DOJ seeks to stay CFTC action against Infinity Q founder
The Department of Justice (DOJ) seeks to intervene and stay an action brought by the Commodity Futures Trading Commission (CFTC) against James Velissaris, founder of Infinity Q Capital Management, LLC. This becomes apparent from documents filed with the New York Southern District Court and seen by FX News Group.
The Government moves to intervene in the CFTC Civil Action, pursuant to Rule 24 of the Federal Rules of Civil Procedure, and to stay the CFTC Civil Action matter in its entirety until the completion of the trial or other disposition in the parallel criminal case.
The defendant consents to the proposed stay, and the CFTC takes no position.
This case and the parallel Criminal Case arise out of the same underlying events. On February 17, 2022, the Indictment against Velissaris was unsealed, and the defendant surrendered to the FBI. The Criminal Case is scheduled for trial in November 2022. Also on February 17, 2022, the CFTC and the Securities and Exchange Commission (SEC) filed complaints in parallel civil proceedings against Velissaris, including the CFTC Civil Action.
As alleged in both the Criminal Case and the CFTC Civil Action, from at least in or about 2018 through 2021, Velissaris engaged in scheme to defraud investors in two investment funds managed by Infinity Q Capital Management LLC. Both the Criminal Case and the CFTC Civil Action allege that Velissaris artificially inflated the value of over-the-counter (OTC) derivative positions held by Infinity Q’s investment funds in order to make the funds appear more successful than they were, and increase his compensation in the form of management and performance fees.
The cases also allege that Velissaris made false and misleading statements to investors regarding the independence of the process for valuing OTC derivative positions. Both cases charge that Velissaris executed his scheme by, among other things, inputting false terms into pricing models used to value the OTC derivative positions and changing the models’ underlying computer code.
Both cases also allege that Velissaris endeavored to conceal his fraud by, among other things, providing falsified term sheets to Infinity Q’s auditors and creating other fabricated documents.
The Government argues that its requests to intervene and for a complete stay of the CFTC Civil Action, with the consent of the defendant should be granted. If this case were to proceed, there would be a risk of significant interference with the Criminal Case and discovery would likely proceed in a one-sided fashion. A complete stay would prejudice no party to the CFTC Civil Action; would prevent the circumvention of important statutory limitations on criminal discovery; and would preserve the Court’s resources because many of the issues presented by the CFTC Civil Action may be resolved in the Criminal Case.