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For better or worse, Scott Sacane's Durus Capital Management is essentially a two-stock hedge fund.

Recent regulatory filings by the troubled hedge fund reveal that shares of the small medical device companies




Esperion Therapeutics

(ESPR) - Get Esperion Therapeutics Inc. Report

now account for about 70% of the dollar value of the Connecticut-based fund's entire stock holdings.

To some extent, the disclosure isn't surprising given last month's revelation that Sacane had been secretly buying up millions of shares in both companies. But the magnitude of Durus' concentration would seem to further undermine Sacane's claim that his fund had "inadvertently" acquired all those shares.

The latest disclosure no doubt will be of interest to the

Securities and Exchange Commission

, which has begun an investigation into Durus' unusual trading activity. Many on Wall Street, meanwhile, attribute the problems at Durus to gross incompetence, stock manipulation or a combination of the two.

Indeed, all the buying activity by Durus, whether inadvertent or deliberate, helped send the value of the hedge fund's stock portfolio soaring. The combined dollar value of Durus' stock holdings as of June 30 was $594 million -- up 142% from the end of March, according to the most recent regulatory filing by the hedge fund.

The value of Durus' stock overall holdings has declined since June 30, because the share prices of Aksys and Esperison both fell sharply in the wake of the trading scandal.

But it's estimated that Durus, which opened for business two years ago, spent about $260 million the past year to acquire its huge equity stakes in Aksys and Esperion. That's an outstanding sum, since the hedge fund is believed to currently have about $400 million in total assets.

Meanwhile, the heavy concentration in the stocks could create a cash-crunch at Durus in the coming months, especially if investors begin demanding that Sacane allow them to withdraw money.

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That's because Sacane last month signed agreements with both Aksys and Esperion that prohibits Durus from selling any of its shares over the next four to six months. If a large number of Durus investors seek to withdraw their money, it could force Sacane to liquidate his other stock holdings -- which include positions in

Allos Therapeutics

( ALTH),

Cardiac Science

( DFIB) and

Vicuron Pharmaceuticals

( MICU).

Also complicating Durus' cash woes is a little-known securities law that prohibits major stockholders from generating any short-term trading profits in a stock. The securities rule requires the stockholder to turn over any short-term trading profits to the company.

Already, Aksys has filed a lawsuit seeking to recoup any short-term trading gains it's entitled to, and Esperion is considering doing the same. In a recent corporate filing, Esperion said an attorney for Durus admitted "its liability" under the law but did not provide an estimate of the size of the trading gains Durus might owe Esperion.

In an earlier article,

estimated that in the month of July -- a time when Durus was both buying and selling large blocks of shares in Esperion -- the hedge fund generated proceeds of $25 million.

But a spate of investor redemption notices doesn't necessarily mean a quick end for Durus, despite all its legal woes. Securities lawyers said hedge funds commonly have rules that limit investors from trying to withdraw all their money at once and effectively stage a run on the bank.

Ron Geffner, a partner with Sadis & Goldberg, a New York firm that represents a number of hedge funds, said most funds permit a manager to "freeze" redemption requests in certain extraordinary situations.

Sacane also might be able to honor redemption claims by giving investors shares of Aksys and Esperion instead of cash, said Geffner. The problem with that scenario is that Durus investors might be bound by the same selling restrictions the two companies have imposed on the hedge fund.

The word coming from Scott Sacane's camp is that the redemption issue isn't a problem because most of his investors are sticking with him despite the growing scandal. A spokesman for Sacane said the majority of Durus investors continue to "trust" Sacane.

If that's true, Sacane has one rather loyal following.