Hedge Fund Manager Swap Valuation Fraud Enforcement
Summary
The CFTC obtained a federal court order granting summary judgment against James R. Velissaris, former hedge fund manager of Infinity Q Capital Management LLC, for a multi-year swap valuation fraud scheme. Velissaris was ordered to pay $2.2 million in civil monetary penalties and permanently barred from CFTC-regulated markets and trading. The scheme inflated fund net asset values through manual adjustments to independent pricing systems, resulting in over $125 million in excess fees to investors.
What changed
The U.S. District Court for the Southern District of New York granted the CFTC's motion for summary judgment against James R. Velissaris, finding he engaged in fraudulent swap valuation practices from 2018-2021. Velissaris manually adjusted an independent third-party pricing system to inflate the value of over-the-counter derivative positions held by two commodity pools managed by Infinity Q Capital Management LLC, a CFTC-registered commodity pool operator. These inflated values were used to charge excess fees exceeding $125 million, of which approximately $22 million was used for Velissaris's personal benefit. The court imposed a $2.2 million civil monetary penalty, permanent injunction from CFTC-regulated markets and trading, and permanently enjoined Velissaris from registering with the Commission. A related criminal case resulted in a 15-year prison sentence, $125,969,962 in criminal restitution, and $22 million in forfeiture.
Compliance officers at registered commodity pool operators, commodity trading advisors, and hedge funds should review their swap valuation practices to ensure independent pricing systems are not subject to unauthorized manual adjustments. Internal controls over third-party valuation systems should be audited, and fee calculations based on net asset values should be verified for accuracy. The permanent injunction and criminal penalties in this case demonstrate the serious consequences of valuation fraud in derivatives markets.
What to do next
- Audit third-party pricing systems for unauthorized manual adjustments to swap valuations
- Implement segregation of duties controls over derivative valuation processes
- Review fee calculations based on net asset values for accuracy and investor protection
Penalties
$2.2 million civil monetary penalty, permanent injunction from CFTC-regulated markets and trading, permanent ban from CFTC registration; related criminal penalties include 15-year prison sentence, $125,969,962 criminal restitution, $22 million forfeiture
Source document (simplified)
Release Number 9205-26
Federal Court Grants CFTC Motion for Summary Judgment, Orders Former Hedge Fund Manager to Pay $2.2 Million for Swap Valuation Fraud
April 02, 2026
WASHINGTON — The Commodity Futures Trading Commission today announced the U.S. District Court for the Southern District of New York entered an order granting the CFTC’s motion for summary judgment against James R. Velissaris, finding that he engaged in a fraudulent scheme in violation of the Commodity Exchange Act.
The order imposes a $2.2 million civil monetary penalty and permanently enjoins Velissaris from engaging in further violations of the CEA, trading in any CFTC-regulated markets, entering into any transaction involving commodity interests, and registering with the Commission.
The court cited the egregiousness of Velissaris’s misconduct, which lasted for years and resulted in substantial investor losses. The court also noted the significant sanctions imposed upon him in a related criminal case, including a 15-year prison sentence, $125,969,962 in criminal restitution, and $22 million in forfeiture.
The summary judgment order resolves the CFTC’s enforcement action filed Feb.17, 2022, which charged Velissaris with operating a fraudulent scheme to overvalue assets managed by his multi-billion-dollar hedge fund, Infinity Q Capital Management LLC, a CFTC-registered commodity pool operator. [See CFTC Press Release No. 8495-22 ]
According to that complaint, from 2018 – 2021, Velissaris engaged in a fraudulent valuation scheme to inflate the value of swaps held by two commodity pools managed by Infinity Q. He repeatedly represented that the funds valued their over-the-counter derivative positions using an independent third-party system without any substantive input from Infinity Q. In reality, Velissaris made manual adjustments in the system to artificially increase the reported value of the funds’ OTC derivative positions. These adjustments artificially inflated the funds’ net asset values and created a false record of success. Infinity Q then used those inflated values to charge inflated fees, induce additional investments from existing pool participants, and lure in new participants. Ultimately, the scheme resulted in customers paying more than $125 million in excess fees, of which approximately $22 million Velissaris used for his own benefit.
-CFTC-
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