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Legal Memorandum: Cases Addressing Issue of Commingling of Funds

Issue: Cases addressing the mismanagement of and commingling of funds from the offeror’s (or syndicator’s) perspective.

Area of Law: Litigation & Procedure
Keywords: Commingling of funds; Mismanagement
Jurisdiction: California, Seventh Circuit
Cited Cases: 671 F.Supp. 679; 84 F.3d 936
Cited Statutes: None
Date: 07/01/2006

The following cases are relevant to this issue: In re Rexplore, Inc. Securities, 671 F.Supp. 679 (N.D. Calif. 1987), and Fry v. UAL Corp., 84 F.3d 936 (7th Cir. 1996).  The Rexplore case addresses the commingling of funds issue, in terms of raising capital purportedly for one project and then using it for another.  The Fry case is addresses the notion that the duty not to make misrepresentations does not require the existence of a fiduciary duty.  That is, misrepresentations will expose the issuer to liability; but things like inadvertence and negligence will not.

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