VELISSARIS was the founder and chief investment officer of Infinity Q, an investment adviser that ran both a mutual fund (the "Mutual Fund"), started in about 2014, and a hedge fund (the "Hedge Fund," and collectively the "Investment Funds"), started in about 2017.  As of 2021, the two funds purported to have approximately $3 billion in assets under management.  Infinity Q was headquartered in New York, New York, and employed a small staff including a chief compliance and chief risk officer ("Employee-1"). 

A major component of both the Mutual Fund and the Hedge Fund's holdings were over-the-counter ("OTC") derivative positions that involved customized contracts that allowed the counterparties to take positions on the volatility, or price movement, of underlying assets or indices.  VELISSARIS, through Infinity Q, represented to its investors that it valued these OTC derivative positions based on fair value, and that in order to do so, it utilized the services of an independent third-party provider.  In particular, Infinity Q represented to investors and other stakeholders that it used Bloomberg Valuations Service ("BVAL") to independently calculate the fair value of these positions, in accordance with the terms of the underlying derivative contracts.  These OTC derivative positions comprised hundreds of millions of dollars of the Investment Funds' portfolios.   

Velissaris' Scheme to Lie to Investors and Inflate Derivative Swap Positions

In fact, however, VELISSARIS defrauded Infinity Q's investors by taking an active role in the valuation of Infinity Q's positions, and by modeling the positions in ways that were not based on the actual terms of the underlying contracts and were inconsistent with fair value.  VELISSARIS' input into the BVAL valuation process was inconsistent with Infinity Q's representations about the independence of the process and allowed VELISSARIS to fraudulently mismark positions in BVAL.  VELISSARS engaged in the mismarking of positions in BVAL by making false entries in BVAL's system including by secretly altering the computer code employed by BVAL that caused BVAL to alter and disregard certain critical terms.  Altering and disregarding terms in this fashion caused BVAL to report values that were artificially inflated and, often, much higher than fair value. 

By manipulating OTC derivative positions in BVAL in this way, VELISSARIS caused numerous positions in the Investment Funds to have anomalous and, at times, impossible valuations.  For example, at times, VELISSARIS made manipulations in either the Mutual Fund and/or the Hedge Fund that caused certain identical positions that were held by both the Mutual Fund and the Hedge Fund (namely, a position where all the material terms are the same) to have substantially divergent values.  In other cases, some of VELISSARIS' manipulations caused certain positions held by the Investment Funds to have impossible values, such as where under the true terms of the swap, the value adopted by VELISSARIS could only be true if volatility were negative - a condition which is mathematically impossible.

Ultimately, after VELISSARIS' mismarking scheme was uncovered in or about February 2021, Infinity Q liquidated the Investment Funds and sold its OTC derivative positions.  These positions were sold for hundreds of millions of dollars less than their purported market values in BVAL thereby resulting in substantial losses to the investors in the Investment Funds.

Velissaris Lies to Auditors and Obstructs the SEC's Investigation

In order to hide this scheme and prevent its detection, VELISSARIS lied to numerous outside stakeholders and regulators.  First, in order to prevent Infinity Q's outside auditor (the "Auditor") from discovering the fraud VELISSARIS provided the Auditor with falsified term sheets from counterparties that he had altered to change the true terms of certain OTC derivative positions.  In particular, in connection with a number of audits, the Auditor selected certain OTC positions that it would independently value in order to confirm the reasonableness of Infinity Q's values from BVAL.  In order to ensure that the Auditor would not arrive at materially different results when independently valuing positions that VELISSARIS had manipulated in BVAL, VELISSARIS altered the terms of certain deal documents and provided them to the Auditor.  After receiving these falsified documents and relying on them in its independent evaluation, the Auditor confirmed the reasonableness of VELISSARIS' valuations in BVAL.

Furthermore, beginning in May 2020, the SEC opened an inquiry and later an investigation into Infinity Q's valuation practices.  In connection with that investigation, VELISSARIS provided false and misleading information to the SEC.  For example, when the SEC asked for original documents that had been provided to investors, VELISSARIS altered the documents before providing them to the SEC, including certain alterations that would help hide his mismarking scheme.  For example, Infinity Q's original investor materials stated that "[o]nce a price is established for a portfolio security, it shall be used for all Funds that hold the security."  As explained above, this was untrue and on numerous occasions, manipulations in BVAL made by VELISSARIS caused the same positions in the Mutual Fund and the Hedge Fund to have substantially different values.  To conceal the falsity of Infinity Q's disclosures, VELISSARIS along with Employee-1 removed this line from investor documents that were provided to the SEC.

In June 2020, the SEC requested that Infinity Q provide additional materials, including documents regarding Infinity Q's valuation committee and all of its meeting minutes.  Infinity Q's investor materials had represented that Infinity Q had a valuation committee, including VELISSARIS, that the committee would meet monthly or more often, and that VELISSARIS would be responsible for preparing minutes of such meetings.  In fact, however, VELISSARIS had not kept notes of any such meetings.  Accordingly, days before responding to the SEC, VELISSARIS made up notes purporting to be from valuation committee meetings in 2019 and 2020 and submitted them to the SEC.

The SEC's complaint alleges that, from at least 2017 through February 2021, Velissaris engaged in a fraudulent scheme to overvalue assets held by the Infinity Q Diversified Alpha mutual fund and the Infinity Q Volatility Alpha private fund. According to the 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. Velissaris allegedly collected more than $26 million in profit distributions through his fraudulent conduct and without disclosing his activities to investors.

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The SEC also alleges that, by masking actual performance, Velissaris sought to thwart redemptions by investors who likely would have requested a return of their money had they known the funds' actual performance, particularly in the volatile markets in the wake of the COVID-19 pandemic. The complaint alleges that at times during the pandemic, the funds' actual values were half of what investors were told.

In February 2021, Velissaris was removed from his role with Infinity Q after SEC staff confronted the firm with information suggesting that Velissaris had been adjusting the third-party pricing model. Several days later, at Infinity Q's request and to protect shareholders, the Commission issued an order (Investment Company Act Rel. No. 34198 (Feb. 22, 2021)) to suspend redemptions of the mutual fund.

The complaint alleges that during the relevant period, from at least January 1, 2018 through at least February 28, 2021, by and through Infinity Q Capital Management, LLC (Infinity Q), the company he founded, controlled, and of which he was the Chief Investment Officer and majority owner, Velissaris engaged in a fraudulent valuation scheme to show false gains on hundreds of swaps held by two commodity pools managed by Infinity Q, a CFTC-registered commodity pool operator. 

The complaint states that Velissaris engaged in this fraud prior to the COVID-19 global pandemic, but the scope and scale of the fraud increased as he tried simultaneously to mitigate against, and also take advantage of, the unprecedented market volatility caused by the pandemic. As alleged, Velissaris executed his scheme by intentionally corrupting the independent, third-party pricing service models that Infinity Q used and touted to customers to value swaps held by the two commodity pools.

The complaint also alleges that Velissaris accomplished his scheme by, among other methods, surreptitiously inputting false information into the models; changing the models' standard underlying computation codes; and using improper pricing templates to guarantee the pricing service would return whatever artificial values he wanted rather than the values that the independent pricing service models would produce without Velissaris's nefarious actions. Using these fraudulent valuations, the complaint alleges, Velissaris successfully caused Infinity Q to show hundreds of millions of dollars in false, exaggerated gains, creating a false record of success that Infinity Q in turn used to charge inflated fees, induce existing pool participants to commit additional monies, and lure in new participants.

According to the complaint, Velissaris also took various steps to conceal his fraud, including  providing falsified swap term sheets to Infinity Q's auditors; surreptitiously making retroactive changes to Infinity Q's written valuation policy; and creating phony minutes for meetings of Infinity Q's valuation committee that never happened. The impact of Velissaris's fraudulent scheme was massive, resulting in the overvaluation of the funds managed by Infinity Q in certain months by more than $1 billion. 

From in or about 2013 and in or about 2019, BARBERA was the founder and CEO of Nanobeak, a privately held nanotechnology company that represented to investors that the company had developed a breathalyzer sensor technology that could detect cancer and narcotics in human breath.

From at least in or about 2013 through in or about 2020, BARBERA and others perpetrated a scheme to defraud dozens of investors out of at least approximately $8.4 million (i) by soliciting investments through false and misleading statements, (ii) by failing to use investors' funds as promised, and (iii) by converting investors' money to his own use.  BARBERA and others made false and misleading representations to actual and potential investors, including as set forth below:

BARBERA falsely represented that Nanobeak had developed a breathalyzer sensor that could detect narcotics and cancer in a person's breath, and that the company was expected to earn millions of dollars in sales revenue through distribution contracts.  In truth and in fact, Nanobeak never developed the purported technology, and it was impossible for the company to generate revenue because there was no breathalyzer device to sell and accordingly, no distribution contracts.

BARBERA also falsely represented that Nanobeak would soon have an initial public offering ("IPO"), which would result in large profits to investors.  In truth and in fact, the company was not close to an IPO, and BARBERA was permanently barred from serving as the CEO of a public company as a result of a prior, unrelated proceeding brought by the U.S. Securities and Exchange Commission ("SEC").

BARBERA falsely represented that he had undergraduate and graduate degrees in physics from New York University, and that he had a business degree from the Massachusetts Institute of Technology.  In truth and in fact BARBERA never finished college and never attended MIT.

BARBERA converted to his own use at least approximately $3.3 million of the approximately $8.4 million in investor funds in the form of cash withdrawals and to pay personal expenses, including private school and college tuition for his children, mortgage payments on his Central Park West apartment, and for his other personal items, such as credit card bills, jewelry, automobiles, and daily living expenses.

[T]he defendants' crime involved efforts to run a pump-and-dump scheme in Global WholeHealth Partners' stock. Their scheme included maintaining control over the company's free-trading shares through secret nominee accounts; artificially inflating the stock's price and trading volume by promoting the stock through high pressure call rooms and penny stock newsletters; engaging in manipulative stock trading; and selling the stock at inflated prices to unwitting investors.  The defendants collectively spoke on dozens of recorded calls about key aspects of their scheme.

[B]eginning in June 2020, Global Wholehealth's CEO, California resident Charles Strongo, prepared press releases and signed reports filed with the SEC, falsely claiming that Global Wholehealth had pending requests for emergency use authorizations with the U.S. Food and Drug Administration for three COVID-19 tests. According to the complaint, at the same time, California resident and recidivist Brian M. Volmer, Florida resident and recidivist Joshua Yafa, Florida resident Jamie M. Yafa, and Empire Associates, Inc., a stock promotion firm operated by Joshua and Jamie Yafa, carried out a promotional campaign to boost Global Wholehealth's stock price. The scheme allegedly included newsletter email blasts, stock research reports, and a phone room, all urging investors to purchase Global Wholehealth stock. As alleged, the newsletters did not disclose that Global Wholehealth had compensated Empire Associates with 75,000 Global Wholehealth shares to implement a market awareness campaign and instead claimed that an unspecified third party had paid Empire Associates for the newsletters. The complaint further alleges that the newsletters did not disclose that the defendants intended to sell their Global Wholehealth shares from the outset, and instead misleadingly stated only that the unspecified third party and Empire Associates may sell their shares. In fact, the SEC claims that the defendants unloaded their shares on the OTC market as the promotional campaign progressed for a total of about $1.95 million in illicit proceeds.

[B]lanchette was employed by Bank of America as a relationship manager.  As a relationship manager, Blanchette had the authority to cause temporary ATM cards to be activated and assigned to a customer's account.  Between August 2014 and March 2016, Blanchette caused multiple temporary ATM cards to be activated for bank accounts of a customer who Blanchette knew was experiencing cognitive decline.  Without the customer's authorization, Blanchette used the temporary ATM cards to withdraw significant funds from the customer's accounts, keeping a significant portion for her own benefit, and causing a loss of $103,080.

[KT Corp.] lacked sufficient internal accounting controls over charitable donations, third-party payments, executive bonuses, and gift card purchases.  As a result, KT Corp. employees, including high-level executives, were able to generate slush funds that were used for gifts and illegal political contributions to government officials in Korea who had influence over KT Corp.'s business.  Other employees were able to make payments in connection with seeking business from government customers in Vietnam.