Infinity Q Funds Investor Alert: Massive Valuation Fraud Prompts Government Lawsuits

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Updated on: February 25, 2022

National investment fraud lawyers KlaymanToskes is investigating individual securities arbitration claims on behalf of investors who sustained losses in the Infinity Q Diversified Alpha Fund (NASDAQ: IQDNX) and Infinity Q Volatility Alpha Fund (“Infinity Q Funds”) that were purchased through full-service brokerage firms.

SEC, CFTC, and DOJ File Suit Against Former CIO of Infinity Q Funds

In February 2022, the SEC, CFTC, and DOJ filed actions against James Velissaris, the founder and former CIO of Infinity Q Capital Management, for fraudulently overvaluing assets held by the Infinity Q Funds by more than $1 billion.

According to the SEC’s Complaint, from approximately February 2017 through February 2021, Velissaris manipulated valuation models available from a pricing service and altered inputs to conceal the massive valuation fraud.

The former CIO’s alleged misconduct allowed him to attract investor funds, keep investors from redeeming their investments, and enrich himself through fees. The Infinity Q Diversified Alpha Fund’s net asset value was allegedly overstated by over $500 million, and the Fund was ultimately forced into liquidation.

Infinity Q Funds Liquidation and Distribution

The Infinity Q Diversified Alpha Fund is under distribution process. As of March 19, 2021, the Fund’s portfolio has been entirely liquidated to cash or cash equivalents pursuant to the Fund’s Asset Liquidation Plan, which became effective on February 25, 2021.

On December 30, 2021, the Fund published an updated NAV per share of $0.0250 for Institutional Class shares and $0.0250 for Investor Class shares. The process of revaluing the Fund’s historical NAVs is ongoing.

According to the Monthly Report under the Plan of Distribution for the Alpha Fund, there are $745,220,877 total assets as of January 31, 2022. There is a remaining Special Reserve Amount of $742,740,466. According to the Fund’s liquidation website, the reserve fund is necessary for the following reasons:

“The Plan treats (i) current shareholders as equity owners of the Fund’s assets; and (ii) former shareholders, to the extent they have claims against the Fund’s assets, and shareholders who submitted redemption requests on or before February 18, 2021 that were not satisfied by the Fund, as creditors who may have claims against the Fund. Claims of creditors are considered liabilities of the Fund. Although there is overlap of identity between current shareholders and members of the proposed classes alleging damages claims against the Fund’s assets, there are also potential class members alleging damages claims who are not current shareholders. So, not all members of the potential classes are entitled to distribution as equity holders. And even if there were identity between shareholders and the members of the potential classes, the method by which payment to one or both potential classes would be distributed among class members in a litigation would be net of payment of their attorneys’ fees and expenses and would be different from the pro rata methodology for distributing to equity holders set forth in the Plan. And, even if those serious distinctions did not exist, the fact is the Fund does not have the power to end the pending class action litigation unilaterally, even by distributing reserved amounts.”

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