Having agreed to pay more than $19m to settle US SEC charges relating to improper bond trading, hedge fund Chatham Asset Management is now looking to recoup those costs, plus damages, from its compliance adviser Advisor Compliance Associates (ACA), according to a report by Bloomberg.

The $6bn hedge fund firm, which was founded by Anthony Melchiorre, is reportedly pursuing a $100m lawsuit claiming that the outsourced compliance consultancy, which was set up by former regulators, failed to prevent trading practices that fell foul of the regulator.

The case relates to the trading of bonds in A360media (formerly American Media), owner of US tabloid the National Enquirer, which the SEC alleged Chatham carried out improperly by using outside brokerages to move the investments at elevated prices among funds it managed.

ACA and Chatham are set to appear in federal court in New Jersey next week, after a judge ruled in December that accusations of gross negligence, negligent misrepresentation and breach of fiduciary duty can proceed, after ACA failed to have the case dismissed.