A Participations Ltd. v Velissaris 2026 NY Slip Op 30684(U) February 24, 2026 Supreme Court, New York County Docket Number: Index No. 652720/2023 Judge: Melissa A. Crane Cases posted with a "30000" identifier, i.e., 2013 NY Slip Op 30001(U), are republished from various New York State and local government sources, including the New York State Unified Court System's eCourts Service. This opinion is uncorrected and not selected for official publication.
file:///LRB-ALB-FS1/Vol1/ecourts/Process/covers/NYSUP.6527202023.NEW_YORK.005.LBLX038_TO.html[03/09/2026 3:45:57 PM] FILED: NEW YORK COUNTY CLERK 02/24/2026 04:36 PM INDEX NO. 652720/2023 NYSCEF DOC. NO. 573 RECEIVED NYSCEF: 02/24/2026
SUPREME COURT OF THE STATE OF NEW YORK NEW YORK COUNTY PRESENT: HON. MELISSA A. CRANE PART 60M Justice ---------------------------------------------------------------------------------X INDEX NO. 652720/2023 A PARTICIPATIONS LTD., AMITELL MASTER FUND, AQUIS CAPITAL AG, AUGESCO HOLDINGS, CARL MOTION DATE N/A FRIEDRICH MARINO GUMPERT, CRESCENDO CAPITAL SA, DAIWA HOUSE INDUSTRY PENSION FUND, MOTION SEQ. NO. 031 FRANCOIS DEKKER, GIOVE S.R.L., JAMES T. SHERWIN, JAPAN MEDICAL SUPPORT CO., LTD, KATSUSHI NAKAYAMA, KIYOKAZU KANNO, KEIKO KANNO, LIGHTVC, LTD., MAXYM ENTIN, MONTSOL ANSTALT, MUFG ALTERNATIVE FUND SERVICES (CAYMAN) LIMITED REF EQUATOR INVESTMENTS LIMITED, OPUS CHARTERED ISSUANCE S.A. COMPARTMENT 127, REINBERGER FOUNDATION, SHADOWBOLTS LIMITED, STEINFREUND57 S.A., SICAV-RAIF - GLOBAL HEDGEFUNDS, TEXAS TECH UNIVERSITY SYSTEM, TOTUS HOLDINGS, 2010 REVOCABLE GST GARY L. PILGRIM, ABRAHAM JOSHUA HESCHEL SCHOOL, AEJ CAPITAL, LLC,ANDREW SCHWERIN, BONNIE SCHWERIN, ATLAS GLOBAL FUND, BELMONTI FAMILY REVOCABLE TRUST & MARGARET M. BELMONTI REVOCABLE TRUST HELD AS TENANTS IN COMMON, BRIAN N. KAUFMAN REVOCABLE TRUST U/T/A 02/13/13, BRITTON FUND, BYRON S. KRANTZ REVOCABLE TRUST, CAROL A. BUEKER REVOCABLE TRUST U/A 12/12/95, MELDRUM FAMILY, LLC,COBALT ABSOLUTE, LLC,DAVID A. COHEN DECLARATION OF TRUST, DAVID A. HORN TR UW FBO CAROLYN, DAVID A. HORN TR UW DECISION + ORDER ON FBO HELEN, DAVID N. SCAIFE 2020 REVOCABLE MOTION TRUST, DRAKE LEONARD II LLC,DJI 2006 FUND, EARL H. DEVANNY, III REVOCABLE TRUST U/A DTD 4/2/2001, ELLIOT SIGAL, RUTH SIGAL, FFI 2011 FUND, FLINT HILLS DIVERSIFIED STRATEGIES, LP, FRANK C. SULLIVAN II DECLARATION OF TRUST, FRANK H. PORTER JR. DECLARATION OF TRUST, GARY L. PILGRIM 2010 IRREVOCABLE TRUST, GARY L. PILGRIM 2013 DELAWARE TRUST, GARY L. PILGRIM GST TR U/D 6/4/98, GO4G BEST IDEAS, LLC,GOHEELS, LLC,GREENLEAF TRUST, HARVEY L. KAPLAN TRUST, HUMMEL PARTNERS LP, IRENE B. NEWMAN REVOCABLE TRUST, IRIS ABSOLUTE, LLC,JASON M. KUHN REVOCABLE TRUST, JEFFREY BELMONTI REVOCABLE TRUST, JOHN D. STARR REVOCABLE TRUST U/A DTD 11/10/93, JOHN R. GRISSINGER LIVING TRUST U/A 4/7/11, KAPLAN 2020 FUND, KENDOR II LLC,KEVIN M. ANDERSON 2017 UPN IRREVOCABLE TRUST U/A DTD 3/21/2017, LAUREN N. RAINEN, LIBERTY SPECIAL STRATEGIES FUND LLC,MARIE GENSHAFT, MARGARET J. ANDERSON REVOCABLE
652720/2023 A PARTICIPATIONS LTD. ET AL vs. INFINITY Q CAPITAL MANAGEMENT LLC ET Page 1 of 14 AL Motion No. 031
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TRUST U/A DTD 7/22/1999, MARK DAVID 1994 PERSONAL IRREVOCABLE TRUST, MARK H SONNENBERG, SUSAN L SONNENBERG, MATTHEW N. KRISER REVOCABLE TRUST, MCSR MASTER FUND, L.P., MICHAEL J. HAGAN, MICHAEL J. RAINEN REVOCABLE TRUST U/A/ DTD 5/4/1990, MICHAEL J. SELVERIAN, NEIL GENSHAFT REVOCABLE TRUST, PAUL L. GOLDBERG DECLARATION OF TRUST, PFLP INVESTMENTS, LLC,RICHARD B. KLEIN REVOCABLE TRUST U/A/DTD 6/8/1993, REVOCABLE TRUSTY AGREEMENT OF JULIETTE B. FREEMAN, REGE S. EISAMAN, ROBERT A. BERNSTEIN REVOCABLE TRUST U/A DTD 7/8/1997, AS AMENDED, RUTH E. PILGRIM REV. GST TR 9/22/10, SECOND AMENDED AND RESTATED AGREEMENT OF TRUST FOR LAWRENCE S. CONNOR DATED MAY 2, 2016, SECULAR GROWTH INVESTORS, LP, SIGAL FAMILY INVESTMENTS, LLC,SIMBA INVESTMENTS, LLC,SNYDER RESOURCE MANAGEMENT L.P., STATE TEACHERS RETIREMENT SYSTEM OF OHIO, STEVEN B. SHAFFER TRUST U/A 8/25/2003, THE 2009 JOHN N. MCCONNELL III GIFT TRUST, THE 2020 MARK FISHMAN TRUST PREVIOUSLY THE 2009 MARK FISHMAN TRUST, THE LEONARD G. HERRING FAMILY FOUNDATION, INC.,THOMAS E. LAUERMAN REVOCABLE TRUST U/A DTD 10/30/2000, AS AMENDED, TUTERA GROUP, INC.,VIOLET A. CARSON RESTATED 2004 REVOCABLE TRUST, VERGER CAPITAL FUND, LLC,WA ABSOLUTE RETURN HEDGE FUND LLC,WALLIS ANNENBERG LIVING TRUST, WEINERG FAMILY LP,
Plaintiff,
-v- JAMES VELISSARIS, INFINITY Q CAPITAL MANAGEMENT LLC,SCOTT LINDELL, LEONARD POTTER, INFINITY Q MANAGEMENT EQUITY, LLC,WILDCAT PARTNER HOLDINGS, LP, WILDCAT CAPITAL MANAGEMENT, LLC,EISNERAMPER LLP, EISNERAMPER US (CAYMAN) LTD., U.S. BANCORP FUND SERVICES LLC,U.S. BANCORP FUND SERVICES, LTD.,
Defendant. ---------------------------------------------------------------------------------X
The following e-filed documents, listed by NYSCEF document number (Motion 031) 444, 445, 446, 447, 448, 449, 467, 468, 469, 503, 540 were read on this motion to/for DISMISS .
652720/2023 A PARTICIPATIONS LTD. ET AL vs. INFINITY Q CAPITAL MANAGEMENT LLC ET Page 2 of 14 AL Motion No. 031
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In motion sequence no. 031, defendant Infinity Q Capital Management LLC (IQCM)
moves, pursuant to CPLR 3211 (a) (3) & (7) and 3016 (b) to dismiss plaintiffs' second amended
complaint (the SAC). For the reasons set forth below, the motion is granted and the SAC is
dismissed against IQCM.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
For a full recitation of the facts and the relevant procedural history in this action, the
court refers to its prior decisions and orders, in particular the decision and order for motion 30,
with which familiarity is presumed. Additional facts are drawn from the SAC unless noted
otherwise and are assumed to be true for purposes of this motion.
Briefly, this action arises out of the collapse of Infinity Q Volatility Alpha Fund (the
Hedge Fund), that was comprised of Infinity Q Volatility Alpha Fund, L.P., a master fund
organized as a Delaware limited partnership, and Infinity Q Volatility Alpha Offshore Fund,
Ltd., a feeder fund organized as a Cayman Islands exempt company (NY St Cts Elec Filing
[NYSCEF] Doc No. 368, SAC at 1 n 1; NYSCEF Doc No. 428, Karam affirmation, exhibit E at
1).
Defendants James Velissaris (Velissaris) and Leonard Potter (Potter) co-founded
defendant IQCM, the Hedge Fund’s general partner and investment advisor responsible for its
day-to-day management (SAC, ¶¶ 130 and 134-135). Defendant Infinity Q Management Equity,
LLC (IQME) and BFLP, nonparty David Bonderman’s (Bonderman) family partnership, own
60% and 40%, respectively, of IQCM (id., ¶¶ 131-132 and 142). Velissaris and defendant Scott
Lindell (Lindell), together, own IQME (id., ¶ 131). Velissaris served as IQCM's Chief
Investment Officer (CIO) and had been employed by Wildcat as a portfolio manager from “2012
through at least 2018” (id., ¶¶ 134 and 140). Lindell acted as IQCM’s Chief Risk Officer, Chief
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Compliance Officer, and Head of Portfolio Services while simultaneously serving as Wildcat’s
Head of Risk Management (id., ¶ 136). Potter acted as IQCM’s Chief Executive Officer while
simultaneously serving as Wildcat's President and CIO (id., ¶¶ 13 and 135). Defendants U.S.
Bancorp Fund Services, Ltd. and U.S. Bancorp Fund Services LLC (together, USB) served as the
Hedge Fund’s administrator charged with calculating the Hedge Fund’s net asset value (NAV)
and preparing monthly account statements for investors (id., ¶¶ 7, 138 and 214). Defendants
EisnerAmper, LLP and EisnerAmper US (Cayman) Ltd. (together, EisnerAmper) acted as the
Hedge Fund’s outside auditor and issued Form K-1 tax statements to investors (id., ¶¶ 9 and
137).
The Hedge Fund invested in the same over-the-counter (OTC Derivatives) strategies as
the Infinity Q Diversified Alpha Fund (the Mutual Fund), a pooled investment vehicle that
IQCM had launched three years earlier (id., ¶¶ 143 and 146). IQCM categorized the majority of
the Hedge Fund’s OTC Derivatives as Level 3 assets (id., ¶ 151). “Level 3 assets have no
observable inputs (e.g., market prices or models), may require some measure of estimation based
on management assumptions, and are valued based on the best available information” (id.).
According to IQCM’s due diligence questionnaire, “[t]he primary source of pricing information
typically will be independent sources, such as brokers or pricing services, but Infinity Q’s
Valuation Committee is ultimately responsible for determining fair value for investments held by
each client” (NYSCEF Doc No. 453, Crossland affirmation, exhibit Aat 7; SAC, ¶ 154).
After conducting pre-investment due diligence on the Hedge Fund and IQCM, plaintiffs
executed subscription agreements with the Hedge Fund and collectively invested more than $380
million dollars between July 2018 and February 2021 (SAC, ¶¶ 1, 14 and 30-129).
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The Hedge Fund collapsed in February 2021 after the Securities and Exchange
Commission (SEC) discovered that Velissaris had been manipulating and inflating the value of
the Hedge Fund’s OTC Derivatives, thereby inflating the Hedge Fund’s overall value (id., ¶¶ 4-
5, 177 and at 4 n 3). Velissaris pled guilty to securities fraud and was sentenced to 15 years in
prison (id., ¶¶ 188 and 190; United States v Velissaris, 2023 WL2875487, *1 and 11, 2023 US
Dist LEXIS 62740, *1 and 30 [SD NY, Apr. 10, 2023, No. 22crl05 (DLC)], affd 2024
WL4502201, 2024 US App LEXIS 26034 [2d Cir, Oct. 16, 2024]). IQCM, BFLP, and Lindell
entered into separate consent judgments with the SEC1 (SAC, ¶¶ 191-192). Three class actions
related to IQCM’s collapse brought in Supreme Court, New York County, and the United States
District Court for the Southern District of New York have settled2 (id. at 44 n 11).
Plaintiffs subsequently commenced this action seeking “to recover the difference between
the amount that each Plaintiff overpaid for their limited partnership interests in the Hedge Fund
as of the date of their investments due to IQCM's overvaluations, as well as damages for
payment of taxes on illusory income” (id., ¶ 14). As against IQCM, the SAC pleads
fraud/fraudulent inducement as a nineteenth cause of action.
IQCM now moves to dismiss the SAC. Plaintiffs oppose.
DISCUSSION
“On a motion to dismiss for failure to state a claim under CPLR 3211 (a) (7), the Court
affords the pleading 'a liberal construction' and must ‘accept the facts as alleged ... as true, accord
[the nonmoving party] the benefit of every possible favorable inference, and determine only
whether the facts as alleged fit within any cognizable legal theory’” (Taxi Tours Inc. v Go N.Y
1 The SEC did not allege a mismarking fraud against Lindell, and Lindell made “no admissions in connection with” his settlement with the SEC (NYSCEF Doc No. 565 at 153-156). 2 Plaintiffs opted out of the class action settlement reached in Matter of Infinity Q Diversified Alpha Fund Sec. Litig., Sup Ct, NY County, index No. 651295/2021. 652720/2023 A PARTICIPATIONS LTD. ET AL vs. INFINITY Q CAPITAL MANAGEMENT LLC ET Page 5 of 14 AL Motion No. 031
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Tours, Inc., 41 NY3d 991, 993 [2024] [internal citation omitted]; see also Guggenheimer v
Ginzburg, 43 NY2d268, 275 [1977] [“the sole criterion is whether the pleading states a cause of
action, and if from its four corners factual allegations are discerned which taken together
manifest any cause of action cognizable at law”]).
A. Standing - Direct vs. Derivative
IQCM first moves to dismiss the SAC on the ground that plaintiffs lack standing to sue
because their claims are derivative (see NYSCEF Doc No. 445 at 2-16). On a pre-answer motion
to dismiss brought under CPLR 3211 (a) (3), the defendant bears the burden of demonstrating
that the plaintiff lacks standing to sue (Homelink Intl., Inc. v Law Offs. of Sanjay Chaubey, -
AD3d -, 2025 NY Slip Op. 05460, *1 [1st Dept 2025]). The court has already considered and
rejected this argument in the decision that disposed of the motion brought by BFLP, Wildcat and
Potter (see NYSCEF Doc No. 567, Decision and Order resolving MS #030, same index number).
Because plaintiffs’ fraud claim is direct by nature, rather than derivative, the court denies so
much of IQCM’s motion to dismiss the nineteenth cause of action in the SAC for lack of
standing (see NYSCEF Doc No. 567, Decision and Order resolving MS #030, same index
number).
B. Fraud/Fraudulent Inducement
IQCM next moves to dismiss the SAC on the ground that it fails to state a claim for
fraud/fraudulent inducement. A cause of action for fraud requires the plaintiff to plead “a
misrepresentation or a material omission of fact which was false and known to be false by [the]
defendant, made for the purpose of inducing the other party to rely upon it, justifiable reliance of
the other party on the misrepresentation or material omission, and injury” (Pasternack v
Laboratory Corp. of Am. Holdings, 27 NY3d817, 827 [2016] [internal quotation marks and
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citations omitted]; Underwood v Urban Homesteading Assistance (U-HAB), Inc., 191 AD3d550,
551 [1st Dept 2021] [discussing fraudulent inducement]). Because a cause of action for fraud
must be pled with particularity (CPLR 3016 [b]), the complaint must contain “specific facts with
respect to the time, place, or manner of this purported misrepresentation” (CMB Export
Infrastructure Inv. Group 48, LP v Motcomb Estates, Ltd., 223 AD3d513, 514 [1st Dept 2024];
Orange Orch. Props. LLCv Gentry Unlimited, Inc., 191 AD3d609, 609 [1st Dept 2021] [same];
Hamrick v Schain Leifer Guralnick, 146 AD3d606, 607 [1st Dept 2017] [same]). Statements
made upon information and belief are insufficient (see Facebook, Inc. v DLA Piper LLP (US),
134 AD3d610, 615 [1st Dept 2015], lv denied 28 NY3d903 [2016]). That said, a plaintiff need
not present “unassailable proof of fraud" so long as "the facts are sufficient to permit a
reasonable inference of the alleged conduct” (Pludeman v Northern Leasing Sys., Inc., 10
NY3d486, 492 [2008]). In addition, “[i]n actions for fraud, corporate officers and directors
maybe held individually liable if they participated in or had knowledge of the fraud, even if they
did not stand to gain personally” (Polonetsky v Better Homes Depot, Inc., 97 NY2d46, 55
[2001]).
Here, IQCM raises the same three objections to plaintiffs’ fraud/fraudulent inducement
claim against it that co-defendant Scott Lindell (Lindell) raised in his own motion to dismiss
plaintiffs’ fraud/fraudulent inducement claim against him (SAC cause of action ten; see
NYSCEF Doc No 406, ¶¶ 598-605). These include the arguments that: (1) the SAC fails to
comply with the heightened pleading standard in CPLR 3016 (b) as it fails to identify the specific
misrepresentations that IQCM officers are alleged to have made or to specify the times, places
and manner in which they are alleged to have made them but, instead sets forth impermissible
“group pleading” allegations; (2) the SAC fails to adequately plead scienter; and (3) plaintiffs
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disclaimed any reliance on alleged misrepresentations contained in certain “offering documents”
in the subscription agreement they executed with IQCM. The court passed on those arguments
in its decision disposing of Lindell’s dismissal motion (see NYSCEF Doc No 568, MS #029) and
reiterates its findings here.
Firstly, plaintiffs have not pled facts implicating IQCM’s participation in the purported
fraudulent scheme with the requisite particularity that CPLR 3016 (b) requires. The SAC fails to
plead the particular misrepresentations IQCM’s officers allegedly made about the Hedge Fund’s
performance, governance, connection with Wildcat, assets, and Level 3 Valuation Procedures.
Contrary to plaintiffs’ contention, plaintiffs should be in possession of those facts and therefore,
they could have included those details in the SAC.
With the exception of two plaintiffs (Mark H. Sonnenberg and Susan L. Sonnenberg), the
102 plaintiffs or their advisors,3 generally, allege that they held telephone calls, conferences and
in-person meetings and had written exchanges with IQCM “personnel,” including (without
differentiation) Lindell, Velissaris, Potter, Shawn Rowatt (Rowatt), and Scott Griffith (both
IQCM investor relations managers; SAC, ¶¶ 396, 409, 413, 417, 421, 424, 428, 432, 436, 440,
444, 448, 451-452, 456, 460, 462, 466-467, 471, 475, 478, 481, 486, 490-491, 495, 499, 503, 506
and 508). Eighty-six plaintiffs allege that IQCM “represented,” “corroborated,” “always
represented” or “always described that the marketing materials depicted the Hedge Fund's
valuation procedures (id., ¶¶ 409, 413, 417, 424, 436, 440, 444, 451, 456, 460, 466, 471, 475,
481, 486, 490 and 499). Absent from the SAC, however, are any specific misrepresentation
attributed to these IQCM officers or any particular details as to when, how and to whom they
might have made them (see CMB Export Infrastructure Inv. Group 48, LP, 223 AD3d at 514
3 Several plaintiffs had retained advisors in connection with their investments in the Hedge Fund (SAC, ¶¶ 412, 416, 427, 431, 435, 439, 443, 455, 459, 465, 477, 494, 498 and 502). 652720/2023 A PARTICIPATIONS LTD. ET AL vs. INFINITY Q CAPITAL MANAGEMENT LLC ET Page 8 of 14 AL Motion No. 031
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[dismissing fraudulent inducement claim where the “[p]laintiff ... did not allege any specific facts
with respect to the time, place, or manner of this purported misrepresentation”]; INTL FCStone
Mkts., LLC v Corrib Oil Co. Ltd., 172 AD3d492, 493 [1st Dept 2019] [“[t]he allegations
supporting the fraud claims also lack particularity, as, with minimal exceptions, they fail to
identify who made the misrepresentations, when the misrepresentations were made, and the
substance of the misrepresentations”]; Gregor v Rossi, 120 AD3d447, 447 [1st Dept 2014]
[dismissing fraud and fraudulent inducement claims where “the words used by defendants and
the date of the alleged false representations are not set forth” in the complaint] ; Hamrick, 146
AD3d at 607, citing Eastman Kodak Co. v Roopak Enters., 202 AD2d220, 222 [1st Dept 1994]
[“[t]he complaint does not allege who made the misrepresentations or when or where they were
made”]). This alone is a sufficient ground upon which to dismiss the instant fraud claim.
In addition, however, IQCM is also correct to assert that “group pleading” in fraud claims
is impermissible (see Principia Partners LLC v Swap Fin. Group, LLC, 194 AD3d 584, 584 [1st
Dept 2021] [failure to distinguish between defendants is improper group pleading]; RKA Film
Fin., LLC v Kavanaugh, 171 AD3d 678, 678 [1st Dept 2019] [dismissing fraud claim where
plaintiffs “impermissibly lumped those defendants together with the others against whom
specific acts had been pleaded”]), and that IQCM cannot be held liable for statements made by
undifferentiated “personnel” to plaintiffs. As the court noted elsewhere, the SAC generally
describes the fraud claim as including a “years-long ... scheme” in which “Velissaris ...
fraudulently manipulat[ed] asset values,” and a “central component [of this scheme] was to claim
that IQCM played no role in the valuation of the Hedge Fund's exotic OTC Derivatives,” that
resulted in a more than $1 billion overvaluation of the Mutual Fund and Hedge Fund (see
NYSCEF Doc No 567 at 23-24, citing SAC, ¶¶ 4 and 183-184). However, the controlling
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caselaw makes it clear that Velissaris’s guilty plea to securities fraud may not be broadly
imputed to all other IQCM “personnel” as well. Because the SAC fails to identify IQCM
officers, to impute discrete fraudulent statements to them and/or to allege the time, place and
manner in which they made those statements, the court deems that the nineteenth cause of action
therein is an impermissible “group pleading” that does not withstand scrutiny under CPLR 3016
(b).
IQCM’s second dismissal argument concerns the “scienter” element of a fraud claim that,
under New York law, may be adequately pled “by ‘alleging facts (1) showing that the defendants
had both motive and opportunity to commit the fraud or (2) constituting strong circumstantial
evidence of conscious misbehavior or recklessness’” (In re Longtop Fin. Tech. Ltd. Sec. Litig.,
910 F Supp2d 561, 574 [SD NY 2012] [citations omitted]).4 ”To successfully allege scienter
based on motive and opportunity, a plaintiff must plausibly plead that the defendant ’benefitted
in some concrete and personal way from the purported fraud‘“ (Mangrove Partners Master
Fund, Ltd. v Bristol-Myers Squibb Co., 2025 WL 1420914, *4 [2d Cir, May 16, 2025] [citation
omitted]). Here, IQCM argues that the allegation in the SAC that money motivated Lindell
because IQME (in which he was a 15% owner) would benefit from the monthly management and
annual performance fees IQCM collected from the Hedge Fund is insufficient as a matter of law.
Caselaw holds that “an allegation that defendants were motivated by a desire to maintain or
increase ... compensation is insufficient because such a desire can be imputed to all corporate
officers” (Kalnit v Eichler, 264 F3d 131, 139 [2d Cir 2001]; see also Mangrove Partners Master
Fund, Ltd, 2025 WL1420914, *4 [desire for corporation to appear profitable not sufficient
motive]; Saraf v Ebix, Inc., 2024 WL1298426, *2, 2024 US App LEXIS 7208 [2d Cir, Mar. 27,
4 In re Longtop Fin. Tech. Ltd. Sec. Litig. concerns a private claim for fraud brought under the Securities Exchange Act of 1934 (910 F Supp2d at 566). 652720/2023 A PARTICIPATIONS LTD. ET AL vs. INFINITY Q CAPITAL MANAGEMENT LLC ET Page 10 of 14 AL Motion No. 031
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2024] [avoiding bankruptcy not enough to plead motive and opportunity]; SSRII, LLC v John
Hancock Life Ins. Co. (U.S.A.), 37 Misc 3d 1204[A], 2012 NY Slip Op. 51880[U], *5 [Sup Ct,
NY County 2012] [same]). Artificially inflating the price of shares and then selling shares for
personal profit can be sufficient to plead motive and opportunity (see Novak v Kasaks, 216 F 3d
300, 308 [2d Cir 2000], cert denied 531 US1012 [2000]). Here, however, the SAC alleges that
IQME failed to sell its interests in IQCM (SAC, ¶ 167). Thus, plaintiffs have failed to plead how
any of IQCM’s officers stood to receive a concrete and personal “benefit” (see Nandkumar v
AstraZeneca PLC, 2023 WL3477164, *3 [2d Cir 2023]). As noted, failure to adequately plead
the element of “scienter” mandates the dismissal of a fraud claim.
Finally, with respect to IQCM’s “disclaimer” argument, New York law has long
recognized that a general merger clause coupled with a provision specifically disclaiming
reliance on extra-contractual representations can defeat a claim sounding in fraud (see Citibank v
Plapinger, 66 NY2d90, 94 [1985], rearg denied 67 NY2d647 [1986]). In such instances,
however, dismissal is only warranted where “(1) the disclaimer is made sufficiently specific to
the particular type of fact misrepresented or undisclosed; and (2) the alleged misrepresentations
or omissions did not concern facts peculiarly within the seller's knowledge” (Basis Yield Alpha
Fund (Master) v Goldman Sachs Group, Inc., 115 AD3d 128, 137 [1st Dept 2014]). Here, section
3.01(v) in the subscription agreement states that “[n]o representations or warranties have been
made to the Subscriber by the Fund or Infinity Q, or any of their partners, officers, employees,
agents, affiliates or subsidiaries, other than the representations of the Fund in this Agreement and
the Partnership Agreement/Articles5” (NYSCEF Doc No. 428 at 3.01 (v)). This language is not
5 “Agreement” means the subscription agreement (NYSCEF Doc No. 428 at 1). “Partnership Agreement” means the “Agreement of Limited Partnership of the Partnership,” and “Articles” means the “Articles of Association of the [Infinity Q Volatility Alpha Offshore Fund, Ltd.]” (id.). “Fund” means either Infinity Q Volatility Alpha Fund, L.P. and Infinity Q Volatility Alpha Offshore Fund, Ltd. (id. at 2). 652720/2023 A PARTICIPATIONS LTD. ET AL vs. INFINITY Q CAPITAL MANAGEMENT LLC ET Page 11 of 14 AL Motion No. 031
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sufficiently specific to foreclose a fraud claim based on the alleged misrepresentations that
IQCM adhered to the valuation policies and procedures the Hedge Fund’s “offering documents”
and/or other marketing materials (see Loreley Fin. (Jersey) No. 3 Ltd. v Citigroup Global Mkts.
Inc., 119 AD3d136, 144 [1st Dept 2014] [finding that the “disclaimers and disclosures fall well
short of tracking the particular misrepresentations and omissions alleged by plaintiffs”] ; Silver
Oak Capital L.L.C. v UBSAG, 82 AD3d666, 667 [1st Dept 2011] [disclaimer in private placement
memorandum not sufficiently specific as to the particular misrepresentation at issue]).
Consequently, IQCM’s argument that plaintiffs disclaimed any reliance on his pre-investment
statements is unpersuasive and the court rejects it.
Nevertheless, the SAC’s nineteenth cause of action against IQCM for fraud/fraudulent
inducement is dismissed for the reasons discussed above.
C. Fiduciary Duty
IQCM next argues that the SAC should be dismissed on the ground that “the complaint
does not plead breach of fiduciary duty” against it (NYSCEF Doc No. 445 at 17-18). Plaintiffs
respond that they “do not assert a breach of fiduciary duty claim against IQCM; they assert a
fraud claim,” and that “a fiduciary duty is not required for a fraud claim” (NYSCEF Doc No. 467
at 22).
IQCM appears to have abandoned its argument to dismiss breach of fiduciary duty
because its reply papers do not mention fiduciary duty further (NYSCEF Doc No. 540). Indeed,
the operative complaint asserts just one claim against IQCM, the nineteenth cause of action for
fraud. In any case, IQCM’s argument is irrelevant to plaintiffs’ fraud claim (see e.g. Goldin v
TAG Virgin Is., Inc., 149 AD3d 467, 468 [1st Dept 2017], citing Mandarin Trading Ltd. v
Wildenstein, 16 NY3d 173, 179 [2011] [a plaintiff asserting a cause of action for fraudulent
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concealment must plead the existence of a fiduciary duty, but this element is not required to
assert a cause of action for fraud]). Therefore, the court rejects it.
D. Group Pleading
IQCM next moves to dismiss the SAC on the ground that it “allege[s] that IQCM made
affirmative misrepresentations to [plaintiffs] or their investment advisors in calls, emails and/or
in person meetings,” but that it “fail[s] to allege with specificity the nature of any
misrepresentation made in such meetings, the identity of the person who made the
misrepresentation, the actual knowledge of the unidentified speakers, or any legal or factual basis
for imputation of such fraudulent intent to IQCM” (NYSCEF Doc No. 445 at 18-20). IQCM
asserts that this type of “group pleading” violates the specificity requirement set forth in CPLR
3016 (b) (id.). The court previously addressed the CPLR 3016 (b) specificity argument in section
B of this decision, supra.
E. Extrinsic Representations
IQCM finally moves to dismiss the SAC on the ground that “[t]o the extent plaintiffs’
claim is premised on the alleged valuation process misstatements in the “offering documents,”
that theory is precluded by plaintiffs’ contractual agreement that they did not rely on those
misstatements” (NYSCEF Doc No. 445 at 20). The court likewise addressed this argument in
section B of this decision, supra.
Accordingly, it is
ORDERED that the motion, pursuant to CPLR 3211 and 3016 (b), brought by defendant
Infinity Q Capital Management LLC to dismiss the second amended complaint (motion sequence
no. 031) is granted, and the second amended complaint is dismissed as against this defendant,
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with costs and disbursements as taxed by the Clerk of the Court, and the Clerk is directed to
enter judgment accordingly in favor of said defendant; and it is further
ORDERED that the action is severed and continued against the remaining defendants;
and it is further
ORDERED that counsel for the moving party shall serve a copy of this order with notice
of entry upon the Clerk of the Court and the Clerk of the General Clerk’s Office within ten days
of the e-filed date of this decision and order; and it is further
ORDERED that such service upon the Clerk of the Court and the Clerk of the General
Clerk’s Office shall be made in accordance with the procedures set forth in the Protocol on
Courthouse and County Clerk Procedures for Electronically Filed Cases (accessible at the “E-
Filing” page on the court's website).
202602~C21~61177B
2/24/2026 DATE MELISSA A. CRANE, J.S.C. CHECK ONE: CASE DISPOSED X NON-FINAL DISPOSITION
□ X GRANTED DENIED GRANTED IN PART OTHER
APPLICATION: SETTLE ORDER SUBMIT ORDER
□ CHECK IF APPROPRIATE: INCLUDES TRANSFER/REASSIGN FIDUCIARY APPOINTMENT REFERENCE
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