmost good faith and 

had an affirmative duty to make full and fair disclosure of all material facts, as well as a duty to 

act in the fund’s best interests. 

256. By engaging in the acts and conduct described in this Complaint, Defendant, 

directly or indirectly, singly or in concert, while acting as an investment adviser, by use of the 

mails or the means and instrumentalities of interstate commerce, has: (i) knowingly or recklessly 

employed devices, schemes, or artifices to defraud clients or prospective clients, and/or (ii) 

knowingly, recklessly, or negligently engaged in transactions, practices, and courses of business 

which operated or would have operated as a fraud or deceit upon clients or prospective clients.  

257. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, 

has violated and, unless enjoined, will again violate Advisers Act Sections 206(1) and (2) [15 

U.S.C. §§ 80b-6(1) and 80b-6(2)].  

 
 
 
 

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FIFTH CLAIM FOR RELIEF 
(Against Defendant Only) 

Violations of Advisers Act Section 206(4) and Rule 206(4)-7  
 

258. The SEC realleges and incorporates by reference here the allegations in 

paragraphs 1 through 243. 

259.  By engaging in the acts and conduct described in this Complaint, Defendant,  

knowingly, recklessly, and/or negligently, provided investment advice to its clients without 

adopting and implementing written policies and procedures reasonably designed to prevent 

violation, by Defendant and Defendant’s supervised persons, of the Advisers Act and the rules 

promulgated under the Advisers Act.  

260. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, 

has violated, and unless enjoined, will again violate Section 206(4) of the Advisers Act [15 

U.S.C. § 80b-6(4)] and Rule 206(4)-7 thereunder [17 C.F.R. § 275.206(4)-7]. 

SIXTH CLAIM FOR RELIEF 
(Against Defendant Only) 

Violations of Advisers Act Section 206(4) and Rule 206(4)-8 Thereunder 
 

261. The SEC realleges and incorporates by reference here the allegations in 

paragraphs 1 through 243. 

262. Each of the Infinity Q Funds was a pooled investment vehicle within the meaning 

of Rule 206(4)-8(b) of the Advisers Act [17 C.F.R. § 275.206(4)-8(b)]. Each of the Funds was 

engaged in, held itself out as being engaged primarily, and proposed to engage itself primarily in 

the business of investing, reinvesting, and/or trading in securities, and thus was an investment 

company as defined in Section 3(a) of the Investment Company Act of 1940 [15 U.S.C. § 80a-

3(a)] or would have been an investment company under that provision but for the exclusion 

provided from that definition under either Section 3(c)(1) or Section 3(c)(7) of the Investment 

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Company Act of 1940 [15 U.S.C. § 80a-3(c)(1) & (7)].  

263. By engaging in the acts and conduct described in this Complaint, Defendant, 

directly or indirectly, singly or in concert, while acting as an investment adviser to a pooled 

investment vehicle, knowingly, recklessly, or negligently (i) made an untrue statement of 

a material fact or omitted to state a material fact necessary to make the statements made, in the 

light of the circumstances under which they were made, not misleading, to any investor or 

prospective investor in the pooled investment vehicle; and/or (ii) engaged in acts, practices, or 

courses of business which were fraudulent, deceptive, or manipulative, with respect to an 

investor or prospective investor in the pooled investment vehicle.  

264. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, 

has violated and, unless enjoined, will again violate Advisers Act Section 206(4) [15 U.S.C. § 

80b-6(4)] and Rule 206(4)-8(a) thereunder [17 C.F.R. § 275.206(4)8].  

SEVENTH CLAIM FOR RELIEF AGAINST DEFENDANT 
(Against Defendant Only) 

Violations of Advisers Act Section 207 
 

265. The SEC realleges and incorporates by reference here the allegations in 

paragraphs 1 through 243.  

266. By engaging in the acts and conduct described in this Complaint, Defendant, 

directly or indirectly, singly or in concert, by use of the mails, and the means and 

instrumentalities of interstate commerce, willfully made untrue statements of material fact in, 

and omitted to state material facts required to be stated in, reports required to be filed with the 

SEC under Section 203 of the Advisers Act. A Form ADV is a registration application or report 

filed with the Commission pursuant to Section 203 of the Advisers Act.  

267. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, 

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has violated and, unless enjoined, will again violate Advisers Act Section 207 [15 U.S.C. § 80b-

7].  

EIGHTH CLAIM FOR RELIEF  
(Against Defendant Only) 

Violations of Investment Company Act Section 34(b) 
 

268. The SEC realleges and incorporates by reference here the allegations in 

paragraphs 1 through 243.  

269. The Mutual Fund is an “investment company” as defined by Section 3(a)(1) of the 

Investment Company Act [15 U.S.C. § 80a-3]. 

270. By engaging in the acts and conduct described in this Complaint, Defendant, 

directly or indirectly, singly or in concert, made untrue statements of material fact in a 

registration statement or filing under the Investment Company Act, and/or filed, transmitted, or 

kept documents which omitted to state any fact necessary in order to prevent the statements 

made, in the light of the circumstances under which they were made, from being materially 

misleading. 

271. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, 

has violated and, unless enjoined, will again violate Investment Company Act Section 34(b) [15 

U.S.C. § 80a-33]. 

NINTH CLAIM FOR RELIEF 
(Against Defendant Only) 

Aiding and Abetting Violations of Investment Company Act Rule 22c-1 
 

272. The SEC realleges and incorporates by reference here the allegations in 

paragraphs 1 through 243.  

273. The Mutual Fund is an “investment company” as defined by Section 3(a)(1) of the 

Investment Company Act [15 U.S.C. § 80a-3].  

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274. By engaging in the acts and conduct described in this Complaint, the Mutual Fund 

sold, redeemed, or repurchased its redeemable security at a price other than the price based on the 

current net asset value of such security that is next computed after receipt of a tender of the 

security for redemption or of an order to purchase or sell the security. 

275. By reason of the foregoing, Defendant, directly or indirectly, singly or in 

concert, aided and abetted the Mutual Fund’s violations of Investment Company Act Rule 22c-1 

[17 C.F.R. § 270.22c-1] by knowingly or recklessly providing substantial assistance to the Mutual 

Fund’s violations pursuant to Section 48(b) of the Investment Company Act [15 U.S.C. § 80a-

47(b)], and unless enjoined, will again aid and abet violations of this provision.  

PRAYER FOR RELIEF 

 WHEREFORE, the SEC respectfully requests that the Court enter a Final Judgment: 

I. 

Permanently enjoining Defendant and its agents, servants, employees and attorneys and 

all persons in active concert or participation with any of them from violating, directly or 

indirectly, Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)], Section 10(b) of the 

Exchange Act [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], Sections 

204(a), 206(1), 206(2), 206(4) and 207 of the Advisers Act [15 U.S.C. §§ 80b-4(a), 80b-6(1), 

80b-6(2), 80b-6(4), 7 80b-6(7)], and Rules 204-2(a), 206(4)-7, and 206(4)-8 thereunder [17 

C.F.R. § 275.206(4)8], and Section 34(b) of the Investment Company Act [15 U.S.C. §§ 80a-33, 

80a-36], and from aiding and abetting violations of Rule 22c-1 under the Investment Company 

Act [17 C.F.R. § 270.22c-1];  

II. 

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Ordering Defendant to disgorge all ill-gotten gains it received directly or indirectly, with 

pre-judgment interest thereon, as a result of the alleged violations; 

III. 

Ordering Defendant to pay civil monetary penalties under Securities Act Section 20(d) 

[15 U.S.C. § 77t(d)], Exchange Act Section 21(d)(3) [15 U.S.C. § 78u(d)(3)], Advisers Act 

Section 209(e) [15 U.S.C. § 80b-9(e)], and Investment Company Act Section 42(e) [15 U.S.C. § 

80a-41(e)]; 

IV. 

Ordering the appointment of an independent Monitor to oversee a claims and distribution 

process for the Private Fund. 

         V. 

Ordering Relief Defendant to pay disgorgement and prejudgment interest. 

VI. 

 Granting any other and further relief that may be appropriate and necessary for the 

benefit of investors. 

 

JURY DEMAND  

 The SEC demands a trial by jury.  

Dated: New York, New York 
 June 16, 2023 

       
     ___________________ 
     Andrew Dean 
     Osman Nawaz* 
     Joshua Brodsky 
     Preethi Krishnamurthy 

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     Alistaire Bambach 
     Neal Jacobson 
     Zachary Sturges 
     Ariana Torchin 
     Attorneys for Plaintiff 
     SECURITIES AND EXCHANGE COMMISSION 
     100 Pearl Street 
     Suite 20-100 
     New York, New York 10004 
     (212) 336-0095 (Jacobson)  
     Email:[email protected] 
     *Not admitted to U.S.D.C for the S.D.N.Y. 
 

 

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	Neal Jacobson
	Zachary Sturges
	Ariana Torchin
	Attorneys for Plaintiff
	SECURITIES AND EXCHANGE COMMISSION
	New York Regional Office
	100 Pearl Street
	Suite 20-100
	New York, New York 10004
	(212) 336-0095 (Jacobson)
	Email: [email protected]
	*Not admitted to U.S. District Court for the S.D.N.Y.
	Plaintiff Securities and Exchange Commission (“SEC”), for its Complaint against Defendant Infinity Q Capital Management, LLC (“Infinity Q” or “Defendant”), and Relief Defendant, Wildcat Partner Holdings, LP (“WPH”) (F/K/A Bonderman Family Limited Part...
	SUMMARY
	1. SEC-registered investment adviser Infinity Q engaged in a fraudulent scheme that inflated by more than $1 billion the value of assets held by a mutual fund (the “Mutual Fund”)  and a hedge fund (the “Private Fund”) Infinity Q advised (collectively,...
	2. Infinity Q’s fraudulent scheme was conducted through acts committed by James Velissaris (“Velissaris”), Infinity Q’s founder and former chief investment officer (“CIO”), who pleaded guilty to securities fraud in connection with the scheme on Novemb...
	3. From at least February 2017 through February 2021 (the “Relevant Period”), Infinity Q represented to investors and others that certain holdings of the Infinity Q Funds were valued by an “independent” third party pricing service (the “Pricing Servic...
	4. Unbeknownst to investors, Infinity Q knowingly inflated the Funds’ stated valuations in at least four ways during the Relevant Period. Infinity Q manipulated computer code to cause the valuation models to disregard certain information, entered inpu...
	5. Despite inflating the Infinity Q Funds’ valuations by manipulating the Pricing Service, Infinity Q repeatedly told investors, the Mutual Fund’s board of trustees (the “Board”), and the Funds’ auditor during the Relevant Period that Infinity Q had n...
	6. Infinity Q’s pricing manipulations materially inflated the Mutual Fund’s net asset values (“NAVs”) and the Private Fund’s total assets, as well as the Funds’ reported performance, and Infinity Q disseminated false and misleading information about t...
	7. Infinity Q’s manipulations of the Funds’ valuations were pervasive. At times, Infinity Q had different valuations for the same position held by different Funds, and the Mutual Fund reported positions at mathematically impossible valuations. Infinit...
	8. By March 2020, when faced with market volatility caused by the COVID-19 pandemic, Infinity Q knew that its Funds were poorly positioned for increasing market turmoil and that they were at risk of failing. Infinity Q sought a $100 million cash infus...
	9. As of the end of March 2020, as a result of Infinity Q’s mismarking, Infinity Q reported year-to-date returns for institutional class shares in the Mutual Fund of 8.95%, one-year returns of 10.61%, three-year returns of 8.72%, and five-year returns...
	10. Meanwhile, Infinity Q tried to conceal the mismarking scheme, including from the Infinity Q Funds’ independent auditor. For example, in connection with the Infinity Q Funds’ audits, Infinity Q forged transaction confirmation documents by changing ...
	11. By September 2020, Infinity Q’s fraudulent scheme had resulted in an overvaluation of the Infinity Q Funds by over $1 billion.
	12. By February 2021, when Infinity Q removed Velissaris from its management, the Infinity Q Funds remained overvalued by at least hundreds of millions of dollars.
	13. As a result of the Infinity Q Funds’ overvaluation, Infinity Q received management and performance fees to which it was not entitled.
	VIOLATIONS
	14. By virtue of the foregoing conduct and as alleged further herein:
	a. Infinity Q violated Section 17(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. § 77q(a)], Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5], ...
	15. Unless Infinity Q is restrained and enjoined, it will engage in the acts, practices, transactions, and courses of business set forth in this Complaint or in acts, practices, transactions, and courses of business of similar type and object.
	NATURE OF THE PROCEEDINGS AND RELIEF SOUGHT
	16. The SEC brings this action pursuant to the authority conferred upon it by Section 20(b) of the Securities Act [15 U.S.C. §§ 77t(b)], Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)], Section 209(d) of the Advisers Act [15 U.S.C. § 80b-9(d)],...
	17. The SEC seeks a final judgment: (a) permanently enjoining Infinity Q from violating the federal securities laws and rules this Complaint alleges it has violated; (b) ordering Infinity Q to disgorge all ill-gotten gains it received as a result of t...
	18. The SEC also seeks a final judgment ordering WPH to pay disgorgement and prejudgment interest.
	JURISDICTION AND VENUE
	20. Infinity Q has, directly and indirectly, made use of the means or instrumentalities of interstate commerce or of the mails in connection with the transactions, acts, practices, and courses of business alleged herein.
	21. Venue lies in this District under Section 22(a) of the Securities Act [15 U.S.C. § 77v(a)], Section 27 of the Exchange Act [15 U.S.C. § 78aa], Section 214 of the Advisers Act [15 U.S.C. § 80b-14], and Section 44 of the Investment Company Act [15 U...
	DEFENDANT
	22. Infinity Q Capital Management, LLC is a registered investment adviser headquartered in New York, New York. Infinity Q was organized as a Delaware limited liability company in 2014. Infinity Q’s principal owners are Infinity Q Management Equity, LL...
	RELIEF DEFENDANT
	23. Wildcat Partner Holdings, LP (F/K/A Bonderman Family Limited Partnership) is a family limited partnership that owns 40% of Infinity Q, and which received distributions from Infinity Q on account of its investment in Infinity Q.
	RELATED INDIVIDUAL AND ENTITIES
	24. James R. Velissaris, age 38, was the founder and CIO of Infinity Q and majority owner of Infinity Q Management Equity, LLC, which was the majority owner of Infinity Q. On February 17, 2022, the Commission charged and the Department of Justice unse...
	25. Scott Lindell, age 44, was the chief compliance officer (“CCO”), chief risk officer, head of operations, and a portfolio manager of Infinity Q. Lindell is also a minority owner of Infinity Q Management Equity, LLC, which is an owner of Infinity Q....
	26. An audit, accounting, advisory, and consulting firm (the “Auditor”) served as the Mutual Fund’s and the Private Fund’s auditor since 2018.
	FACTS
	I. Background
	A. Mutual Funds, Private Funds, and Investment Advisers
	1. Mutual Funds
	27. A mutual fund is a type of SEC-registered investment company, or series thereof. Investment companies pool money from many investors and invest the money in stocks, bonds, short-term money-market instruments, other securities or assets, or some co...
	28. Investors in mutual funds buy their shares from, and sell/redeem their shares to, the mutual funds themselves. Mutual fund shares are typically purchased from the fund directly or through investment professionals like brokers. Mutual funds are req...
	29. A mutual fund is required under the Investment Company Act to calculate its NAV using the market value of its portfolio securities when market quotations for those securities are “readily available.” If a market quote for a security is not readily...
	30. Mutual funds must comply with various disclosure requirements under the Investment Company Act and, if they publicly offer shares, the Securities Act. For example, Sections 30(a), (b), and (e) of Investment Company Act, and rules adopted thereunde...
	2. Private Funds
	31. Other investment pools may rely on one of the exclusions from the definition of investment company set forth in Section 3 of the Investment Company Act. Investment pools that rely on the exclusions set forth in Section 3(c)(1) and Section 3(c)(7) ...
	32. Like mutual funds, private funds pool investors’ money and invest the money in an effort to make a positive return.
	33. Private funds are not subject to some of the regulations applicable to mutual funds. Private funds, however, and their advisers, are subject to the same prohibitions against fraud as are other market participants, and, like investment advisers to ...
	34. A private fund often discloses its valuation procedures in communications with investors or prospective investors.
	35. Whereas the mutual fund advisory fee structure is often based on a percentage of assets under management, the private fund advisory fee structure typically includes both a management fee (based on assets under management) and a performance fee (ba...
	3. Investment Advisers
	36. An investment adviser, under the Advisers Act, is any person that, for compensation, engages in the business of providing investment advice to others, including a mutual fund or private fund, about the value of or about investing in securities. Ad...
	B. Derivatives and Variance Swaps, Generally
	37. Derivatives are financial instruments whose performance is derived, at least in part, from the performance of an underlying asset, security, or index, among other things.
	38. Over-the-counter (“OTC”) derivatives are contracts that are privately negotiated between two counterparties without going through an exchange.
	39. A swap is a type of derivative in which two counterparties agree to exchange or “swap” payments with each other as a result of such things as changes in a stock price, interest rate, commodity price, or even the volatility or variance of a financi...
	40. Volatility is a measure of the magnitude of price movement, either up or down, of a financial instrument or another financial measure such as an index. Variance is the square of volatility.
	41. Generally, in a variance swap, at the time of the expiration of a position, the buyer of the swap receives the amount of realized variance (i.e., the square of the realized volatility) over a certain period, subject to certain conditions, multipli...
	C. Infinity Q and the Infinity Q Funds
	42. In approximately 2014, Velissaris, having worked at several well-known asset managers and a prominent family office, sought to strike out on his own and started Infinity Q with the goal of putting into practice his own investment approach.
	43. Infinity Q is an investment adviser within the meaning of Section 202(a)(11) of the Advisers Act, 15 U.S.C. § 80b-2(a)(11) and has been registered as an investment adviser with the SEC since May 6, 2014.
	44. Velissaris is also an investment adviser within the meaning of Section 202(a)(11) of the Advisers Act. As the founder, indirect majority owner, and CIO of Infinity Q, Velissaris had control over the firm, and his actions and state of mind are impu...
	45. Infinity Q and Velissaris, as investment advisers to the Infinity Q Funds, owed a fiduciary duty to the Infinity Q Funds.
	46. At all relevant times through at least February 21, 2021, the date that he was placed on administrative leave, Velissaris was responsible for all investment decisions of Infinity Q.
	47. During the Relevant Period, Infinity Q offered two main products, which held the majority of the assets advised by Infinity Q: (a) the Mutual Fund (launched in 2014); and (b) the Private Fund (launched in 2017).
	48. Through its Mutual Fund, Infinity Q sought to attract retail investors. The Mutual Fund had thousands of investors, including at least one investor located in this District.
	49. Through its Private Fund, Infinity Q sought to attract institutional investors, which included public pension funds, university endowments, and charitable foundations, among others. The Private Fund had over 150 investors, including at least one i...
	50. Infinity Q represented in marketing materials that it offered retail investors “access to the top tier investment strategies typically reserved for elite high net worth clients.”
	51. Infinity Q further represented to investors in both the Mutual Fund and the Private Fund that its “mandate” was “to provide positive absolute returns while having full liquidity and low average correlation to equity and credit markets.”
	52. The Mutual Fund’s and the Private Fund’s portfolios consisted primarily of cash and a variety of equity and derivative positions, including swaps. The swaps held by the Infinity Q Funds were predominately variance swaps, the value of which was tie...
	53. Velissaris operated as the head trader at Infinity Q and was one of three members of the Infinity Q valuation committee. In practice, there were no formal valuation committee meetings since at least approximately 2018. Velissaris was the sole deci...
	II. Infinity Q’s Purported Valuation Process
	A. Valuation Policies and Use of Pricing Service
	54. In order to price the OTC derivative positions that constituted a significant portion of the Funds’ assets, Infinity Q through Velissaris, starting in approximately 2016, identified, retained, and started using the Pricing Service—a well-known pre...
	55. By 2017, the Infinity Q Funds’ administrator (the “Administrator”) directly accessed from the Pricing Service the values generated through Velissaris’s use of the Pricing Service and used the reported values to calculate and publish the Mutual Fun...
	56. In offering documents, prospectuses, valuation policies, and other documents, Velissaris and Infinity Q represented to the Funds’ current and prospective investors how they would value the Funds’ assets, including how they would seek to “fair valu...
	57. For example, Infinity Q represented that Infinity Q Funds’ assets were valued in accordance with U.S. Generally accepted Accounting Principles (“GAAP”).
	58. Accounting Standards Codification Topic 820 (“Topic 820”), Fair Value Measurement, provides a framework for determining fair value in accordance with GAAP.
	59. Topic 820 defines fair value (with the emphasis in the original) as “the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market...
	60. Infinity Q further represented to current and prospective investors in the Mutual Fund that Infinity Q and the Board of trustees (the “Board”) had established valuation policies and procedures to purportedly “fair value” portfolio holdings in acco...
	61. In the Mutual Fund’s 2017 and 2018 prospectuses, for example, Infinity Q represented that “[w]hen market quotations are not readily available, a security or other asset is valued at its fair value as determined under procedures approved by the Boa...
	62. In the Mutual Fund’s prospectus dated December 31, 2019, for example, Infinity Q represented:
	Generally, the Fund’s investments are valued at market value or, in the absence of a market value, at fair value as determined in good faith by [Infinity Q] with oversight by the [valuation committee of the Trust] pursuant to procedures approved by or...
	63. Many of the Infinity Q Funds’ OTC derivative positions, which constituted a significant portion of the Funds, did not have readily available market prices. While the settlement values of such positions are generally agreed upon by the parties at t...
	64. The Infinity Q valuation policy was contained in its compliance manual and in the Private Fund private placement memorandum (“PPM”) that Infinity Q sent to and used to raise funds from investors, from 2017 through May 2020.1F  In its valuation pol...
	65. For the OTC derivatives held by the Private Fund, the Infinity Q valuation policy further represented prior to May 2020, when Velissaris surreptitiously revised the policy, that it “utilizes [the Pricing Service], Broker Quotes, and Counterparty V...
	66. The Infinity Q valuation policy further provided prior to May 2020, when Velissaris surreptitiously revised the policy,  that “[a]t each month end, valuations are compared to the values provided by counterparties for reasonableness,” and that “[o]...
	67. In its 2019 compliance manual, Infinity Q stated that it utilized “[p]ricing services and broker dealers” in an “attempt to obtain a minimum of two independent prices” when trying to “determine the fair value of the instrument,” and “[t]he final p...
	68. In the Mutual Fund’s 2019 and 2020 annual reports and semi-annual reports, Infinity Q further represented that the Mutual Fund “uses a pricing service to model price the variance swap trades” and that the Pricing Service “uses quotes from brokers ...
	69. In its required reporting on private funds on Form ADV for 2017 through 2020, Infinity Q represented that 100% of the Private Fund’s assets were valued by a person who was not a “related person” of Infinity Q.2F
	70. In or around March 2018, Velissaris was asked to review a draft of Infinity Q’s Form ADV, which contained the statement that 100% of the Private Fund’s assets were valued by a person who was not a “related person” of Infinity Q. On March 29, 2018,...
	B. Infinity Q, through Velissaris, Makes Additional Representations About Infinity Q’s Valuation Process
	71. Velissaris and others at Infinity Q repeatedly referred to Pricing Service-generated valuations as “independent” prices in communications with, among others, investors, the Board, and the Auditor.
	72. For example, in response to an August 2016 Board inquiry about Infinity Q’s use of the Pricing Service to price OTC derivatives, Velissaris explained that Infinity Q “provide[s] the term sheet, and [the Pricing Service] created the pricing model. ...
	73. In other correspondence with the Board in October 2016, Velissaris claimed that the Mutual Fund’s “positions were valued independently by [the Pricing Service] team,” and “[w]e were not involved in the valuation process.”
	74. In April 2018, Velissaris edited a draft response for the CCO to send to representatives of the Administrator, who had inquired about Infinity Q’s valuation process. The draft response, after Velissaris’s edits, represented: “Infinity Q does not p...
	75. In April 2018, Velissaris informed the Auditor that Infinity Q’s variance and correlation swaps “are modeled independently by [the Pricing Service] and [the Pricing Service] independently obtains broker implied volatility values (with no input fro...
	76. Velissaris and Infinity Q also repeatedly told investors and provided them with documents that indicated that Infinity Q had no role in the Pricing Service valuation process, that the Pricing Service was independent from Infinity Q, and that the A...
	77. Similarly, in May 2020, Velissaris told an investor that “[t]he valuation and reporting for the mutual fund is conducted by [the Administrator].”
	III. The Mismarking Scheme
	78. The statements made by Velissaris and Infinity Q during the Relevant Period about Infinity Q’s valuation process, including about the use of the Pricing Service, were false or misleading. Velissaris knew or recklessly disregarded that he was, in f...
	79. There were three primary steps for Velissaris to price an OTC derivative position held by the Infinity Q Funds through the Pricing Service.
	80. First, Velissaris was required to select, from among numerous models available from the Pricing Service, a model appropriate for the position. For example, the Pricing Service offered a basic valuation model for a “vanilla” variance swap and a dif...
	81. Second, upon selecting the appropriate model, Velissaris was required to enter the terms of the transaction, as reflected in the term sheet or confirmation between Infinity Q and the broker-dealer counterparty, into a user interface (“User Interfa...
	82. After the terms of the transaction were entered into the available fields of the User Interface, those terms were automatically mapped, or copied, onto the model’s underlying computer code that ultimately calculated a valuation for the position (t...
	83. Finally, to the extent applicable for the position, Velissaris could select a volatility surface or snapshot from a drop down menu of options available from the Pricing Service. Volatility, which was derived from the volatility surface, was also a...
	84. After these steps were performed, the model’s Underlying Valuation Code then calculated a value for the position.
	85. In selecting the appropriate model, the Pricing Service provided guidance to clients, including Velissaris, about the correct model to use for a particular type of derivative position.
	86. For certain OTC derivative transactions, the Pricing Service did not initially have a standard model, and so Pricing Service engineers would sometimes, at a customer’s request, derive a custom model to value those positions (a “Custom Model”).
	87. Like regular models, Custom Models also allowed a user to enter terms of the swap transaction into fields in the User Interface. For example, a Custom Model for a corridor variance swap model provided entry fields for the position’s strike price (...
	88. The Underlying Valuation Code for Custom Models was only viewable to a user by clicking on a small box on the User Interface, which would then show the underlying code in a separate window on the user’s screen.
	89. Velissaris had the ability to view the Underlying Valuation Code for all Pricing Service models used by the Infinity Q Funds. Velissaris additionally had the ability to both view and edit the Underlying Valuation Code in Custom Models that he sele...
	90. To that end, the Pricing Service included a warning at the bottom of the Underlying Valuation Code in the Custom Models, which stated that it was the customer’s responsibility to ensure that the code being used matched the terms of the transaction...
	91. Velissaris saved the initial Custom Models provided by the Pricing Service and reused them to value new positions as they were added to the Infinity Q Funds’ portfolios.
	92. Given the functionality of the Pricing Service, Velissaris had the ability to adjust inputs and terms entered into the User Interface’s fields on a transaction-by-transaction basis. Velissaris also had the ability to alter the Underlying Valuation...
	93. Velissaris’s scheme to mismark and inflate the Infinity Q Funds’ values included (a) making changes to the Underlying Valuation Code; (b) entering or changing inputs into the Pricing Service models that did not match the terms sheets for the posit...
	94. Through most of 2021, when his scheme began to unravel, Velissaris did not disclose to anyone else at Infinity Q, the Board, the Administrator, the Auditor, or investors the extent to which he had the ability to, and did, manipulate the Pricing Se...
	A. Velissaris Manipulated Underlying Valuation Code
	95. Velissaris manually accessed and altered the Underlying Valuation Code of the Custom Models for certain positions, effectively changing the terms of the transactions for valuation purposes.
	96. From at least February 2017 through approximately January 2021, Velissaris was the only person at Infinity Q who made any edits or changes to any of the Infinity Q Funds’ positions loaded in the Pricing Service.
	97. Velissaris knowingly made multiple modifications to the Underlying Valuation Code of the Custom Models. These modifications had the effect of artificially increasing the value of certain of the Infinity Q Funds’ variance swap positions as alleged ...
	1. Alterations to Corridors
	98. Generally, corridor variance swaps are derivative products that only pay out if specified index values remain within a “corridor” defined by an upper and lower bound. For example, if a variance swap that references the S&P 500 had corridors of 4,2...
	99. When Velissaris purchased a “long” corridor variance swap from a broker-dealer counterparty, the price paid was determined in part by the corridor boundaries agreed to by the parties—the wider the corridor, the more likely the reference asset woul...
	100. In this scheme, Velissaris opened and edited the Underlying Valuation Code of the Custom Models used for a number of the Infinity Q Funds’ corridor variance swaps. Velissaris’s edits included widening or even eliminating the effect of the corrido...
	101. Because the corridor ordinarily limits the payout on those swaps (i.e., variance only accrues to the extent the index remains within the corridor), the effect of these code modifications was to improperly increase the swaps’ values for a long pos...
	102. These inflated values were then included in the Mutual Fund’s daily NAV and Private Fund’s monthly profit and loss report and otherwise disseminated to investors.
	103. When Velissaris made changes to the Underlying Valuation Code, those changes did not automatically map onto the terms entered into and displayed in the User Interface. By proceeding in this manner, the Underlying Valuation Code was actually valui...
	104. In some instances, Velissaris improperly altered the Underlying Valuation Code by writing into the code an additional amount to be added to an upper corridor and/or subtracted from a lower corridor, thus widening the corridors. By widening the co...
	105. For example, the Private Fund held a certain corridor variance swap that referenced the EURO STOXX 50 index (“SX5E”) with a strike price of 16.85%, an effective date of 1/10/20, and a termination date of 12/17/20. The “corridor” for this position...
	106. Velissaris edited the Underlying Valuation Code for this position by writing into the code a “-2650” to modify the low corridor parameter, which was reflected in the User Interface as 2650 (already differing from the term sheet lower boundary of ...
	107. An image of the Underlying Valuation Code for this position (taken in March 2021), as altered by Velissaris, appears below in Figure 1. Velissaris’s edit of “-2650” to the position’s lower bound (“corridor_low” in the code) appears in line 23 of ...
	Figure 1: Extracted Image of Private Fund Position in Pricing Service as of March 2021
	108. Velissaris knew or recklessly disregarded that these alterations were inappropriate. For example, in April 2020, a risk analyst at Infinity Q sent Velissaris a risk analysis of all of the Infinity Q Funds’ corridor variance swap positions. That a...
	109. In many instances, Velissaris altered the Underlying Valuation Code to disregard the corridors altogether. For example, the Mutual Fund held a certain corridor variance swap that referenced the SX5E index with a strike price of 17%, an effective ...
	110. In other instances, Velissaris altered the Underlying Valuation Code to make worthless positions appear to have value. For example, the Mutual Fund held a certain SX5E index “up” corridor variance swap position with a strike price of 9.7%, an eff...
	111. Velissaris made these changes to the Underlying Valuation Code frequently for positions where the changes increased the value of positions and infrequently for positions where they would have decreased the value of positions.
	112. Velissaris acted knowingly or recklessly in connection with the conduct set forth above.
	2. Alterations to Annualization Factors
	113. Velissaris also knowingly or recklessly edited Underlying Valuation Code to improperly alter the “annualization factor” for certain OTC derivatives.
	114. Generally, an annualization factor is a standard convention for multiplying variance by the number of business days in an index’s underlying calendar year. For a U.S.-based calendar, term sheets typically use an annualization factor or “scaling f...
	115. In numerous instances for both the Mutual Fund and Private Fund, Velissaris altered the default 252-day annualization factor, including to change the annualization factors such that they were coded as being greater than 365 days—an impossibility—...
	116. As a result of Velissaris’s changes to the annualization factors, the valuation models did not reflect the actual terms of the transactions. For positions that have a positive value, increasing the annualization factor will inflate the amount of ...
	117. Velissaris made these code changes frequently for positions where the changes increased the value of positions and infrequently for positions where they would have decreased the value of positions.
	118. Velissaris acted knowingly or recklessly in connection with the conduct set forth above.
	3. Alterations to Correlation Strike Prices
	119. Velissaris also knowingly or recklessly edited Underlying Valuation Code to improperly alter the strike price for certain correlation swaps (as well as for other swaps held by the Infinity Q Funds).
	120. In a correlation swap, payment to or from a counterparty is based on the realized correlation between each pair of underlying reference assets listed in the swap’s description, from effective date until termination date. To calculate the payout f...
	121. For at least two dozen correlation swaps as of December 2020, Velissaris modified the Underlying Valuation Code such that the strike price used for valuation purposes was “shifted,” that is increased or decreased by a certain amount, which had th...
	122. The result of these changes was to improperly increase the value of the positions, which again resulted in valuation models that did not reflect the actual terms of the transactions.
	123. Velissaris made these changes to the Underlying Valuation Code frequently for positions where the changes increased the value of positions and infrequently for positions where they would have decreased the value of positions.
	124. Velissaris acted knowingly or recklessly in connection with the conduct set forth above.
	B. Velissaris Entered Incorrect Inputs into the Pricing Service
	125. Velissaris personally entered the terms of Infinity Q’s OTC derivative positons into the Pricing Service with virtually no oversight or contemporaneous record.
	126. As reflected in the Pricing Service’s audit trail, Velissaris regularly altered the terms of positions held by the Infinity Q Funds that he had previously loaded into the Pricing Service. Velissaris’s updates included making changes to positions’...
	127. At times, Velissaris knowingly or recklessly inputted transaction terms that did not match the terms of the position’s term sheet.
	128. For example, a certain variance swap trade that referenced the iShares MSCI EAFE ETF with a strike price of 18.4%, an effective date of 3/15/19, and a termination date of 12/17/21, was equally allocated to the Mutual Fund and the Private Fund por...
	129. Similarly, a certain variance swap that referenced the Russell 2000 index with a strike price of 22.40%, was added to the Mutual Fund’s portfolio in the Pricing Service with an effective date of February 18, 2020, rather than the correct December...
	130. As the terms of any position should have been inputted in accordance with the position’s term sheet when initially loaded, any changes or updates would be inappropriate unless the terms of the underlying agreement had also changed (which was not ...
	131. Velissaris acted knowingly or recklessly in connection with the conduct set forth above.
	C. Velissaris Chose Improper Models in the Pricing Service
	132. Velissaris also selected improper models to value OTC derivative positions held by the Infinity Q Funds, which inflated the value of those positions.
	133. In June 2019, a representative of the Pricing Service Company informed Velissaris by email that the Pricing Service had “several new and approved” standard models to value swaps, including a model specifically for corridor variance swaps named “C...
	134. After receiving this email, Velissaris used the new corridor variance swap model in some instances. However, he primarily continued to utilize and manipulate the Custom Models, for which he had the ability to alter the Underlying Valuation Code, ...
	135. For certain corridor variance swap positions, Velissaris went so far as to select models for a “vanilla” variance swap to value the corridor variance swap. Because a vanilla variance swap does not have corridor limitations to its payout, the vani...
	136. For example, as of November 30, 2020, Velissaris used the correct “Corridor Varswap” model to value 24 corridor variance swaps held by the Mutual Fund; however, at the same time, Velissaris used Custom Models to value 78 other corridor variance s...
	137. As a result of Velissaris’s improper model selections, the value of positions were inflated.
	138. Velissaris acted knowingly or recklessly in connection with the conduct set forth above.
	D. Velissaris Cherry-Picked Model Assumptions
	139. Velissaris also inflated the value of the Infinity Q Funds by cherry-picking implied volatility—a key input for valuing volatility or variance swaps, which constituted a significant percentage of the holdings of the Infinity Q Funds.
	140. At inception and prior to the effective date of a position, the value of a vanilla variance swap is primarily derived from the calculation of implied volatility. Within the Pricing Service models, implied volatility is derived from volatility sur...
	141. Over time, the value of a position is increasingly derived from the realized, or actual, volatility once the effective date of the position has occurred and realized volatility begins to accrue. Realized volatility is calculated based on the retu...
	142. As Infinity Q stated in the Mutual Fund’s 2020 annual report, “[a] significant change in implied volatility could have a significant impact on the value of a position.”
	143. Infinity Q’s contract with the Pricing Service granted it access to market data, which included as many as 90 different volatility surfaces that could be used to price individual positions. These different volatility surfaces contained hourly sna...
	144. Velissaris could and did select among the volatility surfaces via a pull-down menu within a Pricing Service interface for each position (i.e., this was not a change the user would make to the Underlying Valuation Code).
	145. Velissaris used this virtually unfettered ability to make and change such selections to cherry-pick volatility surfaces, which inflated the value of the Funds.
	146. The cherry-picking manifested itself in Velissaris making inconsistent volatility surface selections for similarly situated positions, which had the effect of inflating the value of the Funds.
	147. For any two positions that reference the same underlying index and that have the same or a similar maturity date, the volatility surface selection should be the same regardless of whether Infinity Q was long or short in the position.
	148. However, in a number of instances, it appears that Velissaris selected different volatility surfaces depending on whether the positions were long or short. For example, the Mutual Fund held two variance swaps that referenced the SX5E index, each ...
	149. Such inconsistent selections were made by Velissaris in order to improperly affect the valuations of the positions to the Infinity Q Funds’ benefit.
	150. Velissaris acted knowingly or recklessly in connection with the conduct set forth above.
	E. In Real Time, Velissaris Knew That He Was Massively Overvaluing Positions
	151. Velissaris knew or at least was reckless and should have known that his changes to the valuation code, entry of incorrect terms, selection of improper models, and cherry-picking of volatility surfaces led to a massive and material overvaluation o...
	152. Velissaris’s manipulation of the Pricing Service generally increased in conjunction with various reporting deadlines of the Infinity Q Funds. As Velissaris explained to the CCO in an August 2018 communication, which coincided with the Mutual Fund...
	153. Velissaris further ignored numerous red flags indicating that his valuations were inappropriate, as alleged below.
	1. Disparate Marks between Infinity Q Funds
	154. Infinity Q’s disparate valuations of the same position allocated to the Mutual Fund and the Private Fund are indicative of Velissaris’s mismarking.
	155. Generally, Velissaris would negotiate a single variance swap trade with one of Infinity Q’s counterparties, and upon the confirmation of the trade Velissaris would allocate a portion of the single trade to the Mutual Fund and a portion to the Pri...
	156. Accordingly, in Infinity Q’s compliance manual, Private Fund PPMs, and standard Due Diligence Questionnaire—which was disseminated to potential investors in the Mutual Fund and the Private Fund, counterparties, and others—Infinity Q represented t...
	157. In fact, the Mutual Fund (which was required to strike a NAV on a daily basis) and the Private Fund (where the financial results were calculated on a monthly basis) had widely disparate marks for some of the same overlapping positions on the same...
	158. For example, a variance swap trade that referenced the iShares MSCI EAFE ETF, with a strike price of 18.4%, an effective date of 3/15/19, and a termination date of 12/17/21, discussed supra ⁋ 128, was equally allocated to the Mutual Fund and the ...
	159. These differences were generally a result of Velissaris’s manipulations within the Pricing Service, as the positions were loaded in separate portfolios in the Pricing Service for the two Infinity Q Funds.
	160. Velissaris did not follow the policy that “[o]nce a price is established for a portfolio security, it shall be used for all Funds that hold the security.”
	161. Velissaris acted knowingly or recklessly in connection with the conduct set forth above.
	2. Mathematically Impossible Valuations
	162. As a registered investment company, the Mutual Fund was required to report information about its portfolio holdings to the SEC, which here were available to the public on the EDGAR system (EDGAR, the Electronic Data Gathering, Analysis, and Retri...
	163. Certain positions reported by the Mutual Fund were reported at mathematically impossible valuations, among other problems and inconsistencies.
	164. Generally, the potential gain on a vanilla volatility or variance swap is inherently limited for the party holding the short position because the realized volatility metric cannot be less than zero. Market volatility is the magnitude or range of ...
	165. Infinity Q, however, reported multiple swaps in the Mutual Fund’s EDGAR filings that appear to have been valued assuming that volatility would be negative, and, thus, the reported gain by the Mutual Fund was higher than the maximum possible payou...
	166. For example, in the Mutual Fund’s February 29, 2020 semi-annual report, the Mutual Fund reported two short MXWO variance swaps, one with an effective date of 3/15/19 (marked at over $5.6 million) and the other with an effective date of 3/18/19 (m...
	167. By at least May 2020, Velissaris was made aware of these and other reporting problems in the Mutual Fund’s EDGAR filings.
	168. Velissaris acted knowingly or recklessly in connection with the conduct set forth above.
	3. Divergent Counterparty Marks, Margin Call Disputes, and Settlements
	169. Divergent Counterparty Marks. The divergent valuations of these same OTC derivative positions by Infinity Q’s swap counterparties, which were known to Velissaris, is a further indication of Infinity Q’s mismarking.
	170. Infinity Q and Velissaris were aware that certain of the Infinity Q Funds’ counterparties were ascribing vastly different marks from Infinity Q to the same positions. For example, in December 2019 the CCO undertook to compare (i) the end-of-day p...
	171. Margin Calls. Velissaris was also aware of tens of millions of dollars of margin calls from Infinity Q’s counterparties related to their divergent valuations of the OTC derivative positions at issue. Generally, the agreements between the Infinity...
	172. In March 2020, the Infinity Q Funds were faced with increased market volatility caused by the COVID-19 pandemic.
	173. Beginning in at least March 2020, Infinity Q and multiple of its counterparties engaged in extensive discussions regarding margin call disputes after the counterparties requested tens of millions of dollars of additional margin from the Infinity ...
	174. Velissaris acknowledged that the Infinity Q Funds’ and their counterparties had widely different marks for the OTC derivative positions at issue. For example, on March 13, 2020, Velissaris sent the CCO a communication instructing, “[i]n an enviro...
	175. Even after the March 2020 market volatility event, the disparate marks persisted. For example, Infinity Q and one of its counterparties entered into multiple “up” corridor variance swaps referencing the U.S.’s Russell 2000 Index (“RTY”) (that is,...
	176. Settlements. In addition, certain positions that Infinity Q valued as having a positive value just days before their termination date expired worthless or at significantly lower values than Velissaris generated through the Pricing Service. For ex...
	177. As a result, in order to conceal the losses (i.e., between the marked values and settlement values when positions matured), Velissaris added new OTC derivative positions and inflated the valuations as alleged above.
	178. Velissaris acted knowingly or recklessly in connection with the conduct set forth above.
	F. Scope of the Mismarking
	179. In 2016, Velissaris began using the Pricing Service, and by at least February 2017, Velissaris was knowingly manipulating the Pricing Service in order to inflate the values of the positions held by the Mutual Fund and the Private Fund.
	180. Separate re-valuations of the historical positions held by the Mutual Fund and the positions held by the Private Fund were conducted by two third-party valuation firms (retained by the Board and Infinity Q’s new management, respectively). Accordi...
	181. The mismarking over time in the Mutual Fund was material. The mismarking is reflected in the table below, based on a third-party valuation firm’s recalculation of the Mutual Fund’s month-end NAV. As reflected in Table 1, at times the Mutual Fund ...
	182. The mismarking over time in the Private Fund was material. The mismarking is reflected in the table below, based on a third-party valuation firm’s recalculation of the Private Fund’s month-end total assets. As reflected in Table 2, at times the P...
	183. The Infinity Q Funds’ marketing materials claimed that its “risk managed investment approach” could “underperform equity benchmarks during bull markets,” but its volatility investment strategy “seeks to offer protection during volatile market env...
	184. In fact, as a result of Velissaris’s overvaluation of the portfolio, Infinity Q reported strong (albeit fake) returns in all markets.
	185. As of the end of March 2020, as a result of Velissaris’s mismarking, Infinity Q reported year-to-date returns for institutional class shares in the Mutual Fund of 8.95%, one-year returns of 10.61%, three-year returns of 8.72%, and five-year retur...
	186. As of the end of March 2020, as a result of Velissaris’s mismarking, Infinity Q reported year-to-date returns in the Private Fund of 5.63%, one-year returns of 17.57%, and two-year returns of 18.35%. By contrast, the hedge fund index that Infinit...
	187. The Mutual Fund grew steadily in the first few years from its launch in 2014, from a reported NAV of $173 million at the end of 2017, to $428 million at the end of 2018, and to $770 million at the end of 2019.
	188. Similarly, the Private Fund, launched in 2017, also grew steadily from a reported total assets of $25 million at the end of 2017, to $199 million at the end of 2018, and to $739 million at the end of 2019.
	189. By the end of 2020, the Mutual Fund’s reported NAV had more than doubled to $1.8 billion, and the Private Fund’s reported total assets had increased by more than $440 million to $1.183 billion.
	190. On February 18, 2021, the day before the Mutual Fund suspended redemptions, its reported NAV was approximately $1.727 billion.4F  The Private Fund reported approximately $1.224 billion of total assets as of January 31, 2021.
	G. Velissaris Mismarked Positions to Attract Subscriptions, Forestall Redemptions, and Enrich Himself and Infinity Q
	191. Velissaris’s knowing manipulation of the Infinity Q Funds’ OTC derivative positions in the Pricing Service led to Infinity Q Funds’ reporting illusory performance, which resulted in additional subscriptions and significant additional fees to Infi...
	192. Velissaris’s mismarking was at all times material and greatly increased after the March 2020 market volatility event related to the COVID-19 pandemic.
	193. During this time period, while multiple competitors of Infinity Q failed or struggled, the Mutual Fund and Private Fund faced tens of millions of dollars of margin calls concerning OTC derivative positions that were losing value, and the Infinity...
	194. On March 13, 2020, Velissaris admitted to the CCO in a communication that “we just didn’t structure the book optimally for a scenario like this.”
	195. Velissaris, concerned about the ability of the Infinity Q Funds to continue, initially tried to obtain a $100 million loan from affiliates of its partial owner in order to meet tens of millions of dollars of margin calls from multiple Infinity Q ...
	196. On March 18, 2020, the CCO sent a communication to Velissaris regarding the proposed loan and asked: “[H]ow much do we need . . . in your opinion[?]” Velissaris immediately responded: “100 mm,” meaning $100 million.
	197. In response to the CCO’s inquiry, Velissaris further replied that Infinity Q’s business development employee was “pushing to get [$]120 [million] in the door on 4/1” as an alternative.
	198. On March 23, 2020, Velissaris sent the CCO a communication regarding the ongoing margin calls and dire cash situation, and stated: “The problem is we don’t have enough cash to do more than 30-40 mm [million] i[n] settlements in day.”
	199. The $100 million loan did not materialize, and Velissaris increased his mismarking to attract additional investor inflows and forestall investor redemptions.
	200. The mismarking allowed the Infinity Q Funds to attract hundreds of millions of dollars of additional funds from investors. These funds helped the Mutual Fund and Private Fund survive tens of millions of dollars of margin calls, which threatened t...
	201. Velissaris’s mismarking, in turn, caused the Infinity Q Funds to pay excess management and performance fees to Infinity Q.
	202. Both the Mutual Fund and the Private Fund paid Infinity Q management fees based on the entities’ respective assets under management, and the Private Fund paid Infinity Q performance fees as a percentage of the fund’s annual returns.
	203. Profits from these excessive management and performance fees were distributed to Infinity Qs owners including Infinity Q Management Equity, which was majority owned by Velissaris.
	H. Misrepresentation of Performance and Other Information to Investors and the Board
	204. In addition to the misrepresentations alleged above concerning valuation policies, Infinity Q and Velissaris also knowingly disseminated false and misleading information about the Infinity Q Funds’ NAV or total assets, performance, and the terms ...
	205. These marketing materials also conspicuously displayed tables and charts reflecting the Mutual Fund’s and the Private Fund’s inflated quarterly and/or monthly track-record of returns and purported outperformance of certain benchmark indices.
	206. The inflated performance was also touted in Infinity Q’s letter to investors at the beginning of the Mutual Fund’s annual report.
	207. Infinity Q also provided the Mutual Fund’s and the Private Fund’s investors and the Board with materially misstated audited financial statements for at least the years ended August 31, 2019 and 2020, for the Mutual Fund, and December 31, 2019, fo...
	208. Infinity Q also disseminated Private Fund PPMs containing misrepresentations regarding its valuation policy and, later, the valuation policy Velissaris had altered to mislead the SEC, as further alleged below.
	209. Velissaris acted knowingly or recklessly in connection with the conduct set forth above.
	A.  Velissaris’s Attempts to Mislead the Auditor
	210. Velissaris altered key documents in an attempt to mislead the Auditor about certain positions selected for re-valuation by the Auditor’s third-party valuation expert.
	211. In connection with the Mutual Fund’s 2020 year-end audit, as part of its testing procedures, the Auditor selected a certain corridor variance swap position to be revalued by an independent valuation expert. The selected position was a corridor va...
	212. Velissaris was informed of the selection of this position for independent valuation in an email from the Auditor on the morning of Friday, September 18, 2020.
	213. Velissaris, in order to conceal the mismarking of this position, then edited the term sheet for the position by deleting the actual lower corridor and replacing it with a reduced lower corridor, such that in the new, forged version of the term sh...
	214. Infinity Q had previously uploaded this position’s term sheet to the Auditor’s client portal. Upon learning of the selection, Velissaris instructed other individuals at Infinity Q to remove the original term sheet for the position and upload in i...
	215. Also on September 18, 2020, after the original term sheet was replaced with the altered term sheet, Velissaris emailed the Auditor: “We noticed several [term sheets] that needed to be updated. [Infinity Q employees] just updated and the current f...
	216. The Auditor then provided the altered version of the term sheet to their valuation expert who was thus able to calculate a valuation close to Infinity Q’s for that position.
	217. Based on the recent re-valuation of this position by a third-party valuation firm retained by the Board, which was based on the actual term sheet, the value of the position as of 8/31/2020 was, in fact, only $4.569 million, not more than $22 mill...
	218. According to the Pricing Service audit log, Velissaris also updated and repriced this position in the Pricing Service on Monday, September 21, 2020.
	219. In February 2021, Velissaris engaged in similar conduct in connection with the Private Fund’s 2020 year-end audit. For example, the Auditor selected for independent re-valuation another corridor variance swap position, which referenced the SX5E i...
	220. Infinity Q had previously uploaded this position’s term sheet to the Auditor’s client portal. Upon learning of the selection, Velissaris himself deleted the original term sheet for the position from the Auditor’s client portal. Velissaris once ag...
	221. The Auditor noticed that new versions of term sheets had been uploaded to the client portal and wrote to Velissaris: “I noticed that the trade confirms that were originally provided on our Client Portal were deleted and replaced with new versions...
	222. In response, Velissaris did not disclose that he had removed the correct term sheet and replaced it with a forged term sheet. Instead, Velissaris replied: “We were finalizing our review and wanted to make sure the final versions were uploaded.”
	223. Velissaris submitted the forged term sheet with a reduced lower bound to the Auditor because he had previously manipulated the Underlying Valuation Code for this very position, as alleged above. As alleged above, Velissaris had coded an additiona...
	224. Velissaris acted knowingly or recklessly out of a concern that, if the Auditor properly tested these positions, his scheme may have been uncovered.
	B. Velissaris’s Attempts to Mislead the SEC
	225. During the SEC’s investigation, Velissaris also attempted to mislead the SEC about his use of the Pricing Service to value the positions at issue.
	226. In response to the SEC’s initial requests for valuation policies and procedures and offering materials in May 2020, Velissaris did not produce the documents that had been sent to investors by Infinity Q. Instead, Velissaris edited the valuation p...
	227. In response to a subsequent request by the SEC for valuation committee minutes, Velissaris drafted and backdated committee minutes for meetings that had not occurred and submitted them to the staff without indicating he had recently created the m...
	228. The SEC staff interviewed Velissaris on two occasions in November 2020. Despite multiple questions posed to Velissaris during the two interviews about how he valued positions and his use of the Pricing Service, Velissaris did not tell the SEC sta...
	229. In connection with the second interview, Infinity Q also produced to the SEC what purported to be screenshots of the standard and custom models it was using in the Pricing Service to value certain positions identified by the SEC staff. These scre...
	230. On February 11, 2021, after obtaining read-only access to the Infinity Q Funds’ portfolios from the Pricing Service, SEC staff informed Infinity Q’s counsel that it had identified certain changes made by Velissaris to the Underlying Valuation Cod...
	231. In February 2021, when Velissaris knew his scheme was about to be discovered, he took an unprecedented profits distribution from Infinity Q. On February 11, 2021, Velissaris effectively transferred to Infinity Q Management Equity, which Velissari...
	232. On February 12, 2021, Infinity Q’s counsel told SEC staff for the first time that Infinity Q could view and change the Underlying Valuation Code. Infinity Q’s counsel further stated that, from its understanding: (a) changes were made to positions...
	233. On February 18, 2021, SEC staff were informed by Velissaris’s personal counsel that his client did in fact make alterations to the Underlying Valuation Code used to value Infinity Q’s corridor variance swaps. According to Velissaris’s counsel, Ve...
	234. On February 19, 2021, Infinity Q’s counsel informed SEC staff that Infinity Q had identified that Velissaris was trying to make an unauthorized change in the Pricing Service to the Infinity Q Funds’ portfolios.
	235. On February 19, 2021, Infinity Q revoked Velissaris’s ability to access the Pricing Service.
	236. On February 22, 2021, the SEC approved Infinity Q’s application to suspend redemptions in the Mutual Fund. In that application, Infinity Q and the Board stated:
	Based on information learned by the Commission staff and shared with Infinity Q, Infinity Q informed the [Mutual] Fund that Infinity Q’s Chief Investment Officer had been adjusting certain parameters within the third-party pricing model that affected ...
	237. Velissaris acted knowingly or recklessly in connection with the conduct set forth above.
	V. Velissaris’s Criminal Conviction
	238. On February 17, 2022, the U.S. Attorney’s Office for the Southern District of New York unsealed an indictment against Velissaris for his role in the mismarking scheme affecting the Infinity Q Funds. United States v. Velissaris, 22 cr. 105 (S.D.N....
	239. On November 21, 2022, Velissaris pleaded guilty to one count of securities fraud in violation of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. At his plea hearing, Velissaris admitted to his conduct in an allocution under oath, inc...
	240. On April 7, 2023, Velissaris was sentenced to 180 months imprisonment for his role in the mismarking scheme.
	VI. WPH
	241. When Infinity Q was formed in 2014, WPH provided it with $2 million in seed capital. Between 2014 and 2019, WPH also advanced to Infinity Q approximately $10 million to pay certain Infinity Q employee compensation and expense reimbursements and o...
	242. Between 2019 and 2021, Infinity Q made distributions to WPH of $19,152,899 in cash and $2.4 million in paid in kind shares in the Private Fund (the “PIK Shares”), for a total of $21,552,899 in connection with WPH’s ownership interest in Infinity ...
	243. WPH has deposited into escrow $15,650,000 into a class action settlement fund in the consolidated class action titled In re Infinity Q Diversified Alpha Fund Securities Litigation, Index No. 651295/2021 (N.Y. Sup.), and has relinquished its right...
	Violations of Section 17(a) of the Securities Act
	244. The SEC realleges and incorporates by reference here the allegations in paragraphs 1 through 243.
	245. By engaging in the acts and conduct described in this Complaint, Defendant, directly or indirectly, singly or in concert with others, in the offer or sale of securities and by use of the means or instruments of transportation or communication in ...
	246. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, has violated and, unless enjoined, will again violate Securities Act Section 17(a) [15 U.S.C. § 77q(a)].
	Violations Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
	247. The SEC realleges and incorporates by reference here the allegations in paragraphs 1 through 243.
	248. By engaging in the acts and conduct described in this Complaint, Defendant, directly or indirectly, singly or in concert, in connection with the purchase or sale of securities and by the use of the means or instrumentalities of interstate commerc...
	249. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, has violated and, unless enjoined, will again violate Exchange Act Section 10(b) [15 U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5].
	THIRD CLAIM FOR RELIEF
	(Against Defendant Only)
	Violations of Advisers Act Section 204(a) and Rule 204-2 Therunder
	251. At all relevant times, Defendant was an investment adviser under Advisers Act Section 202(11) [15 U.S.C. § 80b-2(a)(11)].
	252. By engaging in the acts and conduct described in this Complaint, Defendant directly or indirectly, while acting as an investment adviser, by use of the mails or the means and instrumentalities of interstate commerce, (1) failed to make and keep r...
	253. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, has violated and, unless enjoined, will again violate Advisers act Section 204(a) [15 U.S.C. § 80-b-4(a)] and Rule 204-2 thereunder [17 C.F.R. § 275.204-2].
	FOURTH CLAIM FOR RELIEF
	Violations of Advisers Act Sections 206(1) and (2)
	254. The SEC realleges and incorporates by reference here the allegations in paragraphs 1 through 243.
	255. Defendant owed the Infinity Q Funds a fiduciary duty of utmost good faith and had an affirmative duty to make full and fair disclosure of all material facts, as well as a duty to act in the fund’s best interests.
	256. By engaging in the acts and conduct described in this Complaint, Defendant, directly or indirectly, singly or in concert, while acting as an investment adviser, by use of the mails or the means and instrumentalities of interstate commerce, has: (...
	257. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, has violated and, unless enjoined, will again violate Advisers Act Sections 206(1) and (2) [15 U.S.C. §§ 80b-6(1) and 80b-6(2)].
	FIFTH CLAIM FOR RELIEF
	(Against Defendant Only)
	Violations of Advisers Act Section 206(4) and Rule 206(4)-7
	258. The SEC realleges and incorporates by reference here the allegations in paragraphs 1 through 243.
	259.  By engaging in the acts and conduct described in this Complaint, Defendant,  knowingly, recklessly, and/or negligently, provided investment advice to its clients without adopting and implementing written policies and procedures reasonably design...
	260. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, has violated, and unless enjoined, will again violate Section 206(4) of the Advisers Act [15 U.S.C. § 80b-6(4)] and Rule 206(4)-7 thereunder [17 C.F.R. § 275.206...
	SIXTH CLAIM FOR RELIEF
	Violations of Advisers Act Section 206(4) and Rule 206(4)-8 Thereunder
	261. The SEC realleges and incorporates by reference here the allegations in paragraphs 1 through 243.
	262. Each of the Infinity Q Funds was a pooled investment vehicle within the meaning of Rule 206(4)-8(b) of the Advisers Act [17 C.F.R. § 275.206(4)-8(b)]. Each of the Funds was engaged in, held itself out as being engaged primarily, and proposed to e...
	263. By engaging in the acts and conduct described in this Complaint, Defendant, directly or indirectly, singly or in concert, while acting as an investment adviser to a pooled investment vehicle, knowingly, recklessly, or negligently (i) made an untr...
	264. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, has violated and, unless enjoined, will again violate Advisers Act Section 206(4) [15 U.S.C. § 80b-6(4)] and Rule 206(4)-8(a) thereunder [17 C.F.R. § 275.206(4)...
	SEVENTH CLAIM FOR RELIEF AGAINST DEFENDANT
	Violations of Advisers Act Section 207
	265. The SEC realleges and incorporates by reference here the allegations in paragraphs 1 through 243.
	266. By engaging in the acts and conduct described in this Complaint, Defendant, directly or indirectly, singly or in concert, by use of the mails, and the means and instrumentalities of interstate commerce, willfully made untrue statements of materia...
	267. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, has violated and, unless enjoined, will again violate Advisers Act Section 207 [15 U.S.C. § 80b-7].
	EIGHTH CLAIM FOR RELIEF
	Violations of Investment Company Act Section 34(b)
	268. The SEC realleges and incorporates by reference here the allegations in paragraphs 1 through 243.
	269. The Mutual Fund is an “investment company” as defined by Section 3(a)(1) of the Investment Company Act [15 U.S.C. § 80a-3].
	270. By engaging in the acts and conduct described in this Complaint, Defendant, directly or indirectly, singly or in concert, made untrue statements of material fact in a registration statement or filing under the Investment Company Act, and/or filed...
	271. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, has violated and, unless enjoined, will again violate Investment Company Act Section 34(b) [15 U.S.C. § 80a-33].
	NINTH CLAIM FOR RELIEF
	272. The SEC realleges and incorporates by reference here the allegations in paragraphs 1 through 243.
	273. The Mutual Fund is an “investment company” as defined by Section 3(a)(1) of the Investment Company Act [15 U.S.C. § 80a-3].
	274. By engaging in the acts and conduct described in this Complaint, the Mutual Fund sold, redeemed, or repurchased its redeemable security at a price other than the price based on the current net asset value of such security that is next computed af...
	275. By reason of the foregoing, Defendant, directly or indirectly, singly or in concert, aided and abetted the Mutual Fund’s violations of Investment Company Act Rule 22c-1 [17 C.F.R. § 270.22c-1] by knowingly or recklessly providing substantial assi...
	PRAYER FOR RELIEF