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.
