In 2016, the fund was late in filing a regulatory report because an independent pricing service had been unable to “support” some of its valuations. Prosecutors’ allegations of mispriced assets in the Infinity Q portfolios echo previous problems at the mutual fund. Around March 2020, with the funds in a tailspin, Velissaris sought a $100 million loan from the owners of Infinity Q Capital Management, the SEC said. Prosecutors said the mispricing of assets took place from at least 2017 into 2021. TPG, the private-equity firm cofounded by David Bonderman, did not respond to a request for comment from Bonderman on the prosecutors’ charges. The family lost “a substantial amount” in the collapse, the spokesman said. Last year, an Infinity Q Capital Management spokesman said the Bonderman family was a passive investor in the firm and had no control over its investments. The Bonderman ties were a selling point for Infinity Q a presentation from the fund boasted that its investors would gain access to the same “alternative investment strategies originally created” for the prosperous family. The funds claimed annual returns of approximately 9.5 percent before they folded. Many of their holdings involved bets on exotic investments known as derivatives, because they are derived from other securities. The funds overseen by Velissaris were intended to generate returns that did not move in tandem with the overall stock and bond markets. Mark Schonfeld, a lawyer at Gibson Dunn who represents Velissaris, provided this statement: “James managed investments at Infinity Q with the highest integrity in accordance with all applicable principles. We look forward to vindicating James, who has been scapegoated by others who will have to answer in court for their own compliance failures and the losses incurred by their irresponsible liquidation of the portfolio.”Ī spokesman for Infinity Q Capital Management declined to comment. The SEC also accused Velissaris of pocketing $27 million in management fees generated by his improper valuation of the funds’ holdings. The SEC said its investigation into the debacle is continuing. Each charge carries a maximum sentence of 20 years in prison. In addition to securities fraud and obstruction of justice, Velissaris has been charged with wire fraud and lying to auditors. Prosecutors said Velissaris inflated the value of the funds’ holdings by $1 billion and manipulated the results for at least four years to mask poor performance. At certain times during 2020 when the pandemic was roiling the financial markets, the funds’ real values were half what investors were told they were, prosecutors said. Certain positions held by the mutual fund “were reported at mathematically impossible valuations,” according to a civil complaint filed against Velissaris on Thursday by the Securities and Exchange Commission. Velissaris had worked for the Bonderman family before he co-founded Infinity Q Capital Management. The Bonderman Family was a major investor in Infinity Q Capital Management, the investment company overseen by Velissaris, regulatory documents show. And the collapse ensnared billionaire investor David Bonderman, co-founder of TPG, a huge private-equity firm that went public this year. It was a rare example of a big mutual fund failure amid a roaring bull market. SeongJoon Cho / Bloomberg via Getty Images file David Bonderman attends the Asian Leadership Conference in Seoul, South Korea, on Mar. A government inquiry began, Velissaris stepped down and the mutual fund and a parallel hedge fund he oversaw began liquidating. The Infinity Q Diversified Alpha Fund halted investor redemptions in February 2021, roughly seven years after it was co-founded by James Velissaris, 37, its chief investment officer. The founder and manager of a $1.7 billion mutual fund that collapsed last year has been charged by federal prosecutors with securities fraud and obstruction of justice for allegedly inflating fund asset values to keep investor money flowing, then falsifying records to conceal the improprieties.
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