Barnes & Thornburg Seeks to Withdraw Plea for Infinity Q Founder James Velissaris
New Counsel Argues James Velissaris, One of the Leading African American Fund Managers, is Innocent of Securities Fraud
ATLANTA, March 30, 2023 /PRNewswire/ -- On Friday, leading law firm Barnes & Thornburg filed a motion on behalf of Infinity Q founder James Velissaris to withdraw from a November plea deal regarding one count of alleged securities fraud. Velissaris, a graduate of Harvard University and Columbia University's Fu Foundation School of Engineering, was one of the leading African American fund managers in the country at the time his case began. After establishing himself as one of the highest performing managers on Wall Street, Velissaris founded his own firm, Infinity Q Capital Management, in 2014 and was backed by renowned investor David Bonderman.
According to the motion, in 2021, Velissaris was falsely accused of misrepresenting the value of his multibillion-dollar fund solely based on a discrepancy between his valuation calculations and that of the Bloomberg BVAL pricing tool with known deficiencies. Velissaris believed, and repeatedly stated that the tool was not generating reasonable or directionally correct values and therefore the team had to augment with other known industry data points to arrive at more accurate valuations. This pricing methodology was consistent with the fund's disclosures to investors which, per the motion, stated, "that it [Infinity Q] retained broad, unilateral discretion to change prices received from third-party pricing services such as BVAL if the prices did not provide a reliable indication of fair value."
In January of this year, the Securities and Exchange Commission (SEC) found that the Bloomberg tool did, in fact, misrepresent values and, as a result, fined Bloomberg $5 million dollars. As stated in the press release by Osman Nawaz, Chief of the Division of Enforcement's Complex Financial Instruments Unit, "This matter underscores that we will hold service providers, such as Bloomberg, accountable for misrepresentations that impact investors."
In November of 2022, during the time the SEC was concurrently investigating the Bloomberg tool deficiencies that ultimately resulted in the aforementioned fine, Velissaris was forced to take a plea deal for a crime of which he was innocent or face a possible prison sentence of 90 years to life. Under immense pressure, Velissaris reluctantly chose the plea deal which carried a hefty and unorthodox maximum of 20 years for one count of securities fraud.
As stated in the March 24th motion to withdraw by his new legal team at Barnes and Thornburg, "Mr. Velissaris is also innocent of fraudulently misstating the values of the funds' derivative securities because, as discussed further below, the securities were valued in accordance with the funds' internal risk models, which were objectively consistent with market conditions that prevailed during the relevant period."
According to the filing, the SEC's own subject matter expert communicated as early as 2020 that the values were consistent and expected with the fund's unique investment strategy. "My main takeaway is it's believable that they [i.e., the Infinity Q volatility funds] have these returns' (i.e., the returns the funds disclosed to the public), that the strategy Infinity Q was employing "could deliver this type of return, which is not exactly outlandish," and that if Infinity Q "held these [fund] positions, [it] could have seen mark to market gains of several hundred million dollars . . . ." (See Oct. 15, 2020 email from D. Stevens to T. Husson).
He was not alone, an excerpt from the report of valuation expert Dr. Atanu Saha, a partner with the global advisory firm StoneTurn cited, "Bloomberg's script files in historic BVAL models had an error, which caused it to systematically undervalue a majority of variance swaps at issue."
The SEC settlement with Bloomberg confirmed that the tool did not consistently produce accurate valuations. This is consistent with Velissaris' assertions regarding the BVAL tool. According to the filing, the subsequent findings by respected valuation experts from the SEC and third parties affirm that the valuations by Velissaris were reasonable.
Click here to read the full motion to withdraw the plea. For more information, please contact Fred Hicks at 678-701-5225 or via email at [email protected]
SOURCE James Velissaris
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