HHR hedge fund client RD Legal Capital LLC and its principal, Roni Dersovitz, hit back at the U.S. Securities and Exchange Commission's enforcement action with their own lawsuit seeking to block the agency's "unconstitutional and unfair administrative proceeding," a move that made headlines in Reuters and other sources.
On Aug. 22, RD Legal Capital and Dersovitz  filed a federal lawsuit in Newark, New Jersey one month after the SEC sued them, alleging they defrauded investors. The complaint argues that the agency's administrative proceeding "fails to provide RD Legal Capital and Mr. Dersovitz the even playing field and due process protections guaranteed in open federal courts."
The complaint highlights that the administrative law judge presiding over the SEC's administrative proceeding was not appointed by the commissioners of the SEC, an action which violates the Appointments Clause of Article II of the Constitution.
Terence Healy, who leads the HHR team, said in a statement, "This is not a typical case of alleged investor fraud," he said. "Instead, it is a case where RD Legal Capital and Mr. Dersovitz fully disclosed all material facts in the relevant offering memoranda, used investor funds exactly as represented in those offering documents, and have consistently generated double-digit cumulative and compounded annual returns for all fund investors for nearly a decade."
In addition to Healy, Roel Campos, Will Coronato, John Wood, Alyssa Johnson, Webster McBride, Liz Solander, Katie Steele, Jenny Suh, Ignatius Grande and Win Jordan are working on the case.