↓ Skip to Main Content
SEC ACTIONS
  • Home
  • Articles
  • Archives
  • Media
  • Related Links
  • About
  • Subscribe to our Mailinglist
Home › SECActions ›

Investment Adviser Charged With Overvaluation of Assets

Investment Adviser Charged With Overvaluation of Assets

T. GormanPosted on June 23, 2023 Posted in SECActions

One of the issues frequently seen in matters where insiders manipulate the numbers to increase revenue or decrease costs, is the impossibility of stopping once the process begins until they are caught. Frequently, the insiders involved convince themselves that once will be enough or maybe twice, but usually not. The Commission’s most recent case in this area is a good example, SEC v. Infinity Q Capital Management, LLC, Civil Action No. 1:23-cv-05081 (S.D.N.Y. Filed June 16, 2023).

Named as defendant is a registered investment adviser based in New York City. The owners are Infinity Q Management Equity, LLC and Wildcat Partner Holdings, LP.

Over a four-year period, beginning in February 2017, Infinity Q told investors and others that the Infinity Q Funds were valued by an independent third party pricing service. The statement is not true. In fact, the firm was manipulating the valuation models available from the pricing service to conceal poor performance by the funds managed.

Infinity used four approaches: 1) the computer code for the models was altered; 2) inputs were incorrect; 3) certain valuation models were selected that could not properly value the assets; and 4) it cherry picked one of the key valuation inputs. The result was materially inflated values. The manipulative actions were so pervasive that at times the same security in different funds had different values.

COVID presented a challenge. The funds were not in a position to sustain increased market turmoil. An effort to secure a $100 million cash infusion from affiliates failed. The only possible choice was to step-up the manipulation. This effort resulted in asset increases by hundreds of millions of dollars. In one mutual fund, for example, the increases were about 42%. In a private fund the increase was about 137%. It also resulted in reported values for the funds being out of sync with those at similar funds.

Defendant did try to conceal the scheme form investors and the independent auditors. The auditors, for example, were convinced that the valuations were reasonable. Yet the overvaluation was by about $1 billion. The complaint alleges violations of Securities Act Section 17(a), Exchange Act Section 10(b) and Advisers Act Sections 204(a), 206(1), 206(2), 206(4), 207 and aiding and abetting violations of Rule 22c-1 under the Investment Company Act. The case is in litigation.

James R. Velissaris, the founder and CIO of Infinity Q and majority owner of Infinity Q Management Equity LLC pleaded guilty to one count of securities fraud. He has been sentenced to 180 months in prison. See Lit. Rel. No. 25750 June 16, 2023.

Print 🖨 PDF 📄
‹

Native American Energy Group Sells Unregistered Shares

Happy 4th of July! ›
Tagged with: investment adviser, SEC, valuation

Search SEC Actions

Prepared:

Thomas O. Gorman

DC Attorney specializing in securities
and other agency litigation

Former SEC Senior Counsel, Enforcement
and Special Trial Counsel, GC Office
    © 2025 SEC ACTIONS
    • Subscribe to our Mailinglist
    Manage Cookie Consent
    To provide the best experiences, we use technologies like cookies to store and/or access device information. Consenting to these technologies will allow us to process data such as browsing behavior or unique IDs on this site. Not consenting or withdrawing consent, may adversely affect certain features and functions.
    Functional Always active
    The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
    Preferences
    The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
    Statistics
    The technical storage or access that is used exclusively for statistical purposes. The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
    Marketing
    The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.
    Manage options Manage services Manage {vendor_count} vendors Read more about these purposes
    View preferences
    {title} {title} {title}