WASHINGTON, April 2 — The Commodity Futures Trading Commission said the U.S. District Court for the Southern District of New York has granted its motion for summary judgment against James R. Velissaris, ordering the former hedge fund manager to pay a $2.2 million civil monetary penalty for engaging in a fraudulent swap valuation scheme, according to a CFTC press release.
Court order and sanctions
The court found that Velissaris violated provisions of the Commodity Exchange Act and imposed a permanent injunction prohibiting him from further violations, trading in CFTC-regulated markets, entering transactions involving commodity interests, and registering with the Commission.
The court cited the egregiousness of the misconduct, which spanned multiple years and resulted in substantial investor losses.
Fraudulent valuation scheme
The CFTC said its enforcement action, filed in February 2022, charged Velissaris with operating a scheme to overvalue assets managed by Infinity Q Capital Management LLC, a CFTC-registered commodity pool operator.
According to the complaint, from 2018 to 2021, Velissaris manipulated the valuation of over-the-counter derivatives held by two commodity pools by making manual adjustments in a third-party pricing system. The agency said he falsely represented that the valuations were independently determined, while in reality inflating reported asset values.
The CFTC said the inflated valuations artificially increased the funds’ net asset values, allowing the firm to charge excess fees, attract additional investments from existing participants, and solicit new investors.
Financial impact and related criminal case
The agency said the scheme resulted in customers paying more than $125 million in excess fees, including approximately $22 million that Velissaris used for his own benefit.
The court also noted sanctions imposed in a related criminal case, including a 15-year prison sentence, $125,969,962 in restitution, and $22 million in forfeiture, according to the CFTC.
