On April 8, 2011, the SEC filed a complaint in the U.S. District Court for the Southern District of New York against Perry A. Gruss, the former chief financial officer of D.B. Zwirn & Co., L.P. (DBZ).  The complaint generally alleges that Gruss inappropriately authorized the transfer of cash from hedge funds and accounts managed by DBZ for four purposes: investments by the onshore fund with cash from the offshore fund; repayment of debt of the onshore fund with cash from the offshore fund; early payment of DBZ’s management fees by various funds and accounts; and purchase of an aircraft with funds from the onshore fund and a managed account.  The complaint relates a tale of meteoric growth at DBZ from October 2001 through October 2006.  By our reckoning based on figures in the complaint, DBZ’s AUM grew by $2.74 million per day during that five-year period.  However, the complaint also illustrates the fragility of even the most successful hedge fund management businesses.  DBZ was a great business that was laid low by alleged legal violations that in retrospect appear pedestrian and preventable.  This article relates the factual and legal allegations in the SEC’s complaint, then offers 10 detailed suggestions on how hedge fund managers can avoid the adverse consequences of violations such as those alleged against Gruss.