(Bloomberg News) A federal judge decided earlier this week not to send a Staten Island, N.Y., investment advisor to jail for engaging in post-arrest activity similar to the conduct that led to civil and criminal allegations against him.

U.S. District Judge Jack B. Weinstein in Brooklyn, New York, said he would not revoke bail for Kenneth Marsh, owner of Gryphon Holdings Inc., who faces trial next year.

"We have to move to trial," Weinstein said, noting that Marsh is helping his lawyer go through thousands of documents.

After his April arrest, Marsh tried to replicate at least parts of the scheme to defraud investors he's charged with, prosecutors said in arguing that Marsh should be jailed.

Marsh, 44, was charged with conducting a $17.5 million fraud by misleading investors into paying fees for phony stock tips and investment advice. He was released on a $600,000 bond co-signed by his mother.

Robert Nardoza, spokesman for U.S. Attorney Loretta Lynch in Brooklyn, declined to comment on the judge's ruling.

Nine employees from the sales force were added to the case in June. Of 18 defendants, 16 have pleaded guilty. Marsh and Gryphon sales representative Baldwin Anderson have pleaded not guilty and are scheduled to be tried in February.

Rebranded Version

In May, Marsh hired two information-technology professionals to put up a rebranded version of the Gryphon website under the name "Duke Research," according to a Nov. 5 letter from prosecutors to Weinstein.

Fred A. Schwartz, Marsh's lawyer, wrote to Weinstein yesterday that Marsh's participation in the rejuvenated Website, which is now shut down, was "minimal at best."

About three weeks ago "a number of Gryphon victims" told the government they received an e-mail solicitation from a company called Online Trader Daily similar to Gryphon's solicitations, prosecutors said in the Nov. 5 letter. Public records showed the site was registered by Marsh, and the court ordered it shut down, the government said. Online Trader Daily made only 11 sales since opening in July, according to the letter.

Christopher Cirri, one of Marsh's partners in Online Trader Daily, testified that the sales were made after a test e-mail that was supposed to go to four people mistakenly went to 70,000. Cirri said the company was returning the $99 the 11 customers each paid.

Limits On Calls

Weinstein told Marsh today he is not permitted to use a telephone, except in certain circumstances such as calling 911, his son or his lawyer.

The judge heard testimony from Matthew Stern, a printing company owner in Delray Beach, Florida, who said he was one of the people Marsh solicited in late September to pay $99 for his investment advice.

"The court finds that it's highly probable that the defendant violated the criminal law in a variety of ways in connection with his telephone call," Weinstein said.

Gryphon charged clients as much as $250,000 for access to its investment recommendations, according to a civil complaint brought by the U.S. Securities and Exchange Commission. The company received $9.6 million last year and $3 million in the first two months of this year from investors, according to the complaint. Clients often lost money on trades suggested by Gryphon, the SEC said.

Strip Mall

Gryphon's employees lied about their credentials, falsely claiming to oversee billion-dollar hedge funds from offices on Wall Street and in London and Sydney, prosecutors said. The shop was run from a Staten Island strip mall, they said.

Marsh was "conducting a facsimile of the fraud with which he is charged here," Assistant U.S. Attorney Roger Burlingame told the judge today.

"The company was to operate without fraud," Schwartz, Marsh's lawyer, said. "Each of these gentleman said that Ken Marsh told them that when they came on board."

Schwartz was referring to Marsh's two partners in Online Trader Daily, who testified.

Schwartz said in an August interview that Marsh wasn't an investment adviser. His client published a newsletter recommending stocks, which is protected by the U.S. Constitution's First Amendment speech rights, he said.

The criminal case is U.S. v. Marsh, 10-cr-480, and the SEC case is Securities and Exchange Commission v. Gryphon Holdings Inc., 10-cv-01742, U.S. District Court, Eastern District of New York (Brooklyn).