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A Connecticut federal judge is standing by his earlier decision refusing to release $50,000 in frozen assets to pay the attorneys of an investment adviser and his wife, who face a $5.9 million fraud suit from the U.S. Securities and Exchange Commission.

U.S. District Judge Victor A. Bolden denied the request by John A. Masanotti Jr. and his company, Middlesex Mortgage Group LLC, to modify the asset freeze. The judge issued the original preliminary injunction against the defendants in November and updated it in February after the SEC said it needed to be altered on an expedited basis because regulators learned from at least two witnesses that Masanotti was not abiding by the injunction's guidelines.

The SEC's November complaint accused Masanotti and his company of misappropriating money for personal uses, such as mortgage payments on two homes he owned with his wife, Mary A. Ferrara. Ferrara is named as a relief defendant in the lawsuit.

In a May 17 filing, the SEC argued Masanotti's request to unfreeze the assets "defrauded investor money." The agency said the defendants should not be able to access even a portion of the $148,000 gained from the sale of their Connecticut home because Middlesex investor funds have been subsidizing the mortgage payments for years.

Masanotti argued Ferrara has legitimate claims to the funds because the house was in her name. However, the SEC argued the monthly mortgage payments exceeded her income, and the defendants were using investors' money for the payments and home renovations.

"Proceeds from the sale of the [Connecticut] property are tainted and should be applied toward recompensing defrauded investors who unwittingly funded defendants' lifestyle," the SEC said.

Additionally, the SEC said the defendants may be recklessly spending their income on "golf and luxury cars" and have not shown that they need the additional cash from the home sale funds or that they will use it solely for fees related to the SEC's case.

"Counsel has further indicated that some of the funds, if unfrozen, may be used for Ferrara to retain a divorce attorney, an expense unrelated to the defense of this matter that defrauded investors should not [be] forced to fund," the SEC said.

Masanotti was arrested in a parallel criminal case on May 9. The SEC and the U.S. Department of Justice asked the court to pause the SEC's action against Masanotti until the criminal proceedings conclude, but the court has not yet approved or denied the request.

Masanotti faces eight counts of wire fraud, 11 counts of making illegal monetary transactions, one count of making false statements and one count of falsification of records in a federal investigation.