CFTC wins summary judgment against swaps trader who falsified fund valuations for years

A federal court has granted summary judgment in favor of the Commodity Futures Trading Commission in its case against James R. Velissaris, a former hedge fund manager whose fund valuation scheme ran for roughly three years before regulators caught up with him.

The ruling, announced on August 24, caps an enforcement action the CFTC first filed in February 2022 against Velissaris and his firm, Infinity Q Capital Management LLC, a CFTC-registered commodity pool operator.

What he did, and how he sold it

Velissaris managed funds that held over-the-counter swaps, the kind of complex derivative instruments that do not trade on exchanges and therefore require someone to assign them a price. That pricing step, called valuation, is where he intervened.

He told investors and counterparties that the fund’s valuations were handled independently through a third-party system, without any input from him. The court found that was false. Velissaris was manually adjusting the swap values himself, pushing them higher than they should have been.

Those inflated values fed into the funds’ net asset values, the headline number that tells investors what their stake is worth. Higher NAVs meant higher fees. The scheme ran from 2018 through 2021, and the excess fees it generated exceeded $125 million in total. Of that, approximately $22 million went directly to Velissaris.

The penalties, civil and criminal

The CFTC’s civil action resulted in a $2.2 million monetary penalty, along with permanent bans on trading and registration.

A parallel criminal case produced a 15-year prison sentence, along with $125.97 million in restitution and a $22 million forfeiture order. The restitution figure maps almost exactly to the excess fees the scheme generated. The $22 million forfeiture directly claws back what Velissaris personally took.

Why this case matters beyond the defendant

OTC derivatives pricing is structurally vulnerable to this kind of manipulation precisely because there is no exchange-based reference price. The Infinity Q case illustrates what happens when the person running the models has both the technical access to adjust them and an economic incentive to inflate the results.

The CFTC has been explicit that enforcement in the derivatives space is a priority, and summary judgment rulings like this one are a tool for resolving cases where the factual record is clear enough that a full trial is unnecessary. The court found that no genuine dispute existed about what Velissaris did.

The case also reinforces the CFTC’s reach into fund management practices. Because Infinity Q operated commodity pools holding OTC swaps, the CFTC had direct jurisdiction under the Commodity Exchange Act. Fund managers who touch derivatives even as a secondary strategy are operating inside that regulatory perimeter.

The investors who were on the receiving end of inflated NAVs overpaid in fees for years and made allocation decisions based on fund performance that was not real. The restitution order addresses the financial harm.

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