The former chief risk officer of the defunct investment adviser Infinity Q Capital Management LLC will settle charges of misconduct related to a fraudulent scheme to inflate the value of assets advised by more than $1 billion, securities regulators said on Friday.
Scott Lindell failed to exercise reasonable care and to undertake an appropriate investigation regarding multiple red flags that indicated the value of Infinity Q funds' positions was inappropriate, the U.S. Securities and Exchange Commission said in charges filed in Manhattan federal court.
The court will decide on the charges, with the determination of disgorgement, prejudgment interest, and civil money penalties at a later date, according to the regulators.
Lindell was not immediately available for comment.
Infinity Q was forced to liquidate its mutual funds last year after the SEC found that the firm's founder and former chief investment officer, James Velissaris, manipulated a third-party pricing model used to value fund investments.
The SEC said Lindell negligently misrepresented investors, representatives of the mutual fund's board, and others that the pricing service was independent from Infinity Q when, in fact, Velissaris had control over it.
Lindell helped Velissaris submit misleading documents to the SEC in response to the regulator's initial inquiries over the valuations and helped mislead the mutual fund's auditor with at least reckless disregard of the truth, the SEC said.
The regulators said that Lindell, who was also Infinity Q's head of operations, chief compliance officer and former portfolio manager and member of the firm's valuation committee, willfully misstatements on some Infinity Q SEC filings.