Fund Valuation and NAV Fraud: The Manager Could Edit the Independent Price

In fund valuation and NAV fraud, a manager manipulates asset prices to inflate reported value, performance or fees. The number can come straight from a pricing service while the manager controls the assumptions behind it. If you work with trade confirmations, pricing models or fund accounting, you may know where the published value stopped matching the investment.

This page follows asset prices into net asset value, fees and investor transactions. Our page on false performance reports and backtests follows the figures used to sell an investment strategy. Here, the question starts earlier: what did the valuation system actually price?

How Does an Asset Price Become NAV?

A mutual fund’s per-share net asset value is its assets minus its liabilities, expressed per share. The Securities and Exchange Commission’s Infinity Q complaint explains how that value determines the price at which investors buy or redeem mutual fund shares. An inflated asset price therefore reaches the investor’s transaction as well as the performance report.

Infinity Q Capital Management advised a mutual fund and a private hedge fund. According to the complaint, many of their privately negotiated derivatives lacked readily available market prices. The mutual fund still needed daily valuations, while the private fund needed valuations at least monthly for its profit and loss report. The value at the end of a contract could be settled between the parties, but the funds needed a number before then.

The administrator obtained values directly from the pricing service and used them to calculate the mutual fund’s daily NAV and the private fund’s monthly results. The SEC alleged that Infinity Q’s founder and former chief investment officer manipulated the models generating those values. The download came from outside the firm. The choices behind it came from inside.

Which Pricing Inputs Did the SEC Say Were Manipulated?

The Securities and Exchange Commission’s civil complaint against the former chief investment officer alleged changed model code, false transaction inputs, unsuitable models and selectively chosen volatility assumptions. Each method changed the price before it reached the fund’s accounts.

A Contractual Limit Disappeared in the Code

A corridor variance swap counts movements in an underlying index only while that index stays within agreed boundaries. According to the complaint, the manager changed code so that a position accrued variance when the index was above the lower boundary or below the upper boundary, replacing the requirement that both conditions hold. That effectively removed the corridor.

The SEC said its staff restored the original condition and calculated an approximately $5 million reduction in the position’s value. It also alleged that edits to the underlying code did not automatically appear in the pricing system’s visible input fields. A screenshot could display the agreed terms while the calculation used different ones.

The Model and the Market Snapshot Were Choices Too

Selecting the wrong model could remove the same contractual limit. The SEC alleged that the manager sometimes priced corridor swaps with a model for swaps that had no corridor. It also alleged that he kept using editable custom models after the pricing service directed him toward newer standard models whose code he could not edit.

The pricing service also offered different snapshots of market data used to estimate future volatility. According to the complaint, the manager selected inconsistent snapshots for comparable positions depending on whether the fund held the long or short side, inflating the funds’ value. The service supplied the menu. The manager chose the answer.

What Happened to the Independent Checks?

Infinity Q’s stated valuation policy called for comparisons with counterparties’ prices and a common price across funds holding the same security. The SEC alleged that the manager departed from those policies, received warnings about large differences from counterparty marks and later changed the policy documents supplied to investigators.

The complaint also describes an audit test that the manager allegedly turned back on itself. After the auditor selected a swap for independent valuation, he changed the contract’s lower boundary in its term sheet and instructed others to replace the original document in the auditor’s portal. The valuation expert then used that altered document and reached a value close to Infinity Q’s.

According to the SEC, the fund reported that position at more than $22 million. A later valuation using the actual term sheet put it at $4.569 million as of the same valuation date. Its realized value when the swap settled in December 2020 was approximately $4 million. We see independence on the manager’s terms.

The SEC alleged another replacement of an original term sheet during the private fund’s audit. When the auditor noticed that files had been deleted and replaced, the manager replied:

The complaint says the replacement was a forged term sheet designed to conceal the code change. It separately alleges that the manager drafted and backdated valuation-committee minutes for meetings that had never occurred. Someone who saw the original document, the upload history or the actual committee activity could explain what the completed review package concealed.

How Did Inflated Values Affect Fees and Redemptions?

Inflated values increased the assets used to calculate management fees and the reported performance behind performance fees, according to the SEC’s complaint. It alleged more than $1 billion in combined overvaluation across the funds by September 2020. The same allegedly false performance helped attract new subscriptions and kept investors from redeeming.

The complaint traces the money beyond the published valuations. It says profits from excessive management and performance fees reached Infinity Q Management Equity, the adviser’s majority owner, which received more than $31.5 million in profit distributions from 2019 through February 2021. Of that amount, the former chief investment officer received at least $26.9 million.

Redemption calculations carried the valuation problem to investors leaving the mutual fund. The complaint recounts the Securities and Exchange Commission’s approval of a suspension of mutual fund redemptions in February 2021. Infinity Q had told the fund it could not verify that the swap values reflected fair value or calculate accurate replacements in time for NAV.

What Evidence Is Needed for Fund Valuation Whistleblowing?

Useful valuation evidence connects the actual investment to the price reported, the people who could change it and the money calculated from it. Our work on securities fraud evidence starts with those comparisons. An insider’s knowledge can explain why records that look consistent on their face describe different transactions.

The Infinity Q complaint identifies both pricing-service audit logs and the auditor’s portal history. Those records connected changes to positions and documents with the people making them. Our page on reading SEC allegations and findings explains how the documents distinguish allegations from findings. We work with you to connect your role in that process to what the documents can show, whether you saw a changed input, a disputed mark or a replacement confirmation.

What Can a Fund Insider Add to an SEC Action?

A fund insider can supply the connection between a published value and the choices that produced it. That connection may sit across departments: the code change in one place, the confirmation in another and the fee calculation somewhere else. Your explanation of what happened can make those records intelligible together.

A broader fraud-detection study, The Significance of Whistleblowing as an Anti-Fraud Measure, published in the Journal of Forensic & Investigative Accounting in 2018, examined 4,943 occupational frauds with complete data. It found whistleblowing identified 35.9% of them, compared with 21.4% through internal controls.

An SEC award order from August 2025 shows the value of connecting fragments. It describes a principal restricting financial information so individual employees lacked the full picture. Whistleblowers combined their knowledge, interviews and documents to reveal investment-project misrepresentations. We bring that same attention to the connections between a fund’s pricing records and what its investors were told.

Eligible SEC whistleblowers can receive 10% to 30% of qualifying monetary sanctions collected. Our SEC award page explains that program’s financial incentive. Separately, a whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. We guide you through the whistleblower process with the program and securities fraud whistleblower lawyers your evidence calls for.

You Know How the Fund Chose That Price

If you saw a valuation override, a rewritten confirmation or a fee calculated from a price the fund could not support, speak with our whistleblower experts about the number and the decision behind it. We work with you to build your strongest securities whistleblower case around the original terms, the changed price and the money it moved. We bring in securities fraud whistleblower lawyers who understand fund pricing and remain your partners through the case.