A New York-based hedge fund and its advisor have been found liable for illegal short-selling.

According to Securities and Exchange Commission’s complaint, filed two years ago, Cary Brody and two entities he controlled, Colonial Fund and its adviser, Colonial Investment Management, used shares purchased in at least 18 registered public offerings to cover short sales that they made during the five days before the offerings’ pricing, which is illegal.

The defendants allegedly realized profits in excess of $1.4 million from the illegal trades because Colonial Fund typically sold shares short during the restricted period at prices that were higher than the offering prices and then covered the restricted period short positions with shares purchased at lower prices in the offerings. The complaint also alleged the defendants often structured post-offering trades to hide their violations.

A U.S. District Judge for the Southern District of New York found after a bench trial that Brody and two entities he controlled were liable for the illegal trading. The defendants were ordered to pay disgorgement totaling more than $1.4 million in ill-gotten gains, plus prejudgment interest. Brody was also hit with a civil penalty of $450,000.