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MoKa Brings Two Cases Regarding Infinity Q Liquidation And Valuation Failures

Morris Kandinov LLP has filed two cases seeking to recover losses incurred by investors in the Infinity Q Diversified Alpha Fund (the “Fund”), a mutual fund that announced in early 2021 that it was liquidating because of extensive securities pricing errors that rendered its last reported net asset value (“NAV”) inaccurate. After the Fund’s portfolio was liquidated, it held only $1.25 billion of the $1.73 billion in net assets that the Fund had last reported. The Fund’s board of trustees attributed the losses to inaccuracies in the prices of the Fund’s swap contracts, which had been manipulated by the Fund’s investment adviser, Infinity Q Capital Management, LLC (“Infinity Q”), and its portfolio manager James Velissaris.

By MoKa
02/23/22

The first case was filed on February 9, 2022 in the Wisconsin Circuit Court on behalf of investors in the Fund and against U.S. Bancorp Fund Services, LLC (“U.S. Bank”), the service provider responsible for calculating the value of the Fund’s securities and publishing its NAV. The case alleges, among other things, that U.S. Bank overstated the Fund’s NAV for years, causing investors to overpay for the Fund’s shares, and misled investors regarding the process U.S. Bank used to determine the value of the Fund’s swap contracts, which unbeknownst to investors relied almost exclusively on Infinity Q. The case asserts claims under the federal securities laws.

The second case was filed on February 23, 2022 in the Delaware Court of Chancery on behalf of the Fund and against the board of trustees of the Fund, U.S. Bank, certain of the Fund’s officers, and Infinity Q. The case alleges, among other things, that the defendants breached their contractual and fiduciary duties with respect to securities pricing by permitting the Fund to systematically overstate the value of its swap contracts by hundreds of millions of dollars, resulting in the Fund’s immediate liquidation when the errors were revealed by the SEC. The case seeks to recover the damages caused to the Fund by these breaches, including substantial investment losses, liability exposure, legal and administrative expenses, inflated asset-based fees, and indemnification expenses.

For more information regarding the Fund’s ongoing liquidation proceedings, see the Fund’s liquidation website.

For more information regarding the SEC’s pending action against James Velissaris, see the SEC’s press release.

For more information regarding the pending civil litigation concerning the Fund and its investors, including the cases referenced above, please contact Leo Kandinov at leo@moka.law.