A California court has ruled that a lawsuit can proceed against the accounting firm Rothstein Kass, which has been sued by two hedge fund managers claiming that the firm never uncovered the fabricated trading activity of one of their business partners.

The lawsuit was filed in August by Paron Capital Management CEO Peter McConnon and CFO Timothy Lyons, who hired Rothstein Kass in 2010 to verify that the investment returns of over 20 percent claimed by a trader they wanted to do business with were legitimate. The trader, James Crombie, wanted to attract investors to his platform for trading futures contracts, and the hedge fund managers hired the risk consulting firm Kroll and Rothstein Kass to perform due diligence checks on him.

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