Judge Denies Release of Frozen Assets in SEC Fraud Case

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The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C., U.S., May 12, 2021. REUTERS/Andrew Kelly

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.