Not So Swingin’: Hedge Funds Say Money Manager Stole Money For Sex Club

Aug 13 2009 | 1:35pm ET

A group of hedge funds is learning that there are perils to investing with a pornographer.

Todd Ault promised a dozen international hedge funds that he would invest their money in a quantitative stock-trading program, according to their lawsuit, filed in Manhattan state court. In fact, Ault, CEO of Zealous Inc. used the money to buy what he hoped would be a “swingers’ ranch,” the hedge funds allege.

“Ault never intended to use the money for Zealous,” the suit says. “He intended to, and did, use plaintiffs’ money to fund [his] lifestyle, which included the development of a ‘swingers’ ranch’ in the Catskills and other pornographic-related endeavors.”

Ault, a Dean Witter Reynolds and Prudential Securities veteran who lives in California, told the New York Daily News that the lawsuit was “worthless.”

“We were subdividing it into eight lots,” Ault said of the alleged “swingers’ club” site in New Lebanon, N.Y., a town on the New York-Massachusetts border roughly equidistant from New York City and Boston. “There was never going to be a swingers’ club.”

Instead, Ault says the money was lost when the stock market tanked, and that some of the lost money has already been recouped by the hedge funds.

It is true that Ault has pornographic interests. His company co-produced a porno based on former Alaska Gov. and Republican vice-presidential nominee Sarah Palin. What’s more, Zealous merged with Adult Entertainment Capital in September.

In the press release announcing the merger, Zealous and AEC announced plans for a 140-acre project for the “fast-growing swingers lifestyle” on the East Coast. But Ault said that was “simply a joke,” and the company never planned to turn the 130-acre plot in New Lebanon—purchased, he said, before the hedge funds invested with him—into a sex club.

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