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The finance chairman for Dan Liljenquist's U.S. Senate campaign resigned Thursday, a day after he was sued by federal regulators over impropriety at a hedge fund he manages.

The Securities and Exchange Commission filed a lawsuit this week, accusing Russell Cannon of artificially inflating the value of assets in his hedge fund, RKC Matador Funds. Cannon's attorney says the charges are untrue.

"Effective immediately, Rusty Cannon has resigned from and will have no further role in our campaign," said Liljenquist's campaign chairwoman, Holly Richardson. "Our thoughts and prayers are with Rusty as he addresses these issues."

Liljenquist said the SEC action is completely unrelated to the campaign.

"This is a dispute with the SEC," Liljenquist said. "It had absolutely nothing to do with our campaign or campaign finances."

Cannon, 38, is accused by the Securities and Exchange Commission of making last-minute trades on the final day of the month to inflate the value of the holdings of his hedge fund and of dictating the price of the stock listed in Matador's financial reports to clients.

The SEC said that Cannon put more than half of the money from Matador investors into Global Pari-Mutuel Investments, Inc., where Cannon's father was a board member. He then used trades on the last day to try to inflate Global's price. When that didn't work, he allegedly gave a false share price in Matador's monthly brokerage statements.

Cannon's incentive pay was dependent on Matador's performance.

The SEC asks that Cannon be ordered to halt the allegedly fraudulent activities, pay a fine and disgorge profits.

Twitter: @RobertGehrke

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