U.S. Securities and Exchange Commission v. Spartan Securities Group, LTD

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FOR PUBLICATION

In the

United States Court of Appeals

For the Eleventh Circuit

____________________

No. 22-13129

____________________

U.S. SECURITIES AND EXCHANGE COMMISSION,

Plaintiff-Appellee,

versus

SPARTAN SECURITIES GROUP, LTD,

ISLAND CAPITAL MANAGEMENT,

CARL E. DILLEY,

MICAH J. ELDRED,

Defendants-Appellants,

DAVID D. LOPEZ,

Defendant.

____________________

Appeal from the United States District Court

for the Middle District of Florida

D.C. Docket No. 8:19-cv-00448-VMC-CPT

____________________

Before BRANCH, LUCK, and TJOFLAT, Circuit Judges.

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22-13129 Opinion of the Court 2

PER CURIAM:

The perpetrators of two microcap securities fraud schemes

created nineteen shell companies that didn’t maintain actual busi-

ness operations or assets, and then sold the companies’ securities

at inflated prices after the securities became eligible for public trad-

ing. This case is about the firms who helped make those compa-

nies’ securities publicly tradeable.

Carl Dilley and Micah Eldred owned and operated the two

firms—Spartan Securities Group, Ltd., and Island Capital Manage-

ment. Spartan, a broker-dealer, submitted Form 211 applications

on each shell company’s behalf to the Financial Industry Regula-

tory Authority (FINRA). Once a Form 211 was approved by

FINRA, Spartan initiated public quotation on the companies’ secu-

rities. Then Island, a transfer agent, applied to make the securities

eligible for the Depository Trust Company’s (DTC) convenient,

electronic settlement process.

The Securities and Exchange Commission (SEC) brought

this enforcement action against Dilley, Eldred, Spartan, and Island.

Count six of its fourteen-count complaint alleged that each defend-

ant made false statements to obtain FINRA clearance and DTC el-

igibility, in violation of section 10(b) of the Securities Exchange Act

of 1934 (codified at 15 U.S.C. section 78j(b)) and SEC rule 10b-5(b)

(codified at 17 C.F.R. section 240.10b-5(b)).

Ahead of trial, the defendants moved to exclude an SEC ex-

pert witness as unqualified and unreliable, and they moved for spe-

cial interrogatories on facts that would determine the maximum

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possible penalties. The district court denied each motion. The case

went to trial, which ended in a jury verdict for the SEC as to count

six. Each defendant moved for judgment as a matter of law, and

the district court denied that relief too. And then, during the rem-

edies phase, the district court enjoined the defendants from violat-

ing section 10(b) and rule 10b-5(b) in the future, barred them from

having any involvement with penny stocks, ordered that each de-

fendant pay civil penalties, and ordered Island to disgorge ill-gotten

profits to the United States Treasury.

This is Dilley, Eldred, Spartan, and Island’s appeal. They ar-

gue the district court erred by denying their motion to exclude the

SEC’s expert witness and their motion for judgment as a matter of

law. They also contend that the district court abused its discretion

when imposing remedies. Most of the remedies were time-barred,

they say. As to the disgorgement, they argue (1) the Exchange Act

doesn’t authorize ordering disgorgement to the Treasury, (2) the

facts of this case made that relief inequitable, (3) the SEC failed to

show Island’s profits and wrongdoing were causally related, and

(4) the SEC didn’t reasonably approximate the ill-gotten profits. As

to the civil penalties, they argue (1) the Seventh Amendment re-

quired that a jury find the facts establishing the maximum allowa-

ble penalties and (2) the district court failed to consider their ability

to pay the fine.

After careful consideration, we affirm.

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FACTUAL BACKGROUND

Over-the-Counter Market Regulation

Before turning to the defendants’ conduct, we first describe

the process they used to take companies public for listing in the

over-the-counter market.

Microcap securities are low-priced stocks—often called

penny stocks—that trade “over the counter,” meaning that they do

not trade on a major national exchange. See Microcap Fraud,

https://www.sec.gov/securities-topics/microcap-fraud

[https://perma.cc/FF7A-BPC7] (last visited Jan. 21, 2025). To pre-

vent microcap-securities fraud, the SEC adopted rule 15c2-11. Rule

15c2-11 requires that, before a broker-dealer can “publish any quo-

tation for a security or . . . submit any such quotation for publica-

tion[]” in the over-the-counter marketplace, it must disclose certain

information about the issuing company. 17 C.F.R. § 240.15c2-

11(a)(1), (b)(5)(i). That information includes the issuer’s name and

address, the identity of its transfer agent, and a “description of the

issuer’s business,” including what products or services it sells and

the facilities it operates. Id. § 240.15c2-11(b)(5)(i).

A broker-dealer complies with rule 15c2-11 by submitting a

Form 211 to FINRA, a private nonprofit organization that regulates

broker-dealers. The Form 211 asks the broker-dealer to disclose

the information required by rule 15c2-11, including the issuer’s and

transfer agent’s identities. It also asks for “circumstances surround-

ing the submission of th[e] application,” such as “the identity of any

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person(s) for whom the quotation is being submitted and any in-

formation provided to [the] firm by such person(s).”

A “registered principal of the firm responsible for th[e]

Form 211 application[] and all subsequent submissions made in

connection with [it]” must certify that he “has a reasonable basis

for believing that the information accompanying th[e] form . . . is

accurate.” By signing the certification, the principal

“acknowledge[s] that copies of th[e] form, accompanying docu-

ments, and subsequent submissions made in connection with [the

form]” may be given to the SEC, other agencies, and “to the public

upon request.”

After the broker-dealer certifies and submits the Form 211,

FINRA examiners may request more information about the appli-

cation, or point out issues of concern (called “red flags”) by sending

“deficiency letters” to the broker-dealer. If it still desires FINRA

clearance, the broker-dealer will respond and cure the deficiencies;

otherwise, the application is abandoned. This back-and-forth pro-

cess continues until FINRA’s concerns are resolved and it ultimately

approves the application.

When FINRA approves a Form 211 application, it clears the

issuer’s securities for public quotation on the over-the-counter

market. Or, in the words of FINRA compliance analyst Deji Ad-

ams, who testified at the defendants’ trial, completing the

Form 211 process “essentially open[s] the door” to over-the-coun-

ter public trading of the issuer’s securities. Without broker-dealers

initiating and completing the Form 211 process, he explained, “the

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general public would not be able to invest” in the over-the-counter

market.

FINRA approval also enables the transfer agent to apply to

make the issuer’s securities eligible for clearance and settlement

through the DTC. The DTC is a financial clearinghouse and the

largest depository for shares of securities in the United States. The

DTC facilitates convenient, virtually instant transfers of securities

for eligible issuers. It holds stock certificates in trust for eligible

issuers and allows eligible issuers to take advantage of electronic

settlements of any purchase or sale in the marketplace.

The Shell Companies

From 2009 through 2014, Spartan was registered with the

SEC as a broker-dealer. During that same period, Island was a reg-

istered transfer agent.

Spartan and Island were “sister companies.” The two com-

panies shared the same office space, equipment, and employees.

They also shared the same corporate officers. Dilley was a regis-

tered principal of Spartan and the president of Island. Eldred was

a registered principal of Spartan and the CEO of Island. Eldred

testified that he created both companies to “complement” one an-

other by providing both broker and transfer-agent services to the

same clients.

Four of the “clients” who solicited Spartan and Island’s ser-

vices were Alvin Mirman, Sheldon Rose, Michael Daniels, and Di-

ane Harrison. These four individuals asked Spartan and Island to

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help them trade nineteen shell companies through the over-the-

counter market.

Mirman/Rose Issuers

Mirman and Rose, collectively, created fourteen of the shell

companies: Kids Germ Defense Corp., Obscene Jeans Corp., On

the Move Corp., Rainbow Coral Corp., First Titan Corp., Neutra

Corp., Aristocrat Group Corp., First Social Networx Corp., Global

Group Enterprises Corp., E-Waste Corp., First Independence

Corp., Envoy Group Corp., Changing Technologies, Inc., and First

Xeris Corp. (together, the “Mirman/Rose issuers”).

Mirman and Rose’s plan from the onset was for these com-

panies to be sold as public vehicles. To that end, they recruited an

officer for each company to act as CEO in name only. They re-

cruited personal friends and family members to fill these positions.

Specifically, Mirman and Rose focused on friends and family who

“had [a] background in th[e] specific company.” For example, E-

Waste’s purported business plan was to open an electronics recy-

cling facility, so Rose recruited an electrical engineer to be its direc-

tor. Rose testified that these straw officers “knew . . . up front” that

Mirman and Rose would sell the companies and give the officers a

cut. These officers, Rose explained, had no control over the issu-

ers’ business plans—Mirman and Rose “pretty much directed the

total company.”

After recruiting the straw officers, Mirman and Rose began

the process of taking the companies public. The parties stipulated

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that Mirman and Rose “prepared false and misleading . . . SEC fil-

ings [that] falsely depicted the issuers as actively pursuing a variety

of business plans, when the only plan from the onset was for the

compan[ies] to be sold as public vehicles.”

To discuss the next step—seeking FINRA clearance—Mir-

man and Rose “had a couple of lunches” with Dilley and Eldred.

Dilley and Eldred would ask “‘what’s in the pipeline’ type of

things.” Mirman and Rose responded that they were “working on

a couple of things” that they “might be able to provide to [Dilley

and Eldred] so that [they] can do some of the FINRA work.” Mir-

man testified that Dilley and Eldred told him that “in order for

[him] to deal with their broker-dealer, they would want me to deal

with their transfer agent as well.” So he and Rose asked Spartan to

file the shell companies’ Form 211 applications and for Island to be

their transfer agent.

Spartan began preparing Form 211 applications for Mirman

and Rose, and Mirman and Rose served as Spartan’s “point people”

during that process—providing Spartan with any information that

it needed to complete the applications. Mirman and Rose for-

warded documents necessary to complete the applications to Spar-

tan. Spartan, Rose explained, would “take th[e] information” and

“put it into the proper language for FINRA,” including “writing ba-

sically the company’s plan and what it’s all about, the technical type

of work to finally get the company public.” That information in-

cluded Mirman and Rose’s purpose for creating the companies—

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Rose testified that he told Spartan “that the plan from the begin-

ning” was to sell “[n]ot only Kids Germ,” but also “anyone down

the road [he and Mirman] would be selling.”

Rose testified that because he and Mirman were Spartan’s

point people, he never told the issuers’ officers to contact Spartan

or any of its employees, and he never introduced the officers to

Spartan. He explained that Mark Nicholas, his son-in-law and Kids

Germ CEO, “didn’t know Carl Dilley” and had “no reason” to con-

tact Spartan. Mirman testified he was unaware of Spartan ever ask-

ing the issuers’ officers for information. Two of the issuers’ offic-

ers—Nigel Lindsay of First Independence and Matt Egna of Chang-

ing Technologies—testified that they never contacted Spartan.

Lindsay, a friend of Rose’s son, testified he never spoke to anyone

from Spartan and had never heard of Dilley’s name. He also said

that he never saw the Form 211 that Spartan completed for First

Independence. Egna similarly testified that he did not know Dilley

or Eldred, never spoke to them, and never interacted with them

through Spartan while he was Changing Technologies’ president.

Spartan ultimately submitted Form 211 applications for each

Mirman/Rose issuer to FINRA between December 2009 and 2014,

which Dilley signed as the “principal of the firm responsible for

th[e] . . . application[s].” Each of these applications responded to

the Form 211’s question asking for “circumstances surrounding the

submission of th[e] application,” such as “the identity of any per-

son(s) for whom the quotation is being submitted and any infor-

mation provided to [the] firm by such person(s),” by saying “see

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cover letter for details.” The cross-referenced cover letters were

written on Spartan letterhead and signed on Spartan’s behalf by

Spartan employees—either Dilley, Anna Krokhina (who was an Is-

land employee too), or Taylor Zajonc.

All of Spartan’s cover letters opened with an “Introduction

to Spartan Securities” section. These introductory sections stated

that Spartan was filing the Form 211 applications after Dilley talked

to the issuers’ respective officers by phone and electronically. For

example, the First Independence Form 211 letter stated “Dilley . . .

was telephonically contacted by Nigel Lindsay,” and that Spartan

was proceeding with filing a Form 211 “[f]ollowing telephone con-

versations and electronic communication over the past two

months with the [i]ssuer.”

After the introduction, the cover letters included a, “The

[i]ssuer described its business as follows:” section. These sections

said that “[t]he [i]ssuer[’s] described” business plans included selling

consumer products or services (Obscene Jeans—women’s cloth-

ing, Kids Germ—germ defense products, On the Move—electronic

devices for vehicles, First Xeris—landscaping, Changing Technolo-

gies—smartphone apps, Neutra—healthcare products), running a

social networking site for parents (First Social), and opening vari-

ous types of facilities (E-Waste—an electronics recycling facility,

Aristocrat Group—a pregnancy healthcare center, Envoy Group—

an “adult day care center,” Global Group—a vodka distillery, Rain-

bow Coral—a sea “coral farm,” and First Independence—a food-

product labeling and testing facility). Each letter then provided

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more information about the issuers, including that “[t]he issuer[s]

ha[d] represented” they had not entered into any merger discus-

sions, that they “[we]re not working with any consultants,” and

that their officers had not “requested a listing quotation on” any

other companies.

FINRA sent Spartan deficiency letters as to each application,

and Spartan responded each time with additional information to

address FINRA’s concerns. FINRA ultimately cleared each Mir-

man/Rose issuer for public quotation, informing Spartan each time

that it was “acting in reliance upon the information” in the applica-

tions. The parties stipulated that, after Spartan obtained the issu-

ers’ FINRA clearance, Spartan “acted as the exclusive market-

maker for the issuer[s] for [thirty] days,” holding itself out to the

market as ready to buy and sell the issuers’ securities.

Dilley testified that, “for every company that . . . had gone

through the Form 211 process[, t]he next thing would be to go and

figure out how to get them DTC eligible.” He viewed this next

step as important for “brokers that would buy or sell the stock,”

acknowledging that DTC eligibility was necessary to “allow[] for

electronic settlement of any purchase or sale[] in the marketplace”

and to “make[] the transaction easier in the event of a sale or pur-

chase.” Then, according to Rose, “once everything was formulated

[with FINRA and DTC], the next thing was basically . . . to sell the

shell of a company” and the “job was to basically sell the shell”—

which he and Mirman did. Island was each Mirman/Rose shell’s

transfer agent, with the exception of Envoy Group.

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Kids Germ, for example, took that path. Kids Germ, accord-

ing to Rose, “wasn’t operating” when Spartan submitted its

Form 211. After FINRA approved its Form 211 on January 4, 2010,

Rose emailed Dilley that same day asking, “What do you recom-

mend the company do with the DTC know [sic] the route it is tak-

ing?” Rose also asked, “Do you want to speak to the atty interested

in the company?” Dilley responded, “We should apply for DTC

eligibility[—]Anna [Krokhina] can get that going.” And Dilley of-

fered to call the “atty.” When asked about the email exchange at

trial, Rose testified that “atty” meant “the attorney for the com-

pany, whoever was buying it at the time.” That the attorney was

someone who “wanted to purchase the company and wanted to

make sure that it’s going to happen” was, Rose explained, “the only

thing [he] could think of.”

Less than two weeks later, Krokhina, who “did a lot of the

work with the guidance of Dilley,” used her Island email address to

submit a DTC application for Kids Germ. In January 2010, she sent

the required information to Penson Financial Services, a DTC

clearing firm, and wrote that “the company is not a shell.” One

month later, once Kids Germ became DTC eligible, it sold in a re-

verse merger that Island assisted as the transfer agent. 1

1

Generally, a “reverse merger” refers to when a small public shell company

acquires a large private company that isn’t a shell. This acquisition essentially

allows the private company to go public without having to navigate the regis-

tration process.

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Daniels/Harrison Issuers

Eldred knew that Daniels and Harrison (husband and wife)

were both active in the “reverse merger business” and that they

“dealt extensively” with shell companies. Daniels and Harrison

had been friends with Eldred since 2003 or 2004. Aside from their

personal friendship, Daniels, Harrison, and Eldred also frequently

did business together. Eldred testified that “Spartan and Island pro-

vided services to [Daniels’s and Harrison’s] law firm’s clients,” plus

“some other things . . . outside of that.”

For example, in 2010, Eldred and Harrison discussed becom-

ing business partners. Eldred emailed Harrison from his Spartan

address about a “partnership approach,” “proposing[] a series of

transactions . . . to reorganize certain companies . . . through bank-

ruptcy and then sell them.” Eldred mentioned “[one], or maybe

[two] projects” that they could “do immediately” and that they

could “add [one] or two additional per year.” As for splitting the

profits from these projects, Eldred proposed that Harrison would

receive a one-third share—telling Harrison that, for example, “if a

cleaned up shell is worth $300k, then that’s $100k for you when we

sell it.” In 2012, Harrison helped Eldred sell a company called En-

deavor to businessman Andy Fan. Eldred emailed Harrison (again

from his Spartan address) to “get to work” on a contract for that

transaction, which Fan wrote was the “beginning of a beautiful re-

lationship.”

The parties stipulated that, spanning 2011 through 2014,

Daniels and Harrison asked Spartan to file Form 211 applications

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for five issuers: a 2011 application for Dinello Restaurant Ventures,

Inc.; a 2012 application for Court Document Services, Inc.; another

2012 application for Quality Wallbeds, Inc.; a 2013 application for

Top to Bottom Pressure Washing, Inc.; and a 2014 application for

PurpleReal.com Corp. (together, the “Daniels/Harrison issuers”).

Spartan submitted each of these applications—which Daniels and

Harrison had both worked on—to FINRA. Harrison served as each

issuer’s attorney.

When Spartan submitted these applications on Daniels’s and

Harrison’s behalf, Eldred signed the Top to Bottom and PurpleReal

forms as the “principal of the firm responsible for th[e] . . . applica-

tion[s].” These applications—like the Mirman/Rose applica-

tions—included cover letters, written on Spartan letterhead and

signed by Zajonc, describing the issuer’s “[i]ntroduction to Spartan

Securities.” The Top to Bottom letter stated Spartan’s introduction

to the issuer was that the company president’s wife called Eldred,

but Spartan “d[id] not have any other relationship with [the presi-

dent’s wife], [the president], Top to Bottom . . . , or any of their

other representatives.” Daniels served as Top to Bottom’s treas-

urer and secretary, and Tina Donnelly—a Dinello employee who

“handled all the financial records” for the Daniels/Harrison issu-

ers—testified that Daniels’s “role in taking [Top to Bottom] public”

was that “[h]e directed everything.” She elaborated that Top to

Bottom “didn’t do anything without his direction [and] guidance.”

Similarly, the PurpleReal letter’s introduction section stated

that Harrison was the company’s CEO and that she called Eldred.

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Besides “Harrison [being] known to [Spartan] for many years,” the

letter wrote, Spartan “d[id] not have any other relationship with

[her], the [i]ssuer, and/or its representatives.” When asked about

this statement at trial, Eldred testified he “personally did” other

business with Harrison, which the application didn’t disclose.

Both letters stated that “[t]he [i]ssuer ha[d] represented that

they ha[d] not entered into any . . . discussions or negotiations con-

cerning potential merger or acquisition candidates.” Donnelly tes-

tified that the actual “business model” for these companies began

with taking them public by obtaining FINRA clearance. After that,

the plan was to “immediately” dispose of all the company’s assets

and sell the remaining public shell to an investor—usually for a re-

verse merger with one of Fan’s “businesses in China.” Donnelly

explained that once FINRA cleared Top to Bottom, its assets were

sold off in “a fire sale” and the remaining public shell was “sold to

an[] . . . investor that Daniels and Harrison found.” Daniels pro-

posed doing the same with PurpleReal, telling Donnelly and two

others, “Let’s . . . create a company from scratch, and let’s—let’s

take it through the process, take it public, and, you know, you girls

would make, you know, tons of money.” But before FINRA could

clear PurpleReal, the SEC obtained a stop order.

* * *

The SEC pursued enforcement actions against Mirman,

Rose, Daniels, and Harrison based on fraud and misrepresentations

about the nineteen shell companies. It initiated criminal actions

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against Mirman and Rose. Mirman, who testified that he con-

sented in 2007 to being barred from associating with any FINRA

member and “shouldn’t be involved in the . . . filing of [Form]

211s,” pleaded guilty to conspiracy to commit securities fraud re-

lating to ten of the Mirman/Rose issuers. So did Rose as to all four-

teen Mirman/Rose issuers.

The SEC initiated civil enforcement action against Daniels

and Harrison, alleging they made misrepresentations as to the

other five companies. Daniels, who had a past forgery conviction

before working with the defendants, did not admit the allegations

but did consent to a judgment. Likewise, Harrison did not admit

the allegations but consented to a judgment.

PROCEDURAL HISTORY

On February 20, 2019, after the enforcement actions against

Mirman, Rose, Daniels, and Harrison ended, the SEC filed this en-

forcement action against Dilley, Eldred, Spartan, and Island. The

SEC’s fourteen-count complaint alleged that the defendants

schemed with Mirman, Rose, Daniels, and Harrison to “package[]”

the shell companies “for sale as public vehicles,” or at least aided

and abetted schemes to do that, while knowing the companies

2

“were pursuing their stated plans under false pretenses.” Most rel-

2

Count one alleged Spartan published quotations without the “reasonable ba-

sis” required by rule 15c2-11 and count two alleged Dilley and Eldred aided

and abetted that violation. Counts three through five and seven through thir-

teen alleged either that the defendants engaged in schemes to defraud with, or

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22-13129 Opinion of the Court 17

evant to this appeal, the SEC alleged in count six that each defend-

ant made false statements or misleading omissions about the shell

companies to obtain FINRA clearance and DTC eligibility, in vio-

lation of Exchange Act section 10(b) and SEC rule 10b-5(b). As re-

lief for those violations, the SEC sought a permanent injunction,

monetary civil penalties, a penny stock bar as to Spartan, Dilley,

and Eldred, and disgorgement as to Island.

Pretrial Motions

Before trial, the defendants filed three motions relevant to

this appeal.

First, the defendants moved for summary judgment, argu-

ing that “[m]ost of [the] SEC’s claims” were time-barred. Citing 28

U.S.C. section 2462’s five-year statute of limitations for any “action,

suit or proceeding for the enforcement of any civil fine, penalty, or

forfeiture, pecuniary or otherwise,” they contended that “the only

acts for which the SEC [could] seek penalties” or disgorgement

were those related to Envoy Group, Changing Technologies, First

Xeris, Top to Bottom, and PurpleReal. The defendants argued that

aided and abetted frauds conducted by, Mirman, Rose, Daniels, and Harrison.

Count six alleged the defendants violated section 10(b) and rule 10b-5(b)

through false statements and omissions. And count fourteen alleged that Spar-

tan, Island, and Dilley violated the Exchange Act by selling or offering to sell

securities without effective registration statements.

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all conduct concerning the other issuers occurred before October

3

23, 2013.

The district court denied the summary judgment motion,

concluding that the defendants’ alleged violations “[we]re based on

a single course of conduct” spanning from 2009 through 2014. Less

than a week after the district court denied the summary judgment

motion, Congress enacted the William M. Thornberry National

Defense Authorization Act (NDAA). The NDAA created a new

ten-year statute of limitations applicable to “claim[s] for any equi-

table remedy” under the Exchange Act. See NDAA, Pub. L. No.

116-283, § 6501, 134 Stat. 3388, 4625–26 (2021); 15 U.S.C.

§ 78u(d)(8)(B). It separately created a new ten-year limitations pe-

riod for certain “[d]isgorgement” claims, including those based on

violations of section 10(b) or involving scienter. See 15 U.S.C.

§ 78u(d)(8)(A)(ii)(I), (IV).

Second, the defendants moved to exclude any trial testi-

mony by the SEC’s expert, James Cangiano. Cangiano is a private

securities-regulation consultant. He largely studied English in col-

lege and has not published any peer-reviewed work on regulating

securities. But Cangiano worked for over forty years in securities

regulation. He served as NASDAQ’s chief regulatory officer and

spent more than twenty years as a regulator for the National Asso-

ciation of Securities Dealers, Inc. (NASD)—FINRA’s predecessor

3

Although five years from the SEC’s February 20, 2019 filing date is February

20, 2014, the parties agreed to toll section 2462’s five-year period by 119 days.

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organization. During his time with NASD, he oversaw hundreds

of investigations, including investigations through which he “iden-

tif[ied] and address[ed] major frauds” in the microcap market.

Cangiano gave deposition testimony that there would sometimes

“be a transfer agent element” involved in those fraud investiga-

tions.

The SEC proffered Cangiano as an expert witness on “the

role of transfer agents and their function in bringing securities to

market.” The defendants conceded Cangiano had “extensive cre-

dentials as a regulator.” They argued, though, that his “‘jack of all

trades’ expertise” did not include any experience specific to transfer

agents and thus did not qualify him to testify on practices “in the

transfer agent industry.” His inexperience, they contended, ren-

dered his opinions unreliable under Daubert v. Merrell Dow Pharm.,

Inc., 509 U.S. 579 (1993).

4

The district court denied the defendants’ Daubert motion.

It found that Cangiano was qualified to testify about transfer

agents, explaining that he had extensive relevant experience based

on his time as a NASD regulator and consultant, which included

consulting on fraud cases where “fraudsters actually owned their

own transfer agent and . . . used [it] . . . to clean up the stock and

4

The defendants renewed their objection to Cangiano’s qualifications and re-

liability at trial. The district court overruled their objection based on its pre-

trial order.

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get it saleable.” And the district court found that Cangiano’s opin-

ions were reliable because he based them on his experience, SEC

regulations and guidelines, and his review of the evidence in this

case. At trial, Cangiano testified that DTC only accepts free-trading

5

shares, and that the transfer agent must affix a “restrictive legend”

to stock certificates if the shares are not free-trading. And he

opined that the defendants created “a one-stop shop” to “facilitate[]

the cleaning of shells so that they could be sold” at inflated prices.

Third, the defendants moved for special interrogatories.

Specifically, because section 21(d) of the Exchange Act allows a dis-

trict court to impose one of three maximum-penalty “tiers” that

increase based on the type of violation, see 15 U.S.C. § 78u(d)(3)(B),

the defendants argued that the Seventh Amendment required a

special jury finding of “th[e] facts that might be necessary for clas-

sification of penalties.” The district court denied this motion, find-

ing that the Seventh Amendment did not require a special jury de-

termination.

Trial and Rule 50 Motions

The case proceeded to trial, which lasted thirteen days. At

the close of the SEC’s case, both sides moved for judgment as a

matter of law under Federal Rule of Civil Procedure 50(a). The

5

Cangiano explained that “free-trading stock” means “unrestricted stock” that

can “be freely traded without any restrictions in the marketplace.” Stock that’s

controlled by an insider or control person is generally not unrestricted or free-

trading.

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district court reserved ruling on those motions and the jurors be-

gan deliberating.

A few hours later the jury returned a verdict. The jury found

Spartan, Island, Dilley, and Eldred liable on count six—making

false statements or omissions under Exchange Act section 10(b)

and SEC rule 10b-5(b). It did not find any defendant liable on any

other count. The district court then denied the rule 50(a) motions.

The defendants filed a renewed motion for judgment as a

matter of law under rule 50(b). Their arguments as to Dilley, El-

dred, and Spartan focused on the FINRA Form 211 applications.

They first argued that Dilley, Eldred, and Spartan did not “make”

any false statements in those applications; instead, they contended,

they simply repeated statements the issuers told them. Second,

they argued that any misrepresentations were immaterial to inves-

tors because the statements were made in nonpublic cover letters.

Third, they asserted that none of these misrepresentations were

made in connection with the purchase or sale of a security.

Island, for its part, argued that the only statements relevant

to its liability were those made to Penson (the DTC clearing firm)

about the status of stocks as free trading. Island specifically argued

that the statement to Penson that “[Kids Germ] is not a shell,” was

true, immaterial, and not in connection with the purchase or sale

of a security.

The district court denied the rule 50(b) motion. It concluded

that sufficient evidence showed that the defendants made multiple

misrepresentations, including that the issuers’ officers contacted

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Dilley or Spartan, that Spartan didn’t have relationships with Dan-

iels and Harrison, that Island, through Krokhina, told Penson that

Kids Germ was “not a shell,” and that Island misrepresented the

status of the stocks as free-trading. The district court then rejected

that the misrepresentations were immaterial and lacked any con-

nection to the purchase or sale of securities.

Remedies

After the district court denied the rule 50(b) motion, the fo-

cus turned to remedies. The SEC moved to permanently enjoin

the defendants from violating section 10(b) and rule 10b-5(b) in the

future, for the maximum tier-three civil penalties under sec-

tion 21(d)(3)(B)(iii) of the Exchange Act, for penny stock bars

against Spartan, Dilley, and Eldred, and for disgorgement of Is-

land’s ill-gotten profit to the Treasury.

As for the amounts of the financial remedies, the SEC ini-

tially requested that Island disgorge $147,508, which an SEC ac-

countant calculated based on the “fees [Island was paid] from each

of the [fourteen] Mirman/Rose companies through the date of the

issuer’s bulk sale.” The accountant stated that he arrived at

$147,508 after reviewing Island’s financial statements regarding

each issuer. After Island argued that it had legitimate expenses that

needed to be deducted, the SEC stuck by its initial request. The

agency acknowledged, though, that deducting $21,388 regarding

“possible” legitimate expenses for line items like “[p]rinting;

CUSIP; credit memo; courier; DTC” would result in disgorgement

of $125,720 and prejudgment interest of $43,710.74.

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For penalties, the SEC limited its civil-penalty request to

statements about Envoy Group, Changing Technologies, and First

Xeris as to Dilley, and Top to Bottom and PurpleReal as to Eldred.

It requested “one-time” penalties as to Spartan and Island not spe-

cific to any issuer.

The defendants opposed each type of proposed remedy.

They argued that the SEC asked for an overly broad “obey-the-law”

injunction. As to the civil penalties, the defendants contended the

SEC did not prove that tier-three penalties were appropriate. Dil-

ley, Spartan, and Island also argued that their respective “financial

condition[s]” warranted lesser (or no) penalties—Spartan and Is-

land were out of business, and Dilley had a negative monthly net

income.

As for disgorgement, Island made four arguments. First, it

argued that the Exchange Act does not authorize ordering dis-

gorgement directly to the Treasury. Although the parties stipulated

that distributing any disgorged profits to investors instead “would

be infeasible,” Island contended that the Exchange Act only allows

distributing disgorged profits to harmed investors. For this, Island

cited section 21(d)(5), which allows the SEC to seek, and a district

court to order, “any equitable relief that may be appropriate or nec-

essary for the benefit of investors.” 15 U.S.C. § 78u(d)(5).

Second, Island contended that disgorgement was inequita-

ble because Island’s profits were paid by the issuers, who “were

proven at trial to be fraudsters” and had unclean hands. Further,

citing the case’s “unique timing,” Island repeated its argument that

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the SEC’s disgorgement claim was mostly untimely under 28 U.S.C.

section 2462. Island also asserted that it would be unfair to retro-

actively apply the NDAA’s new ten-year statute of limitations.

Third, Island argued that the SEC failed to connect its calculation

to evidence from trial. And fourth, it maintained that the SEC did

not reasonably approximate Island’s ill-gotten gains because it

failed to subtract Island’s legitimate business expenses, like routine

operational costs.

After an evidentiary hearing, the district court partly

granted the SEC’s remedies motion. The court permanently en-

joined Dilley, Eldred, and Island from violating section 10(b) and

rule 10b-5(b), and it imposed penny stock bars as to Dilley, Eldred,

and Spartan.

Next, the district court ordered that Island disgorge $114,520

in profits to the Treasury, and it assessed $39,874.05 in prejudgment

interest. The district court rejected Island’s contention that the Ex-

change Act does not authorize ordering disgorgement directly to

the Treasury. It acknowledged that the Supreme Court held, in Liu

v. SEC, 591 U.S. 71, 74 (2020), that disgorgement ordered under sec-

tion 21(d)(5) must be “awarded for victims.” But it found that Liu

left open whether a district court may order disgorgement to the

Treasury “when it is impossible to identify defrauded victims.”

And, the district court reasoned, section 21(d)(7)—enacted through

the NDAA after Liu—allowed ordering disgorgement to the Treas-

ury even if doing so does not “benefit . . . investors” under sec-

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tion 21(d)(5). See 15 U.S.C. § 78u(d)(7) (“In any action or proceed-

ing brought by the Commission under any provision of the securi-

ties laws, the Commission may seek, and any Federal court may

order, disgorgement.”). Alternatively, the district court weighed

the equities and found that it was “more equitable” to order dis-

gorgement to the Treasury instead of “the money staying with Is-

land, a key player in a scheme to put dubious equities on the mar-

ket.”

After it found that disgorgement was appropriate, the dis-

trict court turned to determining the amount. Although the SEC

proposed disgorgement of all fees the Mirman/Rose issuers paid

to Island, the district court deducted “legitimate expenses incurred

by Island prior to the bulk sale date for each company,” including

expenses “for courier services, printing, and regulatory fees.”

While the SEC did not concede line items for “[p]rinting; CUSIP;

credit memo; courier; DTC” were legitimate, the district court

found that the SEC “tacitly agreed” these expenses should be de-

ducted.

The district court also excluded three $200 payments made

after the bulk sale date of Aristocrat Group, Global Group, and On

the Move, plus a $3,500 expense related to Kids Germ because of

its “odd payment history.” It did not order any disgorgement re-

garding Envoy Group, finding that the SEC’s evidence was “insuffi-

cient” as to that issuer. Although Island requested more reductions

for “fixed costs and overhead,” the district court found that Island

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did not show these expenses were legitimate and “any risk of un-

certainty necessarily [fell] on Island.”

Lastly, for civil penalties, the district court determined that

tier-two penalties were appropriate because the jury found the de-

fendants liable of violating rule 10b-5(b), “which requires that a

material misrepresentation . . . be made with scienter.” To deter-

mine the amount, “the [c]ourt look[ed] to” seven factors and “all

[of ] the facts and circumstances,” including “whether the pen-

alty . . . should be reduced due to defendants’ demonstrated cur-

rent and future financial condition.” After weighing these factors,

the district court—citing the SEC’s request to “assess penalties for

three ‘violations’ against . . . Dilley, two violations against . . . El-

dred, and a single violation against the corporate [d]efendants”—

ordered that Dilley and Eldred each pay $150,000. It also ordered

that Spartan and Island each pay penalties of $250,000 for a “single

violation.” The district court noted that the defendants “d[id] not

dispute” the number of violations attributable to each defendant.

DISCUSSION

The defendants appeal on multiple grounds. We first ad-

dress their argument that the district court abused its discretion by

admitting Cangiano’s expert testimony. Second, we turn to their

contention that each defendant was entitled to judgment as a mat-

ter of law. And third, we address their assertion that the district

court’s remedies order was an abuse of discretion.

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22-13129 Opinion of the Court 27

Cangiano’s Qualifications and Reliability

The defendants argue the district court abused its discretion

when it allowed Cangiano to testify as an expert witness on transfer

agent practices. They first challenge Cangiano’s qualifications,

contending that he was a “classic ‘expert on everything,’” but not

an expert on Island’s role as a transfer agent. The defendants con-

tend that Cangiano was not qualified to testify about “transfer

agents and DTC eligibility” under Federal Rule of Evidence 702

“because he had no experience in the transfer agent industry.” They

argue that he “never worked for a transfer agent,” and that NASD

didn’t directly regulate transfer agents while Cangiano worked

there. Further, they highlight that Cangiano wasn’t formally edu-

cated concerning transfer agents and has never published any work

about them. For these same reasons, the defendants argue Cangi-

ano’s opinions were unreliable.

We review “a trial court’s evidentiary rulings, including its

rulings on the admissibility of expert testimony, for abuse of discre-

tion.” Cook ex rel. Est. of Tessier v. Sheriff of Monroe Cnty., 402 F.3d

1092, 1103 (11th Cir. 2005). District courts “enjoy[] ‘considerable

leeway’ in making these determinations.” United States v. Frazier,

387 F.3d 1244, 1258–59 (11th Cir. 2004) (en banc) (quoting Kumho

Tire Co. v. Carmichael, 526 U.S. 137, 152 (1999)).

Rule 702 “has three basic requirements: the expert must be

qualified; his methodology must be reliable; and his testimony

must be helpful to the trier of fact.” Doe v. Rollins Coll., 77 F.4th

1340, 1347 (11th Cir. 2023); see also Frazier, 387 F.3d at 1259–60. The

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proponent must establish each requirement by a preponderance of

evidence. Doe, 77 F.4th at 1347 (citing Fed. R. Evid. 104(a)). While

“there is inevitably some overlap among th[ese] basic require-

ments . . . they remain distinct concepts.” Frazier, 387 F.3d at 1260

(citing Quiet Tech. DC-8, Inc. v. Hurel-Dubois UK Ltd., 326 F.3d 1333,

1341 (11th Cir. 2003)). We “and litigants must take care not to con-

flate” them. Quiet Tech., 326 F.3d at 1341.

Only the first two requirements are at issue here—Cangi-

ano’s qualifications and the reliability of his testimony. As to qual-

ification, a witness “need not be formally educated” on a topic to

be an expert on it. United States v. Williams, 865 F.3d 1328, 1338

(11th Cir. 2017). Instead, “experts may be qualified in various

ways,” including by knowledge, skill, training, or experience. Fra-

zier, 387 F.3d at 1260–61. Nothing in rule 702 “suggest[s] that ex-

perience alone . . . may not provide a sufficient foundation for ex-

pert testimony.” Fed. R. Evid. 702 Advisory Committee’s Note to

2000 Amendments. “In certain fields, experience is the predomi-

nant, if not sole, basis for a great deal of reliable expert testimony.”

Id.

Through its second requirement—reliability—rule 702 re-

quires a district court “to act as a gatekeeper to [e]nsure that spec-

ulative . . . opinions do not reach the jury.” McClain v. Metabolife

Int’l, Inc., 401 F.3d 1233, 1237 (11th Cir. 2005) (citing Daubert, 509

U.S. at 589 n.7, 597). The district court may take any relevant fac-

tors into account. See Seamon v. Remington Arms Co., 813 F.3d 983,

988 (11th Cir. 2016); Quiet Tech., 326 F.3d at 1341. But generally,

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“the rejection of expert testimony [as unreliable] is the exception

rather than the rule.” Moore v. Intuitive Surgical, Inc., 995 F.3d 839,

850 (11th Cir. 2021) (quoting Fed. R. Evid. 702 Advisory Commit-

tee’s Note to 2000 Amendments).

Keeping in mind the “limited nature” of “appellate review in

this area,” United States v. Brown, 415 F.3d 1257, 1264 (11th Cir.

2005), we cannot say the district court abused its discretion when

it found that Cangiano was qualified and that his opinions were re-

liable. First, the district court reasonably relied on Cangiano’s ex-

tensive job experience in the over-the-counter market when it

found he was qualified to testify about Island’s role as a transfer

agent in that market. Cangiano had more than forty years of regu-

latory experience in the over-the-counter market, including his

time as a NASD regulator. In that role, he oversaw hundreds of

fraud investigations, including investigations where he “identif[ied]

and address[ed] major frauds” in the microcap market. Cf. United

States v. Majors, 196 F.3d 1206, 1215–16 (11th Cir. 1999) (concluding

district court didn’t abuse its discretion by finding that a financial

analyst with eight-and-a-half years of experience, including per-

forming fifty-plus analyses in prior fraud cases, was qualified to tes-

tify about defendants’ records in fraud case). And since he retired

as a regulator, he has continued working in the field by consulting.

The defendants contend that Cangiano’s extensive regula-

tory and consulting experience likely makes him an expert on

something, but not on transfer agents. To that end, they say Cangi-

ano “had no experience in the transfer agent industry” and never

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worked with transfer agents. But that argument ignores Cangi-

ano’s testimony that, when he oversaw fraud investigations, there

would sometimes “be a transfer agent element” involved. And he

consulted on a case involving similar facts to the ones that the SEC

alleged here—involving “fraudsters [who] actually owned their

own transfer agent and . . . facilitate[d] the sale of . . . companies”

by using the “transfer agent to clean up the stock.” Thus it’s not

true that Cangiano has no job-related experience whatsoever in-

volving transfer agents.

The defendants also argue Cangiano was unqualified to tes-

tify about transfer agents because he was never formally educated

about them and he has never published peer-reviewed work about

them. These arguments also miss the mark. Again, a witness

“need not be formally educated” on a topic to be an expert on it.

Williams, 865 F.3d at 1338. The district court reasonably found that

Cangiano’s experience qualified him to testify about transfer

agents. Cf. Fed. R. Evid. 702 Advisory Committee’s Note to 2000

Amendments (“In certain fields, experience is the predominant, if

not sole, basis for a great deal of reliable expert testimony.”).

Second, the district court didn’t abuse its discretion in find-

ing Cangiano’s opinions reliable. Cangiano applied his forty-plus

years of experience to the issues in the case. He reached his opin-

ions after reviewing a variety of fact sources—including the plead-

ings; deposition testimony by Rose, Mirman, Harrison, Eldred, Dil-

ley, Lopez, Krokhina, and Zajonc; the defendants’ emails; FINRA

and SEC regulations and guidance; and the issuers’ SEC filings. Cf.

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Fed. R. Evid. 703 (“An expert may base an opinion on facts or data

in the case that the expert has been made aware of or personally

observed.”). Thus, the district court reasonably found that Cangi-

ano’s opinions were “properly grounded, well-reasoned, and not

speculative.” Fed. R. Evid. 702 Advisory Committee’s Note to 2000

Amendments; cf. United States v. 0.161 Acres of Land, 837 F.2d 1036,

1040 (11th Cir. 1988) (“[W]here the expert’s testimony has a rea-

sonable factual basis, a court should not exclude it.”).

In short, the district court did not abuse its discretion in ad-

mitting Cangiano’s testimony under rule 702.

Judgment as a Matter of Law

The jury found each defendant liable on count six for violat-

ing section 10(b) of the Exchange Act and SEC rule 10b-5(b). Sec-

tion 10(b) makes it unlawful “[t]o use . . . , in connection with the

purchase or sale of any security . . . , any manipulative or deceptive

device.” 15 U.S.C. § 78j(b). And rule 10b-5(b), which “imple-

ments” section 10(b), SEC v. Zandford, 535 U.S. 813, 819 (2002),

makes it unlawful “[t]o make any untrue statement of a material

fact or to omit to state a material fact necessary in order to make

the statements made . . . not misleading,” 17 C.F.R. § 240.10b-5(b).

“The scope of liability under” these two provisions “is the same.”

SEC v. Merch. Cap., LLC, 483 F.3d 747, 766 n.17 (11th Cir. 2007). “To

prove a . . . violation, the SEC must show (1) material misrepresen-

tations or materially misleading omissions, (2) in connection with

the purchase or sale of securities, (3) made with scienter.” Id. at

766 (citing Aaron v. SEC, 446 U.S. 680, 695 (1980)).

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Each defendant argues that no reasonable jury could have

found that the SEC proved the first two elements. So, the defend-

ants contend, the district court erred in denying their motions for

judgment as a matter of law.

We review de novo a district court’s ruling on a motion for

judgment as a matter of law, “applying the same standard that the

district court applied.” Mamani v. Sánchez Bustamante, 968 F.3d

1216, 1230 (11th Cir. 2020) (citation omitted). Viewing all evidence

and drawing all reasonable inferences in the nonmovant’s favor,

our “sole consideration” is whether sufficient evidence supported

the jury’s verdict. Chaney v. City of Orlando, 483 F.3d 1221, 1227

(11th Cir. 2007).

Because the defendants do not argue that a reasonable jury

couldn’t find the third element of a rule 10b-5(b) violation—scien-

ter—we focus on whether the defendants made material misrepre-

6

sentations in connection with the purchase or sale of securities.

6

We need not consider whether sufficient evidence showed the defendants

made misrepresentations as to the three Daniels/Harrison issuers—Dinello,

Quality Wallbeds, and Court Document Services—because any violation as to

those issuers didn’t result in a remedy before us on appeal. The district court

ordered Dilley’s civil penalty based on three violations regarding Envoy

Group, Changing Technologies, and First Xeris, and it ordered Eldred’s pen-

alty based on two violations regarding Top to Bottom and PurpleReal. The

district court ordered Spartan and Island’s civil penalties based on a “single

violation” without specifying a particular company. The disgorgement award

was based on the Mirman/Rose issuers, with the exception of Envoy Group.

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See Merch. Cap., 483 F.3d at 766. As to those two elements, suffi-

cient evidence supported the jury’s verdict. First, a reasonable jury

could find that Spartan and Dilley made material misrepresenta-

tions, in connection with the purchase or sale of securities, on the

FINRA Form 211 applications for the Mirman/Rose issuers. Sec-

ond, a reasonable jury could find that Spartan and Eldred did the

same on the FINRA applications for Top to Bottom and Purple-

Real. Third, a reasonable jury could find that Island made a mate-

rially false statement, in connection with the purchase or sale of a

security, to obtain Kids Germ’s DTC eligibility.

Mirman/Rose FINRA Applications

(Spartan and Dilley)

We begin with the Mirman/Rose issuers’ FINRA applica-

tions, which Spartan submitted and Dilley certified as the “principal

of the firm responsible for th[e] application[s].” We divide our dis-

cussion of the first rule 10b-5(b) element—material misrepresenta-

tion—into two parts: whether Spartan and Dilley actually made

any false statements or misrepresentations and, if so, whether the

misrepresented information was material. We then address the

second rule 10b-5(b) element—the misrepresentations’ connection

to the purchase or sale of securities.

1. Misrepresentations or omissions

Spartan and Dilley argue that they didn’t actually “make”

any false statements in the Mirman/Rose Form 211 applications.

They also contend that they did not have a duty to disclose any

omitted facts necessary to make the applications’ statements not

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misleading. A reasonable jury could find that they affirmatively

made false statements in the applications, independent of any mis-

leading omissions.

There was evidence that Spartan and Dilley made false state-

ments in the Form 211 cover letters about who solicited them to

file the applications and why. Each Form 211 asked for “circum-

stances surrounding the submission,” “[i]nclud[ing] the identity of

any person(s) for whom the quotation[s were] being submitted and

any information provided . . . by such person(s).” On each Mir-

man/Rose application, Spartan responded by saying “see [an at-

tached] cover letter for details.” Each cross-referenced cover letter,

written on Spartan letterhead, began with an “Introduction to Spar-

tan Securities” section stating that the issuers’ officers “telephoni-

cally contacted” Dilley to initiate the Form 211 process.

Then, after each introduction, Spartan included a section

with statements detailing the issuers’ business plans. Each of these

sections stated that “[t]he [i]ssuer described its business as” plan-

ning to maintain future active operations or tangible assets. Spar-

tan’s letters said that “[t]he [i]ssuer[s’] described” operations in-

cluded selling consumer products or services (Obscene Jeans, Kids

Germ, On the Move, First Xeris, Changing Technologies, Neutra),

running a social networking site for parents (First Social), and open-

ing various types of facilities—an electronics recycling facility (E-

Waste), a healthcare center for pregnant mothers (Aristocrat), an

“adult day care center” (Envoy), a vodka distillery (Global Group),

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a “coral farm” (Rainbow Coral), and a food-product labeling and

testing facility (First Independence).

These statements that Spartan and Dilley made were false

because the issuers never “described [their] business[es]” as plan-

ning to maintain real operations or assets—not to Dilley and not to

anyone else at Spartan. The Mirman/Rose issuers’ officers never

planned to actively operate the companies. Mirman and Rose re-

cruited personal friends or family to be straw officers, or, in other

words, CEOs in name only. These officers, Rose testified, had no

control over the issuers’ business plans; Mirman and Rose “pretty

much directed the total company.” The officers “knew . . . up

front” that Mirman and Rose would sell the companies and give

them a cut.

Rose also testified that he never told the issuers’ officers to

contact Spartan or any of its employees, and that he never intro-

duced the officers to Spartan. Mirman echoed this testimony—ex-

plaining that he was unaware of Spartan ever asking the issuers’

officers for information. Two of the officers—Lindsay (First Inde-

pendence) and Egna (Changing Technologies)—testified they

didn’t even know who Dilley was.

Instead of the issuers’ officers, it was Mirman and Rose who

contacted Spartan to file the Mirman/Rose FINRA applications. In

that process, Mirman and Rose served as Spartan’s “point peo-

ple”—providing Spartan with any information that it needed to

complete the applications. And there was evidence that those

“point people” never told Dilley, or anyone else at Spartan, that the

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issuers planned to actively operate the businesses. Rose testified

that he told Spartan “that the plan from the beginning” was to sell

“[n]ot only Kids Germ,” but also “anyone down the road [he and

Mirman] would be selling” as shells. According to Rose, he and

Mirman “controlled the compan[ies]” and never had any intention

of running them.

Spartan and Dilley argue that they didn’t “make” these false

statements because “all the statements provided to FINRA were

from the issuers themselves.” In other words, because the cover

letters prefaced some statements with language like “[t]he [i]ssuer

described” or “[t]he issuer has represented,” they argue that the is-

suers sent them statements to include in the applications and they

simply repeated those statements to FINRA. Spartan and Dilley

contend they had no control over the issuers’ statements, “false or

not.” But a reasonable jury could find Spartan and Dilley had “ul-

timate authority over the statement[s], including [their] content

and whether and how to communicate it,” for two independent

reasons. Janus Cap. Grp., Inc. v. First Derivative Traders, 564 U.S. 135,

142 (2011).

First, although the Mirman/Rose FINRA letters did attrib-

ute some statements to the issuers, they didn’t attribute everything

to the issuers. Every “Introduction to Spartan Securities” section

of the letters stated that the issuers’ respective officers “telephoni-

cally contacted” Dilley, and that Spartan then had more “telephone

conversations and electronic communication” with the issuers.

But not once did a cover letter qualify those statements by saying

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“[t]he issuer has represented” its officer called Dilley or Spartan.

Just as attributing a statement to someone else is evidence that its

maker was “the party to whom it is attributed,” Janus, 564 U.S. at

142–43, speaking without attributing suggests that the statement’s

speaker is the statement’s maker, cf. id. at 142 (“One ‘makes’ a state-

ment by stating it.”). So because Spartan didn’t qualify the state-

ments that the issuers’ officers called Dilley and Spartan—in letters

with Spartan letterhead for applications that Dilley certified as the

responsible principal—a reasonable jury could find Spartan and Dil-

ley had “ultimate authority over the statement[s],” id. at 142. In-

deed, Rose testified that he delegated that authority to Spartan—

explaining that Spartan would “take th[e] information” and “put it

into the proper language for FINRA,” including “writing basically

the company’s plan and what it’s all about.”

Second, there was evidence that the attributions themselves

were false statements made by Spartan and Dilley. Whenever

Spartan’s letters stated that “[t]he [i]ssuer described” its business as

planning to maintain future operations and assets, Spartan and Dil-

ley made a statement that the issuers told Spartan that was the plan.

But again, there was evidence that the issuers’ officers never told

anyone at Spartan about any plans to maintain active business op-

erations or assets. Rose testified that he told Spartan the opposite—

that he and Mirman created the companies to use as shells.

2. Materiality

Next, Spartan and Dilley argue no reasonable jury could

have found that the misrepresentations in the applications were

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material. Spartan and Dilley contend that, although the misrepre-

sentations might’ve mattered to FINRA regulators, those misrep-

resentations couldn’t have impacted an investor’s investment deci-

sion because Form 211 applications are not publicly available. But

because there was evidence that the misrepresentations could have

impacted an investment decision, a reasonable jury could find ma-

teriality.

A misrepresented fact is material under rule 10b-5(b) if “a

reasonable man would attach importance to [it] . . . in determining

his course of action.” SEC v. Goble, 682 F.3d 934, 943 (11th Cir. 2012)

(quoting Merch. Cap., 483 F.3d at 766). “Course of action” means

“an investment decision.” Id. (quotation omitted); cf. In re Galectin

Therapeutics, Inc. Secs. Litig., 843 F.3d 1257, 1275 (11th Cir. 2016)

(“The omission of facts is actionable only to the extent that the ab-

sence of those facts would, under the circumstances, render an-

other reported statement misleading to the ‘reasonable investor, in

the exercise of due care.’” (quoting FindWhat Inv. Grp. v.

Findwhat.com, 658 F.3d 1282, 1305 (11th Cir. 2011)).

In weighing materiality, we consider “the ‘total mix’ of in-

formation available to a hypothetical reasonable investor” deter-

mining his course of action, not just the information available “to

the public at large.” SEC v. Morgan Keegan & Co., 678 F.3d 1233,

1248 (11th Cir. 2012) (citing Matrixx Initiatives, Inc. v. Siracusano,

563 U.S. 27, 38 (2011)). When we consider what inferences an in-

vestor would draw from that information, we must keep in mind

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the Supreme Court’s caution that materiality “assessments are pe-

culiarly ones for the trier of fact.” Id. at 1253 (quoting TSC Indus.,

Inc. v. Northway, Inc., 426 U.S. 438, 450 (1976)); SEC v. Ginsburg, 362

F.3d 1292, 1302 (11th Cir. 2004) (quoting TSC Indus., Inc., 426 U.S.

at 450).

Here, Spartan and Dilley misrepresented who solicited them

to file FINRA applications for the issuers—Mirman and Rose. And

Spartan and Dilley misrepresented why—Mirman and Rose

wanted to create public shells and sell them. A reasonable investor

“would attach importance” to each of these facts in making “an in-

vestment decision.” Goble, 682 F.3d at 943.

First, a reasonable investor would attach importance to Mir-

man and Rose’s involvement in the issuers, including their hiring

of Spartan to take the companies public. An investor would have

wanted to know that Mirman and Rose, while not officers of the

issuers, controlled the issuers and served as Spartan’s point people

for filing the FINRA applications. SEC v. Blackburn, 15 F.4th 676,

681 (5th Cir. 2021) (reasoning that, “[e]ven though [an undisclosed

control person] was not an officer of [a company whose stock sold

over the counter], there [wa]s ‘little doubt that a reasonable inves-

tor would have wanted to know the true identity’ of who was lead-

ing the company” (citation omitted)). A company’s leadership

“might . . . matter[] to investors for a number of reasons,” includ-

ing whether that leadership engaged in past criminal conduct or

simply has a “good, bad, or nonexistent” reputation. Id.

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That Mirman and Rose enlisted Spartan to take the compa-

nies public would matter to investors because Mirman and Rose

were related to the issuers’ officers and shareholders, which Adams

testified could “call into question the control of ownership.” It

would also matter because when Mirman and Rose selected straw

officers, they picked a friend or relative who “had [a] background

in th[e] specific company”; for example, E-Waste’s purported busi-

ness plan was to open an electronics recycling facility, so Rose

picked an electrical engineer to be its director. An investor would

want to know that these expert straw officers actually had no say

in the issuers’ business plans and that nonexperts (Mirman and

Rose) were taking them public. And an investor would want to

know Mirman’s involvement, specifically, because of his past disci-

pline—FINRA barred Mirman from associating with any FINRA

member, which, as Mirman described it, meant “basically [that he]

shouldn’t be involved in the . . . filing of [Form] 211s” at all.

Second, a reasonable investor would attach importance to

why Mirman and Rose solicited Spartan to file the applications.

Mirman and Rose wanted public shells—their “job was to basically

sell the shell” after Spartan secured FINRA clearance. Mirman and

Rose’s plan to sell the companies as shells, rather than to actively

operate them, was material because a plan to sell the company re-

lates to its future. And “material facts include . . . those facts which

affect the probable future of the company.” SEC v. Tex. Gulf Sulphur

Co., 401 F.2d 833, 849 (2d Cir. 1968) (en banc).

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Spartan and Dilley argue that their misrepresentations

weren’t material because it was “undisputed” that completed

FINRA applications are not public, making their misrepresenta-

tions inaccessible by anyone outside of FINRA. To that end, they

analogize this case to our decision in Goble—where we held that a

defendant’s recording of a sham transaction in its internal books,

given to FINRA during an audit, wouldn’t have influenced an in-

vestor’s investment decision. See 682 F.3d at 941, 943–44.

Contrary to Spartan and Dilley’s suggestion, their misrepre-

sentations on FINRA applications aren’t like the Goble defendant’s

recording of a sham transaction in internal books. There was evi-

dence that the completed FINRA applications here—including the

cover letters—could’ve been accessed by the investing public. The

acknowledgement that Dilley signed on each Form 211 certified

that he “acknowledge[d] that copies of th[e] form, accompanying

documents, and subsequent submissions made in connection with

[the form]” could be given to the SEC, other agencies, and “to the

public upon request.” So, for example, if a hypothetical investor

wanted to access the FINRA application for Obscene Jeans before

making an investment decision about it, there was evidence that it

was possible for the investor to request the application, obtain it,

7

and see Spartan and Dilley’s misrepresentations.

7

Spartan and Dilley cite how Adams testified that the Form 211 applications

and any related correspondence were not publicly available. But we view the

facts in the SEC’s favor, see Chaney, 483 F.3d at 1227, and the jury was free to

credit the terms of the Form 211’s acknowledgment over Adams’s testimony.

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3. Connection with the purchase or sale of securities

Spartan and Dilley next argue that even if they made mate-

rial misrepresentations on the FINRA applications, the misrepre-

sentations were not “in connection with” the sale or purchase of

securities. 17 C.F.R. § 240.10b-5(b). They contend that there was

no evidence of a connection because their misrepresentations

8

didn’t “coincide with” a securities transaction. They also argue

that there was no connection because rule 10b-5(b) doesn’t apply

to false statements “directed at FINRA.” Because Spartan and Dil-

ley’s misrepresentations enabled the issuers’ stocks to be bought

and sold, we conclude that a reasonable jury could find they were

made in connection with the sale or purchase of securities.

The Supreme Court interprets the “in connection with” re-

quirement “flexibly,” Zandford, 535 U.S. at 819 (quoting Affiliated Ute

Citizens of Utah v. United States, 406 U.S. 128, 151 (1972)), so we do

as well, see Goble, 682 F.3d at 945–46. “The [Supreme] Court [has]

made clear that a direct or close relation between the fraud and the

securities transaction [i]s not required.” Smallwood v. Pearl Brewing

Indeed, Spartan and Dilley’s codefendant—Eldred—testified that he thought

that the Form 211 applications were “publicly available” based on the ac-

knowledgment, just not “correspondence between [the defendants] and

FINRA.”

8

Spartan and Dilley also repeat their materiality argument that the statements

couldn’t have impacted a securities transaction because completed Form 211

applications aren’t publicly accessible. Because we’ve already explained why

a jury could find that the forms were publicly accessible, we will not address

the argument further.

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Co., 489 F.2d 579, 595 (5th Cir. 1974) (citing Superintendent of Ins. v.

Bankers Life & Cas. Co., 404 U.S. 6, 12–13 (1971)). Instead, “it is

enough that the fraud ‘touch’ the sale in some manner,” Rudolph

v. Arthur Anderson & Co., 800 F.2d 1040, 1046 (11th Cir. 1986) (quot-

ing Bankers Life, 404 U.S. at 12–13), or “coincide” with it, Zandford,

535 U.S. at 822. “The requirement is satisfied, for example, if the

purchase or sale of a security and the proscribed conduct are ‘part

of the same fraudulent scheme.’” Rudolph, 800 F.2d at 1046 (quot-

ing Alley v. Miramon, 614 F.2d 1372, 1378 n.11 (5th Cir. 1980)). Thus

the requirement can be satisfied even if the misrepresentations ex-

isted before any actual purchase or sale. See id. (“[I]f a scheme to

defraud is formulated before a sale or purchase, the fraud when

carried out is . . . ‘in connection’ with the security transaction even

if the scheme does not culminate until after the transaction.” (cit-

ing Brown v. Ivie, 661 F.2d 62, 65–66 (5th Cir. Unit B Nov. 1981);

Smallwood, 489 F.2d at 594–95)). Indeed, “[i]n some instances,”

there can be a rule 10b-5(b) violation “without an actual purchase

or sale of securities” ever occurring. Goble, 682 F.3d at 946 (citing

Grippo v. Perazzo, 357 F.3d 1218, 1223–24 (11th Cir. 2004)).

There was sufficient evidence here that Spartan and Dilley’s

misrepresentations “touch[ed]” the purchase or sale of securities.

Rudolph, 800 F.2d at 1046. Adams testified that broker-dealers like

Spartan “essentially open the door” to over-the-counter public in-

vesting by obtaining FINRA clearance. Spartan obtained FINRA

clearance for the issuers here by making false statements in the ap-

plications—relied on by FINRA—which in turn enabled Spartan to

initiate quotations in the issuers’ securities. And Spartan actually

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marketed those securities soon after obtaining FINRA clearance.

The parties stipulated that it acted as each issuer’s exclusive market-

maker for thirty days after obtaining FINRA clearance—holding it-

self out to the market as ready to buy and sell the issuers’ securities.

Without Spartan initiating and completing the Form 211 process

for each Mirman/Rose issuer, Spartan wouldn’t have been able to

market the securities and “the general public would not [have]

be[en] able to invest” in them.

Spartan and Dilley argue that there was insufficient evidence

supporting the “in connection with” element for two reasons.

First, they contend that rule 10b-5(b)’s “in connection with” ele-

ment doesn’t “encompass[] any step in the process of going public”;

instead, citing the Supreme Court’s decision in Zandford, they say

that it requires that “the violation and the sale of securities . . . , at

a minimum, ‘coincide.’” They argue that a misrepresentation and

securities transaction only “coincide” if the “misrepresentation . . .

and [the] securities transaction . . . occur at the same time.” Spar-

tan and Dilley contend that because their misrepresentations were

made “well before any securities transaction,” those misrepresen-

tations didn’t coincide with a securities transaction. Second, they

argue that rule 10b-5(b) “was not targeted at misleading statements

to regulators like FINRA, so [the connection element] does not en-

compass [false statements] directed at FINRA.” We find each of

these arguments unpersuasive.

First, while “[i]t is enough” for a connection “that the

scheme to defraud and the sale of securities coincide,” Zandford,

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22-13129 Opinion of the Court 45

535 U.S. at 822, Spartan and Dilley are mistaken that a discrete mis-

representation and securities transaction must always occur at the

same time” for the connection element to be satisfied. “[I]n con-

nection with the purchase or sale of any security,” 17 C.F.R.

§ 240.10b-5, is broad. See Zandford, 535 U.S. at 819–20. And it is

broad enough to cover a situation where—as here—a defendant

makes a false statement intentionally calculated to facilitate the

purchase or sale of a security on a later date. See Rudolph, 800 F.2d

at 1046 (citing Brown, 661 F.2d at 65–66; Smallwood, 489 F.2d at 594–

95); see also Brown, 661 F.2d at 65–66 (holding that the plaintiff, a

corporate officer, alleged a connection where the defendants, other

officers, convinced him to sign an agreement requiring that persons

leaving the corporation sell their shares back to it—without telling

the plaintiff they planned to oust him seven days later); Smallwood,

489 F.2d at 594–95 (concluding that a letter’s misleading omissions

about a proposed merger “touch[ed]” the actual merger, which

happened forty-three days after the letter was mailed); SEC v. Pirate

Inv. LLC, 580 F.3d 233, 248 (4th Cir. 2009) (discussing cases where

defendant’s “intent to induce a securities transaction” supported

connectivity). Zandford itself—where the Supreme Court held that

a stockbroker’s misrepresentation and securities transactions “co-

incide[d]”—involved an initial misrepresentation that the stock-

broker would “conservatively invest” a man’s money, followed by a

“series of transactions” completed “throughout [a two]-year pe-

riod.” 535 U.S. at 815, 819–21.

There may be cases where the alleged deceit is too remote

to “touch” or “coincide” with the purchase or sale of securities.

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22-13129 Opinion of the Court 46

But we need not resolve where that line should be drawn because

the misrepresentations here were not so remote or “well before any

securities transaction” as Spartan and Dilley argue. See Smallwood,

489 F.2d at 595 (“It is important that the standard be fleshed out by

a cautious case-by-case approach.”). The misrepresentations were

an “integral part” of getting FINRA clearance to initiate quotations

in the issuers’ stock. Cf. Brown, 661 F.2d at 65–66 (distinguishing

cases where the connection between fraud and transactions were

too remote because, in those cases, “the defendants . . . did not as

an integral part of their scheme induce the plaintiffs to enter into

[a] stock-retirement agreement” (citations omitted)).

Second, although Spartan and Dilley made their statements

directly to FINRA rather than face-to-face to an investor, the “in

connection with” element doesn’t require that a misrepresentation

be made directly to investors. See Graham v. SEC, 222 F.3d 994,

1001–03 (D.C. Cir. 2000) (concluding that fraud perpetrated on

brokers who executed securities transactions, rather than the ac-

tual investors, was in connection with the transactions); cf. United

States v. Naftalin, 441 U.S. 768, 772–73 & n.4 (1979) (holding that “in

the offer or sale of any securities,” which Congress “ha[s] on occa-

sion used . . . interchangeably” with “in connection with,” “does

not require that the victim of [a] fraud be an investor”). In any

event, despite Spartan and Dilley making their statements to

FINRA, there was evidence that investors could have had access to,

and could have relied on, the false statements.

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22-13129 Opinion of the Court 47

* * *

To summarize, there was sufficient evidence that Spartan

and Dilley made materially false statements in connection with the

purchase or sale of securities on each FINRA application for the

Mirman/Rose issuers.

Daniels/Harrison FINRA Applications

(Spartan and Eldred)

We now turn to the FINRA applications for the relevant

Daniels/Harrison issuers—Top to Bottom and PurpleReal—which

Spartan submitted and Eldred signed as the “principal of the firm

responsible for th[e] . . . application[s].” The evidence showed that

Spartan, through Eldred, made materially false statements about

these issuers “in connection with the purchase or sale of . . . secu-

rit[ies].” See 17 C.F.R. § 240.10b-5(b).

First, there was evidence that Spartan and Eldred made false

statements about Daniels’s and Harrison’s role in taking the com-

panies public. Spartan and Eldred made a false statement about

Daniels’s involvement and relationship with Spartan in the Top to

Bottom application. The cover letter stated that the issuer’s presi-

dent’s spouse introduced the company to Spartan, and that Spartan

“d[id] not have any other relationship with” the company “or any

of [its] other representatives.” But there was evidence that Spartan

filed the Top to Bottom application at Daniels’s request—and Dan-

iels was Top to Bottom’s secretary and treasurer. The parties stip-

ulated that Daniels (and Harrison) “requested [that] Spartan file”

the Form 211 for Top to Bottom. Indeed, Daniels’s “role in taking

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[Top to Bottom] public” was that “[h]e directed everything. [They]

didn’t do anything without his direction [and] guidance.” There

was also evidence that Spartan had other business with Daniels.

The parties stipulated that Daniels (and Harrison) had solicited

Spartan to file three earlier FINRA applications—those for Dinello,

Court Document Services, and Quality Wallbeds.

Similarly, Spartan and Eldred made a false statement about

Spartan’s relationship with Harrison in the PurpleReal application.

The cover letter stated that Spartan “d[id] not have any other rela-

tionship with Diane Harrison” beyond (1) Harrison calling Eldred

about taking the company public and (2) Harrison being “known

to [Spartan] for many years.” When asked about this statement at

trial, Eldred himself—Spartan’s majority owner—testified that he

had done “other business with Diane Harrison.” Other evidence

showed that their “other business” included a partnership arrange-

ment to sell shell companies. Eldred emailed Harrison in 2010 pro-

posing that “if a cleaned up shell is worth $300k, then that’s $100k

for you when we sell it.” Eldred also wrote that “there [we]re ac-

tually [one] or maybe [two] projects to do immediately,” and that

he thought “we could add [one] or two additional per year.”

And after the 2010 email, but before the 2014 PurpleReal ap-

plication, Spartan and Harrison continued collaborating on “other

business.” Spartan filed three other FINRA applications at Harri-

son and Daniels’s request—those for Court Document Services,

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9

Quality Wallbeds, and Top to Bottom. In 2012, Harrison helped

Eldred sell a company to Fan. Eldred emailed (from his Spartan

address) Harrison to “get to work” on a contract for that transac-

tion, which Fan wrote was the “beginning of a beautiful relation-

ship.”

Second, the false statements downplaying Daniels’s and

Harrison’s involvement and relationships with Spartan were mate-

rial because a reasonable investor would attach importance to how

Spartan was working with Daniels and Harrison to take multiple

issuers public, one after the other. Adams testified that when “cer-

tain individuals . . . get market makers to file [Form] 211s for mul-

tiple companies,” it raises a red flag that those individuals are en-

gaging in “possible manipulation of the market.” Adams explained

that it “is very, very uncommon” for “one individual [to] be be-

hind . . . a [Form] 211 being filed for multiple issues.” Cangiano

testified similarly, explaining that “hav[ing] numerous companies

in the pipeline” is an “indication . . . that they’re in the business of

selling . . . shells.” He further testified that it “indicates . . . that

the[] companies are not being brought forward and, you know, op-

erating as real companies but they’re being formed to be sold.”

There was also evidence that the SEC has informed investors,

through bulletins and proposed rules, that these indicators suggest

that a shell company is being used to manipulate the market. From

9

Their “other business” also included Spartan’s filing of the Dinello applica-

tion, but the PurpleReal application did disclose that fact.

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22-13129 Opinion of the Court 50

this, a reasonable investor familiar with these indicators could be-

lieve that Spartan, Daniels, and Harrison were working together to

maintain a shell factory and manipulate the over-the-counter mar-

ket. That belief would “affect the [investor’s] desire . . . to buy, sell,

or hold the compan[ies’] securities.” Tex. Gulf Sulphur Co., 401 F.2d

at 849.

That those indicators would’ve affected an investor’s deci-

sion to buy, sell, or hold the securities Spartan brought to market

at Daniels’s and Harrison’s behest is supported by the evidence of

their “general reputation[s] . . . in the . . . industry.” Blackburn, 15

F.4th at 681. The parties stipulated that Daniels and Harrison

“were active in the reverse merger business and had consummated

a number of reverse mergers prior for clients who wanted to enter

the public market.” And Daniels, for his part, had a past forgery

conviction.

Third, there was evidence that the false statements in the

Top to Bottom and PurpleReal applications were made “in connec-

tion with the purchase or sale of . . . securit[ies].” 17 C.F.R.

§ 240.10b-5. Donnelly testified that the “business model” for all

Daniels/Harrison issuers had three steps: (1) to take the company

public by obtaining FINRA clearance; (2) to “immediately” dispose

of all the company’s assets; and (3) to sell the remaining public shell

to an investor—usually for reverse mergers with Fan’s “businesses

in China.” That’s what happened once Spartan’s misrepresenta-

tions secured Top to Bottom’s FINRA clearance. Donnelly ex-

plained that once FINRA cleared Top to Bottom, its assets were

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22-13129 Opinion of the Court 51

sold off in “a fire sale” and the remaining public shell was “sold to

an[] . . . investor that Daniels and Harrison found.” And Daniels

and Harrison planned to do the same with PurpleReal once Spartan

obtained its FINRA clearance—a sale that Spartan and Eldred’s mis-

representations would’ve facilitated but for the SEC’s intervention.

See Goble, 682 F.3d at 946 (“In some instances a [section] 10(b) fraud

may occur even without an actual purchase or sale of securities.”

(citing Grippo, 357 F.3d at 1223–24)); cf. Grippo, 357 F.3d at 1223

(giving the example of “a broker who accepts payment for securi-

ties that he never intends to deliver” (quoting Zandford, 535 U.S. at

819)). So, as to both Top to Bottom and PurpleReal, Spartan’s mis-

representations—calculated to allow Daniels and Harrison to sell

public shells—“‘touch[ed]’ the sale” of securities “in some man-

ner.” Rudolph, 800 F.2d at 1046 (quoting Bankers Life, 404 U.S. at

12–13).

Spartan and Eldred challenge the sufficiency of the evidence

as to these issuers by making the same arguments that we’ve al-

ready addressed in the context of the Mirman/Rose issuers. Spe-

cifically, they contend that they didn’t make any statements in the

Daniels/Harrison applications because they only repeated the issu-

ers’ statements; that they didn’t have any duty to disclose omitted

facts; that their misrepresentations weren’t material because they

weren’t publicly accessible; and that the connection between their

deceit and the purchase or sale of securities was too remote. These

arguments fail for the same reasons we’ve already discussed.

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We conclude that a reasonable jury could find that Spartan

and Eldred made materially false statements in connection with the

purchase or sale of securities as to Top to Bottom and PurpleReal.

Statements for DTC Clearance (Island)

We now turn to Island. The district court instructed the jury

that the SEC alleged Island violated rule 10b-5(b) in three ways—

by: (1) stating that issuers weren’t shell companies in applications

filed for DTC clearance; (2) representing the restricted securities as

“free trading,” and (3) omitting restrictive legends from the stock

certificates. Island argues that there wasn’t enough evidence for

the jury to find it liable under the first theory. Island also contends

that the jury couldn’t have found it liable under the second or third

theories because it found Island not liable on count fourteen, which

alleged that Island offered to sell securities without any effective

registration statements for them. We conclude that sufficient evi-

dence supported Island’s liability under the first theory, which is

10

enough to affirm the verdict as to Island on count six.

10

To the extent the jury found Island liable on count six under the second and

third theories, Island forfeited any argument that the jury’s finding was irrec-

oncilable with its verdict on count fourteen. “A party must object to a verdict

as inconsistent before the jury has been dismissed,” and “failure to object to

an inconsistent verdict before the jury is excused forfeits the objection.” Reider

v. Philip Morris USA, Inc., 793 F.3d 1254, 1259–60 (11th Cir. 2015) (citations

omitted). Island didn’t raise its inconsistency objection before the jury was

excused; instead, it raised the argument in its later renewed motion for judg-

ment as a matter of law.

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22-13129 Opinion of the Court 53

Island made a false statement to Penson—a DTC clearing

firm—about Kids Germ’s shell status. Island employee Anna

Krokhina, who “did a lot of the work with the guidance of [Island

president] Dilley,” emailed Penson from her Island email address,

stating “the company is not a shell.” There was evidence that this

statement was false. Rose testified that Kids Germ “wasn’t operat-

ing” and that the plan from the beginning was to sell it as a public

shell, which Dilley knew.

The misrepresentation that Kids Germ wasn’t a shell com-

pany was material. There was evidence that the entire point of

obtaining DTC clearance was to facilitate selling Kids Germ in a

reverse merger. Rose informed Dilley of a potential buyer for the

Kids Germ shell on the same day that Dilley told him Krokhina

would file a DTC application. In a January 4, 2010 email exchange

(on the same day FINRA cleared Kids Germ), Rose asked Dilley,

“Do you want to speak to the atty interested in the company?” and

“What do you recommend the company do with the DTC know

[sic] the route it is taking?” Dilley responded that he could call the

interested attorney and that they “should apply for DTC eligibil-

ity[—]Anna [Krokhina] can get that going.” Rose testified that

“atty” meant “the attorney for the company, whoever was buying

it at the time.” That the attorney was someone who “wanted to

purchase the company and wanted to make sure that it’s going to

happen” was, as Rose explained, “the only thing [he] could think

of.” This actual plan to use Kids Germ for a reverse merger “af-

fect[ed] the probable future of the company.” Tex. Gulf Sulphur Co.,

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401 F.2d at 849; see also Ginsburg, 362 F.3d at 1302 (“A merger is an

event of considerable magnitude to an investor . . . .”).

And the misrepresentation was in connection with the pur-

chase or sale of securities. Based on Dilley and Rose’s email ex-

change, a reasonable jury could find Island’s misrepresentations to

Penson were calculated to facilitate Kids Germ’s sale to the “atty.”

In February 2010—shortly after obtaining DTC eligibility—Kids

Germ was sold in a reverse merger that Island assisted as the trans-

fer agent.

Island argues that insufficient evidence showed the “not a

shell” statement violated rule 10b-5(b) for two reasons. First, it ar-

gues that Krokhina told Penson the truth. It contends Kids Germ

wasn’t a shell because its SEC filings showed that the company

“had ‘nominal’ assets and operations.” They specifically cite how

Rose testified about a Kids Germ 2009 Form 10-K filing with the

SEC, where he “had Kids Germ report” to the SEC “that it had

[$25,254 in] cash” assets and that it had “spent approximately

$62,000 over the year in its operations.” Second, it argues that the

misrepresentation wasn’t in connection with the purchase or sale

of securities because it was made in “nonpublic communications”

to Penson, rather than to any investors. They characterize the

DTC application as “but one step in the process” too remote from

the purchase or sale of a security.

As for Island’s first argument about the Form 10-K, that fil-

ing doesn’t conclusively establish that Kids Germ maintained cash

assets and active operations. There was evidence that the Form 10-

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22-13129 Opinion of the Court 55

K itself misrepresented Kids Germ’s assets and operations. The par-

ties stipulated that the issuers’ registration statements “and subse-

quent SEC filings . . . falsely depicted the issuers as actively pursu-

ing a variety of business plans, when the only plan from the onset

was for the compan[ies] to be sold as public vehicles.” And Rose

repeatedly testified that Kids Germ was a shell company.

Island’s second argument fares no better. Even if the “not a

shell” statement wasn’t publicly visible to investors, Island’s mis-

representation wasn’t too remote from the sale of Kids Germ’s se-

curities because, as Dilley himself testified, Island sought Kids

Germ’s DTC eligibility to “make[] the transaction easier in the

event of a sale or purchase.” He viewed obtaining DTC eligibility

after FINRA clearance as important for “brokers that would buy or

sell the stock,” acknowledging that DTC eligibility was necessary

to “allow[] for electronic settlement of any purchase or sales in the

marketplace.” Cangiano similarly testified that obtaining Kids

Germ’s DTC clearance was “important” to “the route it [wa]s tak-

ing”—being sold in a reverse merger. He explained that it was “im-

portant” to facilitate that merger because getting DTC eligibility

allows for convenient, less expensive public trading—“the whole

process [through DTC] is electronic.” Without DTC clearance,

Cangiano explained further, a security would be “ex-clearing,”

which means that trading it would require “physical delivery of the

shares and a physical check.” Critically, he testified that “no one

would buy or sell a security that’s ex-clearing usually because it’s

very expensive to do that.”

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So, in short, there was sufficient evidence that Island made

a materially false statement to Penson about at least one issuer’s

shell status. Because that misrepresentation was material and in

connection with the purchase or sale of securities, a reasonable jury

could find Island liable on count six. 11

Remedies

The defendants next argue that, even if sufficient evidence

supported the jury’s verdict, the district court erred when it (1) or-

dered Island to disgorge its ill-gotten gains to the Treasury and

(2) imposed civil penalties on the defendants.

We review for abuse of discretion a district court’s award of

disgorgement, civil penalties, and injunctive relief under the secu-

rities laws, see SEC v. Diversified Corp. Consultant Grp., 378 F.3d 1219,

1228 (11th Cir. 2004), including the “amount of a[ny] monetary

remedy.” SEC v. Warren, 534 F.3d 1368, 1369 (11th Cir. 2008); see

also SEC v. Monterosso, 756 F.3d 1326, 1337–38 (11th Cir. 2014). We

11

After oral argument, we ordered the parties to brief what impact, if any, the

Supreme Court’s recent decision in Macquarie Infrastructure Corp. v. Moab Part-

ners, L.P. had on this appeal. 601 U.S. 257 (2024). Macquarie held that “pure

omissions” are not actionable under SEC rule 10b-5(b). Id. at 266. “A pure

omission occurs when a speaker says nothing[.]” Id. at 263. Pure omissions

are distinct from “[h]alf-truths,” which are “representations that state the truth

only so far as it goes, while omitting critical qualifying information.” Id. (quot-

ing Universal Health Servs., Inc. v. United States, 579 U.S. 176, 188 (2016)). Half-

truths are covered by section 10b-5(b). Id. Because, in the end, our decision

rests on the defendants’ misstatements and half-truths, and not on any pure

omissions by the defendants, Macquarie does not affect our analysis.

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review de novo the timeliness of these remedies under the govern-

ing statutes of limitations. See Berman v. Blount Parrish & Co., 525

F.3d 1057, 1058 (11th Cir. 2008).

The defendants argue that the district court ordered reme-

dies based on conduct that was time-barred. Beyond timeliness,

they make several disgorgement- and penalty-specific arguments.

12

We address their contentions below.

Statute of Limitations

We begin with the defendants’ timeliness argument. They

contend the district court erred when it “ordered sanctions based

on . . . time-barred conduct,” citing 28 U.S.C. section 2462. It did

not.

The defendants concede on appeal, as they did in the district

court, that the civil penalties claims for five issuers—Envoy Group,

Changing Technologies, First Xeris, Top to Bottom, and Purple-

Real—were timely under 28 U.S.C. section 2462’s five-year statute

of limitations. The defendants did not request summary judgment

based on timeliness as to those five issuers.

The defendants’ concession is key because these were the

only issuers that the district court relied on when it ordered the

12 We reject one of the defendants’ conclusory arguments at the outset—that

the district court violated due process by “order[ing] remedies based on con-

duct that the jury found did not violate the law.” The district court based the

ordered remedies on the defendants’ false statements in violation of count six,

and not on any violation alleged in other counts.

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civil penalties. The court cited the SEC’s request to “assess penal-

ties for three ‘violations’ against . . . Dilley,” which the SEC based

on Envoy Group, Changing Technologies, and First Xeris. And it

cited the SEC’s request to “assess penalties for . . . two violations

against . . . Eldred,” which the SEC based on Top to Bottom and

PurpleReal. Based on the defendants’ concession, the district

court’s civil penalties were timely.

All other relief granted by the district court—the disgorge-

ment, penny stock bar, and injunction—was timely as well. Con-

gress enacted the NDAA while this case was pending, and we apply

an amended statute of limitations if Congress “clearly manifest[s]

an intent to have an amended limitations statute apply to existing

causes of action.” Sarfati v. Wood Holly Assocs., 874 F.2d 1523, 1525

(11th Cir. 1989). Under section 21(d)(8), as enacted through the

NDAA, see Pub. L. No. 116-283, section 6501, 134 Stat. at 4625–26,

the statute of limitations applicable to a “claim for any equitable

remedy” is ten years. 15 U.S.C. § 78u(d)(8)(B). A ten-year period

also controls claims for “[d]isgorgement” based on violations of

section 10(b) or those that involve scienter—which is what count

six alleged. Id. § 78u(d)(8)(A)(ii)(I), (IV).

Congress “clearly manifest[ed]” its intent for these new, Ex-

change Act-specific provisions—not 28 U.S.C. section 2462—to ap-

ply to this action while it was pending. See Sarfati, 874 F.2d at 1525.

The NDAA provided that these amendments “appl[ied] with re-

spect to any action or proceeding that [wa]s pending on . . . the date

of enactment.” NDAA, Pub. L. No. 116-283, § 6501(b), 134 Stat. at

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4626. Island does not dispute that the injunctive relief, penny stock

bar, and disgorgement—based on statements about the Mir-

man/Rose issuers that occurred, at the earliest, after December

2009—are timely under the new statute of limitations.

So, in sum, the statutes of limitations did not bar any of the

relief ordered by the district court. 13

Disgorgement

Disgorgement “is a form of ‘[r]estitution measured by the

defendant’s wrongful gain.’” Kokesh v. SEC, 581 U.S. 455, 458–59

(2017) (quoting Restatement (Third) of Restitution & Unjust En-

richment § 51, cmt. a, at 204 (Am. L. Inst. 2010)). The district court

ordered Island to disgorge $114,520 to the Treasury, plus

$39,874.05 in prejudgment interest. Island appeals the disgorge-

ment award on four different grounds.

Island first argues that the Exchange Act bars a district court

from ordering disgorgement to the Treasury. It contends that be-

cause disgorgement is an equitable remedy and Exchange Act sec-

tion 21(d)(5) requires that “any equitable relief” be “for the benefit

13

Because the district court relied only on timely conduct when it ordered

remedies, we need not resolve the defendants’ argument that the district court

erred by applying the continuing violations doctrine at summary judgment,

or that it relied on untimely conduct when it denied the rule 50(b) motion.

Nor do we resolve their argument that the district court’s order denying sum-

mary judgment is appealable after a full trial on the merits under Dupree v.

Younger. See 598 U.S. 729, 731 (2023) (holding that “a purely legal issue re-

solved at summary judgment” is reviewable after trial even if not raised in a

post-trial motion).

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of investors,” 15 U.S.C. § 78u(d)(5), a district court may only order

disgorgement if it orders that the money be returned to harmed

investors. Second, although it conceded that repaying harmed in-

vestors was infeasible in this case, Island argues that the equities

didn’t support ordering disgorgement to the Treasury and thus the

district court abused its discretion. Third, Island asserts that “there

was no proof that [its profits] were causally related to the . . . viola-

tion[s] found by the jury.” And fourth, Island maintains that the

SEC didn’t satisfy its burden of reasonably approximating the ill-

gotten gains. We disagree.

1. Disgorgement to the Treasury

We begin with Island’s argument that the Exchange Act

does not authorize a district court to order disgorgement to the

Treasury. We conclude that it does.

“Initially, the only statutory remedy available to the SEC in

an enforcement action was an injunction.” Kokesh, 581 U.S. at 458.

The original Exchange Act, in 1934, did not expressly authorize dis-

trict courts to award monetary remedies like civil penalties or dis-

gorgement. See id.; SEC v. Hallam, 42 F.4th 316, 327–30 (5th Cir.

2022) (outlining history of available remedies under the Exchange

Act, explaining that “[t]he concept of ‘disgorgement’ as a securities

remedy is essentially the product of a runaway mutation”). How-

ever, we and other circuits held that district courts could order dis-

gorgement “as an ancillary remedy in the exercise of . . . general

equity powers.” Tex. Gulf Sulphur Co., 446 F.2d at 1307 (citation

omitted); see also Kokesh, 581 U.S. at 458–59 (discussing how in the

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1970s, courts began awarding disgorgement in securities actions

“as an exercise of their ‘inherent equity power[s]’” (citation omit-

ted)); SEC v. Blatt, 583 F.2d 1325, 1335 (5th Cir. 1978) (“The trial

court acted properly within its equitable powers in ordering [the

defendant] to disgorge the profits that he obtained by fraud.”).

Congress later expanded the category of remedies the SEC

may seek in enforcement actions. Congress amended the Ex-

change Act in 1990 to authorize civil penalties by adding sec-

tion 21(d)(3), titled “[m]oney penalties in civil actions.” Securities

Enforcement Remedies and Penny Stock Reform Act of 1990, Pub.

L. No. 101-429, § 201, 104 Stat. 931 (1990). And in 2002, Congress

added section 21(d)(5), which provides that “[i]n any action”

brought by the SEC, the SEC may seek, and district courts may

grant, “any equitable relief that may be appropriate or necessary

for the benefit of investors.” 15 U.S.C. § 78u(d)(5); see Hallam, 42

F.4th at 330. But even after these amendments, the SEC’s ability

to seek certain remedies under the Exchange Act remained uncer-

tain. The Exchange Act does not define “equitable relief,” and

“courts have had to consider which remedies the SEC may impose

as part of its [section 21(d)(5)] powers.” Liu, 591 U.S. at 75.

The Supreme Court faced that question in Liu. There, the

Supreme Court held that “equitable relief,” as used in sec-

tion 21(d)(5), includes “a disgorgement award that does not exceed

a wrongdoer’s net profits and is awarded for victims.” Id. Citing

the provision’s “for the benefit of investors” language, the Court

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concluded that “[t]he equitable nature of the profits remedy gener-

ally requires the SEC to return a defendant’s gains to wronged in-

vestors for their benefit.” Id. at 88 (“[T]he SEC’s equitable, profits-

based remedy must do more than simply benefit the public at

large . . . . To hold otherwise would render meaningless the latter

part of [section] 78u(d)(5).”). The Court did “not address” the

“open question” of whether “the SEC’s practice of depositing dis-

gorgement funds with the Treasury” is relief “for the benefit of in-

vestors.” Id. at 88–89 (emphasis added).

About seven months after Liu, Congress again amended sec-

tion 21(d) through the NDAA. Section 21(d)(3), which Congress

newly labeled “[c]ivil money penalties and authority to seek dis-

gorgement,” now provides that the SEC “may bring an action in a

United States district court to seek, and the court shall have juris-

diction to[,] . . . require disgorgement under paragraph [(d)](7) of

any unjust enrichment by the person who received such unjust en-

richment as a result of such violation.” 15 U.S.C. § 78u(d)(3),

(d)(3)(A)(ii). Section 21(d)(7), which Congress also added after Liu,

provides that “[i]n any action or proceeding brought by the [SEC]

under any provision of the securities laws, the [SEC] may seek, and

any [f ]ederal court may order, disgorgement.” Id. § 78u(d)(7).

Congress did not amend section 21(d)(5).

Consistent with the text of the new disgorgement provision,

we hold that in a civil enforcement action brought by the SEC un-

der the Exchange Act, the SEC may seek, and a district court may

order, that a defendant disgorge its ill-gotten gains to the Treasury

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under sections 21(d)(3)(A)(ii) and (d)(7)—even if directing the

money to the Treasury wouldn’t “be appropriate or necessary for

the benefit of investors” under section 21(d)(5). Here’s why.

Our starting point is the statutory text itself. Korman v. HBC

Fla., Inc., 182 F.3d 1291, 1295 (11th Cir. 1999) (“The first, and most

important, step in statutory construction is to examine the lan-

guage of the [statute] itself.”). Looking to the text here, sections

21(d)(3)(A)(ii) and (d)(7) are unconditional—both allow the SEC to

seek, and a district court to order, disgorgement. Sec-

tion 21(d)(3)(A)(ii) allows the SEC “to seek . . . disgorgement . . . of

any unjust enrichment.” 15 U.S.C. § 78u(d)(3)(A)(ii). Sec-

tion 21(d)(7) repeats that the SEC “may seek . . . disgorgement.”

Id. § 78u(d)(7). In no way does either provision limit where or to

whom those profits must go. We must take these provisions as

Congress wrote them; we cannot rewrite sections 21(d)(3)(A)(ii)

and (d)(7) to include an investor-benefit limitation where Congress

did not provide for one. Korman, 182 F.3d at 1295 (“We . . . neither

add words to nor subtract them from [a statute].”).

The statutory context confirms that the Exchange Act

doesn’t limit who can be the recipient of disgorged profits. See

Black Warrior Riverkeeper, Inc. v. Black Warrior Minerals, Inc., 734

F.3d 1297, 1302–03 (11th Cir. 2013) (explaining that “statutory con-

struction is a ‘holistic endeavor’” and courts must “fit, if possible,

all parts into a harmonious whole” (citations omitted)). Unlike sec-

tions 21(d)(3)(A)(ii) and (d)(7), section 21(d)(5) includes express lim-

iting language. A district court may grant “any equitable relief”

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under the Exchange Act if the relief is “appropriate or necessary for

the benefit of investors.” 15 U.S.C. § 78u(d)(5). While sec-

tion 21(d)(5)’s investor-benefit limitation might foreclose ordering

disgorgement to the Treasury, cf. Liu, 591 U.S. at 88 (“The equita-

ble nature of the profits remedy generally requires the SEC to re-

turn a defendant’s gains to wronged investors for their benefit.”),

Congress omitted any investor-benefit language from sections

21(d)(3)(A)(ii) and (d)(7). We presume sections 21(d)(3)(A)(ii) and

(d)(7) lack the investor-benefit requirement Congress provided for

in section 21(d)(5). “When Congress includes particular language

in one section of a statute but omits it in another section of the

same Act, we generally take the choice to be deliberate.” Badgerow

v. Walters, 596 U.S. 1, 11 (2022) (cleaned up); see also State Farm Fire

& Cas. Co. v. U.S ex rel. Rigsby, 580 U.S. 26, 34 (2016) (“Congress’

use of ‘explicit language’ in one provision ‘cautions against infer-

ring’ the same limitation in another provision.” (quoting Marx v.

Gen. Revenue Corp., 568 U.S. 371, 384 (2013)); Jones v. Governor of Fla.,

975 F.3d 1016, 1042 (11th Cir. 2020) (en banc) (“A material variation

in language suggests a variation in meaning.”).

Island recognizes that we must read sections 21(d)(3)(A)(ii)

and (d)(7) in their proper context rather than in isolation. But it

insists that because courts have historically considered disgorge-

ment an equitable remedy, the only harmonious interpretation is

that disgorgement ordered under section 21(d)(7) must still satisfy

section 21(d)(5)’s investor-benefit requirement for “any equitable

relief.” 15 U.S.C. § 78u(d)(5). Island maintains that Congress’s ad-

dition of sections 21(d)(3)(A)(ii) and (d)(7) simply “ma[d]e explicit

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that which had previously only been implicit”—“that disgorge-

ment is an available equitable remedy.” If we do not read the Ex-

change Act to bar ordering disgorgement to the Treasury, Island

contends, then we would render section 21(d)(5)’s investor-benefit

requirement superfluous. Island points to one representative’s pre-

Liu statement in the legislative history to support its interpretation.

Contrary to Island’s suggestion, reading sec-

tions 21(d)(3)(A)(ii) and (d)(7) to allow ordering disgorgement to

the Treasury is harmonious with section 21(d)(5). Section 21(d)(5)

is a general provision—it authorizes district courts to grant “any

equitable relief” that benefits investors. 15 U.S.C. § 78u(d)(5). But

sections 21(d)(3)(A)(ii) and (d)(7), which lack the investor-benefit

requirement, are provisions specific to one remedy—“disgorge-

ment.” Id. § 78u(d)(3)(A)(ii) (providing, in subsection labeled

“[c]ivil money penalties and authority to seek disgorgement,” that

the SEC may seek “disgorgement”); id. § 78u(d)(7) (providing, in

subsection labeled “[d]isgorgement,” that the SEC may seek “dis-

gorgement”). To read those provisions harmoniously, we simply

treat the specific disgorgement authorization as an exception to the

general provision governing all other equitable relief. See RadLAX

Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, 644–45

(2012) (“It is a commonplace of statutory construction that the spe-

cific governs the general.” (cleaned up)).

Our holding that the Exchange Act allows ordering dis-

gorgement into the Treasury doesn’t render section 21(d)(5)’s in-

vestor-benefit requirement superfluous or ineffective. Construing

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a specific provision as an exception to a general provision “does not

mean that the . . . specific provision voids the general provision.”

Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation

of Legal Texts, § 28, at 184 (2012). “[A]ny equitable relief” ordered

under the Exchange Act—except disgorgement—must still “be ap-

propriate or necessary for the benefit of investors.” 15 U.S.C.

§ 78u(d)(5). Thus, there are still circumstances where the investor-

benefit requirement applies. See RadLAX Gateway Hotel, LLC, 566

U.S. at 645–46 (discussing how applying the general/specific canon

can avoid introducing superfluity into a text).

Section 21(d)(8)—which includes the Exchange Act’s new

statute-of-limitations provisions—also illustrates how the new dis-

gorgement provisions operate as exceptions to general ones gov-

erning other types of equitable relief. Under section 21(d)(8)(B),

titled “[e]quitable remedies,” the SEC must bring “a claim for any

equitable remedy . . . not later than [ten] years after” the claim ac-

crues. 15 U.S.C. § 21(d)(8)(B). But section 21(d)(8)(A), titled “[d]is-

gorgement,” allows the SEC to “bring a claim for disgorgement”

within ten years only for four types of violations. Id.

§ 21(d)(8)(A)(ii). For all other types of violations, the SEC must

“bring a claim for disgorgement” within five years. Id.

§ 21(d)(8)(A)(i). That the statute requires the SEC to enforce cer-

tain disgorgement claims sooner than claims seeking other equita-

ble relief does not mean sections 21(d)(8)(A) and (B) are necessarily

irreconcilable. See RadLAX Gateway Hotel, LLC, 566 U.S. at 644–45.

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It is Island’s interpretation that renders parts of the Exchange

Act superfluous and ineffective. See Black Warrior Riverkeeper, Inc.,

734 F.3d at 1303 (“[A] court should . . . avoid interpreting a provi-

sion in a way that would render other provisions of the statute su-

perfluous.”). We must presume that Congress “intend[ed] its

[post-Liu] amendment[s] to have real and substantial effect.” Intel

Corp. Inv. Pol’y Comm. v. Sulyma, 589 U.S. 178, 189 (2020) (quoting

Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S. 241, 258–59

(2004)). But under Island’s theory, Congress added sec-

tions 21(d)(3)(A)(ii) and (d)(7) to settle an issue that Liu had already

settled once and for all—whether the SEC can seek disgorgement

14

under section 21(d)(5). See Liu, 591 U.S. at 74–75 (“The Court

holds today that a disgorgement award that does not exceed a

wrongdoer’s net profits and is awarded for victims is equitable re-

lief permissible under [section] 78u(d)(5).”); cf. Ryan v. Gonzales, 568

14

The parties have directed us to two Second Circuit cases as supplemental

authorities: SEC v. Ahmed, 72 F.4th 379 (2d Cir. 2023), and SEC v. Govil, 86 F.4th

89 (2d Cir. 2023). Ahmed “conclude[d] that disgorgement under [section]

78u(d)(7) must comport with traditional equitable limitations as recognized in

Liu.” 72 F.4th at 396. And Govil, applying Ahmed, held that a district court

abuses its discretion if it orders disgorgement under section 78u(d)(7) without

first finding “that . . . investors suffered pecuniary harm” because “disgorge-

ment must be ‘awarded for victims.’” 86 F.4th at 93–94 (quoting Liu, 591 U.S.

at 75). Island argues that these two cases establish that the disgorgement or-

dered here was inequitable. But neither case spoke to the question Liu ex-

pressly left “open”—whether ordering disgorgement to the Treasury is “for

the benefit of investors” if “the wrongdoer’s profits cannot practically be dis-

bursed to the victims.” Liu, 591 U.S. at 88–89 (quoting 15 U.S.C. § 78u(d)(5)).

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U.S. 57, 66 (2013) (“We normally assume that, when Congress en-

acts statutes, it is aware of relevant judicial precedent.” (citation

omitted)).

Finally, we reject Island’s reliance on a lone congressman’s

pre-Liu statement to interpret sections 21(d)(3)(A)(ii) and (d)(7)’s

unambiguous text. See CSX Corp. v. United States, 18 F.4th 672, 680

(11th Cir. 2021) (“To the extent that legislative history is useful at

all in statutory interpretation, ‘we do not consider legislative his-

tory when the text is clear.’” (citation omitted)). These provisions

unambiguously allow the SEC to seek, and district courts to order,

disgorgement—without any requirement that it benefit investors.

2. The balance of equities

We next address whether the district court abused its equi-

table discretion in ordering disgorgement to the Treasury because

repaying harmed investors was infeasible. We conclude that the

district court didn’t abuse its discretion.

“Equity courts have routinely deprived wrongdoers of their

net profits from unlawful activity[.]” Liu, 591 U.S. at 79. That prac-

tice “reflect[s] a foundational principle: ‘[I]t would be inequitable

that [a wrongdoer] should make a profit out of his own wrong[.]’”

Id. at 79–80 (quoting Root v. Ry. Co., 105 U.S. 189, 207 (1882)); see

also Restatement (Third) of Restitution & Unjust Enrichment § 51,

cmt. e (Am. L. Inst. 3d ed. Oct. 2024 Update) (“The object of the

disgorgement remedy—to eliminate the possibility of profit from

conscious wrongdoing—is one of the cornerstones of the law of

restitution and unjust enrichment.”).

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Relying on that foundational principle, we have affirmed

judgments directing wrongdoers to pay ill-gotten gains to the

Treasury when compensating harmed parties was infeasible. We

first did so in Burk Builders, Inc. v. Wirtz—a Fair Labor Standards

Act case where an employer argued any unlawfully retained wages

that could “not be delivered to the [entitled employees] should re-

main with it and become its property.” 355 F.2d 451, 452–53 (5th

Cir. 1966). We later affirmed another judgment directing disgorge-

ment to the Treasury in FTC v. Gem Merch. Corp.—a case arising

under the Federal Trade Commission Act. 87 F.3d 466, 470 (11th

Cir. 1996), abrogated on other grounds, AMG Cap. Mgmt., LLC v. FTC,

593 U.S. 67, 75 (2021) (holding that section 13(b) of the FTC Act

“does not authorize . . . court-ordered monetary relief”). In each

case, we concluded that “equitable principles would not suggest

that [the wrongdoer wa]s entitled to the funds,” Burk Builders, Inc.,

355 F.2d at 453, and “because it is not always possible to distribute

the money to the victims . . . , a court may order the funds paid to

the United States Treasury.” Gem Merch. Corp., 87 F.3d at 470; ac-

cord FEC v. Craig for U.S. Senate, 816 F.3d 829, 847–48 (D.C. Cir.

2016) (“[C]ourts of appeals have often affirmed the propriety of di-

recting disgorged funds to the U.S. Treasury.”); Off. Comm. of Unse-

cured Creditors of WorldCom, Inc. v. SEC, 467 F.3d 73, 81 (2d Cir.

2006) (“‘[I]t remains within the [district] court’s discretion to deter-

mine how and to whom the money will be distributed,’ and if the

district court determines that no party is entitled to receive the dis-

gorged profits, they will be paid to the United States Treasury[.]”

(citations omitted)).

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The district court didn’t abuse its broad discretion in apply-

ing the same foundational principle to the Exchange Act. Cf. Porter

v. Warner Holding Co., 328 U.S. 395, 398 (1946) (explaining that a

district court’s “equitable powers assume a[] . . . broad[] and more

flexible character” in proceedings where “the public interest is in-

volved”). The SEC and the defendants stipulated that “[a] distribu-

tion to investors of the disgorgement amount requested would be

infeasible.” That stipulation presented the district court with two

options: either let Island keep its ill-gotten gains, or direct that the

money be paid to the Treasury. The district court reasonably

found that it would be more equitable to direct the money be paid

to the Treasury because it “would be inequitable that [Island]

should make a profit out of [its] own wrong.” See Liu, 591 U.S. at

79–80 (quoting Root, 105 U.S. at 207).

Island argues the district court abused its discretion because

“equity requires clean hands,” and the $114,520 in profits at issue

here was paid by fraudsters—Mirman and Rose. The “clean hands”

doctrine recognizes that “‘he who comes into equity must come

with clean hands,’ and a party . . . ‘tainted with . . . bad faith’ ‘closes

the doors of a court of equity.’” Arkin v. Pressman, Inc., 38 F.4th

1001, 1012 (11th Cir. 2022) (quoting Precision Instrument Mfg. Co. v.

Auto. Maint. Mach. Co., 324 U.S. 806, 814 (1945)). But Island doesn’t

explain how the fraudsters’ unclean hands makes it fair to allow Is-

land to profit from illegal conduct. “[E]quitable principles [do] not

suggest that [Island] is entitled to the funds” merely because there

are no investors that can be feasibly reimbursed. See Burk Builders,

Inc., 355 F.2d at 453.

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3. Causation

Island’s third challenge to the disgorgement award is that

the SEC never showed a “causal connection” between the fees that

Mirman and Rose paid Island and its wrongdoing. Specifically, Is-

land contends that the SEC didn’t show causation because the jury

found that it didn’t “scheme” with Mirman and Rose to commit

securities fraud. But we conclude that the SEC showed a causal

link between the fees and wrongdoing.

Spartan and Island, through Dilley and Eldred, worked in

tandem—they were “sister companies” with common ownership,

office space, equipment, and employees. The evidence shows that

they marketed themselves as a one-stop shop to get shell compa-

nies quoted through Spartan and then transferred through Island.

Mirman even testified that Dilley and Eldred told him that “in or-

der for [him] to deal with their broker-dealer [Spartan], they would

want [him] to deal with their transfer agent [Island] as well.” And

as we’ve already discussed, this one-stop shop’s shared employees

repeatedly lied to take Mirman and Rose’s companies public and

help sell them—which is what Mirman and Rose paid for. Island

was ultimately each Mirman/Rose shell’s transfer agent, with the

exception of Envoy Group (an issuer that the district court disre-

garded when it ordered disgorgement).

4. Reasonable approximation

Lastly, Island argues that the SEC’s approximation of Is-

land’s ill-gotten gains was “rife with errors” because it did not ex-

clude legitimate expenses. The company also argues that, because

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the SEC didn’t satisfy its burden of reasonably approximating the

gains, the district court abused its discretion by shifting the burden

to Island to prove the SEC’s estimate was unreasonable. We con-

clude that the district court didn’t abuse its discretion.

“The SEC is entitled to disgorgement upon producing a rea-

sonable approximation of a defendant’s ill-gotten gains.” SEC v.

Calvo, 378 F.3d 1211, 1217 (11th Cir. 2004). Ordering disgorgement

of ill-gotten gains isn’t “limited to confiscation of trading profits.”

SEC v. Blavin, 760 F.2d 706, 713 (6th Cir. 1985); see also SEC v. Wash.

Cnty. Util. Dist., 676 F.2d 218, 227 (6th Cir. 1982) (remanding for

district court to order disgorgement of defendant’s kickbacks from

an underwriter’s “fiscal agent fee”); Blatt, 583 F.2d at 1335–36 (rea-

soning that district court could order disgorgement of “fee[s] real-

ized by each defendant for his assistance in executing the fraud,”

which included “legal fees” and fees paid “for [a defendant’s] efforts

in soliciting sellers”). The SEC has the initial burden of showing

that its approximation of the gains is reasonable. See Calvo, 378 F.3d

at 1217; SEC v. First City Fin. Corp., 890 F.2d 1215, 1232 (D.C. Cir.

1989). If the SEC reasonably approximates the ill-gotten gains,

“[t]he burden then shifts to the defendant to demonstrate that the

SEC’s estimate is not a reasonable approximation.” Calvo, 378 F.3d

at 1217.

Reasonableness doesn’t require “[e]xactitude,” id., but a dis-

trict “court’s power to order disgorgement extends only to the

amount with interest by which the defendant profited from his

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wrongdoing. Any further sum would constitute a penalty assess-

ment.” Blatt, 583 F.2d at 1335. That means “courts must deduct

legitimate business expenses” to “ensure that any disgorgement

award falls within the limits of equity practice.” Liu, 591 U.S. at 92.

Here the district court didn’t abuse its discretion by finding

that the SEC satisfied its initial burden of reasonably approximating

Island’s ill-gotten gains. The SEC initially requested that Island dis-

gorge $147,508, which an SEC accountant calculated based on the

“fees [Island was paid] from each of the [fourteen] Mirman/Rose

companies through the date of the issuer’s bulk sale.” The SEC

accountant relied on Island’s own financial statements regarding

each issuer, showing the fees that the shells paid. The SEC then

acknowledged $125,720 would account for line-item expenses that

Island argued were legitimate—specifically, “[p]rinting; CUSIP;

credit memo; courier; DTC.” The district court held the SEC to

this “tacit[] agree[ment]” that $125,720 more accurately accounted

for legitimate expenses.

Because Island’s statements were evidence of the “fees [it]

received for [its] role” in facilitating public trading of the Mir-

man/Rose securities, see Blatt, 583 F.2d at 1335–36, and because the

adjusted estimate excluded legitimate expenses, the district court

reasonably found that the SEC satisfied its initial burden, Calvo, 378

F.3d at 1217. And the district court then did what Liu requires dis-

trict courts to do—it deducted other legitimate costs. The district

court excluded three $200 payments made after the bulk sale date

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of Aristocrat Group, Global Group, and On the Move. It also ex-

cluded a $3,500 expense related to Kids Germ because of its “odd

payment history.”

Island argues that the district court abused its discretion by

finding that the SEC satisfied its initial burden because the initial

calculation was “rife with errors,” which “included unsubstantiated

fees and payments, fees paid after the bulk transfer date, and a fail-

ure to account for legitimate business expenses.” But Island’s brief

doesn’t identify which fees the SEC included in its adjusted request

that were “unsubstantiated.” Although the SEC’s approximation

included fees paid after the bulk transfer date, those amounts to-

taled—at most—$4,100 out of the SEC’s estimate. More “[e]xacti-

tude” wasn’t required. Calvo, 378 F.3d at 1217. To the extent Island

argues that the district court should’ve excluded other allegedly

“legitimate” expenses, including Island’s fixed costs and overhead,

Island hasn’t shown that the district court abused its discretion in

that respect either. Island doesn’t explain how the district court

could’ve allocated its fixed costs to the thirteen transactions out of

the many it processed.

Island also argues that the district court erroneously shifted

the burden of proof, presuming that any risk of uncertainty in cal-

culating the disgorgement amount fell onto Island. But the district

court applied the appropriate framework: it found that the SEC

satisfied its initial burden, it deducted legitimate expenses under

Liu, and it determined that Island didn’t rebut the SEC’s showing

as to other allegedly legitimate expenses.

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So, in the end, the district court didn’t abuse its discretion

when it ordered disgorgement.

Civil Penalties

The Exchange Act allows the SEC to seek monetary penal-

ties “[f ]or each violation.” 15 U.S.C. § 78u(d)(3)(B)(i). A district

court may “impose, upon a proper showing,” those penalties

against the violator. Id. § 78u(d)(3)(A)(i).

“The amount . . . shall be determined by the court in light

of the facts and circumstances,” id. § 78u(d)(3)(B)(i), and the maxi-

mum penalty allowed depends on the type of violation. “First tier”

penalties, which “shall not exceed the greater of (I) $5,000 for a nat-

ural person or $50,000 for any other person, or (II) the gross

amount of pecuniary gain to such defendant as a result of the vio-

lation,” are the general rule. Id. “Second tier” penalties, which

“shall not exceed the greater of (I) $50,000 for a natural person or

$250,000 for any other person[] or (II) the gross amount of pecuni-

ary gain,” may be imposed if the violation “involved fraud, deceit,

manipulation, or deliberate or reckless disregard of a regulatory

requirement.” Id. § 78u(d)(3)(A)(ii). And “[t]hird tier” penalties,

which “shall not exceed the greater of (I) $100,000 for a natural per-

son or $500,000 for any other person[] or (II) the gross amount of

pecuniary gain,” may be imposed if the violation qualifies for tier

two and “directly or indirectly resulted in substantial losses or cre-

ated a significant risk of substantial losses to other persons.” Id.

§ 78u(d)(3)(A)(iii).

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The district court here ordered tier-two penalties against

each defendant. It imposed a $150,000 penalty on Dilley and Eldred

for violations relating to Envoy Group, Changing Technologies,

First Xeris, Top to Bottom, and PurpleReal. It also ordered that

Spartan and Island each pay a $250,000 penalty.

The defendants appeal the penalties on two grounds. First,

they argue that the district court violated the Seventh Amendment

by finding the facts necessary to establish the total civil-penalty

amounts instead of allowing a jury to determine those facts. Sec-

ond, Dilley, Spartan, and Island argue that the district court abused

its discretion by not considering their respective abilities to pay the

fines. Again, we disagree with both arguments.

1. Right to jury trial

The defendants’ first challenge is that the district court vio-

lated their Seventh Amendment right to a jury trial. Specifically,

they contend that the Seventh Amendment required a jury—not

the district judge—to find (1) the facts necessary to establish tier-

two penalties (that the violation “involved fraud, deceit, manipula-

tion, or deliberate or reckless disregard of a regulatory require-

ment,” 15 U.S.C. section 78u(d)(3)(B)(ii)), and (2) the number of vi-

olations that each defendant was responsible for. We do not reach

whether the Seventh Amendment required a jury to find those

facts because the defendants’ arguments fail for other reasons.

First, even if the district court couldn’t order tier-two penal-

ties without a jury finding of the qualifying facts—fraud, deceit,

manipulation, or disregard of a regulatory requirement—the jury

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here necessarily found deceit in this case as to each defendant. The

jury held each defendant liable on count six. And count six re-

quired that the SEC prove deceit through either an “untrue state-

ment” or an omission “necessary . . . to make the statements . . .

not misleading.” 17 C.F.R. § 240.10b-5(b). Thus, the jury’s finding

allowed the district court to order tier-two penalties without any

additional factfinding. See 5 U.S.C. § 78u(d)(3)(B)(ii), which is what

the district court did here.

Second, the defendants forfeited their assertion that the Sev-

enth Amendment required a special jury finding on the number of

violations. “[F]orfeiture is the failure to make the timely assertion

of a right.” United States v. Campbell, 26 F.4th 860, 872 (11th Cir.

2022) (en banc) (citation omitted). No defendant timely asserted a

right to have the jury determine the number of violations before

the district court submitted the case to the jury. Their motion for

special interrogatories only sought a special jury finding as to the

penalty tier.

The defendants argue that they preserved the number-of-vi-

olations issue because they “never wavered in their conviction that

they were not liable—that they committed [zero] violations.” But

an assertion that the defendants weren’t liable cannot preserve the

issue that, if the jury found them liable, it should specify the num-

ber of violations on the verdict form.

2. Defendants’ ability to pay

Next, Dilley, Spartan, and Island argue that the district court

abused its discretion in determining the penalty amounts. They

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contend that they lack the net worth and assets to pay the penalties

that the district court ordered. To that end, they argue that the

district court should’ve considered their inability to pay before or-

dering penalties and that its failure to do so was an abuse of discre-

tion. Dilley, Spartan, and Island are mistaken for two independent

reasons.

First, the district court did consider Dilley’s ability to pay a

$150,000 penalty, and it did consider Spartan and Island’s ability to

pay a $250,000 penalty. The district court’s remedies order ex-

pressly stated that it considered “all [of] the facts and circum-

stances,” including “whether the penalt[ies] that would otherwise

be appropriate should be reduced due to defendants’ demonstrated

current and future financial condition.”

The second reason is one that Dilley, Spartan, and Island

concede—even if the district court didn’t consider their ability to

pay the penalties, our precedent did not require it to consider that

factor. A district court abuses its discretion “when a relevant factor

that should have been given significant weight is not considered.”

Ameritas Variable Life Ins. Co. v. Roach, 411 F.3d 1328, 1330 (11th Cir.

2005). But we held in Warren that a wrongdoer’s ability to pay Ex-

change Act penalties “does not merit significant weight.” 534 F.3d

at 1370. “At most, ability to pay is one factor to be considered in

imposing a penalty.” Id.

Dilley, Spartan, and Island maintain that we got it wrong in

Warren. They argue that because the Eighth Amendment bars ex-

cessive fines, “ability to pay [Exchange Act penalties] is a factor that

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should be given significant weight” by district courts. Under our

prior panel precedent rule, though, Warren binds us “unless and

until it is overruled or undermined to the point of abrogation by

the Supreme Court or by this court sitting en banc.” United States v.

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