The founder of a New York-based investment company recently pleaded guilty to securities fraud.
James Velissaris, 38, of Atlanta, Ga., was a founder and former chief investment officer of Infinity Q Capital Management, which ran a mutual fund and hedge fund that claimed to have about $3 billion in assets under management, according to a Nov. 21 U.S. Department of Justice news release.
"Today’s guilty plea demonstrates this office's resolve to pursue even the most sophisticated of financial crimes," U.S. Attorney for New York's Southern District Damian Williams said in the news release. "James Velissaris thought he could get away with mismarking some of the most esoteric derivative products on Wall Street by manipulating sophisticated financial models and computer code. This case has exposed that fraud and shown that Velissaris lied to his investors in order to line his own pockets with inflated fees. Velissaris will now be held accountable for his actions."
Among other things, Velissaris allegedly misled investors and regulators about Infinity Q's methodology for valuing specific over-the-counter derivative positions, which made up a sizeable portion of the holdings of the mutual and hedge funds, the release reported. Velissaris fraudulently mismarked those securities in a manner that did not reflect their fair value. By inflating its assets by more than $1 billion, Infinity Q could collect more fees from investors.
"In other cases, some of Velissaris' manipulations caused certain positions held by the investment funds to have impossible values, such as where, under the true terms of the swap, the value adopted by Velissaris could only be true if volatility were negative – a condition which is mathematically impossible," the news release said.
Velissaris also allegedly obstructed a U.S. Securities and Exchange Commission probe by producing altered documents in order to hide the mismarking, the release reported.
Velissaris' charge carries a maximum sentence of 20 years in prison, according to the news release. His sentencing is scheduled for March 3.
