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On April 20, 2022 GWG Holdings, Inc. (GWG) filed for bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas (case 22-90032). According to an article in the Wall Street Journal, published on the same day, the bankruptcy was due to “accounting issues...read more
Did you or a family member invest in Infinity Q Diversified Alpha Fund (IQNDX/IQDAX) based on the recommendation of your stockbroker or investment adviser? Our law firm, Epperson & Greenidge, represents investors in Infinity Q. We are working with Infinity Q investors to recover their losses if they purchased the fund based on their stockbrokers’ or financial advisors’ negligence and/or inadequate due diligence in recommending Infinity Q to their clients.
February 2021 – Infinity Q suspends redemptions
Infinity Q was a popular mutual fund that was marketed as a “hedge fund for the masses.” Much of Infinity Q’s assets were tied up in a complex investment strategy that was illiquid and difficult to value. The bulk of these assets were invested in derivatives contracts known as “swaps”.
On December 30th, 2020, Infinity Q announced without explanation that effective the next day it was closed to all new investment, including through reinvestment. Then on February 22nd, 2021, Infinity Q submitted an application to the SEC for an order pursuant to Section 22(e)(3) of the Investment Company Act of 1940 to suspend all redemptions of shares in the fund, effective February 19, 2021. The justification for the request to suspend all redemptions, provided by Infinity Q, was its “inability… to value certain Fund holdings and the Fund’s resulting inability to calculate net asset value (NAV).”
February 2022 – Infinity Q’s founder arrested
On February 17, 2022, Infinity Q’s founder and chief investment officer (CIO) James Velissaris was criminally indicted by the United States Department of Justice for securities fraud and obstruction of justice for orchestrating a scheme to lie to the Funds’ investors and falsify documents. On the same day, both the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) also civilly charged Velissaris with fraud for overvaluing the Funds’ assets by more than $1 billion while pocketing tens of millions of dollars in fees.
The SEC’s complaint alleged that, from at least 2017 through February 2021, Velissaris engaged in a fraudulent scheme to overvalue assets held by both the Infinity Q Diversified Fund and the Infinity Q Volatility Fund.
According to the SEC complaint, Velissaris executed the overvaluation scheme by altering inputs and manipulating the code of a third-party pricing service used to value the Funds’ assets. Moreover, Velissaris falsely showed gains on hundreds of swaps held by two commodity pools managed by Infinity Q.
Infinity Q red flags and inadequate due diligence
Epperson & Greenidge is investigating whether investment advisers, financial advisors and stockbrokers conducted adequate due diligence before recommending Infinity Q to their clients. It appears that there were red flags regarding Infinity Q that were apparent as early as February 29, 2020 that should have given stockbrokers and investments advisers deep concerns about Infinity Q, had they performed proper due diligence. One apparent red flag was that in Infinity Q’s February 29, 2020 semi-annual report published to the public on the SEC’s Edgar website, Infinity Q reported two short MXWO variance swaps, one with an effective date of 3/15/19 (marked at over $5.6 million) and the other with an effective date of 3/18/19 (marked at over $2.8 million). These valuations for the two positions were mathematically impossible because they required that the implied volatility metric be less than zero, an impossibility. It appears from the criminal indictment and the SEC complaint, that Infinity Q and Velissaris were made aware of these nonsensical valuations in the SEC public filings by at least May of 2020 and that the SEC began investigating Infinity Q and Velissaris around this same time.
Recover your losses through FINRA arbitration?
If you purchased Infinity Q through a financial advisor or stockbroker, and have suffered heavy losses, you may be able to recover your money through a process called FINRA arbitration.
FINRA arbitration is a unique, narrow area of the law. The attorneys at Epperson & Greenidge have extensive experience working within FINRA and we specialize in bringing these arbitration claims on behalf of investors.
If you or a loved one has lost money investing in Infinity Q, call the experienced FINRA arbitration attorneys at Epperson & Greenidge for a free consultation (877) 445-9261 or contact us on-line.