U.S. Commodity Futures Trading Commission v. Southern Trust Metals, Inc. et al

Filing 339

ORDER IMPOSING DISGORGEMENT ON REMAND. Signed by Senior Judge James Lawrence King on 5/30/2019. See attached document for full details. (jw)

UN I
TED STA TES DISTR I C O UR T
CT
SO UTH ERN D I
STR ICT O F FLO RI
DA
M I M ID I I O N
A
V SI
CASE N O . 1: CV: 14- 22739JLK
U . COM M ODI FUTURES TRAD I G
S.
TY
N
COM M I ON ,
SSI
Pl ntf,
ai if

SOUTHERN TRU ST M ETA LS,I ,
NC.
LORELEY OW RSEA S CORPOM TI ,
ON
a RO BERT ESCO BI
nd
O,

I ef nda s.
l e nt

O RD ER I PO SI D I O R G EM EN T O N R EM AN D
M
NG SG

THI M A TTER com esbef et Cour on r m a f om t U nied St t Cour of
S
or he
t e nd r he t
a es
t
Appe sf t El vent Cic tw ih i tuc i t cons dere t bl r edi ot t
al or he e h r ui t ns r tons o
i quia e em es her han

r siuinwi r s c t Dee a t'rgitai vilto ta a et s be tofCou
ettto t epe t o fnd ns e sr ton oains h t r he u j c
h
nt
4 oft CFTC' Compl nt Se CFTC v.S.Tr. et s I ,894 F. 131 131 1331
he
S
ai . e
M al, nc.
3d
3, 9,
-

32( 1hCi. 8 .
1 t r 201 )
1. BA CK G RO U ND I
A.

The Elvent Ci t sO pi on and Ins ructons on Rem and
e
h rcui'
ni
t i
l isopi on i s J y 1 201 t El ve h Cicui afim ed t sCour ' Fi
nt
ni s ued ul 2, 8, he e nt r t fr
hi
ts nal

J g e te tr d a a ns So h r Tr tM ea s I (ûT M e as' a Ro r Es ob o
ud m n n e e g i t ut e n us t l, nc. t
S
tl' nd be t c i
)
lTheCour as um esf iirt w ih t f t bac ound oft sc e andw ilt ef e
t s
am la iy t he ac ual kgr
hi as
l her or
onl di c st f ct pe tne t t sor r The f t a pr edur hi t y a edicus èd
y s us he a s r i nt o hi de .
ac s nd oc al s or r s s
m or f l i t Cour ' pr oror r and f ct lfndi . SeeD E 1 DE 166,D E 167.
e uly n he
ts i
de s
a ua i ngs
22,

f vi ai so t Co di Ex h ng Ac (h t EA' .I a ii n t a fnni t
or olton f he mmo t c a e t t e û ' n ddto o fi ng he
y
C. )
Cour ' tndi oflabiiy underal f count oft CFTC' Com pl nt t Elve h
ts s ngs i lt
l our
s he
S
ai , he e nt

Cic iafr dt Cou tsis n eofij ncierlelcvipe lis a $15 3,9 i
rut fime he r' sua c n u tv eit i l nate , nd ,4 8 2 n
r tt i n f t l r
esiuto or he eve aged- e al s he e atis i Count 1t ough 3 oft CFTC'
m t s c m
s ue n
s hr
he
S
Compl nt SeeS.Tr M e al,894 F. at1 -32.
ai .
. t s
3d
331

Att s tme,t Elve h Cic tvac ed t $559, r tt i a r f
he ame i he e nt r ui at he
725 esiuton wa d or
c t e l s as oc a ed w ih Def
usom r os es s i t
t
endant unr ser d-ut essc e,whi h i ved
s' egit e f ur
hem
c nvol

t f ur sa o i t a ac i a i s i Count4.1 TheEl ve h Cic tr as
he ut e nd ptons r ns tons t s ue n
d.
e nt r ui e oned

t t e tt to i r srce t C o s spr x ma eyc us dby ghe vi l to 'a t r wa
ha r siu i n s e tit d o t s e o i t l a e
l
t l o a in,' nd he e s
i ufi e evi
ns f cint dence t s
o how t tDef
ha
endant f iur t r s e bef e a ptng m one
s' a l e o egit r or cce i
y
a or r f om t f ur a optons c t er w a t pr m a e c e oft ta ng
nd de s r he ut es nd i
us om s s he oxi t aus
he r di

l sss fee b t s c tmes Se i a 1 31(mph ssa e )
ose ' fr d y ho e uso r. e d. t 3 e a i dd d .
u
A sar ul,t El nt Cicui r m anded wih i tuc i t cons de whet any
es t he eve h r t e
t nsr tons o
i r
her

ot requiabl r m edy i a oprat d. I doi s t El
he
t e e
s ppr i e.1 n ng o, he event Cic tk tc a l
h r ui t i ul ry
par

no e dltesaut y s e tonund rwhiht c r ma or rt digo g me to gans
t g h tt or ubs c i
e c he ou t y de he s r e n f i ,

i a o it crumsa e , tou rgar t pr xi ec s . d (iig 7U. C.j
n pprprae ic tnc s wih t e d o o mat au e' . ctn
'1
S.
1 a 1 d)3 )( mph i a e )
3 - ( ( ) e ass dd d .
B.

ThePartes Subm i sons
i '
si
On r a t Cour ent ed an or diec i t pari st tl bref addr s ng
em nd, he
t er
der r tng he te o q e i s
es i

( )t a o it r me y f De e da t'r gitai n v olto a d ( t a pr prae
1 he ppr prae e d or f n n s e sr to i a ins n 2) he p o it
am ountt be a a de See DE 267.
o
w r d.

The CFTC s it is br e on M a c 5,201 See DE 279. The CFTC a gue
ubm ted t i f
rh
9.
r s

t digor
hat s gementi t a opraer
s he ppr it emedy,andt $360, i t appr i eamount
hat
337 s he
oprat
.
1 at2. The CFTC not t , i r tt i whi h i r t i ed t ûl s spr m at l
d.
es hat unlke es iuton, c s esrct o :os e oxi e y

ca ed' by t vi a i digor m entm ay be or ed upon as i ofigai r ei
us ' he ol ton, s ge
der
how ng k ns ec ved

i c nne ton wih' avi ain.1 a 7 ( uo i g jj 1 a 1 d ( ( ,( ) Ap yig t t
n o ci t ' olto d. t q tn
3 - ( )3)A) B). pl n ha
t ns r ved' l nguage her t CFTC cont nds t tdi gor m e i t am ountof
û
gai ecei ' a
e, he
e
ha s ge nt n he

$360, i a oprat bas on t Cour' fndi t ST M et sc r d comm isi
337 s ppr i e ed he
ts i ng hat
al ha ge
s ons

t isf t r sc t me si t a o nto $ 60,37.f a 8 ( ii Aug. 9, 1 Fi i s
o t u u e uso r n he m u f 3 3
#. t ctng
2 20 6 nd ng
o c a d Co l insofLa a 1 DE 1 )
fFa t n ncuso
w t 0,
66 .
( nM ar 22,201 D ef ndant fl t ropposng br efar ngt tdigor ent
)
ch
9, e
s ied hei
i
i gui ha s gem
i i ope and t no ot r m e e s d be i
s mpr r
hat
her e di s houl
mpos f t rr git a i vi a i .
ed or hei e sr ton ol tons
See Def . Br,DE 294. D e e
s' .
f ndant fr tar t tt CFTC w ai t rghtt pur ue
s is gue ha he
ved he i o s
di gor entby onl i udi r tt i i ispr
s gem
y ncl ng esiuton n t opos tndi off a concl i
ed s ngs act nd
us ons

o lw.1 a 4.De e a t as c ne t t c bi c n tbehedj i l a sve al
f a d. t
fnd ns lo o tnd ha Eso o a no
l onty nd e r l
y
la ef di gor m e w ih ST M e al be
i bl or s ge nt t
t s caus t ewasno r d evi nces i t t
e her
ecor
de
how ng ha
Es o hi se fr ved any oft c m i sons 1 at5-8. Al o,Def nda s a guet t
cobi m l ecei
he om s i . d.
s
e nt r
ha
digor e c
s gem nt annotbe or r agai tST M e al eiher be
de ed
ns
t s t , caus undert rr ng ûf
e,
hei eadi

t cas l w ,l oxi at caus m us be s n i eve y f de alcaus ofa i ' a t
he e a û
pr m e
e
t
how n r e r
e
cton,' nd he
CFTC ca
nnots ts y t pr m a e ca e r r e f di gor e . 1 at8.
a i f he oxi t us equiem nt or s gem nt d.
I addii t c l ng digor enta ar edy,Def ndant cont s t a ount
n
ton o halengi
s gem
s em
e
s
e t he m
pr
opose by t CFTC.A cc di t D e e nt di gem enti m eas edby t tgai ,
d
he
or ng o f nda s, sgor
s
ur
k
ne
ns

t kng a c u ofe pe s s'a hee t CFTC û e e t d no e d n et de o tae
a i c o nt x n e , nd r , he
'
ç s ne
pr
vi e c o m nsr i

Sout n Tr tM e al'ne gai ,ac
her us t s t ns countng f expens sas oci ed w ih t t a ac i
i or
e s at
t he r ns tons
a com m i s onss i wih br s. 1 at1 1.Fi l D ef
nd
si
plt t oker ' d. 0-1
'
naly, endant ar t s a
s gue hat uch n

a a d woul am ountt a e s i fnei vi a i oft Ei h Am e
w r
d
o n xce s ve i n ol ton he ght
ndm e .1 a 11.
nt d. t
l.DI
I
SCU SSI N
O

A.

I igorgem entU nde t Com m odiy Exchange A c
ls
r he
t
t

S ci n 1 a 1d)3)of h CEA c diist e ia l r me e t a ma bei os d
e to 3 - ( ( t e
o fe he qut b e e di s h t y mp e
f vi a i oft s a ut I r
or oltons he t t e. t eads:
I any acton br
n
i
oughtunde t ss i t Com m i s on m a s
r hi ecton, he
si
y eek,and t
he
cour m a i pos ,on apr rs
t ym
e
ope howi on any pe son f
ng,
r
ound i t a ton t
n he c i o
ha com m it any vi a i equia e r edi i udi ve
ted
ol ton, t bl em es ncl ng-

( digo ge n o gansr c i d i c ne to wi s c vi a in.
B) s r me t f i e eve n on ci n t u h olto
h
7 U. C.j 1 - ( ( )B) A ss mm a ie by t Elve h Cic t t CEA l ut orz s
S.
3a 1d)3 ( .
u rz d he e nt r ui, he
û h ie
a
diti tcours t i
s rc
t o mpos equia e r edi ,i udi digor ent upon a fndi t t
e
t bl em es ncl ng s gem ,
i ng ha

t def nthasvi at a ofispr s ons' CF FC v.Amer an,645 F.A pp' 938,
he enda
ol ed ny t ovi i .'
m
x

9 ( 1h Ci. 1 )
43 1 t r 20 6 .

û igo g me ti a e uia er me yitn dt prve unu te rc nt'SEC
o s r e n s n q tbl e d ne de o e nt j s n ihme .
'
v M on e o s 75 F.d 1 26,1 7 ( 1h Ci.2 4)
. tr s o, 6 3 3
33 1 t r 01 .To s po tadig r m e or r
up r s o ge nt de ,

û th CFTC ne d ony S r u e a r a o a e a pr xi to ofa d f nda tsilgo tn
û le
l
e l p od c e s n bl p o mai n
e e n ' l- te
g i .' Ame man 645F. p' a 9 ( uo i S v Cal o 378F. 1 1 ,1 7( 1h
ans'' r ,
Ap x t 43 q tng EC . v ,
3d 2 1 21 1 t
Ci. 0 ) CFTC v Sl i 1 F. 11 2,11 8 ( 1h Ci.1 99) û ciud i no a
r 20 4)*
,
. dot, 78 3d 3
3 1 t r 9 . û tt e s t
Exa
r r e ;s l ast m eas e ofdi gor m e i r s bl a r s ofunce t nt
equiem nt o ong he
ur
s ge nt s ea ona e, ny ik
r ai y

s d f lon t w r
houl al
he ongdoe whos il lc
r
e lega onduc c ea ed t unc t nt ' Amer
t r t hat erai y.
'
man,

6 F. p' a 9 (ntr lq t to ma ksomitd)
45 Ap x t 43 i e na uo ai n r
te .
B.

D igorgem enti A ppr
s
s
opri e f Def ndant 'R e s rat on V i atons
at or
e
s gi t i
ol i

Unde t CEA,d s o ge e tm a beo d r d o aç o e s wi (ha ape s n
r he
ig r m n y r e e n t p r ho ng t t r o
pr

ha lc mmitd a y vi lto ' ft saut .Ame ma 6 F. p' a 9 ( mpha i i
s o te n o a in'o he t t e
r n, 45 Ap x t 44 e
ss n
o ii a ) TheElve t Cic t sr c gn z dt a $ g l y vi a i i l sr g sr to
rg n l.
e n h r uiha e o i e h tû a n olton' ncude e itai n
$
vi atons.'1 l A cc di y,digor e w oul be a opr a e f any gai r ei d
ol i ' d.
or ngl s gem nt
d
ppr i t or
ns ec ve

i connec i wih D ef
n
ton t
endant 'r sr ton vi a i
s egit a i
ol tons.A sdi c s be ow , heCour fnds
s us ed l t
ti
t ts gai a e adequa el s
ha uch ns r
t y uppored by t r d.
t
he ecor

Athes
t ummayj gme tsa e teCo r fundbohSTM easa Es o ola e
r ud n tg ,h u to
t
tl nd c bi ibl
a am a t rof1 f t r sr tonvi atonst tw er a se t i Count4 oft CFTC'
s
te
aw or he egit a i
ol i ha
e s red n
he
S
Com pl i . See DE 1 a 9
ant
22 t -10. Thos vi a i i ved Def
e ol tons nvol
endant ac ptng m oney
s ce i
a or r f com m odiy f t esand optonst adesw ihoutha ng r s e ed asa Sf t es
nd de s or
t u ur
i r
t
vi egi t r
ku ur

com m is on m e c 'w ih t Com m i s on.D E 1 at1 . eeal o Com pl Count4,D E
si
r hant' t he
si
22 0,s
s
.
M or over t Cour ' f ualfndi des i d t ûl s ' a çgai ' s em m i
e
, he
ts act i ngs crbe he ûos es' nd ç ns' t
ng

2Ast e Co t e o l e pl i d ( 1 6 a 20 , heu e se e f t r ss he wa
h ur pr vi usy x ane DE 6 t ) t nr git r d u u e c me s
no m e e t hni vi aton oft l w . Se St l r & Co.v.CFFC,855 F. 1288,1
r ec cal ol i
he a
e ote
2d
293

( t Ci.1 8 (û g sr to i t eki pi i t sau o y ma hi r oft Co diy
7h r 98 ) ç itai n s h ng n n he tt t r c ney he mmo t
Re
Exc nge A c ,gi ng t Com m i son t i or aton a
ha
t vi he
s i he nf m i boutpa tci nt i com m odiy
ri pa s n
t
tadi whi h i s vialy r r t c y outisot rs at or f tons ofm oniorng
r ng
c t o t l equies o an'
t he t ut y unc i
t i

a d e o cngt Ac .)( a k t o te .
n nf r i he t' br c e s mitd)
'
3 Spe fc l , De e da svi lt d j6d a oft e CEA, c ma si un a u G o bea
cii aly
f n nt o ae
() h
whih ke t l wf l û
t
f ur c m is on m er ha 'w ihouttr tr s e i wih t Com m i s on. 7 U . C. .
ut es om s i
c nt' t
s s egit rng t he
si
S. A

j 6 a . A l uur sc m miso m e c n ' i dei d t i l e a o o h rt ngs q
d( ) i t e o s in r ha t' s fne o ncud , m ng t e hi ,a
f
pe s w ho i engaged i ac ptng or r f t pur ha or s e of a com m odiy f
r on
s
n ce i
de s or he c se
al
t 4r

f t r d lve yo a y c m modt o in.1 j 1 ( .
uu e ei r r n o
iy pto d. a28)

fom t sunr ser f ur s hem e.SeeDE 1 at9 0.A lhough t Cour ' fndi
r hi egit ed ut es c
66 -1
t
he
ts i ngs

f us
oc edprm a iy on c t erl s , heCour al odes rbed gai r ved by ST M e a s
i rl
us om os es t
t s
ci
ns ecei
tl

i fndi t i cha ged commisonst isf t escusom e si t amountof$360,
n i ng hat t r
s i o t uur
t r n he
337.

1 a 1 s e as Fi lJ g nta 6 ( s rbi khet t lmo tr gan t De e da s
d. t 0; e lo na ud me t de ci ng i o a nea y i o f n nt
t

of$ 60,3 5 stea n t tST MeasC hag disqf ursc tme si c ne to
3 3 75a h mou t ha
tl k r e tg ut e uso r n on cin
c
wiht vilto s... e ci di Cou 4oft Compli '
t he oain
d srbe n nt
he
ant).
A c di y,t Cour ' pror or s and fndi s
cor ngl he
ts i
der
i ngs uppor t concl i t t
t he
us on hat he
com m is onsc ged t ST M e al ' f ur cusom e scons iut ilgote gai r i
si
har
o
t s s ut es t r
tt e l- t n ns ece ved

i c cton wih Defnda s r gitatonvi atons a t t$360, i aûr ona e
n onne i
t
e nt ' e sr i ol i , nd ha
337 s ûeas bl

a prxi to o (ho e ilgotngans'Ame man, 45F. xa 9
p o main f t s j l- te i ,
' r
6
App' t 43.
Def
endant A r
s' gum ent A gai tD igor m ent
s
ns s ge
1.

W ai r
ve

Def nt ar t tt CFTC w ai any r ghtt r
enda s gue ha he
ved
i o eques digor entby onl
t s gem
y

i udi re iuton i ispos-ralbr efng and pr
ncl ng stt i n t
tti i i
opos d fndi off tand concl i
e i ngs ac
usons
ofl w . D ef 'Br 4.
a
s. .

The Cour r pec f l diagr . Def ndant cie no c e 1 w f om t El vent
t es t uly s ees
e
s t
as a r
he e h

Cic tont sis a t r ddoesnots
r ui hi s ue, nd he ecor
uppor Def nt ar
t enda s' gumentt t CFTC
hat he
f ied t r que tdigor enta ti .1d. l d,t CFTC s fc l sat tFort
a l o e s s gem
t ral
ndee he
pecii aly t ed: û he

f ur ,t unr git r f t escl mst CFTC i s ki digor m entof$360, 5
ut es he e seed uur ai he
s ee ng s ge
334.'
Tr a Tr 45: -46: DE 1
i l . 25
2,
61.

2.

Joi and Se alLi lt
nt
ver
abiiy

Iee a t as aguet tMr Es o o c n behedj ity a d sveal la e
lfnd ns lo r ha . c bi a not
l onl n e rly ibl
f di gor m entwih ST M e al,be
or s ge
t
t s caus t e was no e dence or fndi t Es o
e her
vi
i ng hat cobi
hi s fr cei d any oft com m i sons. Def . Br 5-8.
m el e ve
he
si
s' .

The Cour i notper uaded. The El nt Ci c lthas s scaly r
ts
s
eve h r ti
peci l ecogni t
zed hat

ûdls r e nt...ma b j nta svea. eFTC v F' Unie s Mgmt LLC,
i igo g me
l
y e oi nd e r l'
'Se
. r v ral
z
r
,
87 F.d1 4,1 ( 1hCi. 7 .l de d teElve t Cic t sasr dj i -n
7 3 23 239 1 t r201 ) n e ,h e nh ruiha f me onta ds aldigor enta a dsi s alc es whe e def nt m ade t s e ar ent
ever s gem
w r n ever as
r
enda s
he am
gum
t Esc o r s he e.See eg. FTC v.W ilams Sc tt As oci es 679 F.
hat obi aies r
,. ,
li , ot t s at ,
App' 836,
x

8 9 40( 1hCi. 7)(f mi oita s v rl s r e n a r o rdee a ts
3 - 1 t r201 aGr ngj n -nd-e ea digo g me t wad ve fnd n '

ag n t tû es ul bers nsbl onyf rt a nt pe s nal r c ie ';l'r
rume tha k ho d epo i e l o he mou he ro ly e ev d' 1l
h
) 'z
t
Unie s lMgmt,8 F.da 1 (fimigj nta -e rldigo g me ta r o r
vra
77 3 t 243 afr n oi -nd svea s r e n wad ve
de e a tsa gu n t tûtc n bef r e t digo geo y t ea nti r t i d'; C
f nd n ' r me t ha û a
i
o c d o s r nl h mou t e ane ' SE
)

v Mo eoso,5 7 F.App' 91 928 ( 1h Ci.201 ( fimi j i -nd svea
. ntr s 5
x 7, -29 1 t r 4) afr ng onta -e r l
digor mentawar overdefnda ' ar e t tçi woul be i quia et hol hin
s ge
d
e nts gum nt ha s
t
d ne tbl o d i

la l f rd s r m e whe hed dno r c i p o e d ' .M o e ve , c u et Cou t
ib e o igo ge nt n i t e eve r c e s'
) r o r be a s he r
f
ound a am a t of1 w t tEs o w asa ûcontoli pe s 'undert CEA ,he S a
s
ter a ha cobi
l r lng r on'
he
û y
m

b hed la e f (he vi lto . . o t s me e t n a gh )c tole pe s ' i .
e l ibl or t j o ai n . t he a x e t s t e on r l d r on' . ,
e

j i l a s ve a l wih ST M e as Se 7U. C. j 1 c b)
onty nd e r ly t
tl . e S. A. 3 ( .
I t rbr ef D ef
n hei i , enda sr y he l on t Supr m eCour ' deci i i H one
nt el aviy
he
e
ts
son n
ycut
t

v Unie St e ,1 7 S. .1 26 1 5 ( 1 ) I Hon yc tt Su e eCo t l t t
. t d ats 3 Ct 6 , 63 20 7 . n e ut, he pr m
ur hed ha
ac i na f ret r saut d dn pem i ad f nd n t behedj n l a s ve al la e
rmi l o f iu e t t e i ot r t e e a t o
l oity nd e r ly ibl

f pr ry t hi c cons r t de i fom t c i e,butt t def nda hi s f
or ope t hat s o- pia or rved r he rm
hat he e nt m el
di nota r 1 a 1
d
cquie. d. t 630.Appl ng t tr asoni her D ef nda sa guet tt CEA
yi ha e
ng e, e nt r
ha he

sl l ry doesnotper i di gor m entagai tEs o,whe et r i no evi ncet the
inia l
m t s ge
ns cobi
r he e s
de
ha
per onaly r i t com m is onscha ged by ST M e al . See Def . Br 5.
s l ece ved he
si
r
t s
s' .

Def nda s r la on Hone ti m i pl
e nt ' e i nce
ycut s s aced.' nlket def
U i he endanti H one t
n
ycut,
t r ds
he ecor upporst fndi t Es o di r vem one ar ga ns i c
t he i ng hat cobi d ecei
t y i n onnec i w ih
ton t

t r git a i vi atons See e. ,A ug.29,201 Fi ngs ofFac a Concl i of
he e sr ton ol i . , g.
6 ndi
t nd
usons

La a 2 (s ngt tG ee da s' neayganfo t ta a to a is e'ncud s
w t 4 tndi ha D f n nt mo tr i r m he rns cins tsu 'i l e
Ih c mmiso sc r d i c nne tonwih t u r gitr df u e s e ' (mpha i
' e o s in ha ge n o ci t he n e se e utrs als' e
t
)
ss
a de ; r 7 201 Or e Gr n ig Pa ta mma y J gme a 1 (i i Es o o
d d) Ap . , 6 d r a tn rilSu r ud nt t 0 fndng c bi
labl a t c r lng pe s ofST M et s notng t hewasthe l ges s ehol r
i e s he ontoli
r on
al, i hat
s ar t har di
t
i t H ol ng Com pany,w hi h ow nsbot ST M et l a Lor e 'a û s gnat y t ST
n he di
c
h
a s nd el y' nd û i or o
a

M eal a Lor ey' bank ac
t s nd el s
count andhadaut iyt tans e m one t a fom t e
s,
hort o r f r
y o nd r hoj

a c un s'.
c o t'
)
l a event t Cour doe notagr t tt crm i f f iur s a ut di c s
n ny
, he
t s
ee ha he i nal or e t e t t e s us ed
i H one ti ana ogoust t CEA ' di gor m e pr si a i ue her U nlke t
n
ycut s l
o he
S s ge nt ovi on t ss
e.
i he
f f iur sat e whi h a i onl t t pari ardef ndantw ho obt ned t t i ed
or et e t ut , c pples y o he tcul
e
ai
he ant
pr ry,t CEA ' di gor m entpr si apple t ka per on f
ope t he
S s ge
ovi on
i s o 'ny s ound i t ac i t
n he ton o

ha comm it d any vi aton'- r r es ofw het t tpe s w asal o t one w ho
ve
te
ol i ' ega dl s
her ha r on
s he

pe s nal t e eve ' h ilg te gans Compar 21U. C.j 8 3( ) 1 , t 7 U. C.
r o ly û c i d't e l- o tn i .
r
e
S.
5 a ( ) wih
S.
j l - ( )3)
3a 1d ( .

8

3.

Proxi at Caus
m e
e

Def
endant ne a gue t û oxi at caus m us be s n i ever f r c e
s xt r
hat û
pr m e
e
t how n
y ede al aus
ofac i ' a t t r i no e de s i t tcusom e saut i t f ur a
tonr' nd hat he e s
vi nce how ng ha
t r
horzed he ut es nd

o insta sb c s o fnd ns û r s drgitr df t ec mmiso mec nt
pto rde e au e /De e a t'û eume e see uur o sin rha
p

sau . De s'Br 1 (ii Ban o
tts' f. . 0 ctng k fAm.Cop. .Ci o i ,1 7 S. .1 6,1 5
'
r v t fM ami 3 Ct 29 30
y
( 01 ).TheCo r i no pe s d dby De e a t ' oxi t c us a gu n .
2 7)
u t s t rua e
f nd n s pr ma e a e r me t
I r a ng t s cas t El nt C icui expr s y obs ved t di gor m e
n em ndi hi
e, he eve h r t
e sl
er
hat s ge nt
m ay be or e ii a opra e cicum sanc wihoutr gar t oxi at c
der d, sn ppr i t r
t es, t
e d opr m e ause.'S.rr
'
.

Mtal,8 4 F. a 1 1 (mph ssa de ) s ,t Co td s g e swih De e a t '
t s 9 3d t 33 e a i d d .Alo he ur ia r e t f nd n s

ra igo t Su r meCo tsBan o
e dn f he p e
ur' k fAme iao nina rqurngpr maec us ûn
rc pi o s e ii oxi t a e t
i
ever f alc e ofacton. Se Def . Br.8. l t d,t Supr m e Cour sat d t t
y eder aus
i ' e
'
s'
ns ea he
e
t t e ha

p o maec us i r q rdknal a e o l s'Ba fAm.1 7S. . t1 05(mpha i
r xi t a e s e uie t 1c s s fosv' nko
i
, 3 Cta 3 e
ss
a de , uc a t Ciy' a lge l so p o ry-a r ve ue.Butd s r e nté o us s
d d) s h s he t s le d os f r pe t t x e n
igo g me û c e
f
on tl- te gai y nott vi tm ' l s .' Amer an,645 F.A pp' at944. Thus t
ilgo t n ns '
he c i s os es'
m
x
, he
Cour doe notagr t tdi gor m e r r a s
t s
ee ha s ge nt equies howi ofpr m a e c e.
ng
oxi t aus
4.

Deduc i ofExpens s
ton
e

N ext D ef nda scont nd t tt CFTC' pr
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uppored by t r cor a gui t tno evi ncew aspr ent t s
t
he e d, r ng ha
de
es ed o how ST M et s' k
al s û
net

gans a
i , ccountngf expens sas ocaedwiht tans tonsa comm isonss i wih
i or
e s it
t he r aci nd
s i plt i
(

b o r . De s'Br 1 Ac or ngt De e nt, heSu e Cou ti Kok s v S
r ke s' f . . 0. c di o fnda s t
'
pr me r n e h . EC

1 7 S.Ct 1 5,1 44 45 ( 01 ,ç l ta to lc mm o lw digo g me tme s r s
3
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he
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ne ga ns t ng accountofexpens ' 1 a 11.
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9

The El nt Cic thasalea ans e t s que ton,agr ng wih t Second
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r dy wer d hi
si
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Cicui' vi w t tûdef nda s i a di gor m ent ac i a e not e il t deduc cos s
r t s e ha s e nt n
s ge
ton r
ntted o
t t

as ocit d w ih c m itng t r il l a s' FFC v. Was D at Res,I ,704 F.
s ae
t om ti hei lega ct .'
h. a
. nc.
3d

1 23 1 25( 1hCi. 1 (n e na q tto ma kso te ) s ealoS v Ae oknei
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.
r , 44 Ap x 2, 5 1 t r 2 1 at mi igoge n wad n
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ns
t t or i s

e e s s pe s na us ,o ohe wie i i tra t dig g me f' (n ena q tto
xp n e , r o l e r t r s , s mma e i l o s or e n ) it r l uoa i n
maksomi e .
r
t d)
t
M or
eover t Cour doe nota eew ih Def ndant r ng oft Kok h opi on.
, he
t s
gr
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ni

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vi
t
SeeKoke h,1 S.Ct a 1642 n. A l t Cour not t di ge e ts e i es
s 37
.t
3. so, he
t ed hat sgor m nt ûom tm
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s de e t
i aton
enda ' xpens ,' i a 1
es' see d. t 644,and car uly
ef l
di c ai ed r chi a hol ng on t pr i t of s h digor m entor r ,s i at
sl m
ea ng ny di
he opr e y
uc s ge
de s ee d.

1 4 n. (ç t i g i t i o ni n s ul be i tr r t d a a o ni n ...o whehe
6 2 3 û h n n h s pi o ho d n e p ee s n pi o
No
n
t r

c rsha pr pe l a id d s or me tprncplsi t sc nt x .)
ou t ve o ry pple ig ge n i i e n hi o e t' .
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5.

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sve ne ause

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r

Fi l Def ndant m a a cons iutona ar ent ar ng t ç r Es obi has
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To
ly
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e
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w d m
o

a e c s i fnei vi lto jo t Ei t Ame dme t' 1 .
n x e sve i n o ai ng f he gh h
n n. d
'
The Cour r pec f l diagr s w ih D ef nda s Ei h Am e
t es tuly s ee t
e nt ' ght
ndm entar e .
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TheEi h Am e
ght
ndm e ' pr bii on û es i fne ' élm ist gover entspow e
nts ohi ton û
exc sve i s' Ei t he
nm '
r

t e r tpaym e s ...as punihm ent f s e of e e.' Ti v.I ana, 1 S.Ct
o xt ac
nt
s
or om
f ns ' mbs ndi
39
.

6 2, 8(01 ) Eve as mi ds or me c ul b c nsd rdi s me 's b e t
8 68 2 9 . n s u ng ig ge nt o d e o iee k h nt' u j c
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t
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Au s 29 201 Fi l udg n ( 1 7)
gu t , 6 na J me t DE 6 .
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P s n t Fe R.Ci P. () aj dg n s ti f rht s csctr o te
urua t o d. v. 58a, u me t etng o t he pe i ems f h
di go ge entaw a d w ilbe s touti a s r t docum e .
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