Regulators at the Securities and Exchange Commission have sued London-based hedge fund Pentagon Capital Management Plc over an alleged scheme to defraud U.S. mutual fund shareholders.

From June 1999 through September 2003, “PCM actively traded U.S. mutual funds through Pentagon Fund's accounts at numerous broker-dealers in the United States,” the SEC said.

The complaint, filed in U.S. District Court in Manhattan, said Pentagon chief executive Lewis Chester orchestrated a scheme to defraud mutual funds through late trading and deceptive market timing, Reuters reports.

Pentagon manages $2.21 billion in assets in 17 funds.

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