In October 2010, the Securities and Exchange Commission (SEC) brought civil securities fraud charges against defendants Paul T. Mannion, Jr., and Andrew S. Reckles, and the investment advisers they controlled, claiming that they defrauded investors in hedge fund Palisades Master Fund, L.P. (Fund) by lying to investors about the value of the Fund’s stake in World Health Alternatives, Inc. (WHA), stealing and exercising WHA warrants owned by the Fund, failing to disclose their private sales of WHA stock and concealing a short position in Radyne Corporation at the time that the Fund invested in that corporation’s PIPE offering. For a detailed summary of the SEC’s complaint, see “SEC Brings Civil Securities Fraud Action Against Principals of Hedge Fund Palisades Master Fund, Alleging Fraud, Self-Dealing, Misuse of Fund Assets and Use of a ‘Side Pocket’ to Misrepresent the Fund’s Value to its Investors,” Hedge Fund Law Report, Vol. 3, No. 42 (Oct. 29, 2010). The Defendants moved to dismiss the entire complaint on the ground that it failed to state any cause of action against the Defendants. The District Court generally permitted all counts of the complaint to proceed. We summarize the factual background and the Court’s legal analysis.