Imagine for a second a financial advisor who is trusted and promises high returns on the investment you have made. Imagine this advisor inflating your investment’s value, leading to an overvaluation. Investors of Infinity Q Capital Management LLC are not in a Hollywood film, but they do face this reality. This is a situation that has been corrected by the Securities and Exchange Commission.
The SEC Steps in
The SEC today filed a settled case against Infinity Q (a registered investment advisor) for erroneously pricing the net asset values (NAVs) of both its public mutual funds and private funds. The SEC’s action is similar to that of a homeowner inflating their property price to fool potential buyers. In this case, however, the stakes are much higher. They affect countless investors that trusted Infinity Q to manage their money. The SEC doesn’t stop at filing charges. They are also seeking an order to appoint someone to supervise the return of funds to investors who were harmed. Have you ever seen a referee intervene to stop a fight? This is what the SEC has done.
Fraudulent Scheme
Between February 2017 and February 2021 the NAVs reported by the mutual funds and hedge funds were materially and fraudulently inflated. Imagine a balloon filled with hot, inflated air that grows bigger and larger until the balloon is about to burst. Infinity Q invested their money under the supervision of James Velissaris who was previously charged by SEC.
The Charges
- Infringing the anti-fraud provisions of Section 17 (a) of Securities Act of 1932 and Section 10 (b) of Securities Exchange Act of 1934, and Rule 10b-5 thereof.
- Violation of antifraud provisions, bookkeeping and reporting requirements of Sections 204.2(a), 206.2(1), 206.2(2), 206(4), and 207 of Investment Advisers Act of 1941 and the Rules 204-2 (a), 206(4)-7 and 206(4)-8 thereof.
- The Investment Company Act of 1920 (section 34(b)), which requires reporting of certain information.”Investment Company Act”).
- Aiding and abetting mutual fund violations of Rule 22c-1, Investment Company Act.
Infinity Q has consented for the monitor to be appointed and agreed to settle all charges. Court approval is required for the settlement which permanently prohibits Infinity Q’s violation of federal securities laws as alleged in the Complaint and the appointment the monitor.
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The Investigation Continues
The SEC investigation continues under the leadership of a team dedicated professionals from Complex Financial Instruments Unit (CFI), Asset Management Unit (AMU), and New York Regional Office. In this financial thriller, they are the detectives who work tirelessly to bring justice. Neal Jacobson, Alistaire Bambach and the dynamic duo will lead the litigation.
The unfolding of this story is a powerful reminder of the importance and necessity of transparency in the finance world. The SEC’s action is a testament to its commitment to protect investors, maintain fair, efficient, and orderly markets. While the Infinity Q story may seem like a Hollywood movie, it is a cautionary tale that investors and financial advisors should take to heart.
