SEC Seeks Special Master to Oversee Return of Remaining Funds to Harmed Investors of the Infinity Q Mutual Fund
Litigation Release No. 25575/ November 10, 2022
Securities and Exchange Commission v. Infinity Q Diversified Alpha Fund, No. 22-civ-09608 (S.D.N.Y. filed November 10, 2022)
The Securities and Exchange Commission today filed a settled action against the Infinity Q Diversified Alpha Mutual Fund for mispricing its net asset value, or "NAV," as part of a massive overvaluation scheme, and is seeking in its complaint an order appointing a Special Master over the mutual fund to oversee the return of remaining funds to harmed investors.
According to the SEC's complaint, from at least February 2017 through February 2021, the mutual fund's reported NAVs were materially and falsely inflated due to a mismarking scheme conducted by James Velissaris, the Chief Investment Officer of Infinity Q Capital Management, LLC, the investment adviser to the mutual fund. Velissaris was previously charged by the SEC for this conduct. On February 22, 2021, Infinity Q and the mutual fund's board filed an application for an order pursuant to Section 22(e)(3) of the Investment Company Act of 1940 to suspend redemptions in the mutual fund, which was approved by the SEC that same day. The mutual fund was subsequently liquidated, and, to date, the mutual fund has distributed approximately $670 million to current shareholders, with approximately $570 million remaining to be distributed to harmed investors.
The SEC's complaint, filed today in the U.S. District Court for the Southern District of New York, charges the mutual fund with violating the pricing provisions of Rule 22c-1 of the Investment Company Act. The mutual fund has agreed to settle the charges and consent to the appointment of the Special Master to oversee expenses paid from the mutual fund and to administer a process to return the remaining funds to harmed investors. The settlement, which permanently enjoins the mutual fund from violating Rule 22c-1, and the appointment of the Special Master, are subject to court approval.
The SEC's ongoing investigation is being conducted by David H. Tutor of the Asset Management Unit, Joshua Brodsky of the Complex Financial Instruments Unit, and Kerri Palen, James Addison, and Neal Jacobson of the New York Regional Office. It is being supervised by Andrew Dean, Co-Chief of the Asset Management Unit, Osman Nawaz, Chief of the Complex Financial Instruments Unit, and Alistaire Bambach, Chief Bankruptcy Counsel to the Division of Enforcement. The litigation will be led by Mr. Jacobson, Mr. Tutor, and Ms. Bambach.