Federal Court Orders Former Hedge Fund Manager James Velissaris to Pay $2.2 Million in CFTC Swap Fraud Case

The U.S. District Court for the Southern District of New York has granted a motion for summary judgment submitted by the Commodity Futures Trading Commission (CFTC) against James R. Velissaris, concluding an enforcement action involving a fraudulent swap valuation scheme. The court order requires Velissaris to pay a $2.2 million civil monetary penalty. Additionally, it imposes permanent bans barring him from committing further violations of the Commodity Exchange Act (CEA), trading in any CFTC-regulated markets, entering into commodity interest transactions, and registering with the CFTC. The ruling resolves an enforcement action originally filed by the CFTC on February 17, 2022. The regulator charged Velissaris with orchestrating a scheme to artificially inflate asset values managed by Infinity Q Capital Management LLC, a CFTC-registered commodity pool operator. According to the findings, Velissaris engaged in the valuation scheme between 2018 and 2021 across two commodity pools managed by Infinity Q. While representing to participants that the funds' over-the-counter (OTC) derivative positions were independently priced using a third-party system without firm intervention, Velissaris made manual alterations to artificially raise the reported value of swap positions. These manual adjustments inflated the funds' net asset values, fabricated a track record of financial success, and led customers to pay over $125 million in excess fees. Velissaris obtained approximately $22 million of those funds for his personal benefit. In entering the order, the court highlighted the egregiousness of the multi-year misconduct and noted prior sanctions from a related criminal case, where Velissaris received a 15-year prison sentence, $125,969,962 in criminal restitution, and $22 million in forfeiture.