The Commodity Futures Trading Commission (CFTC) is pushing for heavy penalties to be imposed on James Robert Velissaris, founder of Infinity Q Capital Management, LLC.
The CFTC filed a motion for summary judgment against Velissaris at the New York Southern District Court on March 27, 2025.
In the document, the CFTC argues that Velissaris engaged in a fraudulent scheme that enriched himself in an amount of $22 million, yet ultimately caused the Funds to incur losses of $125,969,962.78. Given the facts and evidence presented to the Court, a civil monetary penalty of $66,000,000.00 is appropriate in this case, the CFTC says.
A civil monetary penalty of $66,000,000.00 is equal to three times Velissaris’s monetary gain of $22,000,000.00.
The proposed order envisages that Velissaris should pay restitution in the amount of $125,969,962.78 (“Restitution Obligation”), plus post-judgment interest thereon. In the parallel Criminal Action, Velissaris was ordered to pay restitution in the amount of $125,969,962.78 to the defrauded Funds in connection with the same conduct at issue in the CFTC action. For amounts disbursed to the defrauded Funds as a result of satisfaction of the restitution ordered in the Criminal Action, Velissaris shall receive a dollar-for-dollar credit against the Restitution Obligation.
Also, the proposed order envisages that Velissaris must pay disgorgement in the amount of $22,000,000.00 (“Disgorgement Obligation”), representing the gains received in connection with such violations. In the Criminal Action, Velissaris was ordered to forfeit $22,000,000.00 in connection with the same conduct at issue in the CFTC action.
The CFTC launched its action against Velissaris in February 2022.
The complaint alleges that, from January 1, 2018 through at least February 28, 2021 (the “Relevant Period”), Velissaris engaged in a fraudulent mismarking scheme and made numerous material misstatements and omissions to commodity pool participants concerning the valuation of certain swaps held by two registered commodity pools.
Velissaris was the founder, majority owner, and Chief Investment Officer of Infinity Q Capital Management, LLC (“Infinity Q”), a commodity pool operator that was registered with the Commission from September 23, 2014, through August 11, 2022. In these roles, Velissaris directed, managed, and controlled Infinity Q’s operations.Infinity Q operated two commodity pools registered with the Commission—the Infinity Q Diversified Alpha Fund (“DAF”) and Infinity Q Volatility Alpha Fund, L.P. (“VAF,” together with DAF, the “Funds”)—each of which paid performance and management fees to Infinity Q based on their net asset values.
Throughout the Relevant Period, the Funds invested a portion of their assets in “variance swaps” and “corridor variance swaps,” which are over-the-counter (“OTC”) financial derivative contracts that provide for the payment of monies based upon the magnitude of the change in value over time (i.e., the volatility) of an underlying asset, such as a stock, stock index, or commodity.
Throughout the Relevant Period, Velissaris, using the instrumentalities of interstate commerce, made material misrepresentations and omissions to current and prospective Fund participants about the methods and means by which the Funds’ valued their derivative assets.
Specifically, Velissaris represented that Infinity Q used an independent, third-party valuation service, called the Bloomberg Valuation Service (also known as “BVAL”), to independently value the Funds’ OTC derivative positions, without any substantive input from Infinity Q.
Contrary to Velissaris’s representations, however, Velissaris manipulated the BVAL calculations to improperly inflate the reported values of the Funds’ derivative positions. Velissaris’s alterations resulted in increased net asset values for the Funds and larger management and performance fees for Infinity Q and Velissaris.
Velissaris did not disclose his alterations to current or prospective Fund participants because he knew that, if he disclosed his activities, current Fund participants may redeem their investments and prospective Fund participants may decide not to invest in the Funds at all.
In addition to the increased management and performance fees paid to Infinity Q and Velissaris, Velissaris’s alterations also caused the Funds to overpay certain Fund participants who redeemed their positions during the Relevant Period because those positions had been marked at artificially inflated values.
Once Velissaris’s conduct was discovered, the Funds were forced to engage third- party service providers to unwind his fraud, including services relating to asset reevaluation, asset liquidation, asset distribution, and legal.
In all, the Funds’ losses from the (1) excess management and performance fees, (2) overpayments to Fund participants, and (3) third-party services totaled $125,969,962.78— $66,817,537.78 to VAF and $59,152,425.00 to DAF.
Velissaris, personally benefitted in the amount of $22 million from his illicit scheme.
In a related criminal case involving the same conduct at issue in this case, Velissaris pleaded guilty to one count of securities fraud Action.. During his plea allocution, Velissaris admitted under oath to the fraudulent scheme.
The district court in the criminal proceeding sentenced Velissaris to 180 months in prison and ordered him to pay a $100 assessment, a $50,000 criminal fine, $22 million in forfeiture, and $125,969,962.78 in criminal restitution.
Velissaris’s criminal judgment was later upheld on appeal.
