United States v. John Walsh

In the

United States Court of Appeals

For the Seventh Circuit

Nos. 12-1503 & 12-1504

U NITED S TATES OF A MERICA,

Plaintiff-Appellee,

v.

JOHN E. W ALSH and C HARLES M ARTIN ,

Defendants-Appellants.

Appeals from the United States District Court

for the Northern District of Illinois, Eastern Division.

No. 1:09-cr-00005—Virginia M. Kendall, Judge.

A RGUED A PRIL 22, 2013—D ECIDED JULY 23, 2013

Before W OOD , T INDER, and H AMILTON, Circuit Judges.

T INDER, Circuit Judge. John E. Walsh and Charles Martin

organized One World Capital Group, LLC, and devised

a scheme to defraud its customers. They were caught

and charged with various federal offenses. Both

defendants pleaded guilty to several counts. Walsh

pleaded guilty to wire fraud, tax evasion, and making

false statements in a report to the Commodities Futures

and Trading Commission. Martin pleaded guilty to wire

2 Nos. 12-1503 & 12-1504

fraud, tax evasion, and a Commodities Exchange Act

violation. The district court sentenced Walsh and Martin

to terms of imprisonment of 150 and 204 months, respec-

tively, and ordered each of them to pay $16,976,554

in restitution. They appeal their sentences. Walsh chal-

lenges the district court’s finding as to the amount of

the loss and restitution, and both defendants challenge

the application of a sentencing enhancement based upon

a finding that each was an officer or director of a futures

commission merchant. Finding no error, we affirm.

I. Background

Walsh and Martin were principals of One World, a

futures and foreign currency trading company, formed

in 2005.1 One World acted as a “futures commission

merchant” and as a “forex dealer member.” A company

acting as a futures commission merchant must register

with the Commodities Futures and Trading Commission

(CFTC),2 7 U.S.C. § 6d(a); and once registered, must meet

registration requirements, which include maintaining

net capital to cover trades and filing monthly financial

reports reflecting the company’s financial condition. See

1

Foreign currency transactions (forex transactions) involve

the sale or purchase of one national currency relative to

another. Traders earn profits based upon the change in value

of the two currencies over a period of time.

2

The CFTC is an independent regulatory agency that ad-

ministers and enforces the Commodity Exchange Act and

corresponding regulations.

Nos. 12-1503 & 12-1504 3

17 C.F.R. § 1.17(a)(1); id. § 1.10(b)(1)(i) (“each person

registered as a futures commission merchant must file a

Form 1-FR-FCM as of the close of business each

month”). Walsh, as owner, president, and primary man-

ager, registered One World with the CFTC and with

the National Futures Association (NFA).3 Martin was

banned from serving as a principal or “associated person”

of an NFA member because of prior convictions, so the

defendants concealed his position with One World

from the CFTC and the NFA. One World operated until

December 2007, when the CFTC obtained a temporary

restraining order and shut down its operations.

As a forex dealer member, One World accepted

retail customer funds for the purpose of acting as a

counterparty, or offering to act as counterparty, to over-

the-counter forex transactions. Customers traded forex

with One World via “Metatrader 4,” an internet

trading platform, which maintained records of their

trading activity and calculated the changing value of

their forex trading accounts. At a customer’s request, the

trading platform generated and distributed an electronic

account statement reflecting the equity value of the cus-

tomer’s forex trading account. As a prerequisite to ac-

cepting trades, One World required customers to

secure their forex positions by depositing funds, known

3

The NFA is a registered futures association that serves as

an independent, self-regulatory organization for the futures

industry that develops rules, programs, and services to safe-

guard the futures market.

4 Nos. 12-1503 & 12-1504

as “margin funds,” with One World, but those funds

remained the customers’ property. Customer margin

funds were to be credited or debited according to

changes in the value of the customer’s forex trading

positions. The defendants represented to customers

and prospective customers that margin funds were main-

tained in a separate One World customer account.

Shortly after One World’s formation, Walsh and

Martin began to transfer customer margin funds from

One World to their own personal accounts. They used

the misappropriated funds to purchase goods and

services for themselves and to finance personal business

ventures. They misappropriated $10,019,619 in One

World customer funds. Walsh deposited those funds

into his personal checking account and transferred

$3,771,100 to Martin’s personal checking account. Martin

transferred an additional $2,887,776 directly from One

World to his personal bank account. Walsh and Martin

also charged $4.6 million to One World’s corporate

credit cards for various personal expenses. Their misap-

propriation of customer margin funds rendered One

World insolvent by April 2006.

Walsh and Martin concealed One World’s insolvency

and their criminal conduct by misleading customers

about the company’s ability to meet its obligations. They

allowed existing customers to continue to obtain

account statements that falsely stated their available

margin funds, and they solicited new customers by

making false and misleading statements. They also used

a Ponzi-like scheme, paying existing customers’ redemp-

Nos. 12-1503 & 12-1504 5

tion requests with new customers’ margin deposits.

And Walsh directed One World to submit to the CFTC

false and misleading monthly financial reports that under-

stated the company’s liabilities and overstated its assets.

The NFA initiated a formal action against One World

and Walsh in 2007, precipitating an increase in customer

redemption requests. By the fall of that year, One World

had insufficient funds to honor redemption requests

because of the defendants’ conduct. Walsh falsely

assured, and caused others to falsely assure, customers

that One World would honor their redemption re-

quests; he claimed that they just needed more time. As

of November 5, 2007, about one month before the CFTC

shut down One World, Metatrader’s records showed

that One World had $17,654,486 in unpaid customer

liabilities and only $677,932 in assets.

Walsh pleaded guilty to wire fraud, tax evasion, and

making false statements in a report to the CFTC. In his

written plea agreement, Walsh reserved the right to

contest the loss amount but agreed that his offense

level should be increased by 4 levels under U.S.S.G.

§ 2B1.1(b)(17)(B) (2010) 4 because the offense involved a

violation of commodities law and, at the time of the

4

The 2010 version of the Sentencing Guidelines was in effect

when the defendants entered into their plea agreements and

pleaded guilty, but the 2011 version was in effect at their

sentencing hearings. The disputed offense-level increase

was in subsection (b)(17)(B)(i) of § 2B1.1 in the 2010 version,

but subsection (b)(18)(B)(i) in the 2011 version. We will refer

to the 2011 version, U.S.S.G. § 2B1.1(b)(18)(B)(i).

6 Nos. 12-1503 & 12-1504

offense, he was an officer of a futures commission mer-

chant. The presentence report (PSR) determined that

Walsh’s total offense level was 38, incorporating a 20-

level increase based on a loss amount of more than

$7 million but less than $20 million, and a 3-level reduc-

tion for acceptance of responsibility. Walsh had 4

criminal history points, placing him in criminal history

category III. Given a total offense level of 38 and a criminal

history category III, his guidelines range was 292 to

365 months. Because the statutorily authorized maxi-

mum sentence was less than the upper limit of the guide-

line range, the guideline range was restricted to 292 to

360 months. See U.S.S.G. § 5G1.1.

At sentencing, Walsh objected to the PSR’s conclusion

as to the loss amount. He argued that the loss was less

than $7 million, which would have yielded an 18-level

increase in offense level. The government maintained

that the loss was approximately $17,654,486, based on

the Metatrader records, reflecting unpaid One World

customer liabilities in that amount. The district court

agreed with the government, finding that the loss

amount was a “conservative $17,654,000.” The court

reduced that amount to $16,976,554, to account for

$677,932 in One World assets. Accordingly, the court

determined that Walsh’s guideline range was 292 to

360 months and imposed a term of 150 months’ impris-

onment, a term of supervised release, 200 hours of com-

munity service, a mandatory special assessment, and

ordered restitution of $16,976,554. The court addressed

the sentencing factors, see 18 U.S.C. § 3553(a), and ex-

Nos. 12-1503 & 12-1504 7

plained why it imposed a below-range sentence. In dis-

cussing the seriousness of the offense, the court said it

was an “extensive fraud scheme” involving “an intended

loss of 17 million or more.” Walsh Sent. Tr. 87.

Martin pleaded guilty to wire fraud, tax evasion, and

stealing money provided to a futures commission mer-

chant. In the written plea agreement, he agreed that the

loss exceeded $7 million but was less than $20 million,

thus increasing his offense level by 20, but he reserved

the right to contest the application of the 4-level increase

under U.S.S.G. § 2B1.1(b)(18)(B)(i). The PSR determined

that Martin should receive a 3-level reduction for ac-

ceptance of responsibility; thus, it determined that his

total offense level was 38. The PSR placed Martin in

criminal history category I. A total offense level of 38

and a criminal history category I yielded a guideline

range of 235 to 293 months.

At sentencing, Martin’s only objection to the PSR’s

guideline calculation was that U.S.S.G. § 2B1.1(b)(18)(B)(i)

did not apply because he was not “personally registered”

as an officer or director of One World. The district court

overruled the objection and applied the enhancement.

The court calculated Martin’s guideline range as 235 to

293 months, considered the sentencing factors, and im-

posed a below-range sentence of 204 months’ imprison-

ment, a term of supervised release, a mandatory special

assessment, and ordered Martin to pay $16,976,554

in restitution.

8 Nos. 12-1503 & 12-1504

II. Discussion

On appeal, Walsh contests the district court’s loss

determination and application of the 20-level enhancement

under U.S.S.G. § 2B1.1(b)(1)(K). Both defendants chal-

lenge the court’s application of the 4-level enhancement

under U.S.S.G. § 2B1.1(b)(18)(B)(i), arguing that they

were not officers or directors of a futures commission

merchant. Walsh also moves for leave to file a supple-

mental brief in order to challenge the court’s restitu-

tion order.

A. Loss Calculation

Walsh argues that the district court clearly erred in

finding that the loss caused by his offense was more than

$7 million but less than $20 million, and as a result, im-

properly calculated his guidelines range. He complains

that the government failed to prove intentional loss of

$17 million; he claims specifically that it failed to prove

his subjective intent. He also argues that evidence of

actual loss was unreliable, that the district court shifted

the burden of proof to him to prove errors in the govern-

ment’s loss calculation, and that customer margin

balances were an inappropriate measure of loss from

the offense.

“We review the district court’s interpretation and

application of the guidelines de novo and its findings of

fact for clear error.” United States v. Natour, 700 F.3d 962,

975 (7th Cir. 2012) (quotation and citation omitted). For

cases like this involving fraud, the defendant’s base

Nos. 12-1503 & 12-1504 9

offense level may be increased based on the amount of the

loss. U.S.S.G. § 2B1.1(b). The guideline provides that “[i]f

the loss [was] [m]ore than $7,000,000” but less than

$20,000,000 “add 20” to the offense level. U.S.S.G.

§ 2B1.1(b)(1)(K)-(L). The district court’s loss calculation

“need only be ‘a reasonable estimate of the loss.’ ” Natour,

700 F.3d at 976 (quoting U.S.S.G. § 2B1.1 cmt. n.3(C)).

We generally review the loss calculation for clear error.

Natour, 700 F.3d at 976. New arguments or theories not

raised in the district court, however, are forfeited and

reviewed for plain error. United States v. Westerfield, 714

F.3d 480, 488 (7th Cir. 2013). When a defendant

challenges a district court’s loss calculation, he must

“demonstrate that it is inaccurate” and “outside the

realm of permissible computations.” Natour, 700 F.3d at

978 (quotation and citation omitted).

“A defendant who stipulates to facts as part of a written

plea agreement also waives challenges to the district

court’s reliance on those facts.” United States v. Scott, 657

F.3d 639, 640 (7th Cir. 2011) (per curiam). As the gov-

ernment asserts, Walsh admitted both in his written

plea agreement and in his plea colloquy that he misap-

propriated “over $10 million in One World customer

funds” and “deposited approximately $10,019,619 in

One World funds in his personal Citibank account.”

Walsh Plea Agreement 5; see also Walsh Change of Plea

Tr. 28-29 & 39 (agreeing that he and Martin engaged in

a scheme to defraud One World customers and that,

through the scheme, they misappropriated over $10 million

in customer funds). Walsh’s challenge to the loss

amount runs head-on into these admissions.

10 Nos. 12-1503 & 12-1504

Walsh’s argument that the district court’s loss calcula-

tion was based on “intended loss” rather than “actual

loss” is raised for the first time on appeal. Thus, our

review is for plain error only. E.g., Westerfield, 714 F.3d

at 488. This argument has no support in the record;

thus, there is no error, plain or otherwise. The guideline

application notes state that “loss is the greater of the

actual or intended loss.” U.S.S.G. § 2B1.1, cmt. n.(3)(A).

The record establishes that the district court’s loss cal-

culation was based on the actual, not intended, loss.

See United States v. Dokich, 614 F.3d 314, 319 (7th Cir.

2010). The PSR based the 20-level increase under

2B1.1(b)(1)(K) on the defendants’ “misapprorpiat[ion of]

over $10 million in One World customer funds.” Walsh

PSR 10; see also id. at 7 (referring to the “unpaid aggregate

equity balance that exceeded $17,000,000”). Likewise,

the government’s loss calculation was based on

“$17,654,486 in unpaid customer liabilities,” which was

derived from an analysis of the Metatrader trading plat-

form records as of November 5, 2007. See, e.g., Gov’t

Sent. Memo 3; Walsh Sent. Tr. 43 (government counsel ex-

plaining that “[o]ur loss calculation” is based on “equity

balances”); id. at 46 (again referring to “an equity balance”

of $17,654,486).

Furthermore, at sentencing, in disputing the loss

amount, Walsh’s counsel acknowledged that the gov-

ernment’s loss calculation was based on claimed “unpaid

customer liabilities,” which came from an analysis of

the trading platform records. Walsh Sent. Tr. 10. As

Walsh himself points out, “[t]he only time the word ‘in-

tended’ was even mentioned at his sentencing hearing

Nos. 12-1503 & 12-1504 11

was when the judge said the ‘scheme had an intended

loss of over $17 million.’ ” Appellants’ Br. 19. Our review

of the entire record reveals that the district judge simply

misspoke in referring to an “intended loss”—a single

reference made not in determining the loss amount but

rather when discussing the § 3553 factors. The record

points us to one conclusion: the district court’s loss deter-

mination was based on actual loss.5

And contrary to Walsh’s argument, the record does

establish his intent to defraud One World customers. In

addition to admitting to misappropriating $10 million

in customer funds, Walsh admitted in his plea

agreement that he and Martin “transferred One World

customer margin funds to their personal accounts with

the express intent to steal, embezzle and convert those

funds.” Walsh Plea Agreement 6. He also admitted that

they “used the customer funds misappropriated to pur-

chase goods and services for themselves, and to finance

other personal business ventures.” Id. And Walsh’s ad-

mitted actions manifest his intent: He admitted to “mis-

leading existing and prospective One World customers,

lying to regulators about One World’s financial condi-

tion, and . . . making Ponzi-type payments to One

World’s pre-existing customers.” Id. at 7. More particularly,

Walsh admitted to sending emails to customers assuring

5

The court’s reliance on actual loss seems to have benefited

Walsh. The court stated that it thought the intended loss was

much greater than actual loss. See Martin Sent. Tr. 34-35 (“This

is a very massive fraud scheme, and the amount of intended

loss is astronomical. The amount of actual loss is really solid.”).

12 Nos. 12-1503 & 12-1504

them that One World would honor redemption

requests when he knew that it lacked sufficient funds to

do so. Id. at 11. Furthermore, he admitted that by

April 2006 and continuing until October 2007, at his

direction, One World “submitted false and misleading”

financial reports to the CFTC. Id. at 9.

Walsh contends that the evidence of actual loss

was unreliable and that the district court improperly

shifted the burden of proof to him. He challenges the

court’s reliance on Joy McCormack’s analysis of data from

Metatrader and argues that Daniel Colgan’s testimony

showed flaws in her analysis, including reliance on un-

known user accounts and losing trades. However, the

government’s loss analysis by McCormack, senior investi-

gator at the CFTC, excluded unknown user accounts.

See R.176, Gov’t Sent. Mem. 4-5 (“In an abundance of

caution, the government subtracted test and [trading

group accounts] from its loss calculation spreadsheet.”).

And Walsh had no evidence at sentencing to support his

claim regarding losing trades. See Walsh Sent. Tr. 40.

Moreover, the McCormack loss analysis was “an

incredibly conservative estimate,” id. at 46, because One

World was a fraud as a whole; thus, the loss amount

could have been much higher. As well, the loss analysis

only accounted for customers who were trading in forex

on the Metatrader platform; it did not account for

forex customers who were not trading on that platform

or for customers who traded futures. Thus, the govern-

ment’s loss analysis represented the loss to only a

subset of One World customers.

Nos. 12-1503 & 12-1504 13

Beyond the specific claims noted above, Walsh offers

only general criticisms of McCormack’s analysis rather

than detailed factual objections. His unsupported,

general objections are insufficient to show that the evi-

dence of loss was unreliable or that the court shifted

the burden of proving (or disproving) the loss amount

to him. See United States v. Gordon, 495 F.3d 427, 431 (7th

Cir. 2007) (“Although the burden is on the government

to determine the amount of loss, once the government

has met its burden of proving loss, the defendant’s

wholly unsubstantiated statements are not enough to

counter or even question the court’s acceptance of the

government’s proof of loss.”).

According to Walsh, however, his concessions estab-

lish a loss amount much lower than $17 million. He

focuses exclusively on his admission to a $1.5 million

wire transfer identified in his plea agreement as one

example where One World customers who, based on the

materially false and misleading representations of

Walsh and Martin, continued to provide margin funds

for future forex trading. Walsh Plea Agreement 8. In

doing so, Walsh completely ignores other admissions in

his plea agreement, including that he “misappropri-

ated over $10 million in One World customer funds” by

depositing “funds in his personal Citibank account.” Id.

at 5. We, like the district court, take all of Walsh’s ad-

missions into account.

Next, Walsh maintains that margin balances were an

inappropriate measure of loss from the offense, asserting

that customers who had margin balances in November

14 Nos. 12-1503 & 12-1504

2007 were not necessarily victims of fraud. He claims

that their losses were not directly caused by the

defendants and suggests that their losses may have been

due to the NFA’s formal action against One World,

which precipitated a “run-on-the-bank”; “premature

withdrawals by Martin and Walsh”; and CFTC’s shut

down of One World in December 2007. Because Walsh

did not raise these arguments in the district court, we

review for plain error. See Westerfield, 714 F.3d at 488.

Given the broad range of the loss amount that yields

the 20-level increase in offense level, “there’s . . . no need

to determine with precision where within that span the

loss falls.” United States v. Caputo, 517 F.3d 935, 943 (7th

Cir. 2008). The loss determination “does not require

more than an estimate.” Id. Thus, the district court need

not identify specific victims who were refused margin

redemption requests for purposes of calculating the

loss. Cf. id. (contrasting loss determination for purposes

of § 2B1.1 which may be based on an estimate with resti-

tution which “requires an exact figure” and must

be determined “one customer at a time”).

Furthermore, it was the defendants’ own criminal

conduct that precipitated the NFA’s formal action against

One World, the “run-on-the-bank,” and the CFTC’s shut

down. Besides, Walsh offers no evidence to show that the

appointment of a receiver would have made a difference

in the loss to One World customers, specifically, that

the loss would have fallen below the $7 million mark

required for the 20-level enhancement. Nor has Walsh

shown that the defendants could have repaid any funds

Nos. 12-1503 & 12-1504 15

allegedly “prematurely” withdrawn. See, e.g., United

States v. Mount, 966 F.2d 262, 266 (7th Cir. 1992) (“An

embezzler who abstracts $10,000 to invest in the stock

market causes a ‘loss’ of $10,000 even if he plans to re-

pay.”). We add that Walsh’s characterization of the de-

fendants’ misappropriation of funds as “premature

withdrawals” contradicts his admission that they “trans-

ferred One World customer margin funds to their

personal accounts with the express intent to steal, embez-

zle and convert those funds.” Walsh Plea Agreement 6.

Moreover, as an alternative basis for its loss calculation,

the district court used the gain to the defendants from

their offenses. The guideline provides that “[t]he court

shall use the gain that resulted from the offense as an

alternative measure of loss only if there is a loss but it

reasonably cannot be determined.” U.S.S.G. § 2B1.1 cmt.

n.3(B). The district court found that the gain resulting

from the defendants’ offenses was $10 million. Walsh

Sent. Tr. 51 (“We certainly have a hard-figure loss of

$10 million going out to the two defendants . . . .”). This

finding is not clearly erroneous. As noted, Walsh

admitted to “misappropriat[ing] over $10 million in

One World customer funds,” “deposit[ing] approxi-

mately $10,019,619 in One World funds in his personal

Citibank account,” and “us[ing] the customer funds

misappropriated to purchase goods and services for

[Walsh and Martin], and to finance other personal

business ventures.” Thus, if the loss could not be rea-

sonably determined, the district court could rely on

the gain to the defendants as an alternative basis on

which to find the amount of loss. The defendants’ gain

16 Nos. 12-1503 & 12-1504

of $10 million easily fits within the broad range of $7 to

$20 million in U.S.S.G. § 2B1.1(b) for the 20-level enhance-

ment.

We conclude that the district court properly relied

on Walsh’s admissions and the evidence presented at

sentencing to find a loss amount of approximately

$17 million and that its calculation was a reasonable

estimate of the loss. Therefore, the court did not err in

determining the loss amount—an amount well within

the range in U.S.S.G. § 2B1.1(b)(1)(K)—and properly

increased Walsh’s offense level by 20.

Walsh sought leave to file a supplemental brief in

order to challenge the court’s restitution order. His

motion for leave to file a supplemental brief is

G RANTED . However, his challenge to the district court’s

restitution order comes far too late. He did not object to

the restitution order at sentencing, thus at the least for-

feiting any challenge to that order. And after sentencing,

the government moved to present the court with victim

restitution information, advising that it had underesti-

mated the total losses attributable to the defendants’

conduct. Neither defendant objected to the restitution

amount, and the district court issued an Amended Judg-

ment. If Walsh’s challenge to the restitution order was

not waived but only forfeited, we would review the

restitution order for plain error. Walsh’s challenge to

the restitution order is succinctly stated as this: “The

restitution order . . . was based on the same outstanding

margin balances that the government submitted to

prove loss.” Given our conclusion that the district court

Nos. 12-1503 & 12-1504 17

did not err in finding the loss amount, we find no plain

error in the restitution order.

B. Whether One World was a Futures Commission

Merchant

Martin argues that the district court erred in finding that

he was an officer or director of a futures commission

merchant and, on the basis of this finding, increasing

his offense level by 4 under U.S.S.G. § 2B1.1(b)(18)(B)(i).

He maintains that One World was not a futures com-

mission merchant; therefore, he could not be an officer

or director of a futures commission merchant. Walsh

adopts Martin’s argument. Because Walsh did not object

to the court’s application of the enhancement, as he

concedes, we review for plain error. See Westerfield,

714 F.3d at 488.

The guideline calls for a 4-level increase in offense

level “[i]f the offense involved—a violation of commodities

law and, at the time of the offense, the defendant was (i)

an officer or director of a futures commission mer-

chant.” U.S.S.G. § 2B1.1(b)(18)(B)(i). The defendants do

not dispute that the offenses involved a violation of

commodities law or that they were officers or directors

of One World. We reject their contention that One

World was not a futures commission merchant.

“A defendant who stipulates to facts as part of a

written plea agreement also waives challenges to the

district court’s reliance on those facts.” Scott, 657 F.3d at

640. Walsh and Martin admitted in their written plea

agreements that One World “was a futures . . . trading

18 Nos. 12-1503 & 12-1504

company,” Plea Agreements 3, that “One World acted as

a futures commission merchant (“FCM”) registered with

the CFTC,” id. that, “[a]s a FCM, One World was

required to file a monthly financial report with the

CFTC,” id. at 9, and that the “CFTC generally used these

financial reports to insure . . . that a FCM like One World

was compliant with its regulatory . . . requirements,” id.

Walsh pleaded guilty to filing a false report required

of futures commission merchants. He admitted in his

written plea agreement that his offense level should be

increased by 4 under U.S.S.G. § 2B1.1(b)(18)(B)(i)

because “the offenses of conviction involved a violation

of commodities law and, at the time of the offense, the

defendant was an officer of a futures commission mer-

chant.” Walsh Plea Agreement 17. At his plea hearing,

Walsh expressed his understanding that the 4-level in-

crease applied “because . . . at the time of the offense[,

he] was an officer of a futures commission merchant.”

Walsh Plea Hr’g 12. In addition, he did not merely fail

to object to application of § 2B1.1(b)(18)(B)(i); in his

written plea agreement, he agreed that it should be

applied and he stipulated to the facts supporting its

application. Thus, Walsh expressly waived any chal-

lenge to application of the 4-level enhancement.

Likewise, Martin waived any challenge to the district

court’s reliance on the fact that One World was a

futures commission merchant. Not only did Martin not

object at his sentencing to a finding that One World was

a futures commission merchant, he admitted that fact

in his written plea agreement. Thus, the defendants

waived challenges to the district court’s reliance on the

Nos. 12-1503 & 12-1504 19

admitted fact that One World was a futures commission

merchant. See Scott, 657 F.3d at 640.

But even if the defendants merely forfeited the argu-

ment that One World was not a futures commission

merchant, we find no error. The guideline points to the

Commodity Exchange Act for the definition of “futures

commission merchant,” see U.S.S.G. § 2B1.1, app. n.14(A).

Citing the definition in effect at the time of the offense,

see 7 U.S.C. § 1a(20) (2007) (defining a “futures commis-

sion merchant” to include a company that “is engaged

in soliciting or in accepting orders for the purchase or

sale of any commodity for future delivery”), the defen-

dants argue that One World had to be involved in the

purchase or sale of any commodity for future delivery.

They then maintain that under CFTC v. Zelener, 373 F.3d

861 (7th Cir. 2004), One World was not a “futures com-

mission merchant.” Zelener held that rollovers of foreign

currency sales were not contracts of sale of a commodity

for future delivery but were instead spot sales. Id. at

869. Zelener is inapposite as it was strictly a forex case.

Here, the defendants acknowledge that Walsh “had

some carryover futures clients that followed him to

One World,” Appellants’ Br. 34 n.9, and that “One World

had some futures customers,” id. at 36.

Although the defendants argue that this case was “solely

about the forex side of the business,” id. at 34 n.9,

their claim is not supported by the record. Count Four of

the information charged Walsh with making false and

misleading statements to the CFTC in a required filing

(Form 1-FR-FCM) filed on behalf of One World. Specifi-

20 Nos. 12-1503 & 12-1504

cally, the count charges that he falsely reported One

World’s assets and liabilities, knowing that his report

was false in violation of 7 U.S.C. § 13(a)(3). Thus, Walsh

pleaded guilty to making false statements to the CFTC

in a report required of registered futures commission

merchants. See Walsh PSR 7 (“As a FCM, One World

was required to file a monthly financial report with the

CFTC, known as a Form 1-FR-FCM . . . .”). And Martin

benefited from the fraudulent filings with the CFTC.

The false statements in the reports were an important

part of the scheme to defraud, concealed the fraud from

the CFTC, and allowed the defendants to solicit

customers and continue their misappropriation of cus-

tomer margin funds. In addition, the defendants pleaded

guilty to the charged scheme, which included the prepara-

tion and submission of monthly financial reports with

the CFTC—Forms 1-FR-FCM. And application of the

enhancement furthers the purpose of the 4-level increase,

which is to impose higher sentences on defendants who

hold themselves out as officers or directors of a “futures

commission merchant” regulated by the CFTC in order

to further their fraud and attract potential victims.

The district court did not err in finding that One

World was a “futures commission merchant.” As noted,

the defendants acknowledge that Walsh “had some

carryover futures clients that followed him to One

World” and that “One World had some futures custom-

ers.” Their PSRs provide factual support for the finding

that One World provided services for both futures and

forex trading to its customers. See Walsh PSR 6

(describing One World as a “futures and [forex] trading

Nos. 12-1503 & 12-1504 21

company”); Martin PSR 6 (same). The presence of these

facts supporting the guideline’s application distinguishes

this case from United States v. Jaimes-Jaimes, 406 F.3d 845,

846-47 (7th Cir. 2005). There, we found plain error in

the application of a sentence enhancement based on an

erroneous view of a fact—that the defendant had been

convicted of a crime of violence. Id. at 849-50. In addition,

the government and we had focused on the lack of a

specific objection to the presentence report rather than any

admission in the plea agreement. Id. at 847-48. The defen-

dants do not contend that a company which provides

futures trading services fails to qualify as a “futures

commission merchant.” The district court did not err in

applying the 4-level increase to the defendants as

officers or directors of a futures commission merchant.

IIII. Conclusion

For the foregoing reasons, we A FFIRM the defendants’

sentences.

7-23-13