Escalating her battle with the top U.S. securities regulator, flamboyant New York financier Lynn Tilton sued the U.S. Securities and Exchange Commission on Wednesday to stop it pursuing a case charging her with defrauding her investors.

In a complaint filed in Manhattan federal court, Tilton and her firm Patriarch Partners LLC said the SEC violated the U.S. Constitution by bringing its case in an in-house administrative proceeding rather than in federal court.

Critics of administrative proceedings, which are handled by judges on the SEC payroll, say they can be unfair to defendants because discovery is limited, defense lawyers generally cannot take depositions, and there are no juries.

"I hold hope that our nation will allow a fair fight for truth, to defend integrity and intent against allegations and provides fair forums," Tilton posted on Twitter.

SEC spokeswoman Judith Burns declined to comment.

The SEC charged Tilton and Patriarch on Monday with hiding the poor performance of assets underlying three collateralized loan obligation (CLO) funds, known as the Zohar funds, that they managed and which had raised more than $2.5 billion.

It said this enabled Tilton and Patriarch to collect almost $200 million of fees to which they were not entitled, and created what SEC enforcement director Andrew Ceresney called a "major conflict of interest."

CLOs are securities typically backed by low-rated corporate debt.

Like others who have challenged SEC administrative proceedings, Tilton said the forum violates Article II of the Constitution because administrative law judges qualify as executive branch officers, yet enjoy job protections that can make it impossible for the President to remove them.

The 2010 Dodd-Frank financial reforms gave the SEC power to pursue more enforcement cases in-house.

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