Laura Seitz, Deseret News
Dan Liljenquist speaks to reporters after the announcement that he forced Senator Orrin Hatch into a primary election at the Utah Republican Party 2012 Nominating Convention at the South Towne Exposition Center in Sandy on Saturday, April 21, 2012.
He is no longer involved in our campaign. —Holly Richardson, campaign manager

SALT LAKE CITY — U.S. Senate candidate Dan Liljenquist's campaign finance chairman resigned Thursday, a day after federal regulators accused him of running a scheme to artificially inflate the assets of a hedge fund.

The Securities and Exchange Commission filed a complaint against Russell K. "Rusty" Cannon on Wednesday, alleging he used fraudulent and manipulative trading practices to convince people to invest in his RKC Matador Fund.

Cannon, 38, used a technique called “marking the close” of a stock by instructing Matador’s fund administrator to price that stock above the market price for several months while it was actually declining, according to the complaint. As a result, Matador was overvalued by as much as 104 percent from November 2007 through July 2011, and its performance returns were overstated.

Cannon, of North Salt Lake, joined Liljenquist's staff as campaign finance chairman in January. It was not a paid position.

"He is no longer involved in our campaign," said Holly Richardson, campaign manager.

Richardson said the SEC allegations do not raise any concerns about Cannon's work on the campaign's finances.

Cannon, who formerly worked for Merrill Lynch and Smith Barney, formed RKC Capital in 2006 and begin soliciting clients to act as their investment adviser. By 2009, RKC managed more than 130 client accounts in addition to Matador. RKC claimed to have approximately $32 million in assets under management, according to the SEC.

The SEC complaint asks a federal judge to require Cannon to cease operations, return "ill-gotten" gains and pay fines.

Liljenquist is facing Sen. Orrin Hatch for the Republican nomination. Utah's primary election is June 26.

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