Motion to Dismiss in In Re Infinity Q Diversified Alpha Fund Securities Litigation v. Xxx| Trellis.Law

On February 24, 2021 a Motion,Ex Parte was filed involving a dispute between In Re Infinity Q Diversified Alpha Fund Securities Litigation, and Xxx, for Commercial Division in the District Court of New York County.

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FILED: NEW YORK COUNTY CLERK 09/14/2021 11:29 PM INDEX NO. 651295/2021
NYSCEF DOC. NO. 127 RECEIVED NYSCEF: 09/14/2021

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK

In re INFINITY Q DIVERSIFIED ALPHA
FUND SECURITIES LITIGATION
Index No. 651295/2021
_________________________________
Motion Sequence No. 11

This Document Relates To: Hon. Andrew S. Borrok

The Consolidated Action Oral Argument Requested

_________________________________

REPLY MEMORANDUM OF LAW IN FURTHER SUPPORT OF THE
MOTION TO DISMISS THE CONSOLIDATED COMPLAINT OF DEFENDANTS
JAMES VELISSARIS AND INFINITY Q MANAGEMENT EQUITY, LLC

GIBSON, DUNN & CRUTCHER LLP
Robert F. Serio
Reed M. Brodsky
Karin Portlock
Seth M. Rokosky
Lauren Myers
200 Park Avenue
New York, NY 10166
Telephone: (212) 351-4000

Attorneys for Defendants James Velissaris and
Infinity Q Management Equity, LLC

September 14, 2021

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TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT ................................................................................................... 1

ARGUMENT ................................................................................................................................. 3

I. The Complaint Fails to State a Claim Against the Velissaris Defendants
Under Section 11 of the Securities Act. ................................................................. 3

II. The Complaint Also Fails to State a Claim Against the Velissaris
Defendants Under Section 15 of the Securities Act............................................... 8

CONCLUSION ............................................................................................................................ 11

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TABLE OF AUTHORITIES

Page(s)

Cases

Charter Tp. of Clinton Police & Fire Ret. Sys. v. KKR Fin. Hldgs. LLC,
2010 WL 4642554 (S.D.N.Y. Nov. 17, 2010) ...........................................................................7

Connaughton v. Chipotle Mexican Grill, Inc.,
29 N.Y.3d 137 (2017) ................................................................................................................8

Emerson v. Mut. Fund Series Tr.,
393 F. Supp. 3d 220 (E.D.N.Y. 2019) .......................................................................................9

Feinberg v. Marathon Patent Grp., Inc.,
193 A.D.3d 568 (1st Dep’t 2021) ..............................................................................................8

Fischbein v. Beitzel,
281 A.D.2d 167 (1st Dep’t 2001) ............................................................................................11

Grimm v. Whitney-Fidalgo Seafoods, Inc.,
1973 WL 495 (S.D.N.Y. Dec. 4, 1973) .....................................................................................6

Herman & MacLean v. Huddleston,
459 U.S. 375 (1983) ...................................................................................................................6

Hornstein v. Wolf,
67 N.Y.2d 721 (1986) ..............................................................................................................11

In re Global Crossing, Ltd. Sec. Litig.,
322 F. Supp. 2d 319 (S.D.N.Y. 2004)........................................................................................6

In re NovaGold Res. Inc. Sec. Litig.,
629 F. Supp. 2d 272, 295 (S.D.N.Y. 2009)................................................................................7

In re Refco, Inc. Sec. Litig.,
503 F. Supp. 2d 611 (S.D.N.Y. 2007)......................................................................................10

In re Weight Watchers Int'l Inc. Sec. Litig.,
504 F. Supp. 3d 224 (S.D.N.Y. Nov. 30, 2020) ...................................................................9, 10

Matter of Netshoes Sec. Litig.,
64 Misc. 3d 926 (Sup. Ct. N.Y. County 2019) ....................................................................8, 10

Youngers v. Virtus Inv. Partners Inc.,
195 F. Supp. 3d 499 (S.D.N.Y. 2016)........................................................................................9

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TABLE OF AUTHORITIES
(continued)

Page(s)

Statutes

15 U.S.C. § 77f ............................................................................................................................4, 5

15 U.S.C. § 77g ................................................................................................................................6

15 U.S.C. § 77k ................................................................................................................................6

15 U.S.C. § 80a-2 ...........................................................................................................................10

Other Authorities

H.R. Rep. 73-85 ...............................................................................................................................5

Lead Pls.' Mem. of Law, In re Refco, Inc. Sec. Litig., No. 05 Civ. 8626, 2006 WL
3097010, Dkt. 67 (filed Sept. 15, 2006) ..................................................................................10

iii

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The Velissaris Defendants respectfully submit this reply memorandum of law in further

support of their motion to dismiss Plaintiffs’ Consolidated Complaint (NYSCEF No. 13). The

Velissaris Defendants hereby join in and incorporate by reference the applicable arguments and

authorities set forth in the reply memoranda of law filed on behalf of the Trust 1 and the Trust

Officers (“Trust Reply”) and IQCM, Potter, and Bonderman (“IQCM Reply”), as well as by the

other Defendants as applicable herein. 2 This separate brief highlights arguments specifically

applicable to the claims against the Velissaris Defendants.

PRELIMINARY STATEMENT

The issue in this case is whether the Velissaris Defendants can be held liable for alleged

misstatements in the Trust’s publicly filed Registration Statements from 2019 and earlier, years

prior to the Alpha Fund’s suspension of redemptions. Plaintiffs have utterly failed to plead

violations of Sections 11 and 15 of the Securities Act against either Velissaris Defendant.

Even assuming arguendo that Plaintiffs have alleged the Registration Statements were false

or misleading when issued—and they have not—the Velissaris Defendants are not among the

limited categories of persons that can be liable under Section 11. Section 11 plainly does not reach

non-signatory officers of the issuer, let alone those of a non-issuer investment advisor to a non-

issuer fund. Plaintiffs seek to ascribe primary liability to Mr. Velissaris because he supposedly

“signed” the Trust’s Registration Statements, but they ignore that, like Defendant Potter, Mr.

Velissaris signed the documents on behalf of “Infinity Q Commodity Fund, Ltd.”—an entity that

1
Capitalized terms and abbreviations used here have the meanings specified in the Velissaris
Defendants’ opening brief in support of their motion to dismiss the Consolidated Complaint. The
brief separately refers to the briefs in opposition to the Trust Brief, IQCM Brief, and Velissaris
Brief as “Trust Opp.,” “IQCM Opp.,” and “Velissaris Opp.,” respectively.
2
As further described herein, the Velissaris Defendants join in and incorporate by reference
the other Defendants’ arguments relating to Plaintiffs’ failure to plead actionable statements and
opinions, permissible Section 11 defendants, and control-person liability.

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is separate from the Trust—and that he signed it solely with respect to “information that

specifically relates to Infinity Q Commodity Fund, Ltd.,” none of which Plaintiffs challenge as

allegedly false or misleading. Plaintiffs also fail to adequately allege that Mr. Velissaris can be

held primarily liable for performing “similar functions” to those of directors of the Trust. Merely

managing the investments of one of the Trust’s eighteen funds, as an investment advisor (as Mr.

Velissaris’s employer, IQCM, did here), is manifestly different from performing the oversight and

management functions of the Trustees who managed the business of the Trust. Likewise, Plaintiffs

wrongly claim that Mr. Velissaris can be held primarily liable for having “consented to being

named as having prepared or certified . . . any report or valuation” used in connection with the

Registration Statement, as Plaintiffs do not allege that Mr. Velissaris prepared or certified any part

of the Registration Statement that they challenge as false or misleading. And they simply ignore

Mr. Velissaris’ express disclaimer of consent to being named as certifying the truth of any

information in the Registration Statements other than as “specifically relates to Infinity Q

Commodity Fund, Ltd.”

The Complaint likewise fails to state “control-person” claims against the Velissaris

Defendants under Section 15. Because Plaintiffs have failed to state an underlying violation

against the allegedly controlled entities (the Trust and IQMC), Plaintiffs’ Section 15 claims fail as

a matter of law. But in any event, Plaintiffs’ Section 15 claims must be dismissed because, as

noted above, Plaintiffs have failed to allege facts demonstrating either that Mr. Velissaris “signed”

the Registration Statements on the Trust’s behalf or that Mr. Velissaris allegedly controlled its

statements through his employment role at the Trust’s investment advisor, IQCM. Plaintiffs’ sole

claims as to IQME, in turn, relate to a conclusory assertion about its alleged minority shareholder

status as to IQCM and irrelevant statements by the Trust in its Prospectus that have no bearing on

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Section 15 liability. The Court should hold that Plaintiffs have failed to adequately plead Section

11 and 15 claims.

As the Velissaris Defendants have noted, if this case were to progress past the pleading

stage (and it should not), a full factual record would reveal that Plaintiffs’ allegations relating to

Mr. Velissaris and valuation of the Fund’s swaps are false for numerous reasons. 3 For example,

Mr. Velissaris acted in good faith at all times in his role at IQCM and subjectively believed that

the Fund’s swap positions were fairly valued in accordance with disclosed procedures applicable

to these complicated derivatives. Moreover, Mr. Velissaris was not ultimately responsible for the

Fund’s valuations, which were tested by independent auditors in any event. But regardless, the

Consolidated Complaint makes clear that Plaintiffs at most complain about the materialization

(during the COVID-19 pandemic) of a fully disclosed risk—that “[t]here can be no assurance that

the Fund will obtain the fair value assigned to a security if it were to sell the security.” NYSCEF

No. 42 at 21. This Court therefore should hold that Plaintiffs’ sparse allegations against the

Velissaris Defendants are insufficient to state a cause of action under Sections 11 and 15 of the

Securities Act, and those claims should be dismissed with prejudice.

ARGUMENT

I. The Complaint Fails to State a Claim Against the Velissaris Defendants Under
Section 11 of the Securities Act.

As the Velissaris Defendants explained in their opening brief, Plaintiffs wrongly claim they

have stated a primary Section 11 claim against the Velissaris Defendants. See Velissaris Opp. at

4-6. The Velissaris Defendants are not even permissible Section 11 defendants, which is why

3
Contrary to Plaintiffs’ claims (see, e.g., Velissaris Opp. at 4, 6), Mr. Velissaris has never
“admitted to manipulating” the Fund’s valuations.

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Plaintiffs are now seeking (unsuccessfully) to diverge from the theory of liability that they pled in

their own Complaint. See IQCM Br. at 8-10; Velissaris Br. at 7.

Contrary to Plaintiffs’ claims (see Velissaris Opp. at 5), Mr. Velissaris is not liable under

Section 11 by virtue of having “signed the registration statements.” Velissaris Opp. at 5; see

Velissaris Br. at 7; IQCM Br. at 6-10; IQCM Reply at 6. Section 11 plainly does not even reach

non-signatory officers of the issuer, let alone those of a non-issuer investment advisor to a non-

issuer fund. The Securities Act mandates only that a Registration Statement be signed by the

issuer, its principal executive officers, its principal financial and accounting officers, and the

majority of its board of directors. See 15 U.S.C. § 77f(a). Here, as Plaintiffs concede, the Trust is

the “registrant and issuer.” Compl. ¶ 27.

Plaintiffs further acknowledge that Mr. Velissaris did not sign those documents on behalf

of the issuer “pursuant to the requirements of the Securities Act,” as did the Trust’s President

(NYSCEF No. 61 at C-6), or sign for the Trust’s statements “pursuant to the requirements of the

Securities Act,” as did the Trust’s principal executive officer, principal financial and accounting

officer, and members of its Board of Trustees (id.). Indeed, those Defendants do not contest that

they are proper Section 11 defendants under the Securities Act by virtue of their signatures.

Instead, Mr. Velissaris signed a separate page of the Registration Statement on behalf of

Infinity Q Commodity Fund, Ltd., a Cayman Islands entity that is legally separate from both the

Trust and the Fund that Plaintiffs never allege has any connection to this dispute. See, e.g.,

NYSCEF No. 42 at C-3, C-7. Moreover, Plaintiffs wholly ignore that Mr. Velissaris expressly

limited any such representations to the narrow body of “information that specifically relates to

Infinity Q Commodity Fund, Ltd.” Id. at C-7 (emphasis added). Plaintiffs cite no case—because

there is none—that would permit Plaintiffs to hold an individual such as Mr. Velissaris liable under

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Section 11 of the Securities Act for signing statements solely relating to an entirely different,

legally separate entity than the issuer of the challenged statement, and only after expressly

disclaiming having attested to any challenged statements concerning the issuer. Such a rule would

serve no valid statutory purpose. See, e.g., H.R. Rep. 73-85 at 9-10 (Securities Act places primary

liability only on those who have a “particularly heavy” responsibility because they personally

“assum[e] responsibility for the making of these statements”).

Plaintiffs’ alternative arguments as to primary liability fare no better. Plaintiffs are simply

incorrect in claiming that they have alleged that Mr. Velissaris was a “‘person performing similar

functions’” to directors of the Trust when the Trust issued its Registration Statements. Velissaris

Opp. at 5 (quoting 15 U.S.C. § 77k(a)(2)); see, e.g., IQCM Reply at 2-4; Lindell Reply at 2-7. The

Securities Act mandates that a Registration Statement be signed by, among other people, the

issuer’s board of directors. See 15 U.S.C. § 77f. In this case, the Trust is governed by a Board of

Trustees that has general oversight over all operations of the Trust. See NYSCEF No. 42 at SAI-

24-26. Plaintiffs allege that Mr. Velissaris was the Chief Investment Officer of an investment

portfolio for one of eighteen separate funds within the Trust, each of which was managed by an

independent investment advisor but ultimately overseen by the Trust’s Board of Trustees. See

Trust Br. at 4-5 (“overall management of the Trust’s business is vested with its Board of Trustees

(the ‘Board’), and day-to-day operations of the Trust are delegated to its officers”). That Mr.

Velissaris allegedly was “managing and directing the actions of the [Alpha] Fund,” one fund, or

was “responsible for the day-to-day management of [that] Fund’s investment portfolio,” in no way

suggest that he was performing functions similar to those of the Trust’s actual directors. Velissaris

Opp. at 5; see, e.g., Compl. ¶ 61 (Prospectus stated that investment advisor was a “service

provider” to the Board). In any event, there is no allegation that Mr. Velissaris personally

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“consent[ed]” to being “named in the registration statement” as performing similar functions to

those of the Trust’s directors. 15 U.S.C. § 77k(a)(3); see infra at 6.

Plaintiffs are similarly incorrect to claim that Mr. Velissaris can be held liable as an expert

such as an “accountant, engineer, or appraiser,” or as a “person whose profession gives authority

to a statement made by him, who has with his consent been named as having prepared or certified

any report or valuation which is used in connection with the registration statement.” Velissaris

Opp. at 5-6 (quoting 15 U.S.C. § 77k(a)(4)); see IQCM Reply at 4-6; Lindell Reply at 7-9. Under

the Securities Act, experts are liable only for the part of the Registration Statement that expressly

“purports to have been prepared or certified by [them].” 15 U.S.C. § 77k(a)(4); see, e.g., Herman

& MacLean v. Huddleston, 459 U.S. 375, 381 n.11 (1983). 4 The Complaint, however, includes

no allegation whatsoever that Mr. Velissaris prepared or even had “authority” over any alleged

misstatements in the Registration Statements, much less personally “consent[ed]” to and was

thereby “named ... as having prepared or certified any report or valuation used in connection

with” such statements. Velissaris Opp. at 6 (quoting 15 U.S.C. § 77k(a)(4)); see 15 U.S.C.

§ 77g(a)(1) (requiring such written consent filed with the Registration Statement). To the contrary,

by signing on behalf of Infinity Q Commodity Fund, Ltd., and solely with respect to “information

that specifically relates to Infinity Q Commodity Fund, Ltd.,” Mr. Velissaris expressly disclaimed

any such certification here. See supra at 4-5.

As for IQME, Plaintiffs make no attempt to allege any facts indicating that IQME would

fall within the list of defendants potentially liable under Section 11. See Velissaris Opp. at 4-6.

Indeed, Plaintiffs make no argument that IQME ever signed the Registration Statements on its

4
See also, e.g., In re Global Crossing, Ltd. Sec. Litig., 322 F. Supp. 2d 319, 348 (S.D.N.Y. 2004);
Grimm v. Whitney-Fidalgo Seafoods, Inc., 1973 WL 495, at *2 (S.D.N.Y. Dec. 4, 1973).

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behalf or for another entity, and the Complaint pleads no facts demonstrating that IQME

“perform[ed] similar functions” to a director of the Trust, or was ever “named as having prepared

any report or valuation” used by the Trust in its Registration Statements. Id. (citing 15 U.S.C.

§ 77k(a)(2), (4)).

Finally, Plaintiffs’ Section 11 claims fail for the independent reason that Plaintiffs have not

“adequately allege[d] actionable misstatements and omissions” in the Trust’s Registration

Statements. Velissaris Opp. at 4; see Velissaris Br. at 8-9; Trust Br. at 10-18; Trust Reply at 2-8.

Contrary to Plaintiffs’ claims, the fact that the Fund suspended redemptions and liquidated assets

one or more years after the Trust issued the Registration Statements does not demonstrate that any

alleged misstatements were false when made. See Trust Reply at 2-3. The offering documents

fully disclosed that determining fair value for holdings such as swaps involved “reliance on

judgment” by IQCM, and its consideration, among other things, of “price quotations from an

approved pricing service; and [] other factors as necessary to determine a fair value under certain

circumstances.” NYSCEF No. 42 at SAI-20-21, 36. Plaintiffs have specifically alleged that their

claims do “not sound in fraud” and that Defendants did not act with “scienter or fraudulent intent”

(Compl. ¶ 89)—concessions that are inconsistent with the claim that Defendants “manipulated”

the Fund’s valuations. In re NovaGold Res. Inc. Sec. Litig., 629 F. Supp. 2d 272, 295 (S.D.N.Y.

2009) (holding that a complaint alleging negligence and disclaiming fraud could not allege actual

knowledge given “[d]efendants by definition could not have been acting with negligence if they

had actual knowledge that they were making false statements.”).

Simply pointing to a large loss and comparing it to historical NAV statements that Plaintiffs

believe were inaccurate because a loss later occurred—as Plaintiffs do here—is nothing more than

impermissible fraud-by-hindsight pleading. See, e.g., Charter Tp. of Clinton Police & Fire Ret.

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Sys. v. KKR Fin. Hldgs. LLC, 2010 WL 4642554, at *11 (S.D.N.Y. Nov. 17, 2010) (“plaintiffs are

not allowed to plead section 11 claims with the benefit of 20/20 hindsight,” and a Section 11 claim

“cannot be based on a ‘backward-looking assessment’ of the registration statement” (citations

omitted)).

II. The Complaint Also Fails to State a Claim Against the Velissaris Defendants Under
Section 15 of the Securities Act.

Plaintiffs’ attempts to hold the Velissaris Defendants secondarily liable under Section 15

are equally meritless. See Velissaris Br. at 8-11; see also IQCM Reply at 9-14.

First, Plaintiffs wrongly contend that Mr. Velissaris can be held vicariously liable as a

control person of the Trust because he “signed or authorized the signing” of the Trust’s

Registration Statements. See Velissaris Opp. at 7. Even assuming Plaintiffs pled a primary

liability claim against the Trust under the Securities Act, which they have not (see supra at 7-8), 5

Mr. Velissaris manifestly did not “sign” the prospectuses for the Trust—instead, unlike the Trust’s

various officers and trustees that signed the Registration Statements, Mr. Velissaris signed on

behalf of Infinity Q Commodity Fund Ltd., an entirely different entity from the Trust and the Alpha

Fund, and specifically only for statements relating to that entity. See supra Pt. I. Mr. Velissaris’s

signature in no way indicates control over the Trust. 6 See IQCM Reply at 11-13.

Nor can Mr. Velissaris be held secondarily liable for the Trust’s statements on the basis of

his status as director and officer of IQCM, which purportedly vested him with authority for

5
See also Trust Br. at 10-21; Trust Reply at 2-11; Velissaris Br. at 4; Matter of Netshoes Sec.
Litig., 64 Misc. 3d 926, 940 (Sup. Ct. N.Y. County 2019) (where plaintiffs fail to plead a primary
violation, their Section 15 claims “necessarily fail” too); Feinberg v. Marathon Patent Grp., Inc.,
193 A.D.3d 568, 571 (1st Dep’t 2021) (same).
6
Given the complete absence of non-conclusory factual allegations, no weight can be given to
Plaintiffs’ conclusory claim that Mr. Velissaris was “in a position to control and did control, the
inclusion of the false and incomplete statements and omissions.” Velissaris Opp. at 7; see
Connaughton v. Chipotle Mexican Grill, Inc., 29 N.Y.3d 137, 142 (2017).

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“choosing the Trust’s investments and handling its day-to-day” investment business. See

Velissaris Opp. at 7 (quoting Compl. ¶ 108). As previously explained (Velissaris Br. at 10-11), to

plead Section 11 liability, Plaintiffs must allege that Mr. Velissaris had “[a]ctual control over [the

Trust],” such that he was “actual[ly] involve[d] in [its]making of the fraudulent statements.’”

Emerson v. Mut. Fund Series Tr., 393 F. Supp. 3d 220, 260 (E.D.N.Y. 2019) (emphases added)

(quoting In re Refco, Inc. Sec. Litig., 503 F. Supp. 2d 611, 663 (S.D.N.Y. 2007)). Nothing about

Mr. Velissaris’s alleged role at IQCM, an investment advisor for one of the Trust’s funds, indicates

control over the Trust’s alleged public statements in its securities filings. See, e.g., Youngers v.

Virtus Inv. Partners Inc., 195 F. Supp. 3d 499, 524-25 (S.D.N.Y. 2016) (explaining that “the

‘matter[] at issue is the misstatements contained in the registration statement . . . , not the adoption

of the [investment] strategy,” and that “boilerplate allegations that a party controlled another based

on officer or director status” as an investment advisor are insufficient); Emerson, 393 F. Supp. 3d

at 260 (“The fact that [an investment advisor] managed the Fund’s strategy, without more .. .

merely constitutes a boilerplate statement of control status”). That is particularly true here, where

the Trust’s own Board of Trustees and principal officers—not IQCM—controlled the Trust’s

Registration Statements. See NYSCEF No. 42 at C-6; IQCM Br. at 19-20 n.11; IQCM Reply at

12-13; Lindell Reply at 9-12. Indeed, the Prospectus disclosed that IQCM was merely a “service

provider.” It was the Board that performed the Trust’s oversight functions. See Compl. ¶ 61.

Plaintiffs’ Section 15 claim against IQME likewise fails. Plaintiffs’ sole allegation against

IQME, as their brief confirms, is that IQME “owns more than 25% of” IQCM—the Trust’s

investment advisor. Compl. ¶ 44. As an initial matter, IQCM has not been plausibly alleged to

have violated the Securities Act, and absent a primary violation, Plaintiffs’ allegations as to IQME

fail as a matter of law. See IQCM Br. at 6-18; IQCM Reply at 1-9; see also, e.g.,

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Netshoes Sec. Litig., 64 Misc. 3d at 940. In any event, Plaintiffs ignore that conclusory allegations

of shareholder status—such as those alleged here—are simply insufficient to plausibly allege

actual control over another entity’s alleged statements for purposes the Securities Act. 7 See

Velissaris Br. at 10; see also, e.g., In re Weight Watchers Int’l Inc. Sec. Litig., 504 F. Supp. 3d

224, 263-65 (S.D.N.Y. 2020) (46% ownership insufficient); IQCM Reply at 13-14.

Plaintiffs alternatively point to irrelevant language from the Trust’s Prospectus that

supposedly “confirms that IQME is a control person of [IQCM].” Velissaris Opp. at 8 (quoting

NYSCEF No. 42 at 28 (IQME “own[s] more than 25% of the Advisor and . . . is therefore a control

person of the Advisor”)). But the Trust’s Prospectus defines a “control person” as “one who owns

beneficially or through controlled companies more than 25% of the voting securities” (NYSCEF

No. 42 at 27), which is not a correct statement of the law governing Section 15 claims under the

Securities Act. See, e.g., Weight Watchers, 504 F. Supp. 3d at 263-65. Whatever the Trust’s

statements about IQME may say, if anything, about that entity’s control of an investment advisor

under different regulatory regimes, 8 that language has no bearing on whether this Court should

conclude that Plaintiffs have sufficiently pled control-person liability as to IQME under Section

15 of the Securities Act. Plaintiffs have failed to do so here.

7
Plaintiffs’ principal authority to the contrary involved far more concrete allegations and
circumstances wholly unlike those at issue here. There, a CEO was “specifically alleg[d] to have
“prepared and approved” the registration statement and used shell entities as conduits in the
process. Refco, 503 F. Supp. 2d at 638. See, e.g., Lead Pls.’ Mem. of Law, In re Refco, Inc. Sec.
Litig., No. 05 Civ. 8626, Dkt. 67, 2006 WL 3097010 (filed Sept. 15, 2006) (defendants, which
together owned approximately 43% of the controlled entity, were allegedly used “as the vehicles
through which [CEO] exercised his undisputed control”); Refco, 503 F. Supp. 2d at 661
(controlling entities were allegedly “shell entities” through which the fraudster exercised his own
control).
8
See, e.g., NYSCEF No. 42 (Registration Statement filed under the Securities Act and
Investment Company Act); 15 U.S.C. § 80a-2 (Investment Company Act defines “[c]ontrol” to
presume that “[a]ny person who owns, beneficially, either directly or through one or more
controlled companies, more than 25[%] of the voting securities of a company”).

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* * *

Plaintiffs’ theory of liability against the Velissaris Defendants centers solely around their

claims that Mr. Velissaris was the “Chief Investment Officer of [IQCM],” that IQME “had a 25%

ownership interest” in IQCM, and that Mr. Velissaris played a role that affected the Fund’s

valuations. See Velissaris Opp. at 1. But even if those facts were assumed true, they say nothing

about whether either Velissaris Defendant can be held liable for other Defendants’ alleged

statements in the Trust’s Registration Statements pursuant to Sections 11 or 15 of the Securities

Act. The Court should deny the claims against them with prejudice. See Hornstein v. Wolf, 67

N.Y.2d 721, 722 (1986) (denial of leave to replead proper where “the record viewed as a whole

indicates that plaintiff cannot plead a sound cause of action”); Fischbein v. Beitzel, 281 A.D.2d

167, 167 (1st Dep’t 2001) (upholding denial of leave to replead because “the record does not

indicate the existence of a viable claim by plaintiff” against the defendants).

CONCLUSION

The Court should grant the Velissaris Defendants’ motion and dismiss the causes of

action against them with prejudice.

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Dated: New York, New York
September 14, 2021
Respectfully submitted,

GIBSON, DUNN & CRUTCHER LLP

By: /s/ Robert F. Serio
Robert F. Serio
Reed M. Brodsky
Karin Portlock
Seth M. Rokosky
Lauren Myers
200 Park Avenue
New York, NY 10166
Telephone: (212) 351-4000
RSerio@gibsondunn.com
RBrodsky@gibsondunn.com
KPortlock@gibsondunn.com
SRokosky@gibsondunn.com
LMyers@gibsondunn.com

Attorneys for Defendants James Velissaris and Infinity
Q Management Equity, LLC

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FILED: NEW YORK COUNTY CLERK 09/14/2021 11:29 PM INDEX NO. 651295/2021
NYSCEF DOC. NO. 127 RECEIVED NYSCEF: 09/14/2021

CERTIFICATE OF COMPLIANCE WITH COMMERCIAL DIVISION RULE 17

I, Robert F. Serio, an attorney duly admitted to practice law before the courts of the State of

New York, hereby certify that this memorandum of law in support of Defendants’ motion to dismiss

complies with the word count limit set forth in Rule 17 of the Commercial Division of the Supreme

Court (22 NYCRR § 202.70(g)), because it contains 3,621 words, excluding the parts of the

memorandum exempted by Rule 17. In preparing this certification, I have relied on the word count of

the word-processing system used to prepare this memorandum of law.

Dated: New York, New York /s/ Robert F. Serio
September 14, 2021 Robert F. Serio

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Andrew Borrok Track Judge’s New Case

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Document Filed Date

September 14, 2021

Case Filing Date

February 24, 2021

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Parties

APPS, ANTONIA MARIE Attorney for the Defendant
CABIN, MICHAEL ALEXANDER Attorney for the Defendant
CALLAHAN, VERONICA ELLEN Attorney for the Defendant
CANELLOS, GEORGE SPEARE Attorney for the Defendant
Charles Sherck Non Party
COSTER, JAMES J Attorney for the Defendant
David Rosenstein Non Party
DICICCO, SUSAN FELICE Attorney for the Defendant
DUNN, JOSHUA ALAN Attorney
FINK, TYLER JAIRUS Attorney for the Defendant
Floren, Joseph E Attorney for the Defendant
GOLDFARB, JAMES K Attorney for the Defendant
In re INFINITY Q DIVERSIFIED ALPHA FUND SECURITIES LITIGATION Plaintiff
KARAM, CHRISTINA MARIE Attorney for the Defendant
KIM, PHILLIP Attorneys for Plaintiffs
KIM, PHILLIP Attorney for the Plaintiff
KLEIN, JOSH Attorney for the Defendant
LADD, MATTHEW REES Attorney for the Defendant
LAUGHLIN, THOMAS LIVEZEY Attorney for the Plaintiff
MATHESON, CAMERON SCOTT Attorney for the Defendant
MORGAN, BRIAN PATRICK Attorney for the Defendant
MORRIS, AARON THOMAS Attorney
MURPHY, SEAN M Attorney for the Defendant
OH, JENNIFER JIWON Attorney for the Defendant
REILLY, KATHLEEN ANNE Attorney for the Defendant
ROBBINS GELLER RUDMAN & DOWD LLP Attorney for the Plaintiff
SCOTT+SCOTT ATTORNEYS AT LAW LLP Attorney for the Plaintiff
The Rosen Law Firm Attorney for the Plaintiff
U.S. Bancorp Fund Services, LLC Non Party
XXX Defendant
MICHAEL COHEN Attorneys for Plaintiffs
LAURENCE ROSEN Attorneys for Plaintiffs
MARTIN COHEN Attorneys for Plaintiffs
WILLIAM CONNORS Attorney
SAMUEL RUDMAN Attorney
LAUREN MCCABE Attorneys for Plaintiffs
JOSEPH FOX Attorney
CHRISTOPHER MENCONI Attorney
IVAN HARRIS Attorney
ALEXANDER WILLSCHER Attorney
FREDERICK WERTHEIM Attorney
ROBERT MEYERSON Attorney
ERIC PINCISS Attorney
WILLIAM COONEY Attorney
DAVID WALLACE Attorney
ANDREW ROBERTSON Attorney
BRIAN COCHRAN Attorneys for Plaintiffs
JACOB LIEBERMAN Attorneys for Plaintiffs
BRYANT ANTHONY Attorneys for Defendants
KEITH GOLDFARB Attorneys for Defendants
ANDREW CALAMARI Attorney
GLENN MCGILLIVRAY Attorneys for Plaintiffs
ALICE MEYER Attorney
KAREN GOLDFARB Attorneys for Defendants

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Motion,Ex Parte: In Re Infinity Q Diversified Alpha Fund Securities Litigation v. Xxx

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