Sudden Demise of $1.8 Billion Fund Points to Long-Feared Danger

An early sign of trouble for James Velissaris’s complex mutual fund emerged in the waning days of a chaotic year.

Investors in his $1.8 billion fund at Infinity Q Capital Management received a message in December that it would stop accepting new money at month’s end. Customers would be notified as soon as it re-opened.

That day never came. The short advisory belied the turmoil still coming for the Infinity Q Diversified Alpha Fund and its founder. This week the firm shut the fund and relieved Velissaris of his duties after federal regulators raised concerns that he may have ...