The Securities and Exchange Commission filed a civil suit late last week with the United States District  Court for the Northern District of California against two hedge fund traders, Brent Federighi and Michael Hoffman, for allegedly placing more than 3,000 late trades.

The SEC said that between 2000 and 2002, the two placed illegal trades in more than 400 mutual funds on behalf of the $130 million Ilytat hedge fund and that in 2003, Federighi continued the practice in the $55 million Gage Capital hedge fund, which replaced the Ilytat fund after it closed. The two are accused of taking advantage of a loophole in Bear Stearns' order system to systematically place more than 80% of their trades after the 4 p.m. close of trading. In addition, they are said to have deceived mutual funds to repeatedly market time them. Their actions are said to have cost long-term mutual fund shareholders $49 million.

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