SEC says Infinity Q’s Founder Overvalued Fund Assets by More than $1 Billion, Pocketing Millions
According to a press release on Feb. 17, 2022, the Securities and Exchange Commission (SEC) reportedly charged the former Chief Investment Officer and founder of Infinity Q Capital Management, with allegedly overvaluing assets by more than $1 billion while “pocketing tens of millions of dollars in fees”.
According to the complaint, between 2017 and 2021, the founder allegedly overvalued assets held by the Infinity Q Diversified Alpha mutual fund and the Infinity Q Volatility Alpha private fund. The SEC alleges that he executed the fraud scheme by altering inputs and manipulating the code of a third-party pricing service used to value the funds’ assets. The CIO purportedly collected more than $26 million in profit distributions through his allegedly fraudulent conduct while purportedly hiding his activities from investors.
Infinity Q’s founder purportedly marketed the mutual fund as a way for retail investors to access investment strategies typically reserved for high-net-worth clients, while instead “he offered fraudulent documents, altered performance results, and manipulated valuations,” according to the SEC’s Division of Enforcement.
The SEC further alleges that the individual tried to hide his scheme, by creating backdated minutes of valuation meetings that never occurred and altering documents that described Infinity Q’s valuation policies. He also purportedly sent forged term sheets to the auditor of the mutual fund and the private fund, according to the complaint.
The SEC also alleges that, by hiding the actual performance of the funds, the CIO prevented redemptions by investors after the volatile markets due to COVID-19 pandemic. According to the complaint, during the pandemic, the funds’ actual values were reportedly half of what investors were told.
The SEC staff reportedly informed the firm of the allegations that its Chief Investment Officer had been adjusting the third-party pricing model in February 2021, when he was reportedly removed from his position. Several days later, the regulator issued an order (Investment Company Act Rel. No. 34198 (Feb. 22, 2021)) to suspend redemptions of the mutual fund.
The SEC’s complaint seeks permanent injunctive relief, return of allegedly ill-gotten gains, and civil penalties. The SEC also seeks to bar the individual from serving as a public company officer and director.
The U.S. Attorney’s Office for the Southern District of New York today announced criminal charges in a parallel action and the Commodity Futures Trading Commission (CFTC) has also reportedly announced civil charges against him.
Free Consultation with a National Securities Attorney
If you have suffered investment losses with Infinity Q Capital Management, the securities attorneys at the White Law Group may be able to help you. For a free consultation, please call the offices at 888-637-5510.
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