SEC v. Ahmed

21-1686 (L)

SEC v. Ahmed

United States Court of Appeals

for the Second Circuit

August Term 2022

Argued: January 18, 2023

Decided: June 28, 2023

Nos. 21-1686, 21-1712

UNITED STATES SECURITIES AND EXCHANGE COMMISSION,

Plaintiff-Appellee,

v.

IFTIKAR A. AHMED, SHALINI AHMED, I.I. 1, A MINOR CHILD, BY AND

THROUGH HIS NEXT FRIENDS IFTIKAR AND SHALINI AHMED, HIS

PARENTS, I.I. 2, A MINOR CHILD, BY AND THROUGH HIS NEXT FRIENDS

IFTIKAR AND S HALINI AHMED, HIS PARENTS, I.I. 3, A MINOR CHILD, BY

AND THROUGH HIS NEXT FRIENDS IFTIKAR AND S HALINI AHMED, HIS

PARENTS, I-CUBED DOMAINS, LLC, SHALINI AHMED 2014 GRANTOR

RETAINED ANNUITY TRUST, DIYA HOLDINGS, LLC, DIYA REAL

HOLDINGS, LLC,

Defendants-Appellants,

v.

JED HORWITT,

Receiver-Appellee. *

*

The Clerk of Court is respectfully directed to amend the caption

accordingly.

On Appeal from the United States District Court

for the District of Connecticut

Before: WALKER, RAGGI, and PARK, Circuit Judges.

Defendant Iftikar Ahmed defrauded his former employer and

its investors of some $65 million over the span of a decade. His

scheme ended in 2015 when he was indicted on unrelated insider-

trading charges and a subsequent internal investigation revealed the

full breadth of his wrongdoing. The Securities and Exchange

Commission (“SEC”) brought this civil enforcement action against

Ahmed for various violations of the securities laws.

To secure a potential disgorgement judgment, the SEC joined

Ahmed’s family and related entities as Relief Defendants, and the

district court (Arterton, J.) froze Ahmed’s and the Relief Defendants’

assets. Ahmed is currently a fugitive from justice, apparently

residing in India, so the district court excluded him from discovery of

the SEC’s investigative file. Due to a lack of excess frozen funds, the

district court also denied Ahmed access to funds to hire counsel.

The district court granted the SEC’s motion for summary judgment

and awarded disgorgement, supplemental enrichment (including

prejudgment interest and actual gains), and civil penalties against

Ahmed. The district court also adopted the SEC’s theory that

Ahmed is the equitable owner of assets held in the name of the Relief

Defendants as “nominees.”

On appeal, Ahmed and the Relief Defendants challenge the

district court’s judgment and calculation of disgorgement. The

Relief Defendants also move to stay the liquidation of frozen assets

by the Receiver-Appellee pending resolution of these consolidated

appeals. We affirm the district court’s (1) exclusion of Ahmed from

discovery and denial of his access to frozen funds to hire counsel;

(2) calculation of Ahmed’s disgorgement obligation; and

(3) retroactive application of the 2021 amendments to the Securities

Exchange Act of 1934 to Ahmed’s disgorgement obligation. We

2

conclude, however, that the district court (4) failed to assess whether

actual gains on the frozen assets were unduly remote from Ahmed’s

fraud, and (5) should have applied an asset-by-asset approach to

determine whether the Relief Defendants are in fact only nominal

owners of their frozen assets.

The district court’s order is AFFIRMED in part and VACATED

AND REMANDED in part. In a separate order, we dismiss as moot

Defendants’ appeals from the district court’s liquidation orders. The

Relief Defendants’ motion for a stay is DENIED as moot, and all stays

are VACATED.

VINCENT LEVY (Gregory Dubinsky, Andrew C. Indorf, on

the brief), Holwell Shuster & Goldberg LLP, New York,

NY, for Defendant-Appellant Iftikar A. Ahmed.

ADAM G. UNIKOWSKY (Zachary C. Schauf, on the brief),

Jenner & Block LLP, Washington, DC, for Defendants-

Appellants Shalini Ahmed, I.I. 1, a minor child, by and

through his next friends Iftikar and Shalini Ahmed, his

parents, I.I. 2, a minor child, by and through his next friends

Iftikar and Shalini Ahmed, his parents, I.I. 3, a minor child, by

and through his next friends Iftikar and Shalini Ahmed, his

parents, I-Cubed Domains, LLC, Shalini Ahmed 2014 Grantor

Retained Annuity Trust, DIYA Holdings, LLC, DIYA Real

Holdings, LLC.

STEPHEN G. YODER, Senior Litigation Counsel, for Dan M.

Berkovitz, General Counsel, and John W. Avery, Deputy

Solicitor, Securities and Exchange Commission,

Washington, DC, for Plaintiff-Appellee Securities and

Exchange Commission.

3

John L. Cesaroni, Christopher H. Blau, Stephen M.

Kindseth, Zeisler & Zeisler, P.C., Bridgeport, CT, for

Receiver-Appellee Jed Horwitt.

PARK, Circuit Judge:

Defendant Iftikar Ahmed defrauded his former employer and

its investors of some $65 million over the span of a decade. His

scheme ended in 2015 when he was indicted on unrelated insider-

trading charges and a subsequent internal investigation revealed the

full breadth of his wrongdoing. The Securities and Exchange

Commission (“SEC”) brought this civil enforcement action against

Ahmed for various violations of the securities laws.

To secure a potential disgorgement judgment, the SEC joined

Ahmed’s family and related entities as Relief Defendants, and the

district court (Arterton, J.) froze Ahmed’s and the Relief Defendants’

assets. Ahmed is currently a fugitive from justice, apparently

residing in India, so the district court excluded him from discovery of

the SEC’s investigative file. Due to a lack of excess frozen funds, the

district court also denied Ahmed access to funds to hire counsel.

The district court granted the SEC’s motion for summary judgment

and awarded disgorgement, supplemental enrichment (including

prejudgment interest and actual gains), and civil penalties against

Ahmed. The district court also adopted the SEC’s theory that

Ahmed is the equitable owner of assets held in the name of the Relief

Defendants as “nominees.”

On appeal, Ahmed and the Relief Defendants challenge the

district court’s judgment and calculation of disgorgement. The

Relief Defendants also move to stay the liquidation of frozen assets

4

by the Receiver-Appellee pending resolution of these consolidated

appeals. We affirm the district court’s (1) exclusion of Ahmed from

discovery and denial of his access to frozen funds to hire counsel;

(2) calculation of Ahmed’s disgorgement obligation; and

(3) retroactive application of the 2021 amendments to the Securities

Exchange Act of 1934 to Ahmed’s disgorgement obligation. We

conclude, however, that the district court (4) failed to assess whether

actual gains on the frozen assets were unduly remote from Ahmed’s

fraud, and (5) should have applied an asset-by-asset approach to

determine whether the Relief Defendants are in fact only nominal

owners of their frozen assets.

I. BACKGROUND

A. Factual Background

In 2004, Ahmed joined Oak Management Corporation (“Oak”),

a venture-capital firm. Ahmed was responsible for identifying and

recommending “portfolio companies” in which Oak might invest and

negotiating the terms of those investments.

Over the course of a decade, Ahmed stole over $65 million from

Oak and ten portfolio companies, identified as Companies A to J in

the pleadings, using the same basic scheme in each fraudulent

transaction. First, Ahmed opened bank accounts that he personally

controlled ostensibly in the name of Oak and its portfolio companies.

Second, he used those accounts to divert monies intended for Oak

funds and portfolio companies into bank accounts that he and his wife

controlled. To cover his tracks, Ahmed submitted fraudulent

invoices and contracts to Oak, misrepresenting things like the size of

investments, the currency exchange rates applicable to transactions,

and the need to make payments to tax authorities or to reimburse

5

legal and other fees. As one example of Ahmed’s fraud, in 2013, he

negotiated an Oak entity’s investment in Company C that was

conditioned on Company C redeeming shares of an entity that,

unbeknownst to Oak, was owned by Ahmed. Ahmed pocketed

more than $8 million from this particular scheme. 1

In April 2015, Ahmed was arrested on criminal charges in an

insider-trading case. See United States v. Kanodia, No. 15-cr-10131 (D.

Mass. Apr. 21, 2015), ECF 19. 2 Following his arrest, Oak conducted

1 This transaction is described more fully in Section II.B.3.a, infra.

2

Ahmed has been involved in at least four other cases relating to his

conduct at Oak. First, Ahmed and a codefendant were indicted for the

aforementioned insider trading, which remains pending against Ahmed

given his fugitive status. See United States v. Kanodia, No. 15-cr-10131 (D.

Mass.). The First Circuit affirmed the conviction of Ahmed’s codefendant,

see United States v. Kanodia, 943 F.3d 499 (1st Cir. 2019), as well as the district

court’s order of a default judgment of forfeiture on Ahmed’s appearance

bond, see United States v. Ahmed, Nos. 21-1193, 21-1194, 2022 WL 18717740,

at *1 (1st Cir. Nov. 1, 2022). Second, the SEC and Ahmed settled a civil

enforcement action based on the same insider-trading conduct in 2019, and

the district court entered a corresponding consent judgment. See Final J.

as to Def. Iftikar Ahmed & Relief Def. Rakitfi Holdings, LLC, SEC v. Kanodia,

No. 15-cv-13042 (D. Mass. July 8, 2019), ECF 198. Third, Ahmed was

indicted in a separate fraud and criminal money-laundering prosecution,

which remains pending. See Indictment, United States v. Ahmed, No. 16-cr-

10154 (D. Mass. June 1, 2016), ECF 34. Fourth, Oak’s former client NMR

E-Tailing LLC sued Oak and Ahmed. See Decision After Trial on Damages

at 3, NMR E-Tailing LLC v. Oak Inv. Partners, No. 656450/2017 (N.Y. Sup. Ct.

June 21, 2021), ECF 406. Oak and NMR settled, but Ahmed proceeded to

trial on damages (with liability established by default) pro se and as a

fugitive, resulting in a judgment against him for $7.5 million in

compensatory damages, $500,000 in punitive damages, and prejudgment

interest. See id. at 1-3, 11. On appeal, the trial court’s judgment was

6

an internal investigation, which revealed that Ahmed had

misappropriated approximately $67 million between 2005 and 2015.

Oak terminated Ahmed for cause and denied Ahmed “carried

interest”—effectively a bonus tied to Oak’s performance—based on a

provision of its General Partnership Agreement.

B. Procedural Background

1. Preliminary Injunction

On May 6, 2015, the SEC filed a civil complaint against Ahmed,

alleging violations of the Securities Exchange Act of 1934, the

Securities Act of 1933, and the Investment Advisers Act of 1940. The

SEC also named the Relief Defendants3 as the recipients of ill-gotten

gains and joint owners of accounts receiving such gains. To secure

a potential judgment, the district court granted a temporary

restraining order, freezing $55 million in assets. After the SEC

moved for a preliminary injunction to continue the TRO, Ahmed fled

the United States and remains a fugitive.

After a two-day hearing, the district court granted a

preliminary injunction, freezing approximately $65 million for

disgorgement, $9.3 million for potential prejudgment interest, and

$44 million for potential civil penalties ($118.3 million in total). We

affirmed the order. See SEC v. I-Cubed Domains, LLC, 664 F. App’x

affirmed. See Decision and Order, NMR E-Tailing LLC v. Oak Inv. Partners,

No. 2021-1883 (N.Y. App. Div. 1st Dep’t May 25, 2023), ECF 53.

3

The Relief Defendants are Shalini Ahmed (Ahmed’s wife),

Ahmed’s three minor sons, and several companies held in the Ahmeds’

names or for their benefit: Iftikar Ali Ahmed Sole Proprietorship; I-Cubed

Domains, LLC; Shalini Ahmed 2014 Grantor Retained Annuity Trust; DIYA

Holdings, LLC; and DIYA Real Holdings, LLC.

7

53, 55-56 (2d Cir. 2016). The district court later denied Ahmed’s

request for $6 million from frozen funds to hire counsel. In addition,

during discovery, Ahmed requested access to confidential

information in the SEC’s possession, but the district court denied his

request, citing the fugitive-disentitlement doctrine.

2. Summary Judgment

Although Ahmed’s fugitive status has remained unchanged,

the legal landscape has not. Before proceeding to summary

judgment, the district court held the case pending the Supreme

Court’s decision in Kokesh v. SEC, 137 S. Ct. 1635 (2017). Kokesh held

that “[d]isgorgement in the securities-enforcement context is a

‘penalty’ within the meaning of [28 U.S.C.] § 2462, and so

disgorgement actions must be commenced within five years of the

date the claim accrues.” Id. at 1639. Kokesh did not address,

however, “whether courts possess authority to order disgorgement in

SEC enforcement proceedings.” Id. at 1642 n.3. After the decision,

the parties proceeded to summary judgment, and Ahmed moved

once more to modify the asset freeze. The district court bifurcated

the case into liability and remedy stages, and applying Kokesh’s five-

year bar, modified the asset freeze to freeze assets up to $89 million.

At the liability stage, the district court entered summary

judgment for the SEC. At the remedies stage, the district court

awarded a permanent injunction, $41,920,639 in disgorgement, $21

million in civil penalties, $1,520,953 in prejudgment interest for the

period before the asset freeze at the IRS underpayment rate, and

“actual returns on the frozen assets” during the pendency of the asset

freeze. Special App’x at SPA-98 to -109. The district court rejected

Ahmed’s argument that Kokesh barred disgorgement, and it denied an

8

offset for the “carried interest” that Ahmed forfeited to Oak upon his

termination for “Disabling Conduct” within the meaning of his

contract with Oak.

The district court also adopted the “nominee” theory as to the

assets held in the name of the Relief Defendants. Applying a six-

factor test, the district court concluded that these frozen assets were

equitably owned by Ahmed and that the Relief Defendants had failed

to refute the SEC’s supporting evidence. Although the district court

permitted liquidation of frozen assets to proceed under the

supervision of Receiver-Appellee Jed Horwitt (the “Receiver”), it

stayed distribution pending appeal. In a ruling issued in

conjunction with an amended final judgment, the district court

clarified that the judgment did “not extinguish the SEC’s remaining

alternative theory of liability against the Relief Defendants” under

SEC v. Cavanagh (Cavanagh I), 155 F.3d 129 (2d Cir. 1998). Special

App’x at SPA-162.

3. Initial Appeal

After Ahmed filed a notice of appeal, we held the case in

abeyance pending the Supreme Court’s decision in Liu v. SEC, 140

S. Ct. 1936 (2020). 4 Although the Exchange Act did not explicitly

authorize a “disgorgement” remedy, Liu held that disgorgement is a

form of “equitable relief” authorized under 15 U.S.C. § 78u(d)(5)—

answering the question left open by Kokesh. Liu, 140 S. Ct. at 1940.

4

Ahmed also moved for the release of funds to pay for counsel. A

motions panel of this Court construed Ahmed’s motion as seeking

mandamus relief directing the district court to rule on a similar motion then

before it and denied Ahmed’s motion as moot after the district court denied

the motion.

9

Shortly after Liu, Congress enacted the William M. (Mac)

Thornberry National Defense Authorization Act for Fiscal Year 2021

(“NDAA”), Pub. L. No. 116-283, § 6501(a)-(b), 134 Stat. 3388, 4625-26

(codified at 15 U.S.C. § 78u(d)(3), (7)-(8)). The NDAA amended the

Exchange Act in three ways relevant here. First, the NDAA

explicitly authorized the SEC to pursue disgorgement in civil actions.

See NDAA § 6501(a), 134 Stat. at 4625-26 (codified at 15 U.S.C.

§ 78u(d)(7)). Second, the NDAA extended the statute of limitations

for “a claim for disgorgement” to “not later than 10 years after the

latest date of the violation” for conduct under certain securities laws.

Id. at 4626 (codified at 15 U.S.C. § 78u(d)(8)). Finally, the NDAA

provided that its amendments “shall apply with respect to any action

or proceeding that is pending on, or commenced on or after, the date

of enactment of this Act.” Id.

The SEC moved to remand for recalculation of Ahmed’s

disgorgement obligation under the NDAA. Ahmed opposed,

arguing that (1) this Court lacked jurisdiction to remand because the

SEC failed to cross-appeal; (2) application of the NDAA would

reopen a final judgment; (3) the NDAA lacks a clear retroactivity

command, and retroactive application would violate the Ex Post

Facto Clause; and (4) the NDAA does not apply to disgorgement

under 15 U.S.C. § 78u(d)(5). A motions panel granted the SEC’s

motion and remanded “for a determination of Appellant’s

disgorgement obligation consistent with § 6501 of the [NDAA], and,

if appropriate, entry of an amended judgment.” SEC v. Ahmed, Nos.

18-2903, 18-2932, 19-102, 19-103, 19-355, 19-2974, 19-3375, 19-3610, 19-

3721, 2021 WL 1171712, at *1 (2d Cir. Mar. 11, 2021).

10

4. Remand and Liquidation

On remand, the district court found that the NDAA’s ten-year

statute of limitations applied and increased the disgorgement amount

from $41,920,639 to $64,171,646.14, with $9,755,798.34 in prejudgment

interest. The district court also rejected the same arguments Ahmed

raised before the motions panel. Ahmed and the Relief Defendants

appealed again, giving rise to this action.

The district court also approved the Receiver’s proposed

liquidation plan, which was divided into two phases (“First

Liquidation Order”). Phase 1 would liquidate non-unique assets,

and phase 2 would liquidate unique assets as needed to satisfy the

judgment. The district court denied the Relief Defendants’ motion

for a stay pending appeal. Defendants then appealed the First

Liquidation Order, which this Court held in abeyance pending

resolution of the merits of this appeal.

Phase 1 ended with $118 million in the receivership estate,

which was insufficient to secure the total judgment, then estimated to

be in excess of $125 million. The district court approved most of the

Receiver’s phase 2 plan and rejected the Relief Defendants’ motion to

stay liquidation of the unique assets pending appeal (“Second

Liquidation Order”). Defendants appealed the Second Liquidation

Order, with the Relief Defendants moving to stay liquidation of the

unique assets. This Court held the appeals of the Second

Liquidation Order in abeyance pending our decision in these appeals

from the redetermined amended final judgment. While the Relief

Defendants’ stay motion was pending, the Receiver indicated that he

would begin phase 2 by liquidating a MetLife life-insurance policy on

December 28, 2022, and listing the Ahmeds’ two Park Avenue

11

apartments for sale on May 8, 2023. We granted temporary

administrative stays pending our decision on the Relief Defendants’

motion for a stay of liquidation.

II. DISCUSSION

Ahmed first argues that summary judgment was improper

because he was excluded from discovery and denied access to funds

to hire counsel. Ahmed also argues that the district court

miscalculated disgorgement by incorrectly approximating net profits

and erroneously applying the NDAA. The Relief Defendants raise

two additional arguments: first, the district court improperly

calculated prejudgment interest and actual gains, and second, it

misapplied the “nominee” doctrine. Although we are not

persuaded by Ahmed’s arguments, we find merit in some of the Relief

Defendants’ arguments.

A. Summary-Judgment Challenges

Ahmed challenges the district court’s summary-judgment

order, arguing that the district court erred by limiting his access to

discovery and by denying his request to unfreeze assets to hire

counsel. Neither argument is persuasive.

1. Discovery Limitations

The district court did not abuse its discretion by denying

Ahmed extraterritorial access to confidential records in the SEC’s

possession. Drawing on the fugitive-disentitlement doctrine, the

district court reasoned that Ahmed had “removed himself from the

jurisdiction of the [district court],” so the district court had “no ability

to enforce” an “appropriate protective order limiting his use of the

documents produced.” Endorsement Order Denying Def.’s Mot. for

12

Full Access to the SEC’s Investigative File at 3, SEC v. Ahmed, No. 15-

cv-675 (D. Conn. Aug. 22, 2016), ECF 286. The district court thus

denied Ahmed access to SEC discovery materials. Ahmed argues

that this denied him “any practical means of defending himself” in

violation of “the adversarial process set forth in the Federal Rules of

[Civil] Procedure” and the Due Process Clause. Appellant’s Br. at

53, 60-61. We disagree.

Federal Rule of Civil Procedure 26(c)(1) permits a district court

to “issue an order to protect a party or person from annoyance,

embarrassment, oppression, or undue burden or expense.” See

Degen v. United States, 517 U.S. 820, 826 (1996) (explaining that district

courts have broad authority “to manage discovery in a civil suit,

including the power to enter protective orders limiting discovery as

the interests of justice require”); accord Empire Blue Cross & Blue Shield

v. Finkelstein, 111 F.3d 278, 281 (2d Cir. 1997). We review discovery

orders for abuse of discretion. See Lederman v. N.Y.C. Dep’t of Parks

& Recreation, 731 F.3d 199, 202 (2d Cir. 2013); United States v.

Technodyne LLC, 753 F.3d 368, 378 (2d Cir. 2014).

The district court’s discovery restrictions here were a

reasonable exercise of its broad power to enforce protective orders.

“Courts invested with the judicial power of the United States have

certain inherent authority to protect their proceedings and judgments

in the course of discharging their traditional responsibilities.”

Degen, 517 U.S. at 823. A district court retains “authority to manage

discovery,” including “limit[ing] discovery in the interests of justice.”

Finkelstein, 111 F.3d at 281; see also Degen, 517 U.S. at 827 (“A federal

court has at its disposal an array of means to enforce its orders.”).

The discovery material at issue was subject to a protective order

13

under Rule 26 based on the confidential and sensitive nature of the

documents, and the district court determined that the court could not

enforce such an order because Ahmed had removed himself from the

court’s jurisdiction. The district court’s limitation of Ahmed’s

extraterritorial access to the protected materials thus constituted a

reasonable exercise of the court’s “inherent authority to protect” its

own discovery orders to limit Ahmed’s access to civil discovery in

light of his status as a fugitive. Degen, 517 U.S. at 823. Ahmed’s

proposed alternatives, like monetary sanctions, would not ensure the

adequate protection of confidential information in this case.

We affirm the discovery limitations as a reasonable means of

enforcing a protective order, so we do not decide whether the

fugitive-disentitlement doctrine might apply in this case consistent

with due process. 5 See Wells Fargo Advisors, LLC v. Sappington, 884

F.3d 392, 396 n.2 (2d Cir. 2018) (“We are free to affirm on any ground

5 Under the fugitive-disentitlement doctrine, “a person who is a

fugitive from justice may not use the resources of the civil legal system

while disregarding its lawful orders in a related criminal action.” United

States v. Eng, 951 F.2d 461, 464 (2d Cir. 1991), abrogated on other grounds by

Degen, 517 U.S. 820. A blunt instrument, the fugitive-disentitlement

doctrine “forbid[s] all participation by the absent claimant.” Degen, 517

U.S. at 826 (emphasis added). Although we do not decide whether the

doctrine applies here, we note that the purposes underlying it are served

by the district court’s order. Disentitlement is rooted in a court’s ability to

enforce a “judgment on review,” “discourage[] the felony of escape,”

“encourage[] voluntary surrenders,” and “promote[] the efficient, dignified

operation of the courts.” Id. at 824 (cleaned up). Ahmed faces several

criminal charges, see supra note 2, and granting him full access to discovery

could further discourage his voluntary return to the United States and grant

him an unfair advantage in those proceedings to the extent they are based

on the same or related underlying conduct.

14

that finds support in the record, even if it was not the ground upon

which the trial court relied.” (cleaned up)).

2. Denial of Funds to Hire Counsel

The district court did not abuse its discretion by declining to

unfreeze assets for Ahmed to hire counsel. Ahmed argues that the

district court “over-froze [his] liquid assets, and thus improperly

deprived him of the ability to use his money to hire counsel.”

Appellant’s Br. at 61. For the reasons stated infra, the district court

properly calculated disgorgement, so it did not abuse its discretion by

concluding that there were no frozen funds available for Ahmed to

hire counsel. 6 It is well-settled that a defendant has no right to use

tainted assets for his legal defense. See Caplin & Drysdale, Chartered

v. United States, 491 U.S. 617, 626 (1989) (“A defendant has no Sixth

Amendment right to spend another person’s money for services

rendered by an attorney.”). Moreover, Ahmed has no constitutional

right to counsel in this civil enforcement action. See United States v.

Coven, 662 F.2d 162, 176 (2d Cir. 1981). In any event, the Relief

Defendants have hired able counsel who have also represented

Ahmed’s interests throughout these proceedings.

6

Our decision to vacate and remand the district court’s award of

“actual gains” has no bearing on the denial of Ahmed’s motion to unfreeze

funds for two reasons. First, the “actual gains” calculation is part of the

post-judgment liquidation process, whereas Ahmed’s motion to unfreeze

funds relates to the scope of the preliminary injunction. Second, “actual

gains” are calculated based on the growth of disgorged assets regardless of

the size of the judgment. So “actual gains” and disgorgement are

independent for present purposes.

15

B. Disgorgement

The district court did not abuse its discretion in calculating

disgorgement. First, the district court accurately estimated net

profits and reasonably declined to offset Ahmed’s forfeited “carried

interest.” Second, the district court properly gave retroactive effect

to the NDAA.

1. Legal Standard

The Exchange Act, as amended, states that “[i]n any action or

proceeding brought by the Commission under any provision of the

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

order, disgorgement.” 15 U.S.C. § 78u(d)(7). “Disgorgement

serves to remedy securities law violations by depriving violators of

the fruits of their illegal conduct.” SEC v. Contorinis, 743 F.3d 296,

301 (2d Cir. 2014). We review disgorgement orders for abuse of

discretion. SEC v. Warde, 151 F.3d 42, 49 (2d Cir. 1998). “We review

de novo questions of a statute’s interpretation and constitutionality.”

United States v. al Kassar, 660 F.3d 108, 129 (2d Cir. 2011).

2. Equitable Disgorgement After the NDAA

As a preliminary matter, the parties assume, and we agree, that

Liu’s equitable limitations on disgorgement survive the NDAA. In

Liu, the Supreme Court held that although the Exchange Act did not

(at the time) explicitly authorize “disgorgement,” “equitable relief”

under § 78u(d)(5) includes disgorgement. 140 S. Ct. at 1940. The

Court thus held that any disgorgement award must be consistent with

traditional principles of equity. See id. at 1947. Shortly after Liu,

Congress enacted the NDAA, which specifically added

“disgorgement” as a remedy under § 78u(d)(7) while leaving

16

untouched “equitable relief” available via § 78u(d)(5). We read

“disgorgement” in § 78u(d)(7) to refer to equitable disgorgement as

recognized in Liu. 7

First, § 78u(d)(7) authorizes “disgorgement,” which we have

long understood to refer to “the chancellor’s discretion to prevent

unjust enrichment” at equity. SEC v. Commonwealth Chem. Sec., Inc.,

574 F.2d 90, 95 (2d Cir. 1978); see 15 U.S.C. § 78u(d)(3)(A)(ii)

(explaining that the SEC may seek and courts have jurisdiction to

“require disgorgement . . . of any unjust enrichment by the person

who received such unjust enrichment” as a result of violating the

Exchange Act). This terminology is “consistent with a remedy

rooted in equity, given that ‘unjust enrichment’ is another term of

art—the basis for all restitution, which is often equitable.” Hallam,

42 F.4th at 340. Indeed, as the Supreme Court has observed,

“‘statutory reference[s]’ to a remedy grounded in equity ‘must, absent

other indication, be deemed to contain the limitations upon its

availability that equity typically imposes.’” Liu, 140 S. Ct. at 1947

(alteration in original) (quoting Great-W. Life & Annuity Ins. Co. v.

Knudson, 534 U.S. 204, 211 n.1 (2002)); see also Astoria Fed. Sav. & Loan

Ass’n v. Solimino, 501 U.S. 104, 108 (1991) (“Congress is understood to

legislate against a background of common-law adjudicatory

principles.”). The NDAA’s text evinces no intent to contradict Liu or

to strip disgorgement of “limit[s] established by longstanding

principles of equity” in favor of an unbounded “legal” form of

7 The Fifth Circuit recently held that § 78u(d)(7) “authorize[s] legal

‘disgorgement’ apart from the equitable ‘disgorgement’ permitted by Liu”

and questioned “whether equitable disgorgement . . . survived the 2021

Exchange Act amendments.” SEC v. Hallam, 42 F.4th 316, 341, 343 (5th Cir.

2022). We decline to follow the Fifth Circuit’s approach.

17

disgorgement. Liu, 140 S. Ct. at 1947. We thus apply “the strong

presumption that repeals by implication are disfavored and that

Congress will specifically address preexisting law when it wishes to

suspend its normal operations in a later statute.” SEC v. Alpine Sec.

Corp., 982 F.3d 68, 78 (2d Cir. 2020) (brackets omitted) (quoting Epic

Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1624 (2018)).

Second, reading “disgorgement” under § 78u(d)(7) as equitable

disgorgement is consistent with the statutory history. Before the

NDAA, “Congress did not define what falls under the umbrella of

‘equitable relief,’” so “courts . . . had to consider which remedies the

SEC may impose as part of its § 78u(d)(5) powers.” Liu, 140 S. Ct. at

1940. This created some uncertainty about whether, for example, the

Exchange Act authorized disgorgement and the applicable statute of

limitations. See, e.g., Kokesh, 581 U.S. at 461-62 & n.3. The NDAA

then clarified some aspects of this uncertainty. The express addition

of “disgorgement” as a remedy specified under § 78u(d)(7) is thus

best read, not as superfluity, but as a “belt and suspenders”

clarification that equitable disgorgement is available under the

Exchange Act. Moreover, the authorization of a ten-year statute of

limitations under § 78u(d)(8)(A)(ii) is best understood as expressly

overruling Kokesh’s five-year statute of limitations as to certain

securities violations. So we conclude that disgorgement under

§ 78u(d)(7) must comport with traditional equitable limitations as

recognized in Liu.

3. Disgorgement Calculation

The district court properly calculated Ahmed’s disgorgement

obligation. Ahmed argues that the district court (1) miscalculated

“net profits” from two fraudulent transactions involving Company C

18

(“C1” and “C2”) and (2) failed to account for the “carried interest”

forfeited to Oak upon his termination for “Disabling Conduct.” He

further argues that any reduction in the district court’s disgorgement

award should also reduce the district court’s civil penalty. We

conclude that both arguments are meritless, so we decline to disturb

the district court’s rulings as to either disgorgement or civil penalties.

a. Net Profits Calculation

The district court did not abuse its discretion in its calculation

of net profits. Disgorgement must “not exceed a wrongdoer’s net

profits and is awarded for victims,” Liu, 140 S. Ct. at 1940, “that is, the

gain made upon any business or investment, when both the receipts

and payments are taken into account,” id. at 1945 (cleaned up). We

have held that the “amount of disgorgement ordered need only be a

reasonable approximation of profits causally connected to the

violation.” SEC v. Fowler, 6 F.4th 255, 267 (2d Cir. 2021) (cleaned up).

Here, the district court reasonably approximated net profits

based on the difference between the sale and purchase prices

involved in the tainted Company C transactions. As to C1,

Ahmed—in his capacity as a member of BVI Company’s board of

directors—“personally negotiated” a $2 million investment in

Company C without BVI Company’s knowledge. When the

unapproved investment was uncovered, Ahmed “purposefully lied

to his fellow BVI Company directors” that the purchase was a

“mistake.” Special App’x at SPA-35. Ahmed then bought the

shares himself, ostensibly to correct for the “mistake,” but left them

in the BVI Company’s name. Ahmed later negotiated another

investment by an Oak entity in Company C that was conditioned on

Company C paying nearly $11 million to redeem BVI Company’s

19

shares—which, unbeknownst to the Oak entity, were owned by

Ahmed. Ahmed profited more than $8 million on the sale.

As to C2, Ahmed had invested in Company C via Relief

Defendant I-Cubed Domains, LLC, of which Ahmed was founder and

sole member, without disclosure to Oak. Ahmed then pitched Oak

on a $7.5 million stock-purchase agreement for I-Cubed’s Company

C shares without disclosing his personal stake, even going so far as to

forge the signature of I-Cubed’s former manager on the transaction

paperwork to conceal his personal interest. Ahmed’s fraud may not

have driven Company C’s entire growth, but it permitted him to

realize profits driven by that growth. So it was a reasonable

approximation of net profits to take the difference between “gross

sales revenues from the sale of Company C shares” and Ahmed’s

“initial cost of purchasing the Company C shares.” Id. at SPA-103;

see Fowler, 6 F.4th at 267.

Ahmed’s arguments to the contrary are unavailing. Ahmed

argues that, in calculating net profits, the district court should have

credited him an offset based on C1 and C2 because there was no

evidence that Oak paid inflated prices as opposed to fair market

value. Specifically, as to C1, Ahmed argues that any difference

between the purchase and sale prices of Company C stock was based

on “an increase in the market price of the shares,” not Ahmed’s

“unlawful activity.” Appellant’s Br. at 41. As to C2, Ahmed argues

that the district court failed to account for the fact that the market

value of Company C shares was likely well above the price Oak

actually paid.

These arguments fail. Ahmed’s misconduct with respect to

these transactions was not in misrepresenting the purchase prices but

20

in failing to disclose his conflicts of interest, which violated the

Advisers Act. See 15 U.S.C. § 80b-6(3). The C1 and C2 transactions

were thus entirely tainted, and Ahmed’s $14.4 million in profits from

the transactions constituted his “net profits from wrongdoing” under

Liu. See Contorinis, 743 F.3d at 301 (“Because disgorgement’s

underlying purpose is to make lawbreaking unprofitable for the law-

breaker, it satisfies its design when the lawbreaker returns the fruits

of his misdeeds, regardless of any other ends it may or may not

accomplish.”).

Moreover, Ahmed bears the risk of uncertainty affecting the

size of disgorgement. “A wrongdoer’s unlawful action may create

illicit benefits for the wrongdoer that are indirect or

intangible. . . . [T]o require precise articulation of such rewards in

calculating disgorgement amounts would allow the wrongdoer to

benefit from such uncertainty.” Id. at 306; see also Fowler, 6 F.4th at

267 (“If the disgorgement amount is generally reasonable, any risk of

uncertainty about the amount falls on the wrongdoer whose illegal

conduct created that uncertainty.” (cleaned up)). The fact that Oak,

a victim of Ahmed’s fraud, might have gotten a “bargain” on the

share purchase should not redound to the fraudster’s benefit. We

thus find no abuse of discretion in the disgorgement calculation.

b. Carried-Interest Offset

Ahmed next argues that the district court should have offset the

disgorgement award by the “carried interest” he forfeited to Oak

because this forfeiture was “on account of the [unlawful] conduct at

issue in this case.” Appellant’s Br. at 50. We disagree.

Ahmed’s General Partnership Agreement with Oak stated that

“any Member who is removed by reason of having engaged in

21

Disabling Conduct shall forfeit for no consideration such Member’s

entire membership interest, Percentage Interest and Capital Account

and shall not become, or shall cease to be, as applicable, a Class B

member.” Special App’x at SPA-120. Part of Ahmed’s

“membership interest” was a “carried interest” bonus based on “the

performance of the Oak Funds.” Id. at SPA-120 n.24. So Ahmed’s

forfeited “carried interest” is not an ill-gotten gain from his fraud but

rather was his expectancy to a portion of Oak’s profits conferred by the

General Partnership Agreement. But disgorgement does not protect

the wrongdoer’s expectancy interests; it attempts to “restor[e] the

status quo” by “tak[ing] money out of the wrongdoer’s hands.” Liu,

140 S. Ct. at 1943 (cleaned up). Equity does not require an offset for

the carried interest, which was contingent on Ahmed’s relationship

with Oak and was not derived directly from his fraud.

Ahmed’s argument to the contrary is unpersuasive. He

contends that the Court should follow the approach of SEC v. Penn, in

which a district court ordered an evidentiary hearing to determine

“the value of [the defendant’s] forfeited interest in the fund” of his

former employer to offset his disgorgement obligation. No. 14-cv-

581, 2017 WL 5515855, at *3-4 (S.D.N.Y. Aug. 22, 2017). But in that

case, the “SEC d[id] not dispute that Penn’s carried interest in the

Fund . . . could offset his disgorgement obligation,” in accordance

with the terms of Penn’s plea agreement. Id. at *4. Penn did not

conclude that forfeited carried interest generally should offset a

disgorgement obligation.8

8

Ahmed also requests that the district court on remand offset his

disgorgement obligation by the amount of civil judgments obtained against

22

We thus affirm the district court’s calculation of Ahmed’s

disgorgement obligation and decline to revisit its calculation of civil

penalties.

4. Application of the NDAA

The district court did not err by applying the NDAA’s

expanded statute of limitations to Ahmed’s disgorgement obligation.

Ahmed argues that the district court’s application of the NDAA was

incorrect for four reasons: (1) the SEC failed to cross-appeal; (2) the

district court reopened a final judgment; (3) the NDAA does not apply

retroactively; and (4) application of the NDAA violates the Ex Post

Facto Clause. Although the SEC argues that Ahmed’s first three

arguments are barred by the law-of-the-case doctrine, we do not

decide whether that doctrine applies because all four of Ahmed’s

arguments are without merit.

a. Cross-Appeal Rule

The SEC’s failure to cross-appeal did not prevent the district

court from recalculating disgorgement under the NDAA. Under the

cross-appeal rule, “an appellate court may not alter a judgment to

benefit a nonappealing party.” Greenlaw v. United States, 554 U.S.

237, 244 (2008). Ahmed argues that the cross-appeal rule is

jurisdictional, so the SEC’s failure to cross-appeal from the amended

final judgment deprived the district court of jurisdiction to enlarge

disgorgement under the NDAA. This argument fails.

him by his victims. This could be appropriate if Ahmed were to prove that

he paid restitution. See, e.g., SEC v. Palmisano, 135 F.3d 860, 863-64 (2d Cir.

1998).

23

First, the cross-appeal rule did not deprive the district court of

jurisdiction to recalculate disgorgement. It is well-settled that “the

requirement of a cross-appeal is a rule of practice which is not

jurisdictional and in appropriate circumstances may be disregarded.”

Finkielstain v. Seidel, 857 F.2d 893, 895 (2d Cir. 1988); accord Texport Oil

Co. v. M/V Amolyntos, 11 F.3d 361, 366 (2d Cir. 1993) (explaining that

“there has been some conflict in our Court as to whether the late filing

of a notice of cross-appeal is a matter of practice or is a jurisdictional

bar” and “adher[ing]” to Finkielstain); see also Carlson v. Principal Fin.

Grp., 320 F.3d 301, 309 (2d Cir. 2003) (relying on Finkielstain and

Texport and treating the cross-appeal rule as non-jurisdictional);

Clubside, Inc. v. Valentin, 468 F.3d 144, 162 (2d Cir. 2006) (same). 9

Second, the cross-appeal rule is inapplicable to Ahmed’s case

because the SEC did not seek to “enlarge its rights under the

judgment by enlarging the . . . scope of equitable relief,” Int’l Ore &

Fertilizer Corp. v. SGS Control Servs., Inc., 38 F.3d 1279, 1286 (2d Cir.

1994)—i.e., the outcome that the cross-appeal rule forbids—but rather

sought to remand the case to present its NDAA arguments to the

district court in the first instance. Critically, the SEC could not have

presented these arguments in a timely cross-appeal because the

NDAA was enacted after the deadline to file a cross-appeal had

passed. It would make little sense if the cross-appeal rule prevented

nonappealing parties from receiving the benefit of intervening

retroactive statutes. As this Court explained in Litton Systems, Inc. v.

9

Swatch Group Management Services Ltd. v. Bloomberg L.P., 756 F.3d

73 (2d Cir. 2014), is not to the contrary. There, we characterized as

“jurisdictional” only Federal Rule of Appellate Procedure 3(c)(1)(B)’s

requirement that a notice of cross-appeal identify the challenged district-

court order. Id. at 93.

24

American Telephone & Telegraph Co., 746 F.2d 168 (2d Cir. 1984), albeit

under somewhat different circumstances,

No party to an appeal should be held to a standard that

permits consideration of an intervening statute only

when issues affected by the statute are already pending

on appeal. Such a standard would require either

anticipation of statutes not yet enacted or the assertion of

frivolous grounds in appeals and cross-appeals in the

hope that a new statute might affect their resolution

favorably.

Id. at 171. We decline to apply the cross-appeal rule in Ahmed’s case

because it would frustrate congressional intent and judicial economy.

b. Reopening a Final Judgment

Nor would application of the NDAA reopen a final judgment.

“When a new law makes clear that it is retroactive, an appellate court

must apply that law in reviewing judgments still on appeal that were

rendered before the law was enacted, and must alter the outcome

accordingly.” Plaut v. Spendthrift Farm, Inc., 514 U.S. 211, 226 (1995).

The Supreme Court has taken care to distinguish “judgments from

which all appeals have been forgone or completed” and “judgments

that remain on appeal.” Id. at 227.

Here, the district court’s grant of summary judgment is not

“final” within the meaning of Plaut because appeals are ongoing. See

Miller v. French, 530 U.S. 327, 347 (2000) (“[W]hen Congress changes

the law underlying a judgment awarding . . . relief, that relief is no

longer enforceable to the extent it is inconsistent with the new law.

Although the remedial injunction . . . is a final judgment for purposes

25

of appeal, it is not the last word of the judicial department . . . [because

it] is subject to the continuing supervisory jurisdiction of the court,

and therefore may be altered according to subsequent changes in the

law.” (emphasis added) (cleaned up)). Application of the NDAA

thus does not reopen a final judgment.

c. Retroactivity of the NDAA

The district court also did not err by giving retroactive effect to

the NDAA’s disgorgement amendments. In Landgraf v. USI Film

Products, 511 U.S. 244 (1994), the Supreme Court explained that

“[s]ince the early days of this Court, we have declined to give

retroactive effect to statutes burdening private rights unless Congress

had made clear its intent.” Id. at 270. To overcome this

presumption against retroactivity, a “court must ask whether the new

provision attaches new legal consequences to events completed

before its enactment,” thereby suggesting “clear congressional intent

authorizing retroactivity.” Id. at 269-70, 272.

The NDAA’s disgorgement amendments explicitly apply to

cases pending at the time of enactment. Section 6501(b) provides

that the NDAA’s disgorgement amendments “shall apply with

respect to any action or proceeding that is pending on, or commenced

on or after, the date of enactment of this Act.” Pub. L. No. 116-283,

§ 6501(b), 134 Stat. 3388, 4626 (2021). The Supreme Court has, in

dicta, interpreted nearly identical language as a retroactivity

command. See, e.g., Landgraf, 511 U.S. at 255 & n.8, 256 (construing

the phrase “shall apply to all proceedings pending on or commenced

after the date of enactment of this Act” as an “explicit retroactivity

command”); Martin v. Hadix, 527 U.S. 343, 354-55 (1999) (same). If

Congress enacts a provision containing a phrase to which the

26

Supreme Court has previously ascribed a particular meaning, we will

presumptively confer that meaning to the provision. See generally

Siebert v. Conservative Party of N.Y. State, 724 F.2d 334, 337 (2d Cir.

1983) (recounting the “canon of statutory construction that Congress

is presumed to be aware of the judicial background against which it

legislates”). We thus conclude that the NDAA’s disgorgement

amendments apply retroactively to Ahmed’s case.

We are not persuaded by Ahmed’s contrary arguments. First,

we reject Ahmed’s argument that the SEC may not receive the benefit

of the ten-year statute of limitations because the SEC initially brought

this enforcement action under 15 U.S.C. § 78u(d)(5), not § 78u(d)(7).

Section 78u(d)(7) did not exist at the time the SEC filed suit, so it

would have been impossible to invoke that provision. In any event,

the SEC brought the action “pursuant to the authority conferred upon

it by . . . 15 U.S.C. § 78u(d)” generally, Second Am. Compl. at 4, SEC

v. Ahmed, No. 15-cv-675 (D. Conn. Apr. 1, 2016), ECF 208, and, as the

district court explained, it “relied on the common law injunctive,” i.e.,

equitable, “power of the district court[],” Special App’x at SPA-245.

Similarly, the district court itself “did not rely solely on [15 U.S.C.

§ 78u(d)(5)] to authorize disgorgement in its initial ruling” and

instead exercised its inherent equitable power to do so. Id.

Second, Ahmed’s argument that the NDAA eviscerated his

“vested and adjudicated limitation defense” is meritless. Appellant’s

Br. at 33 (emphasis in original). The Supreme Court imposed a five-

year statute of limitations on disgorgement in Kokesh, 137 S. Ct. 1635,

which was decided over two years after the SEC brought this action.

So Ahmed could not have had a reliance interest in Kokesh’s statute of

limitations before the SEC brought this action. We thus interpret the

27

NDAA to contain an effective retroactivity command applicable to

Ahmed’s case.

d. Ex Post Facto Clause

Finally, the district court’s application of the NDAA to

Ahmed’s disgorgement award did not violate the Ex Post Facto

Clause. Ahmed argues that disgorgement under the NDAA is

punitive, so retroactive application to his case would run afoul of the

Ex Post Facto Clause’s guarantee. We are not persuaded.

The Constitution provides, “No . . . ex post facto Law shall be

passed.” U.S. Const. art. I, § 9, cl. 3. “To violate the Ex Post Facto

Clause . . . a law must be retrospective—that is, it must apply to

events occurring before its enactment—and it must disadvantage the

offender affected by it, by altering the definition of criminal conduct

or increasing the punishment for the crime.” Abed v. Armstrong, 209

F.3d 63, 66 (2d Cir. 2000) (cleaned up). A two-step framework

governs Ex Post Facto Clause challenges. At step one, “[w]e must

ascertain whether the legislature meant the statute to establish ‘civil’

proceedings.” Smith v. Doe, 538 U.S. 84, 92 (2003) (cleaned up). If

Congress’s intention “was to impose punishment, that ends the

inquiry.” Id. “If, however, the intention was to enact a regulatory

scheme that is civil and nonpunitive,” we must proceed to step two

and “further examine whether the statutory scheme is ‘so punitive

either in purpose or effect as to negate . . . [that] intention’ to deem it

civil.” Id. (quoting Kansas v. Hendricks, 521 U.S. 346, 361 (1997)).

But we typically “defer to the legislature’s stated intent,” and “only

the clearest proof will suffice to override legislative intent and

transform what has been denominated a civil remedy into a criminal

penalty.” Id. (cleaned up). That is not this case.

28

First, in enacting 15 U.S.C. § 78u(d)(7), Congress clearly

intended to provide a civil remedy. To determine whether a

statutory scheme is civil or criminal, we “ask whether the legislature,

in establishing the penalizing mechanism, indicated either expressly

or impliedly a preference for one label or the other.” Hudson v.

United States, 522 U.S. 93, 99 (1997) (cleaned up). Disgorgement

under § 78u(d) is designated as providing “[c]ivil money penalties,”

and we have previously characterized “disgorgement” as a civil

remedy. 15 U.S.C. § 78u(d)(3); see Contorinis, 743 F.3d at 306

(“Disgorgement . . . is a civil remedy . . . preventing unjust

enrichment.”).

Second, Ahmed does not provide “the clearest proof” that

disgorgement under § 78u(d)(7) is “so punitive either in purpose or

effect” as to “transform what has been denominated a civil remedy

into a criminal penalty.” Smith, 538 U.S. at 92 (cleaned up). Ahmed

argues that disgorgement is in practice a criminal penalty because its

“‘primary purpose . . . is to deter violations of the securities laws,’

which is ‘inherently punitive’” according to Kokesh. Appellant’s Br.

at 36 (quoting Kokesh, 137 S. Ct. at 1643). Ahmed also contends the

NDAA is punitive because it has a longer limitations period for

violations committed with scienter than for those without.

But Ahmed misreads Kokesh. In Liu, the Supreme Court

recognized that Kokesh “expressly declined to pass on the question”

of whether “disgorgement is necessarily a penalty, and thus not the

kind of relief available at equity.” Liu, 140 S. Ct. at 1946 (emphasis

added). The disgorgement award in Kokesh was deemed a “penalty”

because it “exceed[ed] the bounds of traditional equitable principles”

in awarding disgorgement “as a consequence of violating public

29

laws” and to deter the wrongdoer, not to compensate victims. Id. at

1941, 1946. But Kokesh “ha[d] no bearing on the SEC’s ability to

conform future requests for a defendant’s profits to the limits outlined

in common-law cases awarding a wrongdoer’s net gains.” Id. at

1946. In other words, Liu approved disgorgement as long as the

award conforms to traditional equitable limitations—i.e., “restoring

the status quo and ordering the return of that which rightfully

belongs to the purchaser or tenant.” Tull v. United States, 481 U.S.

412, 424 (1987) (quoting Porter v. Warner Holding Co., 328 U.S. 395, 402

(1946)).

Moreover, the longer limitations period for violations

committed with scienter does not render disgorgement punitive.

The more plausible inference is a nonpunitive one—i.e., scienter is an

element of fraud, which may be harder to detect and investigate

because fraud is usually committed with deception. Cf. Merck & Co.,

Inc. v. Reynolds, 559 U.S. 633, 644 (2010) (“[I]n the case of fraud, . . . a

defendant’s deceptive conduct may prevent a plaintiff from even

knowing that he or she has been defrauded.”). We thus hold that the

district court’s application of the NDAA did not violate the Ex Post

Facto Clause.10

* * *

In sum, we find no abuse of discretion in the district court’s

calculation of disgorgement or error in its application of the NDAA.

10

Our decision to vacate and remand the actual-gains award, see

infra Section II.C, does not bear on our Ex Post Facto Clause analysis. The

district court did not increase the actual-gains award following the NDAA

nor do Defendants raise a related Ex Post Facto Clause challenge.

30

C. Calculation of Interest and Actual Gains

We affirm the district court’s award of prejudgment interest but

vacate and remand the award of “actual gains” because it is broader

than equity permits.11

1. Legal Standard

The district court’s prejudgment-interest and actual-gains

awards were incident to disgorgement, so we consider whether they

“fall[] into those categories of relief that were typically available in

equity.” Liu, 140 S. Ct. at 1942 (cleaned up). One such category of

relief is “supplemental enrichment,” which encompasses the

opportunity cost or time value of money lost by victims, including

“interest, rent, and other measures of use value, proceeds, and

consequential gains” on ill-gotten assets. 2 Restatement (Third) of

Restitution and Unjust Enrichment (“Restatement”) § 53(1) & cmt. a

(Am. L. Inst. 2011); see 1 Dan B. Dobbs, Law of Remedies: Damages–

Equity–Restitution § 3.6(2), at 342-43 (2d ed. 1993) (“When the

defendant is under a duty to pay the plaintiff as damages or

otherwise, and during the period of nonpayment the defendant has a

legally recognized benefit from use of the money retained, he is under

an obligation to make restitution of that benefit to the plaintiff,

whether the benefit is measured in profits or interest or some other

form of use value.”). Supplemental enrichment may thus reflect

11

The parties disagree about the calculation of post-judgment

interest. In a December 2, 2022 order, the district court took a different

approach from what either party argues here. Ahmed appealed from this

order, and the appeal was consolidated with other appeals from

liquidation, all of which were held in abeyance pending this appeal. As

explained infra, those appeals are dismissed as moot.

31

passive gains on ill-gotten funds, without the direct manipulation of

a fraudster. We review a district court’s “choice of remedies” for

abuse of discretion. SEC v. Frohling, 851 F.3d 132, 139 (2d Cir. 2016).

2. Prejudgment Interest

The district court did not abuse its discretion by awarding

prejudgment interest at the IRS underpayment rate for the period

before the asset freeze. The Relief Defendants argue that

prejudgment interest was inappropriate because they did not act

wrongfully or know of Ahmed’s wrongful actions and, even if

appropriate, the IRS underpayment rate was punitive and thus

contrary to traditional equitable principles. The SEC counters that

the Relief Defendants’ alleged good faith is irrelevant to prejudgment

interest on Ahmed’s disgorgement obligation. Moreover, the Relief

Defendants present no evidence that the IRS underpayment rate

would overcompensate Ahmed’s victims and thus be punitive. We

agree with the SEC.

“The decision whether to grant prejudgment interest and the

rate used if such interest is granted are matters confided to the district

court’s broad discretion, and will not be overturned on appeal absent

an abuse of that discretion.” Endico Potatoes, Inc. v. CIT

Grp./Factoring, Inc., 67 F.3d 1063, 1071-72 (2d Cir. 1995) (cleaned up).

In assessing prejudgment-interest awards, a court should consider

“(i) the need to fully compensate the wronged party for actual

damages suffered, (ii) considerations of fairness and the relative

equities of the award, (iii) the remedial purpose of the statute

involved, and/or (iv) such other general principles as are deemed

relevant by the court.” Wickham Contracting Co. v. Loc. Union No. 3,

Int’l Bhd. of Elec. Workers, AFL-CIO, 955 F.2d 831, 834 (2d Cir. 1992).

32

The district court did not abuse its discretion by awarding

prejudgment interest at the IRS underpayment rate. First, the good

faith of the Relief Defendants is immaterial because a prejudgment

award concerns the amount that Ahmed, the primary defendant,

must disgorge. Cf. Morales v. Freund, 163 F.3d 763, 767 (2d Cir. 1999)

(upholding the decision not to award prejudgment interest when the

“district court suggested that the defendants, though liable, might

well have acted in good faith”). See generally CFTC v. Walsh, 618 F.3d

218, 225 (2d Cir. 2010) (“A relief defendant is a person who holds the

subject matter of the litigation in a subordinate or possessory

capacity . . . [and] may be joined in a securities enforcement action to

aid the recovery of relief.” (cleaned up)). The district court found

that Ahmed committed securities fraud, so there is no question that

he lacked good faith. Even though, as explained infra, relief-

defendant liability may be inappropriate as against a particular asset,

that does not bear on the propriety or size of prejudgment interest

against the primary defendant. See SEC v. Miller, 808 F.3d 623, 635

(2d Cir. 2015) (“Equitable relief against a third-party non-wrongdoer

may be entered where such an individual (1) has received ill-gotten

funds; and (2) does not have a legitimate claim to those funds.”

(cleaned up)).

Second, the district court did not abuse its discretion by

awarding prejudgment interest at the IRS underpayment rate. That

rate “reflects what it would have cost to borrow the money from the

government and therefore reasonably approximates one of the

benefits the defendant derived from its fraud.” SEC v. First Jersey

Sec., Inc., 101 F.3d 1450, 1476 (2d Cir. 1996) (affirming use of the IRS

underpayment rate). This rate thus reflects “use value,” or

unearned interest that the rightful owner of the funds could have

33

received but for the fraud. In First Jersey, we squarely rejected the

argument that the district court should have applied the one-year

treasury-bill rate—i.e., “the rate at which one lends money to the

government rather than borrows money from it”—because

“defendants have had the use of the money.” Id. at 1476-77. Here,

Ahmed held the ill-gotten gains before the asset freeze, so the IRS

underpayment rate was appropriate.12 We thus affirm the district

court’s award of prejudgment interest.

3. Actual Gains

We vacate and remand the district court’s award of actual gains

because it failed to account for traditional equitable limitations. The

parties dispute the proper equity analog for actual gains. On one

hand, the Relief Defendants argue that we should look to constructive

trust, which requires that gains come from assets traceable to the

fraud. On the other hand, the SEC argues that the proper equity

analog is “accounting” or “accounting for profits,” forms of

restitution by money judgment.

Both constructive trust and accounting may be appropriate

analogs for a primary disgorgement award, but neither is helpful

here. Our review is limited to the scope of actual gains on disgorged

assets—i.e., “supplemental or collateral benefits derived by the

recipient from an initial transaction with the claimant.” 2

The Relief Defendants have not put forth any evidence that the

12

investment return from the Oak funds was less than the IRS underpayment

rate. Their concerns about overcompensation are thus unfounded or, at

the very least, premature before distribution. See 2 Restatement § 53(1)

(“[Supplemental] [e]nrichment . . . may be presumed in the case of a

recipient who is enriched by misconduct.”).

34

Restatement § 53 cmt. a; see 1 Dobbs, Law of Remedies, supra at 31,

§ 4.5(3), at 637 (“[I]f a consequential benefit measure is justified, it

need not be pursued under either a trust or an accounting theory.”).

The most appropriate equity analog for the actual-gains award

here appears to be “consequential gains.” Consequential gains

“result from a profitable investment, use, or other disposition of the

[plaintiff’s] property, distinct from the transaction by which the

defendant was originally enriched.” 2 Restatement § 53 cmt. d; see

also 1 Dobbs, Law of Remedies, supra at 31, § 4.5(3), at 637 (“In the case

of restitution, courts can take the measure of consequential benefits, not

the value of the thing itself but the value it produces in the hands of

defendant.” (emphasis in original)).

One equitable limitation on consequential gains is that a

“conscious wrongdoer” is liable for “consequential gains that are not

unduly remote.” 2 Restatement § 53(3). As the Restatement

commentary suggests, “[t]he object of the disgorgement remedy—to

eliminate the possibility of profit from conscious wrongdoing”—is

measured by the “net increase in the assets of the wrongdoer, to the

extent that this increase is attributable to the underlying wrong.” Id.

§ 51 cmt. e (emphasis added). And treatises confirm:

Even the willful wrongdoer should not be made to give

up that which is his own; the principle is disgorgement,

not plunder. . . . [S]ome apportionment must be made

between those profits attributable to the plaintiff’s

property and those earned by the defendant’s efforts and

investment, limiting the plaintiff to the profits fairly

attributable to his share.

35

1 Dobbs, Law of Remedies, supra at 31, § 4.5(3), at 642 (emphasis

added). So consequential gains on assets subject to disgorgement

must not be unduly remote from the fraud.13

Here, the district court did not consider whether consequential

gains on frozen assets were unduly remote from Ahmed’s fraud. Its

September 6, 2018 ruling simply awarded “actual returns on the

frozen assets” without elaboration or limitation based on Ahmed’s

profitable uses of the frozen assets. Special App’x at SPA-106. 14

And its December 14, 2018 ruling, which sought to clarify the

13 The Restatement provides “scant guidance on how to determine

wealth legally attributable to a wrong for purposes of disgorgement” and

remoteness. Mark P. Gergen, Causation in Disgorgement, 92 B.U. L. Rev.

827, 827 (2012); see also George E. Palmer, Law of Restitution § 2.13 (3d ed.

2023) (noting a “recurring problem[] in the law of restitution” is calculating

“the defendant’s gain [that] is the product not solely of the plaintiff’s

interest but also of contributions made by the defendant”). But several

factors may guide courts awarding consequential gains, including “general

considerations of fairness, . . . the nature of the defendant’s wrong, the

relative extent of his contribution, and the feasibility of separating [gains]

from the contribution traceable to the plaintiff’s interest.” Palmer, Law of

Restitution, supra, § 2.13; see 1 Dobbs, Law of Remedies, supra at 31, § 4.5(3),

at 646 (providing factors governing “[r]ecovery of the defendant’s

consequential gains”).

14 District courts have discretion in awarding supplemental

enrichment, which could include “actual returns on the frozen assets.”

Special App’x at SPA-106. We have previously limited the availability of

prejudgment interest during the period of an asset freeze when the

defendant has “been denied the use of those assets.” SEC v. Razmilovic,

738 F.3d 14, 36 (2d Cir. 2013). But it may be appropriate for a district court

to award an alternative measure of supplemental enrichment, such as a

fixed interest rate that approximates “fair compensation to the person

wronged” within the equitable limits set forth in Liu. 140 S. Ct. at 1943.

36

previous ruling, again imposed no limitation on actual gains and

instead ordered disgorgement of “any actual interest accrued or gains

earned on the frozen assets used to satisfy that disgorgement

amount.” Id. at SPA-151. Indeed, at oral argument, the SEC

conceded that these 2018 orders failed to address any equitable

limitation on actual gains. Moreover, the district court’s September

4, 2019 ruling on Ahmed’s motion to alter the judgment merely

clarified that (1) “interest or gains are owed only on the frozen assets

used to satisfy the disgorgement amount”; and (2) “interest or gains

should be calculated by determining the actual interest accrued or

gains earned and not by using the checking account interest rate.”

Id. at SPA-207 (cleaned up). After this Court remanded for the

district court to recalculate Ahmed’s disgorgement obligation under

the NDAA, the district court stated it would award “any interest or

gains accrued on disgorged frozen assets from the date of the [district

court’s] freeze order,” again without restriction. Id. at SPA-251.

The district court should have ensured that consequential gains on

frozen assets were not unduly remote from Ahmed’s wrongdoing or,

in other words, were attributable to the fraud.

We disagree with the SEC’s argument that the district court’s

award of actual gains is authorized by SEC v. Razmilovic, 738 F.3d 14

(2d Cir. 2013). In Razmilovic, we held that prejudgment interest was

inappropriate during the period of an asset freeze because “the

defendant has already, for that period, been denied the use of those

assets.” Id. at 36. In passing, we also noted, “[i]n such a case, after

a final order of disgorgement, the funds previously frozen would

presumably be turned over to the government in complete or partial

satisfaction of the disgorgement order, along with any interest that

has accrued on them during the freeze period.” Id. We do not read

37

Razmilovic to give the district court blanket permission to award

actual gains without limitations. Rather, under Liu, any such award

must be consistent with equity, and the use of the word “presumably”

in Razmilovic suggests that its discussion of supplemental enrichment

(i.e., “interest that has accrued”) was dicta. Id.

The Relief Defendants argue that our decision in SEC v. Manor

Nursing Centers, Inc., 458 F.2d 1082 (2d Cir. 1972), bars the award of

actual gains. This, too, is inapposite. The district court in Manor

Nursing ordered disgorgement of “proceeds received in connection”

with the defendants’ fraud and “profits and income earned on such

proceeds.” Id. at 1104 (emphasis omitted). We affirmed

disgorgement of “proceeds” as “a proper exercise of the district

court’s equity powers” but vacated the district court’s award “of

profits and income earned on the proceeds” as “a penalty

assessment.” Id. We reasoned that an award of “profits” would

“arbitrarily requir[e] those [defendants] who invested wisely to

refund substantially more than other [defendants].” Id. at 1104-05.

The “only plausible justification” for disgorgement of “profits and

income” was “the deterrent force,” but we found the district court’s

orders of injunctive relief and disgorgement of “proceeds” were

“sufficient deterrence to further violations” of the federal securities

laws. Id. at 1104. Instead of “profits and income,” we ordered

“interest [on the proceeds] at the New York legal rate from the date

[defendants] received the proceeds.” Id. at 1105.

But any suggestion in Manor Nursing that consequential gains

are generally impermissible is in tension with Liu. Under Liu, if

supplemental enrichment is consistent with traditional principles of

equity, it is not a “penalty.” Supplemental enrichment is governed

38

by restitutionary principles—i.e., “restor[ing] the status quo,” Liu, 140

S. Ct. at 1943 (internal quotation marks omitted)—not deterrence of

“further violations” of the securities laws, Manor Nursing, 458 F.2d at

1104. Moreover, district courts retain broad discretion as to the

appropriate measure of supplemental enrichment, whether it is a

form of profits or interest. See, e.g., 1 Dobbs, Law of Remedies, supra

at 31, § 3.6(2), at 343 (“The profits of the fiduciary in this

[disgorgement] example represent one measure of use value of the

money. It is capable of earning interest and it is capable of earning

profits. In this kind of case the plaintiff is entitled to the profits

measure if he prefers.”).

We thus remand for the district court to reassess actual gains in

light of Liu. On remand, the district court retains discretion over the

appropriate measure of supplemental enrichment. Liu offers

general guideposts for equitable relief: namely, wrongdoers should

(1) be deprived of their net profits from unlawful activity; and (2) “not

be punished by paying more than a fair compensation to the person

wronged.” 140 S. Ct. at 1942-43 (cleaned up). If the district court

reimposes an actual-gains award on disgorged assets, it should

ensure that consequential gains on the frozen assets are not “unduly

remote.” See supra note 13. The district court may also elect a

different measure of supplemental enrichment consistent with “fair

compensation,” such as a fixed-interest rate for the period of the asset

freeze. 15

The parties dispute the district court’s method of calculating

15

actual gains, but we decline to reach this issue given our vacatur of the

actual-gains award.

39

D. Nominee Doctrine

Finally, the district court’s analysis in support of its conclusion

that the Relief Defendants are merely nominal owners of all the frozen

assets held in their names was inadequate. The Relief Defendants

argue that the district court should have applied an asset-by-asset

approach to the nominee theory and the SEC failed to satisfy its

burden of proving that the Relief Defendants were mere nominees of

Ahmed as to each asset when they held legal title to, controlled, and

received benefits from those assets. The SEC argues that the district

court correctly characterized the “nominee” doctrine, did not shift the

burden of persuasion to the Relief Defendants, and could not have

applied an asset-by-asset approach because the Relief Defendants

failed to meet their burden to produce evidence of their legitimate

ownership of each of the disputed assets. Furthermore, if the Court

remands, the SEC seeks permission to pursue alternative theories of

recovery, including under Cavanagh I, 155 F.3d 129.

1. Legal Standard

Equitable limits on disgorgement differ between assets held by

the primary wrongdoer (i.e., Ahmed) and those held by third-party

non-wrongdoers (i.e., Relief Defendants). See Miller, 808 F.3d at 635.

As to primary defendants, “[t]he amount of disgorgement ordered

need only be a reasonable approximation of profits causally

connected to the violation.” Razmilovic, 738 F.3d at 31 (cleaned up).

District courts need not “apply equitable tracing rules to identify

specific funds in the defendant’s possession that are subject to

return.” FTC v. Bronson Partners, LLC, 654 F.3d 359, 373 (2d Cir.

2011); see, e.g., Contorinis, 743 F.3d at 303 (explaining, in the context of

an insider-trading violation, “the insider would unquestionably be

40

liable to disgorge the profit . . . whether the insider trader has put his

profits into a bank account, dissipated them on transient pleasures, or

given them away to others”). So the district court is not required to

“trace” ill-gotten gains to specific assets in Ahmed’s possession—any

of his own assets may be liquidated to satisfy his disgorgement

obligation.16

For relief defendants, however, equity imposes different rules.

“A court of equity will wrest property fraudulently acquired, not only

from the perpetrator of the fraud, but . . . from his children and his

children’s children, or, as elsewhere said, from any persons amongst

whom he may have parceled out the fruits of his fraud.” 3 John

Norton Pomeroy, Equity Jurisprudence § 918, at 601 (5th ed. 1994)

(cleaned up). But third parties, like the Relief Defendants, have a

bona fide purchase defense according to which “[a] purchaser for

value and without notice acquires the legal interest that the grantor

holds and purports to convey, free of equitable interests that a

restitution claimant might have asserted against the property in the

hands of the grantor.” 2 Restatement § 66; see also id. § 58(2) (“A

claimant entitled to restitution from property or its traceable product

may assert the same rights against any subsequent transferee who is

not a bona fide purchaser . . . or bona fide payee.”). A bona fide

purchase defense is inherently asset specific, requiring a court to

determine whether a third party (1) gave value in exchange for an

asset in particular and (2) lacked notice as to that asset’s true

provenance.

16

Since Liu, this Court has affirmed the lack of a tracing requirement

as to primary-defendant disgorgement. See, e.g., SEC v. de Maison, No. 18-

2564, 2021 WL 5936385, at *2 (2d Cir. Dec. 16, 2021).

41

In Cavanagh I, we recognized third-party liability in a securities-

enforcement action when a relief defendant “(1) has received ill-

gotten funds; and (2) does not have a legitimate claim to those funds.”

155 F.3d at 136. Although Cavanagh I was decided in the asset-freeze

context, it is based on the same background principles of equity,

including the bona fide purchase rule. See Palmer, Law of

Restitution, supra at 36 n.13, § 19.7 (“Courts are generally agreed that

an innocent person who obtains a benefit through the wrongful act of

a third person will be required to make restitution to the one at whose

expense the benefit was obtained, unless, in addition to his innocence,

the recipient is protected because he gave value.”). So relief-

defendant liability under Cavanagh I applies to disgorgement. 17

But equity also recognizes a third way: the so-called

“nominee” theory. A “nominee” holds bare legal title to an asset but

is not its true equitable owner. Such an asset may be disgorged to

satisfy a judgment against a third party deemed to be the asset’s true

equitable owner.18 This doctrine reflects the principle that “equity

looks to the intent, rather than to the form,” and is thus “able to treat

that as done which in good conscience ought to be done.” 2

Pomeroy, Equity Jurisprudence, supra at 41, §§ 363, 378, at 8, 41

17

Several sister circuits also have continued to recognize relief-

defendant liability after Liu. See, e.g., SEC v. Berkeley Healthcare Dynamics,

LLC, No. 20-16754, 2022 WL 42807, at *2 (9th Cir. Jan. 5, 2022); SEC v.

Camarco, No. 19-1486, 2021 WL 5985058, at *13-17 (10th Cir. Dec. 16, 2021).

18 Relief Defendants argue that state law governs the “nominee”

doctrine. We disagree. Federal courts are courts of law and equity, see

U.S. Const. art. III, § 2, cl. 1, and to deduce equitable limits, we may look to

the practices of the state and federal courts and “the ordinary principles and

practice of courts of chancery.” Liu, 140 S. Ct. at 1950 (cleaned up).

42

(emphasis omitted). “Equity’s advantage in fashioning

restitutionary remedies was . . . sidestepping title problems . . . . to act

against the person rather than against the property.” 1 Dobbs, Law

of Remedies, supra at 31, § 4.3(1), at 587. The principle undergirding

the nominee theory has been widely applied. See, e.g., Nat’l Bank v.

Case, 99 U.S. 628, 632 (1878) (“A transfer for the mere purpose of

avoiding his liability to the company or its creditors is fraudulent and

void, and he remains still liable. . . . [I]f, in fact, the transferee is a mere

tool or nominee of the transferrer, so that, as between themselves,

there has been no real transfer, . . . the transfer will be held for

nought.” (cleaned up)); Higgins v. Smith, 308 U.S. 473, 475 (1940)

(“[T]he jury was instructed to find whether these sales by the

taxpayer . . . were actual transfers of property . . . or whether they

were to be regarded as simply ‘a transfer by Mr. Smith’s left hand,

being his individual hand, into his right hand, being his corporate

hand, so that in truth and fact there was no transfer at all.’”). We

thus agree with the district court that the nominee theory, as a

reflection of background equitable principles, may be used to

determine the owner of an asset for disgorgement purposes. If a

relief defendant is deemed a mere nominal owner of an asset that is

equitably owned by the primary defendant, the equitable rules

governing primary-defendant disgorgement apply. Like the bona

fide purchase defense, the nominee doctrine is necessarily an asset-

specific inquiry. The inquiry turns on a third party’s behavior

toward a particular asset, such as whether the third party controlled,

benefitted from, and/or transferred a particular asset held in a

nominee’s name. We review a district court’s exercise of equitable

43

power to fashion a disgorgement remedy for abuse of discretion.

Frohling, 851 F.3d at 139.

2. Application

The district court’s application of the nominee doctrine was

inadequate as to most of the assets in question because it failed to

determine whether the SEC proved that these particular assets (or

groups of similar assets) were held by the Relief Defendants as mere

nominees of Ahmed. The district court invoked a six-factor nominee

test but did not apply it on an asset-by-asset basis. Instead, it

deemed the Relief Defendants nominal owners of a large swathe of

assets without finding that Ahmed is in fact the equitable owner.

This erroneously shifted the burden to the Relief Defendants to show

that Ahmed is not the equitable owner of assets to which the Relief

Defendants hold legal title.19 See Dan B. Dobbs & Caprice L. Roberts,

Law of Remedies: Damages–Equity–Restitution § 4.4(3), at 446 (3d ed.

2018) (“The law of unjust enrichment places the burden of production

on the party seeking disgorgement.”).

Specifically, the district court’s analysis regarding the Iftikar A.

Ahmed Family Trust, MetLife Policy (which was owned by the Iftikar

A. Ahmed Family Trust), and Fidelity x7540 account was sufficient

because the district court weighed the SEC’s evidence and considered

the Relief Defendants’ counter-evidence as to each asset and made

19 We note, however, that relief defendants carry the burden of proof

with respect to affirmative defenses such as bona fide purchase. See CFTC

v. Kimberlynn Creek Ranch, Inc., 276 F.3d 187, 192 n.5 (4th Cir. 2002). We

also note that courts in civil cases can draw adverse inferences against relief

defendants should they invoke their Fifth Amendment privilege not to

testify. See SEC v. Colello, 139 F.3d 674, 677-78 (9th Cir. 1998).

44

findings on the record. But as to other assets, the district court’s

analysis was insufficient. For many of the disputed assets, the

district court simply rejected the Relief Defendants’ request for an

asset-by-asset approach by noting that the Relief Defendants “made

this same argument before the Second Circuit and it was soundly

rejected.” Special App’x at SPA-110 (citing I-Cubed, 664 F. App’x at

56-57). But I-Cubed concerned the asset freeze, which required “a

lesser showing than is necessary for other forms of equitable relief,”

like disgorgement. I-Cubed, 664 F. App’x at 55. Moreover, for

certain assets, such as the contents of the safety deposit box and the

Ahmeds’ two Park Avenue apartments, the district court made

findings only at the preliminary-injunction stage. And the district

court was silent as to other assets, such as Shalini Ahmed’s earrings

and designer handbags, but it nevertheless authorized disgorgement

of those assets.

As a result, the district court erroneously shifted the burden to

the Relief Defendants to present evidence that they were the true

owners of these assets. But the burden remained with the SEC to

prove that Ahmed was the true owner of each asset (or group of

similar assets), and the district court should have made specific

findings accordingly. Furthermore, the district court discussed

Ahmed’s invocation of his Fifth Amendment right against self-

incrimination and Shalini Ahmed’s invocation of her marital privilege

but failed to discuss what, if any, adverse inference should be drawn.

So, with the exception of the district court’s findings that

Ahmed is the equitable owner of the Iftikar A. Ahmed Family Trust,

MetLife Policy, and Fidelity x7540 account, we vacate and remand the

district court’s disgorgement order as to the Relief Defendants’ assets.

45

On remand, the SEC, as the party seeking disgorgement, must prove

that the Relief Defendants are nominees for each asset or class of

assets. 20 If the district court finds that an asset is nominally owned

by one of the Relief Defendants (and actually owned by Ahmed), it

may be disgorged. If the district court finds that an asset is not

nominally owned by one of the Relief Defendants, then the district

court may consider whether an alternative theory of relief-defendant

liability permits disgorgement of the asset. For example, the district

court may apply Cavanagh I liability or a joint-ownership theory. 21

Moreover, consistent with the burden of proof, the district court

should state on the record what, if any, adverse inferences it draws

from the Relief Defendants’ failure to testify if the SEC offers that

evidence.

III. CONCLUSION

We conclude that the district court (1) reasonably excluded

Ahmed from parts of discovery and denied him access to frozen

funds to hire counsel; (2) accurately calculated disgorgement by

approximating the “net profits” of Ahmed’s fraud; and (3) properly

gave retroactive effect to the NDAA’s disgorgement amendments.

But applying traditional principles of equity under Liu, we also

conclude that (4) the district court’s award of actual gains exceeded

equitable limitations by failing to ensure that no unduly remote

20 We agree with the Relief Defendants’ suggestion at argument that

“in some cases assets can be grouped if the same analysis applies to

multiple assets” or “[c]lasses of assets.” Oral Arg. Tr. at 12-13.

21 The parties dispute whether the district court’s joint-ownership

analysis was dicta or an alternative holding. The record is unclear, and the

district court is best positioned to clarify on remand.

46

consequential gains are awarded; and (5) the “nominee” doctrine—

though well-established in equity and applicable to disgorgement—

must be applied on an asset-by-asset basis. For the foregoing

reasons, we affirm in part and vacate and remand in part the district

court’s judgment.

Our vacatur of the actual-gains award and application of the

nominee doctrine affects the scope of the district court’s liquidation

orders. In a separate order, we thus sua sponte dismiss as moot

Defendants’ appeals from those orders, 22-135, 22-184, 22-3077, 22-

3148. We also deny as moot Relief Defendants’ motions for a stay of

liquidation, and all stays are vacated.

47