SEC Ends Boston Hedge Fund ‘Dealer’ Case in Latest Trump Retreat

The Securities and Exchange Commission tossed a case alleging a Boston hedge fund adviser failed to register as a securities dealer, in the latest enforcement pullback under Chairman Paul Atkins.

The stipulation to voluntarily dismiss the case with prejudice Wednesday comes less than a year after Judge Angel Kelley in US District Court for the District of Massachusetts denied the defendants’ bid to scrap the SEC’s suit.

A dealer under a Depression-era law can include entities that trade securities as a regular part of their business, even if they don’t interact directly with customers, Kelley said in her July 2024 decision. But the defendants argued the SEC’s approach would require all hedge funds in the US to register.

The SEC under Biden-era Chair Gary Gensler sued Auctus Fund Management LLC in 2023, alleging the hedge fund made more than $100 million by converting debt to stock and selling shares into the market at a discount, making it a dealer under federal securities law.

The SEC, Auctus, and two top executives are now dropping the case without costs or fees to either party, noting in the filing that the agency’s decision to seek dismissal doesn’t reflect its position on any other case.

An SEC spokesperson didn’t immediately respond to a request for comment.

The SEC last month dropped several cases targeting lenders that obtain a type of debt from penny stock companies that can be converted into stock at a percentage discount from market price. The dismissals came even after the Biden-era SEC notched several court wins seeking to crack down on “toxic” lenders the agency said were acting as unregistered entities.

Commissioner Caroline Crenshaw cautioned in a May statement that dropping the dealer suits was an unprecedented move to abandon a key part of the agency’s mandate, warning that investors will lose protections without dealer registration enforcement from the SEC.

The agency under the Trump administration has also opted to abandon crypto-related enforcement cases, including some that alleged crypto trading entities acted as unregistered dealers.

Gibson, Dunn & Crutcher LLP represent the defendants.

The case is SEC v. Auctus Fund Mgmt. LLC, D. Mass., No. 1:23-cv-11233, stipulation to dismiss 6/18/25.