CFTC wins summary judgment against swaps trader who falsified fund valuations for years

A federal court has granted summary judgment in favor of the Commodity Futures Trading Commission in its case against James R. Velissaris, a former hedge fund manager whose fund valuation scheme ran for roughly three years before regulators caught up with him. The ruling, announced on August 24, caps an enforcement action the CFTC first filed in February 2022 against Velissaris and his firm, Infinity Q Capital Management LLC, a CFTC-registered commodity pool operator. What he did, and how he sold it Velissaris managed funds that held over-the-counter swaps, the kind of complex derivative instruments that do not trade on exchanges and therefore require someone to assign them a price. That pricing step, called valuation, is where he intervened. He told investors and counterparties that the fund’s valuations were handled independently through a third-party system, without any input from him. The court found that was false. Velissaris was manually adjusting the swap values himself, pushing them higher than they should have been. Those inflated values fed into the funds’ net asset values, the headline number that tells investors what their stake is worth. Higher NAVs meant higher fees. ...