Bermudian-based hedge fund manager Revelation Capital Management has been cleared of wrongdoing in a New York court.

Revelation and company chief Christopher Kuchanny were accused three years ago by the US Securities and Exchange Commission of making more than $1.3 million in an alleged illegal short-selling share trade.

But last month, Judge Valerie Caproni of the US District Court, southern district of New York, ruled that the transactions were not domestic and failed to meet the bar set by a US Supreme Court ruling limiting the reach of federal securities laws to trades taking place inside the US or in securities listed on a US exchange.

The SEC accused Revelation and Mr Kuchanny of breaking Rule 105 in connection with Central Fund of Canada’s November 2009 offering by short-selling Central Fund securities during the restricted period and then buying the same shares in the offering.

But Judge Caproni said that Rule 105 involved two transactions — the short sale and the purchase in the offering, with neither leg prohibited without the inclusion of the other.

The ruling said that, under previous court decisions, at a minimum, the purchase most be domestic for Rule 105 to apply.

But it said that the SEC had failed to show that any activities related to the Revelation transaction took place in the US.

Rule 105 was designed to ban short selling an equity security during a restricted period and purchasing the same security during the offering.

Short sale transactions are where an investor sells stock he or she does not own in the hope that the security’s price will decline.

Rule 105 violations were an enforcement priority at the time the complaint was filed in 2014.

When the charges were filed, Mr Kuchanny said he and the firm would vigorously defend itself” against the allegation.

No one at Revelation could be contacted for comment yesterday.

The listed phone number for the company was not operational and e-mails were bounced back.

Mr Kuchanny, originally from the UK and a graduate of the London School of Economics, ran Osmium Capital Management, which changed its name to Revelation in 2011.

The firm made a name for itself as an innovator in asset management in January 2009 after it announced it would allow investors in its Osmium Special Situations Fund to denominate their holdings in gold.