Petition for Writ of Certiorari — Iftikar A. Ahmed, Petitioner v. Securities and Exchange Commission, et al.
Supreme Court briefJan 5, 2024
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APPENDIX
i
APPENDIX
TABLE OF CONTENTS
Appendix A Opinion in the United States Court of
Appeals for the Second Circuit
(June 28, 2023) . . . . . . . . . . . . . . . App. 1
Appendix B Redetermination
of Defendant’s
Disgorgement Obligation in the
United States District Court for the
District of Connecticut
(June 16, 2021) . . . . . . . . . . . . . . App. 53
Appendix C Redetermined
Final Amended
Judgment in the United States
District Court for the District of
Connecticut
(July 6, 2021). . . . . . . . . . . . . . . . App. 73
Appendix D Ruling on Plaintiff’s Motion for
Remedies and Judgment in the United
States District Court for the District of
Connecticut
(September 6, 2018) . . . . . . . . . . App. 75
Appendix E Ruling on All Parties’ Motions for
Summary Judgment on Liability in
the United States District Court for
the District of Connecticut
(March 29, 2018) . . . . . . . . . . . . App. 116
ii
Appendix F Order Denying Iftikar A. Ahmed’s
Petition for Panel Rehearing, or, in the
Alternative, for Rehearing En Banc, in
the United States Court of Appeals for
the Second Circuit
(October 12, 2023) . . . . . . . . . . . App. 203
Appendix G Relevant Provisions . . . . . . . . . App. 205
Fed. R. App. P. 3(a) . . . . . . . . . . App. 205
Fed. R. App. P. 4(a) . . . . . . . . . . App. 206
28 U.S.C. § 2462 . . . . . . . . . . . . App. 211
15 U.S.C. § 78u(d)(3)(A) . . . . . . App. 212
15 U.S.C. § 78u(d)(5). . . . . . . . . App. 213
15 U.S.C. § 78u(d)(7). . . . . . . . . App. 213
15 U.S.C. § 78u(d)(8). . . . . . . . . App. 213
Pub. L. No. 116-283, § 6501 . . . App. 215
App. 1
APPENDIX A
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
Nos. 21-1686, 21-1712
[Filed June 28, 2023]
________________________________________________
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 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,
)
Defendants-Appellants,
)
)
v.
)
)
JED HORWITT,
)
App. 2
Receiver-Appellee.*
)
_______________________________________________ )
August Term 2022
Argued: January 18, 2023
Decided: June 28, 2023
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
*
The Clerk of Court is respectfully directed to amend the caption
accordingly.
App. 3
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 ReceiverAppellee 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.
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 &
App. 4
Goldberg LLP, New York, NY, for DefendantAppellant 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 PlaintiffAppellee Securities and Exchange
Commission.
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
App. 5
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 ReceiverAppellee 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
App. 6
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 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,
App. 7
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 an
1
2
This transaction is described more fully in Section II.B.3.a, infra.
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 affirmed. See Decision and Order, NMR E-Tailing
App. 8
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 illgotten 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
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.
App. 9
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
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
App. 10
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 SPA98 to -109. The district court rejected Ahmed’s
argument that Kokesh barred disgorgement, and it
denied an 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
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
App. 11
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.
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 crossappeal; (2) application of the NDAA would reopen a
final judgment; (3) the NDAA lacks a clear retroactivity
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.
App. 12
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).
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
App. 13
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 lifeinsurance policy on December 28, 2022, and listing the
Ahmeds’ two Park Avenue 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.
App. 14
A. Summary-Judgment Challenges
Ahmed challenges the district court’s summaryjudgment 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 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
App. 15
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
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.
App. 16
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 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
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.
App. 17
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.
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.
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.
App. 18
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 untouched “equitable relief”
available via § 78u(d)(5). We read “disgorgement” in
App. 19
§ 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
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.
App. 20
disgorgement of “limit[s] established by longstanding
principles of equity” in favor of an unbounded “legal”
form of 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 tenyear statute of limitations under § 78u(d)(8)(A)(ii) is
best understood as expressly overruling Kokesh’s fiveyear 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.
App. 21
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 (“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
App. 22
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 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 ICubed’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 SPA103; 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
App. 23
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 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 lawbreaker, 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
App. 24
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 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.
App. 25
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. 14cv-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
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
8
Ahmed also requests that the district court on remand offset his
disgorgement obligation by the amount of civil judgments obtained
against 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).
App. 26
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 crossappeal 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.
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
App. 27
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. 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
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.
App. 28
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 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.
App. 29
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 Supreme Court has
previously ascribed a particular meaning, we will
presumptively confer that meaning to the provision.
App. 30
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
App. 31
a reliance interest in Kokesh’s statute of limitations
before the SEC brought this action. We thus interpret
the 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
App. 32
“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.
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.
App. 33
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
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
App. 34
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.
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,
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.
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.
App. 35
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 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
App. 36
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 prejudgmentinterest 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).
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
App. 37
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 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
12
The Relief Defendants have not put forth any evidence that the
investment return from the Oak funds was less than the IRS
App. 38
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 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.”).
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.”).
App. 39
The most appropriate equity analog for the actualgains 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.
1 Dobbs, Law of Remedies, supra at 31, § 4.5(3), at 642
(emphasis added). So consequential gains on assets
App. 40
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,
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.
App. 41
which sought to clarify the 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
App. 42
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
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
App. 43
[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 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
App. 44
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
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-byasset 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.
15
The parties dispute the district court’s method of calculating
actual gains, but we decline to reach this issue given our vacatur
of the actual-gains award.
App. 45
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 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
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).
App. 46
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.
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
App. 47
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
(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
17
Several sister circuits also have continued to recognize reliefdefendant 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).
App. 48
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 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
App. 49
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 assetby-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 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
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).
App. 50
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. ICubed, 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. On remand, the SEC, as the party seeking
disgorgement, must prove that the Relief Defendants
App. 51
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
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.
App. 52
equitable limitations by failing to ensure that no
unduly remote 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, 223148. We also deny as moot Relief Defendants’ motions
for a stay of liquidation, and all stays are vacated.
A True Copy
Catherine O’Hagan Wolfe, Clerk
United States Court of Appeals, Second Circuit
[SEAL]
App. 53
APPENDIX B
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
Civil No. 3:15cv675 (JBA)
[Filed June 16, 2021
incorrectly dated as June 16, 2020]
_____________________________________________
UNITED STATES SECURITIES
)
AND EXCHANGE COMMISSION,
)
Plaintiff,
)
)
v.
)
)
IFTIKAR AHMED,
)
Defendant, and
)
)
IFTIKAR ALI AHMED SOLE PROP;
)
I-CUBED DOMAINS, LLC; SHALINI AHMED; )
SHALINI AHMED 2014 GRANTOR
)
RETAINED ANNUNITY TRUST; DIYA
)
HOLDINGS LLC; DIYA REAL HOLDINGS,
)
LLC; 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; and I.I. 3,
)
a minor child, by and through his next friends )
IFTIKAR and SHALINI AHMED, his parents, )
Relief Defendants.
)
____________________________________________ )
App. 54
REDETERMINATION OF DEFENDANT’S
DISGORGEMENT OBLIGATION
On March 11, 2021, the Second Circuit remanded to
this Court determination of Appellant’s disgorgement
obligation “consistent with § 6501 of the National
Defense Authorization Act, and, if appropriate, entry of
an amended judgment.” (Mandate of USCA [Doc.
# 1810] at 2.) After full briefing and oral argument, the
Court’s determination of Defendant’s increased
disgorgement obligation is set forth below.
I.
Background
On May 6, 2015, the Securities and Exchange
Commission (SEC) filed a complaint against Defendant
alleging numerous violations of Sections 10(b) and
17(a) of the Securities Exchange Act and Sections
206(1) and 206(2) of the Advisers Act and requested
equitable disgorgement of the proceeds from these
fraudulent transactions. (Compl. [Doc. # 1] ¶¶ 65-88.)
On August 12, 2015, after a hearing, the Court ordered
that Defendant and Relief Defendants’ assets be frozen
“up to the amount of $118,246,186,” accounting for
“approximately $65 million in illicit profits to be
disgorged plus prejudgment interest ($9.3 million) and
civil penalties ($44 million).” (Ruling and Order
Granting Preliminary Injunc. [Doc. # 113] at 3.) Under
the law at that time, the SEC was authorized to seek
the entirety of illegally obtained profits for
disgorgement as the applicable statutes did not have
temporal limitations.
On June 5, 2017, the U.S. Supreme Court held in
Kokesh v. SEC that disgorgement sought by the SEC
App. 55
pursuant to the Securities and Exchange Act is subject
to the five-year statute of limitations imposed by 28
U.S.C. § 2462 because it constitutes a penalty, but
expressly declined to reach the question of “whether
courts possess authority to order disgorgement in SEC
enforcement proceedings or [] whether courts have
properly applied disgorgement principles in this
context.” Kokesh v. SEC, 137 S. Ct. 1635, 1642 n.3
(2017). In response to Kokesh and with consent of all
parties, this Court reduced the amount of Defendant’s
assets frozen from $118,246,186 to $89,000,000 to
exclude the calculation of illegally obtained profits
beyond the newly imposed five-year statute of
limitations, but declined to release any funds as it
found the judgment to be undersecured because the
actual value of the frozen assets amounted to, at best,
$87 million. (Order on Def.’s Mot. for Mod. of the Asset
Freeze [Doc. # 829] at 3, 5 (representing $44 million in
disgorgement, 1.5 million in prejudgment interest, and
$44 million in civil penalties).)
On March 29, 2018, the Court granted the SEC’s
motion for summary judgment, finding Defendant
liable for violations of sections 206(1) through (4) of the
Advisers Act, section 10(b) of the Exchange Act, and
section 17(a)(1) of the Securities Act. (Ruling on All
Parties’ Mots. for Summ. J. on Liability [Doc. # 835] at
34, 38, 40.) While Defendant argued for dismissal of all
claims stemming from his actions prior to May 6, 2010,
the Court held that, because the SEC sought equitable
disgorgement and injunctive relief as remedies for
Defendant’s pre-2010 actions, Kokesh did not limit the
Court’s authority to find Defendant liable for his
earlier actions. (Id. at 31 (“Because this stage of the
App. 56
proceedings deals with liability, and the question of
whether injunctive relief is appropriate as it relates to
the otherwise time-barred conduct deals with the
remedy, this question must be left to be addressed in
the next phase of the proceedings. The Court therefore
will not dismiss any claims under Kokesh at this
liability stage, however it earlier modified the Asset
Freeze Order [Doc. # 113] to reflect this change in
law.”).) The Court found that “the SEC has met its
burden on summary judgment of establishing [that]
Defendant acted with the requisite scienter with
respect to each act of fraud,” including those that
occurred prior to May 6, 2010. (Id. at 42 (emphasis
added).)
Thereafter, on December 14, 2018, the Court
entered judgment against Defendant
(1) permanently enjoin[ing] Defendant from
violating Section 17(a) of the Securities Act [],
Section 10(b) of the Securities Exchange Act [],
and Sections 206(1), 206(2), 206(3), and 206(4) of
the Advisers Act[]; (2) order[ing] the Defendant
to disgorge $41,920,639 plus prejudgment
interest for the period of time prior to the asset
freeze, and interest and gains returned on the
frozen assets during the pendency of the freeze;
and (3) impos[ing] a civil penalty of $21,000,000
against Defendant.
(Am.. Final J. Against Def. and Relief Defs. [Doc.
# 1054] at 2; see Ruling on Pl.’s Mot. for Remedies and
J. [Doc. # 955] at 17 (finding that “a civil penalty in the
amount of $21 million . . . is reasonable and justified”).)
As required by Kokesh, the Court limited disgorgement
App. 57
to the sum of profits Defendant illegally obtained after
2010. Kokesh, 137 S. Ct. at 1645. Both Defendant and
Relief Defendants immediately appealed the judgment.
(Relief Defs.’ Notice of Appeal [Doc. # 1100]; Def.’s
Notice of Appeal [Doc. # 1101].)
After the Supreme Court granted certiorari on Liu
v. SEC, 140 S. Ct. 451 (2019), to decide whether a
disgorgement award greater than the net profits from
the defendant’s wrongdoing was appropriate under the
Securities Exchange Act, this Court stayed liquidation
of the frozen assets because the “irreparable harm”
that could be caused by prematurely liquidating Relief
Defendants’ and Defendant’s unique assets outweighed
the “potential harm asserted by the SEC and the
Receiver [that] the assets of the Receivership Estate
[could] decline in value to a degree which jeopardizes
the security of the judgment.” (Ruling on Def.’s Mot. to
Stay [Doc. # 1346] at 7.) The Supreme Court ultimately
held in Liu that § 78u(d)(5) of the Act authorizes courts
to order disgorgement that “does not exceed a
wrongdoer’s net profits and is awarded for victims.” Liu
v. SEC, 140 S. Ct. 1936, 1940 (2020).
Once Liu was decided, this Court anticipated that
“the liquidation of assets will soon proceed such that
the judgment will be fully secured and residual assets,
if any, will be unfrozen.” (Ruling Denying Relief Defs.’
Mots. for Funds [Doc. # 1597].) Relief Defendants
requested “clarification that the assets under this
Court’s asset freeze order will stay frozen with no
liquidation of assets pending appeals,” maintaining
that liquidation prior to the resolution of all appeals
would be inappropriate. (Mot. for Clarification [Doc.
App. 58
# 1602] at 2-3.) The Court denied Relief Defendants’
motion, stating,
Following the remand by the Second Circuit, the
Court will determine Defendant’s disgorgement
obligation in accordance with § 6501 of the
National Defense Authorization Act. Thereafter,
a liquidation schedule will be issued. Separately,
the asset freeze order remains in effect until
appeals are decided.
(Order Denying Clarification [Doc. # 1868].)
Codifying the SEC’s disgorgement power, Congress
passed the National Defense Authorization Act
(NDAA), which modifies the Securities Exchange Act to
expressly permit courts to, “[i]n any action or
proceeding brought by the Commission under any
provision of the securities laws, [] order []
disgorgement.” 15 U.S.C. § 78u(d)(7) (“paragraph (7)”).1
The NDAA also requires that the SEC
bring a claim for disgorgement under paragraph
(7) . . . not later than 10 years after the latest
date of the violation that gives rise to the action
or proceeding in which the Commission seeks
the claim if the violation involves conduct that
violates-(I) section 10(b);
(II) section 17(a)(1) of the Securities Act of
1
See also Avi Weitzman & Tina Samanta, Congress Codifies SEC
Disgorgement Remedy in Military Spending Bill, 25 WALL ST.
LAWYER 1, 1 (Feb. 2021) (noting that § 6501 of the NDAA was
intended to codify the rule announced in Liu).
App. 59
1933 (15 U.S.C. 77q(a)(1));
(III) section 206(1) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-6(1))
(IV) any other provision of the securities laws
for which scienter must be established.
15 U.S.C. § 78u(d)(8)(A). These amendments “apply
with respect to any action or proceeding that is pending
on, or commenced on or after” January 1, 2021. William
M. (Mac) Thornberry National Defense Authorization
Act for Fiscal Year 2021, H.R. 6395, 116th Cong. (2020)
(NDAA) § 6501(b), https://www.congress.gov/bill/116thcongress/house-bill/6395.
Upon passage of the NDAA and because the
judgment remained on appeal, the SEC moved the
Second Circuit
to remand the captioned consolidated appeals for
the limited purpose of recalculating DefendantAppellant Iftikar Ahmed’s disgorgement
obligation consistent with recent amendments to
Section 21(d) of the Securities Exchange Act of
1934 (the “Exchange Act”), 15 U.S.C. § 78u(d),
[because] these recent amendments expand the
statute of limitations from five (5) to ten
(10) years with respect to disgorgement as a
remedy for fraud in the Commission’s
enforcement actions, and they expressly apply to
any action pending as of their date of enactment.
Pl. SEC’s Mot. for Limited Remand at 1-2, SEC v.
Ahmed, No. 18-2903 (2d Cir. Jan. 13, 2021), ECF
No. 475. The motion for remand was granted on
March 11, 2021, and the Second Circuit directed this
App. 60
Court to “determin[e] Appellant’s disgorgement
obligation consistent with § 6501 of the National
Defense Authorization Act, and, if appropriate, ent[er]
an amended judgment.” (Mandate by USCA [Doc.
# 1810] at 2.)
The SEC seeks an amended judgment that includes
the entirety of illegally obtained profits within the tenyear period prior to May 6, 2015. (Pl. SEC’s Mem.
Concerning Def.’s Disgorgement Obligation and
Request for Entry of an Am. J. [Doc. # 1904] at 2.)
Defendant and Relief Defendants oppose increasing the
disgorgement amount and further request that the
Court stay liquidation of assets pending final
determination of the Second Circuit. (Def.’s Mem. of
Law Addressing the Impact of § 6501 of the NDAA on
the Final Disgorgement J. [Doc. # 1906] at 1, 21; Relief
Defs.’ Mem. of Law in Opp. to Pl.’s Request to
Recalculate Disgorgement Obligation [Doc. # 1901] at
3.) The Receiver takes no position. (Receiver Mem.
Regarding the Def.’s Disgorgement Obligation [Doc.
# 1899] at 1-2.)2
2
The SEC argues that, in remanding the matter to the District
Court, the Second Circuit necessarily held that the modifications
of the Act applied to Defendant’s case and the District Court’s only
responsibility is to calculate the change in disgorgement obligation.
In contrast, Defendant Parties argue that the Second Circuit
intended for this Court to determine the applicability of the NDAA,
as well as recalculate Defendant’s disgorgement obligation. In an
abundance of caution, this Court analyzes both the applicability of
the NDAA and the scope of Defendant’s new disgorgement
obligation.
App. 61
II.
Discussion
a. Application of Amendments to a “Pending”
Case
The modifications authorized by the NDAA apply to
“any action or proceeding that is pending on”
January 1, 2021. NDAA § 6501(b). Given that a case is
pending until “the last court in the hierarchy [of
Article III courts] rules,” Plaut v. Spendthrift Farm,
Inc., 514 U.S. 211, 227 (1995),3 and the Second Circuit
had not yet ruled on Defendant Parties’ appeals as of
January 1, 2021, this case is “pending” and the NDAA
and its attendant modifications therefore apply.4 See
3
This extended reasoning from the Supreme Court in Plaut is
instructive:
[A] distinction between judgments from which all appeals
have been forgone or completed, and judgments that
remain on appeal (or subject to being appealed), is implicit
in what Article III creates: not a batch of unconnected
courts, but a judicial department composed of “inferior
Courts” and “one supreme Court.” Within that hierarchy,
the decision of an inferior court is not (unless the time for
appeal has expired) the final word of the department as a
whole. It is the obligation of the last court in the hierarchy
that rules on the case to give effect to Congress’s latest
enactment, even when that has the effect of overturning
the judgment of an inferior court, since each court, at
every level, must decide according to existing laws.
514 U.S. 211, 227 (1995).
4
The First Circuit recently noted in an analogous pending SEC
case that although “[w]hen the district court ruled, a five-year
limitation period applied to the SEC’s claims[,] . . . [t]he changed
statute of limitations [as authorized by the NDAA] does not impact
App. 62
also Landgraf v. USI Film Prod., 511 U.S. 244, 273-74
(1994) (“[A] court should apply the law in effect at the
time it renders its decision, even though that law was
enacted after the events that gave rise to the suit.”).
The amendments permit disgorgement to be sought
for up to ten years prior to the Government’s filing of
the complaint for “conduct that violates—
(I) section 10(b); (II) section 17(a)(1) of the Securities
Act of 1933 (15 U.S.C. 77q(a)(1)); (III) section 206(1) of
the Investment Advisers Act of 1940 (15 U.S.C. 80b6(1)); and (IV) any other provision of the securities laws
for which scienter must be established.” 15 U.S.C.
§ 78u(d)(8)(A). In its Ruling on Liability, the Court
found that Defendant “acted with the requisite scienter
with respect to each act of fraud” in violating Section
10(b) of the Exchange Act. (Ruling on Liability at 42.)
With the exception of $650,000 in illegal profits
obtained from Company D in January of 2005, each of
Defendant’s acts of fraud occurred after May 2005, (see
Ruling on Liability at 15-24), and thus are subject to
disgorgement under § 6401 of the NDAA. As such,
Defendant’s new disgorgement obligation is
$64,171,646.14. (Id.)
this case.” SEC v. Morrone, No. 19-2006 at 6 n.3 (1st Cir. 2021).
However, because the issue on appeal to the First Circuit does not
appear to reach disgorgement, the First Circuit declined to analyze
the application of the NDAA beyond that which is quoted above.
Id. This Court, squarely addressing disgorgement, concludes that
the NDAA does apply to this case.
App. 63
b. Defendant and Relief Defendant’s Arguments
Defendant Parties offer a number of reasons why
the NDAA should not apply to this case, all of which
are defeated by the Court’s finding that this judgment
remains “pending.” (See Relief Defs.’ Mem. at 1-3; Def.’s
Mem. at 6-7.)
First, Relief Defendants argue that the Court may
not increase the amount of disgorgement because the
Second Circuit does not permit “an appellee who has
not cross-appealed [to] enlarge the amount of damages
or scope of equitable relief,” (Relief Defs.’ Mem. at 7
(quoting Int’l Ore & Fertilizer Corp. v. SGS Control
Servs., 38 F.3d 1279, 1286 (2d Cir. 1994)); see also
Def.’s Mem. at 6). At the time it moved the Second
Circuit for a limited remand in January 2021, the SEC
had not entered a cross-appeal in this case. However,
“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); see also
Carlson v. Principal Fin. Grp., 320 F.3d 301, 309 (2d
Cir. 2003) (holding the same); Rangolan v. Cty. of
Nassau, 370 F.3d 239, 254 (2d Cir. 2004) (noting that
the cross-appeal rule is one of practice but also
observing that “exercise of the power to disregard the
failure to cross-appeal has been rare, requiring a
showing of exceptional circumstances”) (internal
quotations omitted). To decide whether to disregard the
cross-appeal requirement, this Court applies a factor
test balancing “(1) the interrelatedness of the issues on
appeal and cross-appeal; (2) whether the nature of the
district court opinion should have put the appellee on
App. 64
notice of the need to file a cross-appeal; and (3) the
extent of any prejudice to the appellant caused by the
absence of notice.” Lee v. Burlington N. Santa Fe Ry.
Co., 245 F.3d 1102, 1107 (9th Cir. 2001). Here, since
the amount of the judgment was directly appealed by
Defendant Parties, the District Court’s opinion could
not have put the appellee on notice of any grounds for
cross appeal because the NDAA had not yet passed,
and no prejudice resulted to the appellant as the
Parties had ample opportunity to brief the issue on
remand. Thus, the SEC’s failure to submit a crossappeal will not limit the scope of its disgorgement
remedy.
Second, Defendant and Relief Defendants argue
that expanding disgorgement necessarily would either
reopen a final judgment or unconstitutionally attempt
to revive time-barred claims as prohibited by the ex
post facto clause. (Def.’s Mem. at 10-13, Relief Defs.
Mem. at 17-18.)
Mem. at 11-14, 18-19.) However, as discussed above,
the NDAA applies to pending cases, the judgments of
which are not yet considered final under Plaut, but the
substance of which have already been brought before
the Court. See Plaut, 514 U.S. at 227 (noting the
constitutionally important “distinction between
judgments from which all appeals have been forgone or
completed, and judgments that remain on appeal (or
subject to being appealed)”).5 Because the SEC does not
5
Defendant Parties argue that, because the SEC consented to the
five-year limitation and declined to appeal the judgment, the
judgment should be viewed as “final” as applied to the SEC;
App. 65
seek permission to initiate suit against Defendant for
previously time-barred claims, but rather intends only
to obtain disgorgement of proceeds obtained from
violations for which Defendant has already been found
liable and the judgment of which is still pending, the ex
post facto clause does not apply to this case. The Court
does not therefore address the punitive nature of the
disgorgement and its interaction with the ex post facto
clause. (See Relief Defs.’ Mem. at 18-19; Def.’s Mem. at
17-18); see also SEC v. Sidoti, 2021 WL 1593253 at *6*7 (C.D. Cal. Mar. 19, 2021) (holding that the five-year
limitation of 28 U.S.C. § 2462 applies to disgorgement
sought for non-scienter-based violations of the
Securities Exchange Act because of its penal nature).
Third, Relief Defendants and Defendant argue that
the amendments do not apply to this case because the
NDAA “left § 21(d)(5) unaltered, while creating a new
subparagraph – § 21(d)(7)” and thus this action, which
they argue granted remedial action only pursuant to
§ 21(d)(5), is unaffected by the modifications because
the new “limitations period [] governs only claims for
disgorgement under paragraph (7)” and “‘paragraph (7)’
did not exist before January 2021.” (Relief Defs.’ Mem
at 3, 19-20; see also Def.’s Mem. at 18-19.) However, the
Court did not rely solely on § 21(d)(5) of the Act to
authorize disgorgement in its initial ruling. (See Ruling
on Pl.’s Mot. for Remedies and J. at 10 (“Second Circuit
precedent [recognizes] that disgorgement is a proper
equitable remedy.”) (citing SEC v. Cavanaugh, 445
however, no Defendant Parties support this contention with any
legal authority or meritorious rationale. (Def.’s Mem. at 10-13;
Relief Defs.’ Mem. at 12-14.)
App. 66
F.3d 105, 116 (2d Cir. 2006))). Moreover, the SEC did
not, as Defendant claims “ma[k]e it clear that it was
bringing its claims for disgorgement, and had authority
to do so, only under § 21(d)(5),” (Def.’s Mem. at 19
n.14), but rather relied on the common law injunctive
power of the district courts, (Pl. SEC’s Opp. to Def.’s
Emerg. Mot. to Stay in Light of Kokesh [Doc. # 684] at
6-7 (“[D]istrict courts in Commission actions have for
decades used their injunctive authority under
Section 21(d)(1) of the Exchange Act to order
defendants to disgorge profits that they acquired
through violations of the securities laws. . . .
Disgorgement is also authorized by
Section 21(d)(5). . . .”) (emphasis added)). Thus, Relief
Defendants’ contention that the amendments do not
reach the subsection on which this Court grounded its
decision is incorrect. Moreover, as discussed above,
even though paragraph (7) did not exist until January
2021, because the litigation was still pending at that
time, the Court must apply the new law to the present
case and may therefore order disgorgement in
accordance with the newly-minted paragraph (7).6
Because the judgment was still pending at the time
the NDAA went into effect, disgorgement is properly
ordered to be $64,171,646.14.
6
Defendant and Relief Defendants further argue that
“§ 21(d)(8)(A)(ii)’s ten-year limitations period, if it were applicable,
can only apply to conduct and transactions occurring after January
2011 given that Congress enacted the NDAA in January 2021.
However, the statute itself states that actions must be brought
“not later than 10 years after the latest date of the violation that
gives rise to the action” and thus the argument is without merit.
15 U.S.C. § 78u(d)(8)(A) (emphasis added).
App. 67
c. Prejudgment Interest
In its Amended Final Judgment, the Court awarded
$1,491,064.01 of “prejudgment interest [on the
disgorgement award] for the period of time prior to the
asset freeze.” (Am. J. [Doc. # 1054] at 2, 4.) The SEC
now seeks an increased prejudgment interest award of
$9,755,798.34 to reflect the increased disgorgement
amount. (SEC’s Mem. at 9; Disgorgement and
Prejudgment Interest Summary, Ex. A to SEC’s Mem
[Doc. # 1904-1] at 1-4.) Relief Defendants request that,
to the extent the Court decides to award prejudgment
interest on any increased disgorgement award, such
interest “not be computed using the IRS underpayment
rate or compounded at a quarterly rate” as requested
by the SEC, but instead be computed using “the oneyear Treasury Bill rate.” (Relief Defs.’ Mem. at 7, 8.)
The Court has already determined that an award of
prejudgment interest on disgorged assets calculated
using the SEC’s methodology is appropriate, and there
is no reason why it should not similarly award
prejudgment interest on the increased disgorgement
award. (See Order Granting Pl.’s Mot. for J. and
Remedies at 13.) Although Relief Defendants contend
that the SEC’s proposed method for calculating
prejudgment interest is “punitive” and would
overcompensate the SEC, (id. at 8-9), no court has
found prejudgment interest compounded quarterly
based on the same interest rate the IRS uses to be
“punitive” or to otherwise result in overcompensation
to the plaintiff. To the contrary, numerous courts have
affirmed, even after Liu, that this method is
appropriate because the IRS’s “rate of interest ‘reflects
App. 68
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. Faulkner, No. 3:16-CV-1735-D, 2021
WL 75551, at *10 (N.D. Tex. Jan. 8, 2021) (quoting
SEC v. First Jersey Secs., Inc., 101 F.3d 1450, 1476 (2d
Cir. 1996)); see also SEC v. Skelley, No. 18cv8803 (LGS)
(DF), 2021 WL 863298, at *7-*8 (S.D.N.Y. Feb. 25,
2021) (holding that prejudgment interest calculations
should apply the IRS underpayment rate and
compound quarterly); SEC v. Owings Group, LLC,
No. RDB-18-2046, 2021 WL 1909606, at *5-*6 (D. Md.
May 12, 2021) (holding that a prejudgment interest
award in accordance with “the SEC’s prejudgment
interest calculator[,] which uses the same rate as the
Internal Revenue Service, 26 U.S.C. § 6621(a)(2), and
compounds interest quarterly” is appropriate); SEC v.
Dang, No. 3:20-cv-01353 (JAM), 2021 WL 1550593, at
*7 (D. Conn. Apr. 19, 2021) (holding that an award of
prejudgment interest calculated in the same manner
the IRS uses for tax underpayments is appropriate);
SEC v. Premier Holding Corp., No. SACV 18-00813CJC(KESx), 2021 WL 1048565, at *3 (C.D. Cal.
Jan. 20, 2021) (same); SEC v. Montgomery, No. SA-20CA-598-FB, 2021 WL 210749 (W.D. Tex. Jan. 20, 2021)
(same); SEC v. Blockest, LLC, No. 18CV2287GPB(MSB), 2020 WL 7488067, at *4 (S.D. Cal. Dec. 15,
2020) (same); SEC v. Erwin, No. 13-cv-03363-CMAKMT, 2020 WL 7310584, at *5 (D. Colo. Dec. 11, 2020)
(same); SEC v. Curatives Biosciences, Inc., No. 8:18-cv00925-SVW, 2020 WL 7345681, at *6 (C.D. Cal.
Oct. 22, 2020) (same); SEC v. Mizrahi, No. CV 19-2284
PA (JEMx), 2020 WL 6114913, at *4 (C.D. Cal. Oct. 5,
2020) (same).
App. 69
Consistent with the Court’s prior award of
prejudgment interest on disgorgement, the judgment is
hereby amended to reflect an increased prejudgment
interest award of $9,755,798.34.
d. Liquidation
Despite the fact that the Court had already
explained that liquidation would proceed following
recalculation of the disgorgement award, (Order
Denying Clarification), Defendant and Relief
Defendants elected to argue again in their briefs that
a liquidation schedule should not issue, (see Relief
Defs.’ Mem. at 21; Def’s Mem. at 29-32). The Court
construes Defendant and Relief Defendants’ request to
stay liquidation pending appeal as a motion for
reconsideration. Because Defendant and Relief
Defendants filed their briefs twelve days after the
Court issued its Order Denying Clarification on April 7,
2021, their motions for reconsideration are untimely
and must be denied. See D. Conn. L. R. Civ. P. 7(c)
(Motions for reconsideration must be filed “within
seven days of the filing of the decision or order from
which such relief is sought.”). Moreover, Defendant and
Relief Defendants have not identified any “controlling
decisions or data that the court overlooked in the initial
decision or order,” as the Court issued its prior order
after the Second Circuit issued its limited remand in
light of the NDAA. See id.
Regardless, Defendant and Relief Defendants’
arguments that liquidation should be stayed pending
appeal are unavailing. Given the enlarged
disgorgement award of $64,171,646.14 and the
corresponding increased prejudgment interest award of
App. 70
$9,755,798.34, the asset freeze no longer serves the
same function as a supersedeas bond, which is designed
to protect judgment creditors as fully as possible where
there is a reasonable likelihood that the judgment
debtor will unable or unwilling to satisfy the judgment
in full. See Rand-Whitney Containerboard Ltd.
Partnership v. Town of Montville, 245 F.R.D. 65, 67 (D.
Conn. 2007).
The total judgment against Defendant now stands
at $94,927,444.40, exclusive of gains on any assets used
to satisfy the judgment since the asset freeze order.
Although the most recent valuation by the Receiver
estimates that the Receivership Estate is worth
$123,771,402.92, that amount has fluctuated over the
course of the Receivership, initially reflecting a value
of $89,377,509.22 on May 5, 2019, (First Mot. for Atty
Fees [Doc. # 1160-5] at 6), and decreasing to a low of
$84,959,536.01 on May 15, 2020, (Fifth Mot. for Atty
Fees [Doc. # 1555-11] at 4), before reaching the present
valuation. Given the relatively illiquid nature of some
assets in the Receivership Estate and the documented
fluctuations in value (the lowest of which would leave
the judgment undersecured by approximately
$10 million), the unliquidated Receivership Estate does
not adequately secure judgment. While Defendant
“strongly believes the value of the invested assets will
continue to increase” and thereby fully secure the
judgment, (Def.’s Mem. at 31), there is no guarantee
that this is the case, and the risk of a decrease in value
should not be borne by the victims of Defendant’s
fraudulent scheme.
App. 71
Defendant and Relief Defendants insist that preappeal liquidation will result in irreparable harm since
“certain assets are real assets that can never be
recovered if monetized,” “there will be sizable capital
gains taxes on any stock or bond sales,” and “actions
with respect to any irrevocable trusts and/or UGMAs
may not be reversible.” (Relief Defs.’ Mem. at 22; see
also Def.’s Mem. at 29.) Although it is possible that
irreversible harm could be borne by Defendant and
Relief Defendants should any decision by this Court be
reversed by the Second Circuit, this risk can be
substantially mitigated through a carefully timed
liquidation plan that, inter alia, liquidates unique
assets last and only if necessary to satisfy the
judgment.
Liquidation is also favored as it will allow full
security of the judgment and permit release of any
excess frozen assets to Defendant and Relief
Defendants. After excess assets are returned, there will
be no further need to continually litigate over the
release of frozen assets for Defendant and Relief
Defendants’ various purposes. Liquidation thus
promotes judicial economy.
Accordingly, the Receiver is directed to propose a
liquidation schedule upon which all Parties may
comment. The Receiver is directed to file this proposed
schedule with the Court no later than July 15, 2021.
Comments will be received until July 29, 2021.
III.
Conclusion
For the foregoing reasons and in accordance with
the Second Circuit’s directive on remand [Doc. # 1801],
App. 72
Defendant’s disgorgement obligation is increased to
$64,171,646.14 with a prejudgment interest award of
$9,755,798.34. The Clerk shall amend the judgment
accordingly.
IT IS SO ORDERED.
_________/s/__________________
Janet Bond Arterton, U.S.D.J.
Dated at New Haven, Connecticut this 16th
day of June 2021.
App. 73
APPENDIX C
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
Civil No. 3:15cv675 (JBA)
[Filed July 6, 2021]
_____________________________________________
UNITED STATES SECURITIES
)
AND EXCHANGE COMMISSION,
)
Plaintiff,
)
)
v.
)
)
IFTIKAR AHMED,
)
Defendant, and
)
)
IFTIKAR ALI AHMED SOLE PROP;
)
I-CUBED DOMAINS, LLC; SHALINI AHMED; )
SHALINI AHMED 2014 GRANTOR
)
RETAINED ANNUNITY TRUST; DIYA
)
HOLDINGS LLC; DIYA REAL HOLDINGS,
)
LLC; 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; and I.I. 3,
)
a minor child, by and through his next friends )
IFTIKAR and SHALINI AHMED, his parents, )
Relief Defendants.
)
____________________________________________ )
App. 74
REDETERMINED FINAL
AMENDED JUDGMENT
It is hereby ordered that the Amended Final
Judgment [Doc. # 1054] entered by this Court in the
above-entitled case on December 14, 2018, be amended
as follows:
(4) IT IS HEREBY FURTHER ORDERED that
Defendant is liable for disgorgement of
$64,171,646.14, representing profits gained as
a result of the conduct alleged in the Second
Amended Complaint that occurred within ten
years of the initiation of this case, together with
an increased prejudgment interest award in the
amount of $9,755,798.34 and any interest or
gains accrued on disgorged frozen assets from
the date of the Court’s freeze order.
In all other respects the Amended Judgment [Doc.
# 1054] entered by this Court on December 14, 2018
remains in effect.
IT IS SO ORDERED.
_________/s/__________________
Janet Bond Arterton, U.S.D.J.
Dated at New Haven, Connecticut this 6th
day of July 2021.
App. 75
APPENDIX D
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
Civil No. 3:15cv675 (JBA)
[Filed September 6, 2018]
_____________________________________________
UNITED STATES SECURITIES
)
AND EXCHANGE COMMISSION,
)
Plaintiff,
)
)
v.
)
)
IFTIKAR AHMED,
)
Defendant, and
)
)
IFTIKAR ALI AHMED SOLE PROP;
)
I-CUBED DOMAINS, LLC; SHALINI AHMED; )
SHALINI AHMED 2014 GRANTOR
)
RETAINED ANNUNITY TRUST; DIYA
)
HOLDINGS LLC; DIYA REAL HOLDINGS,
)
LLC; 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; and I.I. 3,
)
a minor child, by and through his next friends )
IFTIKAR and SHALINI AHMED, his parents, )
Relief Defendants.
)
____________________________________________ )
App. 76
RULING ON PLAINTIFF’S MOTION FOR
REMEDIES AND JUDGMENT
This Court found [Doc. # 835] on summary
judgment that Defendant Iftikar Ahmed was liable for
violations of Section 10(b) of the Securities Exchange
Act of 1934 (“Exchange Act”) and Rule 10b-5
thereunder, Section 17(a) of the Securities Act of 1933
(“Securities Act”), and Section 206 of the Investment
Advisers Act (“Advisers Act”). See SEC v. Ahmed, 308
F. Supp. 3d 628, 636-37 (D. Conn. 2018) (hereinafter
“Ahmed II”). Plaintiff, the United States Securities and
Exchange Commission (“SEC”) now moves [Doc. # 886]
for Remedies and Judgment against Defendant,
seeking: (1) a permanent injunction; (2) disgorgement
of Defendant’s fraudulent proceeds in the amount of
$43,920,639; (3) disgorgement of prejudgment interest
on those proceeds in the amount of $1,520,953 along
with interest earned on all frozen assets during the
pendency of freeze; (4) civil penalties in the amount of
$43,920,639; (5) an Order specifically finding that the
assets listed on the Asset Schedule (Ex. 1 [Doc. # 888-1]
to Pl.’s Mem. Supp. Mot. for Judgment) belong to
Defendant and can be used to satisfy a judgment
against him; (6) the appointment of a receiver; (7) the
establishment of a Fair Fund; and (8) any other relief
that the Court may deem appropriate. (Pl.’s Mem.
Supp. Mot. for Judgment [Doc.# 888] at 2.)
For the following reasons, the Court grants the
SEC’s Motion, with modification.
App. 77
I.
Background
The Court assumes the parties’ familiarity with the
facts and procedural history of this case. A detailed
discussion of the facts underlying Defendant’s
violations can be found in the Court’s Ruling granting
summary judgment on the issue of Defendant’s
liability. See Ahmed II, 308 F. Supp. 3d 628. A brief
summary of relevant facts and findings relating to
Relief Defendants’ claims of ownership over assets
listed in the Asset Schedule follows.
In opposition to the SEC’s request for a preliminary
injunction freezing assets, Relief Defendant Shalini
Ahmed and her children made a claim to only three
assets: (1) $7.5 million in proceeds from the Company
C transaction that was held by I-Cubed and placed into
the 2014 Grantor Retained Annuity Trust (the
“GRAT”); (2) income earned from a Park Avenue
condominium held in the name of DIYA that was
purchased for approximately $9.5 million (“Unit 12A”);
and (3) any income earned from a second Park Avenue
condominium held in the name of DIYA Real that was
purchased for approximately $8.7 million (“Unit 12F”).
(See, e.g., [Docs. ## 69, 96].) The Court rejected Ms.
Ahmed’s request, finding that she was a nominal owner
for each requested asset and thus her ownership claims
were not credible. See SEC v. Ahmed, 123 F. Supp. 3d
301, 313 (D. Conn. 2015) (hereinafter “Ahmed I”), aff’d
sub nom. Sec. & Exch. Comm’n v. I-Cubed Domains,
LLC, 664 F. App’x 53 (2d Cir. 2016). However, the
Court agreed to “entertain any application to release
assets identifiable as [Ms. Ahmed’s], and not tainted.”
Sec. & Exch. Comm’n v. I-Cubed Domains, LLC, 664
App. 78
F. App’x 53, 57 (2d Cir. 2016) (internal quotations
omitted)
Relief Defendants chose to take an interlocutory
appeal of the Asset Freeze Order, arguing, inter alia,
that the asset freeze was overbroad as to assets in Ms.
Ahmed’s name that the Court had not individually
analyzed. See I-Cubed Domains, LLC, 664 F. App’x at
55. The Second Circuit deemed the argument
“meritless” and instructed that, even with assets held
in their name, Relief Defendants needed to first
“identify any improperly frozen assets” and apply for
their release before the SEC would be “required to
carry its burden of demonstrating that any such
identified assets are either ill-gotten gains to which
Relief Defendants do not have a legitimate claim or
that Iftikar in fact owns the assets in question.” Id. at
57 (citing Smith v. SEC, 653 F.3d 121, 128 (2d Cir.
2011)). “If Relief Defendants cannot prove that any
frozen assets legitimately belong to them, then
necessarily none of their assets are being improperly
frozen to satisfy the civil penalties alleged to apply to
Iftikar’s conduct.” Id. at 57 n.3. Relief Defendants
subsequently hired an expert “to counter the
Commission’s argument that the Relief Defendants are
mere nominees.” ([Doc. # 340] at 7.)
Since the Second Circuit’s ruling, Ms. Ahmed has
identified only two allegedly improperly frozen assets:
1) $250,000.00 in rental proceeds from Unit 12A that
was previously placed in Fidelity x7540; and (2) nine 1kilogram gold bars discovered in jointly-owned safety
deposit boxes. (See [Doc. # 442].) The Court rejected
these requests, finding that neither asset belonged to
App. 79
her: “Ms. Ahmed is not entitled to proceeds of Unit 12A
because she was only a nominal owner of the
condominium” and “[e]ven Relief Defendants’ Motion
does not contain an explicit allegation of Ms. Ahmed’s
ownership of the Gold Bars, and the SEC has pointed
to testimony which demonstrates that Ms. Ahmed had
no knowledge of the existence of the bars.” ([Doc.# 658]
at 3-5.)
Following the Court’s Summary Judgment Ruling
on Liability, Relief Defendants were ordered to—and
agreed to—“provide a list identifying all assets they
claim belong to them, and the reasons why they claim
such ownership.” ([Doc. # 842] at 3.) On April 27, 2018,
Relief Defendants filed the required list. (See Relief
Defendant’s Asset List [Doc.# 862]). Despite having
made claims to only five frozen assets during the
preceding three years of litigation (all of which were
rejected), Ms. Ahmed and her young children now claim
to own more than $85 million in frozen assets. Id.
Neither Relief Defendants’ Asset List, nor any other
submissions to the Court, explain how Relief
Defendants controlled the assets or how they were
acquired. Nor do they provide any argument that goods
or services were provided in exchange for the assets, or
any expert analysis demonstrating the SEC’ s nominee
allegations are inaccurate.
II.
Discussion
A. Plaintiff’s Motion is Procedurally Sound
Defendants fault the SEC for filing a Motion for
Judgment instead of a motion for summary judgment
App. 80
on damages.1 The SEC responds that summary
judgment is not appropriate given that it is not seeking
damages, but rather is requesting that the Court enter
judgment against Defendant awarding certain
equitable remedies, which cannot be decided at a trial.
See, e.g., Broadnax v. City of New Haven, 415 F.3d 265,
271 (2d Cir. 2005). Relief Defendants cry foul, claiming
entitlement to a jury on the question of whether
specific assets belong to them, or are in fact owned by
Mr. Ahmed.
Relief Defendants provide no convincing authority
supporting their position that ownership of the assets
in this context is a question of fact that must be
determined by a jury. They attempt to characterize the
SEC’s theory of recovery against Relief Defendants as
one of fraudulent conveyance, a question of common
law rather than equity, in order to show entitlement to
a jury trial. However, their sole cited case involves a
private lawsuit in which the government intervened to
enforce tax liens against two defendants by proceeding
against a third defendant under the theory that it was
a nominee for the first two. See Iantosca v. Benistar
Admin. Svcs., Inc, 843 F. Supp. 2d 148, 153-54 (D.
Mass. 2012). The court reasoned that “suits seeking . . .
to compel the defendant to pay a sum of money to the
plaintiff are suits for money damages . . . [a]nd money
damages are, of course, the classic form of legal relief,”
therefore finding that the defendants were entitled to
1
The Court’s April 5, 2018 endorsement order [Doc. # 842],
following a discussion on the record with all parties, specifically
ordered that the SEC file a Motion for Judgment.
App. 81
a jury trial with respect to the government’s nominee
claim. Id. at 153.
Iantosca, which unlike here was a private lawsuit,
is not persuasive in light of the overwhelming case law
cited by the SEC in which district courts have used
their equitable power in the context of securities
enforcement actions to order the turnover of assets
nominally held by third parties. See SEC v. Soflpoint,
Inc., No. 95-CV-2951, 2012 WL 1681167 at* 3 (S.D.N.Y.
May 9, 2012) (where the defendant could use
corporation’s money at will and “attributed the assets
to [the corporation] in order to retain their use while
fraudulently protecting them from creditors[,]” the
court found that the corporation’s assets belonged to
the defendant); SEC v. Zubkis, No. 97 Civ. 8086 (JGK),
2005 WL 1560489 at *4 (S.D.N.Y. June 30, 2005) (“The
Court may use [its] broad equitable power to order the
turnover of assets nominally held by third parties
where the third party lacks a legitimate claim to the
assets.”); SEC v. Martino, 255 F. Supp. 2d 268, 288
(S.D.N.Y. 2003) (ordering the sale of a yacht placed in
the name of a relief defendant but paid for by the
defendant because “the disgorgement of unjustly
retained wealth is a long-standing remed[y] that [is]
within a court’s equity powers” and this inherent
equitable power “certainly extends to a person who,
although not accused of wrongdoing, received ill-gotten
funds and does not have a legitimate claim to those
funds” (internal quotation marks and citations
omitted)).2, 3
2
Several Circuits have similarly found that district courts have
broad equitable powers which include the ability to determine
App. 82
B. Remedies
1. Permanent Injunction
Section 21(d)(1) of the Exchange Act, Section 20(b)
of the Securities Act, and Section 209(d) of the Advisers
Act allow the Commission to obtain permanent
injunctive relief upon a showing that the defendant has
ownership of assets. See SEC v. Coello, 139 F.3d 674, 676 (9th Cir.
1998) (“[A]mple authority supports the proposition that the broad
equitable powers of the federal courts can be employed to recover
ill gotten gains for the benefit of the victims of wrongdoing,
whether held by the original wrongdoer or by one who has received
the proceeds after the wrong.”); SEC v. Cherif, 933 F.2d 403, 414
n. 11 (7th Cir. 1991) (“A court can obtain equitable relief from a
non-party against whom no wrongdoing is alleged if it is
established that the non-party possesses illegally obtained profits
but has no legitimate claim to them. Courts have jurisdiction to
decide the legitimacy of ownership claims made by non-parties to
assets alleged to be proceeds from securities laws violations.”).
3
Accordingly, Defendant’s Motion [Doc. # 884] for Summary
Judgment on Damages is denied because the SEC is not seeking
damages, but only equitable remedies, and therefore there are no
issues which remain for a jury. In his Motion, Defendant makes
many of the same arguments he makes in his Opposition [Doc.
# 902] to the SEC’s Motion for Remedies and Judgment, including
that after Kokesh the SEC is not authorized to seek disgorgement,
that Defendant obtained no ill-gotten gains with regard to the two
Company C transactions, that Oak already holds assets belonging
to Defendant that must be accounted for, and that no civil penalty
or injunction should be imposed. His Motion for Summary
Judgment also argues the right to a jury trial to decide the amount
of disgorgement. (Def.’s Mot. for Summ. J. at 11-12.) The Court
incorporates Defendant’s Motion for Summary Judgment into his
Opposition to the SEC’s Motion for Judgment and thus considers
those arguments made in support of summary judgment as part of
Defendant’s rebuttal to the SEC’s Motion.
App. 83
violated the securities laws and there is a reasonable
likelihood that the defendant will violate the securities
laws in the future. See SEC v. Commonwealth
Chemical Secs., Inc., 574 F.2d 90, 99 (2d Cir. 1978)
(injunction should be granted if the defendant’s past
conduct indicates “a reasonable likelihood of further
violation in the future”); see also S.E.C. v. Rabinovich
& Assocs., LP, No. 07-cv-10547(GEL), 2008 WL
4937360, at *5 (S.D.N.Y. Nov. 18, 2008). In evaluating
that likelihood, a court may consider such factors as
the degree of scienter involved; the sincerity of the
defendant’s assurances against future violations; the
recurrent or isolated nature of the infraction; the
defendant’s recognition of the wrongful nature of his
conduct; and the likelihood, given defendant’s
occupation, that future violations may occur. SEC v.
Universal Major Indus. Corp., 546 F.2d 1044, 1048 (2d
Cir. 1976).
Defendant claims that “[g]iven the very public
nature of this case, which has already been widely
reported both by the print, television and online media,
it is implausible that Defendant will be employed in the
securities industry ever again.” He further “disavows
any interest in ever returning to the securities
industry[,]” and complains that an injunction would
only serve to stigmatize his current educational,
charitable, and non-profit activities. (Def.’s Opp’n at
40.) Despite these noble proclamations, the above
factors weigh in favor of issuing an injunction here.
Defendant’s violation was not an isolated incident,
rather he continuously violated the securities laws for
nearly a decade while employed at Oak. Moreover,
App. 84
Defendant committed these violations with the highest
degree of scienter—“Defendant opened bank accounts
he alone controlled that were deceptively titled in the
name of Oak and its portfolio companies, which he then
used to divert monies intended for Oak funds or its
portfolio companies into his and his wife’s personal
bank accounts.” Ahmed II, 308 F. Supp. 3d at 638.
Defendant has never admitted his wrongful conduct or
accepted any responsibility whatsoever for his fraud,
and indeed fled the country shortly after this case
began, prior to the July 2015 Preliminary Injunction
hearing. Although his current employment may not at
all be related to the securities industry, he nonetheless
retains the skills and capacity to work in that field if
given the opportunity.
On these facts, the Court finds that there is a
“reasonable likelihood” that Defendant will violate the
securities laws in the future. See SEC v. First Jersey
Sec., Inc., 101 F.3d 1450, 1477 (2d Cir. 1996) (An
“injunction is particularly within the court’s discretion
where a violation was founded on systematic
wrongdoing, rather than an isolated occurrence, and
where the court views the defendant’s degree of
culpability and continued protestations of innocence as
indications that injunctive relief is warranted . . .”).
Thus, Defendant is permanently enjoined from
violating Section 17(a) of the Securities Act (15 U.S.C.
§ 77q(a)), Section 10(b) of the Exchange Act (15 U.S.C.
§ 78j(b)) and Rule 10b-5 thereunder (17 C.F.R.
§ 240.10b-5), and Sections 206(1), 206(2), 206(3), and
206(4) of the Advisers Act (15 U.S.C. §§ 80b-6(1), 80b6(2), and 80b-6(3)) and Rule 206(4)-8 thereunder (17
C.F.R. § 275.206(4)-8).
App. 85
2. Disgorgement
“Once the district court has found federal securities
law violations, it has broad equitable power to fashion
appropriate remedies, including ordering that culpable
defendants disgorge their profits.” S.E.C. v. Razmilovic,
738 F.3d 14, 31 (2d Cir. 2013), as amended (Nov. 26,
2013). The equitable remedy of disgorgement “consists
of fact finding by a district court to determine the
amount of money acquired through wrongdoing – a
process sometimes called ‘accounting’ – and an order
compelling the wrongdoer to pay that amount plus
interest to the court.” SEC v. Cavanagh, 445 F.3d 105,
116 (2d Cir. 2006) (“Cavanagh II”) (footnote omitted);
see also SEC v. Commonwealth Chemical Securities,
Inc., 574 F.2d 90, 102 (2d Cir. 1978) (Disgorgement “is
a method of forcing a defendant to give up the amount
by which he was unjustly enriched.”).
Courts may only order disgorgement for profits
which were illegally derived, but given the difficulty in
determining exactly which of a defendant’s gains
resulted from his frauds, “‘[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 (quoting First
Jersey, 101 F.3d at 1475). Thus, courts have found that
“[s]o long as the measure of disgorgement is
reasonable, any risk of uncertainty should fall on the
wrongdoer whose illegal conduct created that
uncertainty.” SEC v. Warde, 151 F.3d 42, 50 (2d Cir.
1998) (internal quotation marks omitted). Obviously, as
discussed above, disgorgement cannot be avoided by
transferring ill-gotten gains to third parties. See, e.g.,
App. 86
Cavanagh I, 155 F.3d at 137 (“Allowing [Defendant’s
wife] to now claim valid ownership of those proceeds
would allow almost any defendant to circumvent the
SEC’s power to recapture fraud proceeds, by the simple
procedure of giving stock to friends and relatives,
without even their knowledge.”)
a. The Court’s Authority
Disgorgement
to
Order
Defendants contend that after Kokesh v. SEC, 137
S. Ct. 1635, 1644 (2017) the SEC cannot seek
disgorgement against any party because it is a penalty
for all purposes. However, Kokesh made clear it was
addressing a narrow issue—whether disgorgement is a
“penalty within the meaning” of the statute of
limitations in § 2462—and explicitly warned that
“[n]othing in this opinion should be interpreted as an
opinion on whether courts possess authority to order
disgorgement in SEC enforcement proceedings . . .”
Kokesh, 137 S. Ct. at 1643, 1642 n.3. Since Kokesh was
decided, courts have declined to endorse similar
arguments as here, that the SEC has no authority to
seek disgorgement at all. As one district court
explained in rejecting that same argument, “Kokesh is
best seen as a decision clarifying the statutory scope of
§ 2462, rather than one redefining the essential
attributes of disgorgement.” SEC v. Jammin Java
Corp., 2017 WL 4286180, at *3 (C.D. Cal. Sept. 14,
2017). That is because “at every step of the analysis,
the Court reinforce[d] [that] it [was] discussing
penalties in the context of a specific provision and for
statute of limitations purposes.” SEC v. Brooks, 2017
WL 3315137, at *6-8 (S.D. Fla. Aug. 3, 2017) (reasoning
App. 87
that “Kokesh’s holding cannot be plucked from the
statutory context that gives it force” and determining
that, despite Kokesh, disgorgement is an equitable
remedy that is remedial for purposes of determining
whether a claim survives the defendant’s death).
Consistent with this view, the Second Circuit has
upheld a disgorgement award post-Kokesh, holding
that courts have “broad discretion” in ordering
disgorgement. SEC v. Metter, 706 Fed. Appx. 699, 702
(2d Cir. 2017).
Thus, nothing in Kokesh disturbed Second Circuit
precedent that disgorgement is a proper equitable
remedy. See SEC v. Cope et al., No. 14CV7575 (DLC),
2018 WL 3628899, at *4 (S.D.N.Y. July 30, 2018); see
also Cavanagh II, 445 F.3d at 118 (explaining that
disgorgement serves the equitable purpose of
“prevent[ing] wrongdoers from unjustly enriching
themselves through violations” and that “[t]he
emphasis on public protection, as opposed to simple
compensatory relief, illustrates the equitable nature of
the remedy” (citing SEC v. Commonwealth Chem. Sec.,
Inc., 574 F.2d 90, 102 (2d Cir. 1978))).4
4
Relief Defendants argue that the Court cannot order
disgorgement of their assets because they are not accused of any
wrongdoing and therefore penalties may not be imposed against
them. However, the SEC is not seeking disgorgement against
Relief Defendants, only against Defendant himself. It is only
because the SEC claims Relief Defendants are holding assets that
are, in reality, Mr. Ahmed’s, that assets in Relief Defendants’
possession may be subject to the order of disgorgement against
Defendant.
App. 88
b. The Total Amount to be Disgorged
Contrary to Relief Defendants’ argument, the SEC
has not conflated disgorgement with restitution. The
Court’s findings in the Summary Judgment Ruling on
Liability focused on Defendant’s fraudulent gains and
did not address Oak’s losses from Defendant’s conduct.
The Court’s findings detail the specific sums Defendant
diverted into his and his wife’s bank accounts, totaling
approximately $67 million, $43,920,639.00 of which
was acquired within five years of the initiation of this
case. See Ahmed, 308 F. Supp. 3d at 638-48.
That being said, with respect to the second
Company C transaction (“C2”), the Ruling on Summary
Judgment, which focused specifically on liability, only
calculated gross sales revenues from the sale of
Company C shares and did not address Defendant’s
initial cost of purchasing the Company C shares
through I-Cubed, which was $2 million. (See Ex. 4
(Ames’ Decl.) ¶ 29(b ).) Thus, Defendants appropriately
dispute the amount that should be disgorged relating
to this transaction. Their argument that the first
Company C transaction (“C1”) similarly was not
properly calculated though, is meritless.
Relief Defendants claim that the SEC’s overall
disgorgement request must be reduced by $8.9 million
because Mr. Ahmed had no ill-gotten gains relating to
the C1 transaction. (R. Def.’s Opp’n at 8.) As the SEC
notes, Defendant’s conflict of interest in the
transaction, where he concealed from both parties “that
he (as opposed to the BVI Company, which was an Oak
portfolio company) was the seller of [the] Company C
shares and that he would personally profit by more
App. 89
than $8 million upon Oak Fund XIII’s $25 million
investment” in Company C violates Advisers Act
Section 206(3). Accordingly, it is appropriate for the
Court to order disgorged “all profits reaped through
[t]his securities law violation[],” which is the
$8.9 million Defendant made by selling the shares for
nearly $11 million after he purchased them for only
$2 million, Ahmed II, 308 F. Supp. at 640-41. See SEC
v. Cavanaugh, 445 F.3d 105, 109 (2d Cir. 2006).
The C2 transaction is another instance in which Mr.
Ahmed concealed the fact that he was on both sides of
the deal—as the sole member of Relief Defendant ICubed, Defendant sold shares of Company C (which
had previously been purchased by I-Cubed, i.e., Mr.
Ahmed) to an Oak Fund. Ahmed, 308 F. Supp. 3d at
641-42. In its Ruling, the Court found that the gross
revenue from the $7.5 million sale was then distributed
into an account on which Mr. Ahmed is listed as the
sole signatory, which he had opened by representing
that he was a member of I-Cubed. See id. at 642 n.9.
Because the Court is authorized to disgorge only
“profits reaped through [Defendant’s] securities law
violations,” the Court concludes that $5.5 million is the
appropriate amount of disgorgement for the C2
transaction. See Cavanaugh, 445 F.3d at 109 (emphasis
added). Accordingly, the total amount the SEC seeks to
have disgorged of $43,920,639.00 must be reduced by
$2 million. Defendants have not established with
respect to any other transaction that the Court’s Ruling
on Liability improperly calculated profits Defendant
derived from his misconduct, and therefore the Court
App. 90
orders Defendant to disgorge
representing his ill-gotten profits.
$41,920,639.00,
3. Prejudgment Interest and Interest/
Gains Accrued on Frozen Assets
As with disgorgement, an award of prejudgment
interest lies within the discretion of the court. See First
Jersey, 101 F.3d at 1476. Generally, “an award of
prejudgment interest may be needed in order to ensure
that the defendant not enjoy a windfall as a result of its
wrongdoing.” Slupinski v. First Unum Life Ins. Co., 554
F.3d 38, 54 (2d Cir. 2009). In deciding whether an
award of prejudgment interest is warranted, 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. First Jersey, 101
F.3d at 1476 (internal citation omitted). It is within the
“discretion of a court to award prejudgment interest on
the disgorgement amount for the period during which
a defendant had use of [its] illegal profits.” Razmilovic,
738 F.3d at 36.5
5
Mr. Ahmed contends that the SEC is not entitled to an award of
prejudgment interest after Kokesh because, in his view,
disgorgement now constitutes a penalty for all purposes and the
SEC cannot seek prejudgment interest on any penalty. (Def.’s
Opp’n at 9.) Because, as discussed below in footnote 8, the Court
disagrees with the basic premise that all disgorgement orders are
now penalties, this argument lacks merit.
App. 91
Here, prejudgment interest on the amount to be
disgorged is appropriate for the period prior to the
asset freeze, since without it Defendant would be
allowed to “obtain[ ] the benefit of what amounts to an
interest free loan procured as a result of illegal
activity.” SEC v. Moran, 944 F.Supp. 286, 295
(S.D.N.Y. 1996). The SEC represents, and Defendants
do not dispute, that this amounts to $1,520,953.00.6
What is disputed, however, is the SEC’s additional
request that the Court order Defendant to turn over all
interest and returns from frozen assets from the time
this Court entered [Doc. # 9] a Temporary Restraining
Order on May 9, 2015. The SEC is not requesting that
Mr. Ahmed pay prejudgment interest on frozen assets
during the pendency of the asset freeze, but it contends
that conversely, he is not entitled to interest or gains
on assets while they were frozen, and those moneys
should be disgorged and returned to Defendant’s
victims. Thus, while recognizing that it can be
improper to collect prejudgment interest on “funds
[that] have been frozen in connection with an
enforcement action,” the SEC claims it is entitled to
disgorge the accumulated returns on frozen funds:
“[F]rozen funds ‘turned over to the government in
complete or partial satisfaction of the disgorgement
order’ should be turned over ‘along with any interest
that has accrued on them during the freeze period.”’
Tavella, 77 F. Supp. 3d at 361 (quoting Razmilovic, 738
F.3d at 36). “Otherwise, a defendant might perversely
6
The SEC is directed to provide a revised calculation for the
prejudgment interest based on the revised disgorgement figure,
discussed above.
App. 92
benefit from the asset freeze by pocketing accumulated
returns on the frozen principal.” Id.
Defendants have not shown entitlement to interest
and gains accrued during the pendency of the asset
freeze and therefore the Court, as instructed by the
Second Circuit in Razmilovic, orders the actual returns
on the frozen assets, the amount of which have not yet
been determined, must also be disgorged.
4. Civil Penalty7
Civil penalties are designed to punish the individual
violator and deter future violations of the securities
laws. SEC v. Moran, 944 F. Supp. 286, 296 (S.D.N.Y.
1996). The Securities Act and the Exchange Act
authorize three tiers of civil penalties. See 15 U.S.C.
§ 77t(d); 15 U.S.C. § 78u(d)(3). Third tier penalties are
appropriate where “the violation involved fraud, deceit,
manipulation, or deliberate or reckless disregard of a
regulatory requirement” and “directly or indirectly
resulted in substantial losses or created a significant
risk of substantial losses to other persons.” Razmilovic,
738 F.3d at 38 (citation omitted). At each tier, “for each
violation, the amount of penalty ‘shall not exceed the
greater of’ a specified monetary amount or the
7
Defendant offers no argument as to how imposing a civil penalty
here violates the Eighth Amendment’s Excessive Fines Clause, and
therefore his citation to SEC v. Metter is puzzling. (See Def.’s Mot.
for Summ. J. at 36 (quoting SEC v. Metter, 706 F. App’x 699, 703
(2d Cir. 2017) (The Second Circuit, “assume[d] without deciding
that, in light of the Supreme Court’s recent decision in Kokesh . . .
the disgorgement liability imposed in this matter was essentially
punitive in nature and thus was a fine within the meaning of the
Excessive Fines Clause of the Eighth Amendment.”)).)
App. 93
defendant’s ‘gross amount of pecuniary gain.”’ Id.
(quoting 15 U.S.C. §§ 77t(d)(2), 78u(d)(3)(B)).
The actual amount of the penalty, within the
bounds of the statute, is left to the discretion of the
district court. Id. When making this determination,
courts consider
(1) the egregiousness of the defendant’s conduct;
(2) the degree of the defendant’s scienter;
(3) whether the defendant’s conduct created
substantial losses or the risk of substantial
losses to other persons; (4) whether the
defendant’s conduct was isolated or recurrent;
and (5) whether the penalty should be reduced
due to the defendant’s demonstrated current and
future financial condition.
SEC v. Haligiannis, 470 F. Supp. 2d 373, 386 (S.D.N.Y.
2007).
The SEC asks the Court to impose a third-tier
penalty equal to the amount of disgorgement, here
roughly $41 million, based upon what it considers
Defendant’s egregious conduct. It argues that
“Defendant engaged in premeditated, extensive, and
continual fraud . . . that was intended to (and did)
inflict harm on those he was entrusted to help, so he
could personally profit.” (Pl.’s Mot. for Judgment at 16.)
Relief Defendants maintain that there is no support in
this Circuit for imposition of a penalty that is 100% of
App. 94
the total disgorgement, and instead that the penalty
should be restricted to only 10-20%.8
Despite Defendants’ protestations, there is no
dispute that the Court is authorized, should it so
choose, to impose a civil penalty equal to the amount
ordered disgorged, representing Defendant’s gross
pecuniary gain. See 15 U.S.C. §§ 77t(d)(2),
78u(d)(3)(B)). Other district courts have done so. See,
e.g., S.E.C. v. Haligiannis, 470 F. Supp. 2d 373, 386
(S.D.N.Y. 2007) (ordering the “defendants to pay a
penalty in the approximate amount of his ill-gotten
gains: $15,000,000.”); SEC v. BIC Real Estate Dev.
Corp., 2017 WL 1740136, at *6 (E.D. Cal. May 4, 2017)
(“ordering the defendant to pay a penalty of
$12,132,370, equal to his profit from wrongdoing”);
SEC v. Zada, 787 F.3d 375, 383 (6th Cir. 2015)
(upholding imposition of civil penalty, equal to the
amount of ill-gotten gains, of over $56 million). On the
other hand, some courts have declined to impose the
maximum penalty. See, e.g., Sec. & Exch. Comm’n v.
Nadel, No. CV110215WFKAKT, 2016 WL 639063, at
*26 (E.D.N.Y. Feb. 11, 2016), report and
8
Defendants do not attempt to persuade the Court not to impose
a third-tier penalty, although Relief Defendants maintain that the
SEC’s request for civil penalty should be denied outright because
disgorgement is already a penalty. However, as the Court noted in
the context of the asset freeze, since “[d]isgorgement merely
requires the return of wrongfully obtained profits; it does not
result in any actual economic penalty or act as a financial
disincentive to engage in securities fraud” and therefore civil
penalties are required in order to deter and punish fraud. Ahmed I,
123 F. Supp. 3d at 313 (quoting S.E.C. v. Moran, 944 F. Supp. 286,
296 (S.D.N.Y. 1996)).
App. 95
recommendation adopted, 206 F. Supp. 3d 782
(E.D.N.Y. 2016) (imposing third-tier penalty in the
amount of $1 million where the disgorgement award
was nearly $11 million); Razmilovic, 822 F. Supp. 2d at
281-82 (declining to impose maximum civil penalty of
over $41 million, and instead imposing civil penalty of
over $20 million, equal to one-half of the disgorgement
amount).9
The Court finds that the circumstances and
consequences of Defendant’s conduct warrant a
significant penalty. Defendant’s solo, flagrant,
fraudulent conduct took place over many years, it was
undoubtedly willful, with the sole motivation being to
personally profit at the expense of his victims, whose
resulting losses were immense. Defendant not only fled
the country following his indictment on criminal
charges in Massachusetts, but he has consistently and
indignantly denied any wrongdoing whatsoever
throughout the course of this litigation. There is no
doubt Defendant utilized his professional talents and
position to commandeer investors’ funds purely for
personal gain. Additionally, Defendant has not
demonstrated that his financial condition warrants any
downward adjustment, and his contention that the fine
9
The facts of this case bear a striking resemblance to those in
Razmilovic, where the defendant similarly perpetuated a pervasive
fraudulent scheme spanning a number of years that involved
“fraud, deceit, manipulation and deliberate, or at least, reckless
disregard of regulatory requirements,” which resulted in
substantial losses to investors. “Yet instead of responding to the
charges against him, the defendant fled the country, continue[d]
to refuse to admit any wrongdoing, and . . . never expressed any
remorse for his conduct.” 822 F. Supp. 2d at 280.
App. 96
should be reduced based upon his inability to pay
deserves little attention given that the SEC has
already secured assets which are likely sufficient to
satisfy the total award.
The Court is of the view that a civil penalty in the
amount of $21 million, representing just over half of
the total disgorgement amount, is reasonable and
justified on the facts of this case, which is far from a
mere slap on the wrist, and is sufficient to effectuate
the punitive and deterrent purposes of such penalties,
while not being greater than necessary. See Razmilovic
822 F. Supp. 2d at 281-82.10
C. Assets Available to Satisfy the Judgment
The SEC asks the Court to find that the assets
listed on the Asset Schedule (Ex. 1 to Pl.’s Mot. for
Judgment) belong to Defendant and can be used to
satisfy a judgment against him. Relief Defendants
object to the process being used by the Court, arguing
that it “would, among other things, improperly shift the
burden of proof to Relief Defendants, requiring them to
establish ownership over assets held in their names.”
10
The SEC also reasons that this civil penalty is appropriate given
that the disgorgement award “will be insufficient to fully
compensate victims from whom [Defendant] stole approximately
$67 million” because Defendant’s fraud extended beyond the fiveyear statute of limitations for the SEC’s claims (Pl.’s Mot. for
Judgment at 16), leading Relief Defendants to complain that the
SEC’s civil penalty is simply an attempt to circumvent the holding
in Kokesh (R. Def.’s Opp’n at 33). However, the SEC has not asked
for a penalty in excess of the Kokesh limits; it seeks a civil penalty
that is limited to the total amount that may be disgorged under
Kokesh.
App. 97
([Doc. # 862 at 1.]) According to Relief Defendants, the
SEC is asking the Court to find that Relief Defendants
are nominal owners of Mr. Ahmed’s assets without
providing an asset-by-asset analysis, which they claim
is required under state law. (R. Def.’s Opp’n at 15
(citing McMahon v. United States, No. 3:09-CV-00046
PCD, 2010 WL 4430512, at *4 (D. Conn. Oct. 29, 2010)
(requiring an asset-by-asset analysis to determine
“whether property is held by a taxpayer’s nominee.”)).)
However, Relief Defendants made this same
argument before the Second Circuit and it was soundly
rejected. The Second Circuit noted “Relief Defendants[’]
argu[ment] that insufficient evidence of nominee status
renders the asset freeze overbroad[,]” and held that
this “argument fails because Relief Defendants have
been unable to point to any improperly frozen assets
. . . . Relief Defendants do not allege that the referenced
assets—a Fidelity account in Shalini’s name and
several trust accounts—properly belong to Relief
Defendants, much less that they do not include
proceeds of Iftikar’s fraud.” I-Cubed Domains, 664 Fed.
App’x. at 56-7. Explicitly rejecting Relief Defendants’
argument, the Second Circuit explained “[i]f Relief
Defendants cannot prove that any frozen assets
legitimately belong to them, then necessarily none of
their assets are being improperly frozen to satisfy the
civil penalties alleged to apply to Iftikar’s conduct.” Id.
at 57, n.3.11
11
See also SEC v. Colello, 139 F.3d 674, 677-8 (9th Cir. 1998)
(rejecting relief defendant’s argument “that the district court
improperly placed the burden on him to show that he had a
legitimate claim to the funds” and affirming summary judgment
App. 98
Thereafter, Relief Defendants conceded that “the
Second Circuit’s ruling on Relief Defendants’
interlocutory appeal indicate[s] a significantly
expanded task for Relief Defendants’ expert in the
attempt to trace funds in order to rebut the SEC’s
argument that the Relief Defendants are mere
nominees[,]” which, they recognized, is a burden “[t]he
Second Circuit’s decision clearly places . . . on the Relief
Defendants.” ([Doc. # 339 at 6-7].) That Relief
Defendants now pivot and attempt to avoid the burden
of establishing ownership of frozen assets can only be
explained by their inability to put forth any convincing
evidence rebutting the SEC’s contention that the assets
belong to Defendant.12
order because Relief Defendant “refused to give information
necessary to determine whether he still possessed any of the funds
or whether he had a legitimate claim to them.”); Commodity
Futures Trading Comm’n v. Kimberlynn Creek Ranch, Inc., 276
F.3d 187, 192, n.5 (4th Cir. 2002) (“We have no doubt that the
district court will provide the Relief Defendants with an
opportunity to demonstrate the existence of a legally and factually
valid ownership interest to some or all of the assets prior to
ordering disgorgement.” (citing Cavanagh I at 136-37)); U.S.
Commodity Futures Trading Comm’n v. EJS Capital Mgmt., LLC,
2015 WL 5679688, at *4 (S.D.N.Y. Sept. 24, 2015) (“Should [relief
defendant] assert some legitimate interest in [disputed] funds, she
must offer evidence of her entitlement; more than unsupported,
conclusory assertions need to be proffered.”); F.T.C. v. Bronson
Partners, LLC, 674 F. Supp. 2d 373, 394 (D. Conn. 2009), aff’d, 654
F.3d 359 (2d Cir. 2011) (“Relief defendant . . . met her burden of
demonstrating that she provided a legitimate service in exchange
for monies paid to her by defendants. Accordingly, [she] is not
liable for any portion of the restitution award.”).
12
The Court has given Relief Defendants multiple opportunities
to present evidence establishing their ownership of specific assets
App. 99
The Court previously detailed the factors it would
consider in determining ownership as to assets held in
the name of Relief Defendants: ‘”[1] a defendant’s
control over the asset, [2] the length of time the asset
had been held, [3] whether the defendant had an
interest in and benefitted from the asset, [4] whether
the defendant had transferred assets from his name
into the asset, [5] whether he or she contributed to
acquire the asset initially, and [6] whether the
defendant ever withdrew any funds from the asset.”’
Ahmed I, 123 F. Supp. 3d at 308 (quoting SEC v.
McGinn Smith & Co., 752 F. Supp. 2d 194, 307-08
(N.D.N.Y. 2010)).
1. Evidence That Relief Defendants are
Nominal Owners of Defendant’s
Assets
Relief Defendants maintain that the SEC has failed
to introduce evidence that Mr. Ahmed “dominated and
controlled” any specific asset that a Relief Defendant is
allegedly holding as his nominee, or shown that Mr.
Ahmed enjoyed any monetary benefit from assets that
were titled to the Relief Defendants, such as the UTMA
trusts created for the sole benefit of their children. The
Court rejects this attempt to avoid the burden of
over the course of this litigation. Not only were Relief Defendants
ordered to provide a list of assets to which they claim ownership,
with “a fairly detailed analysis of why those identified assets are
on a list claimed to be exempt from satisfaction of a judgment
either against the Relief Defendants or Mr. Ahmed” (Ex. 12 to
SEC’s Mot. For Judgment at 17:5-18:14), they also had the
opportunity to, and did, present evidence through their Opposition
to the SEC’s Motion for Judgment.
App. 100
presenting evidence establishing Relief Defendants’
ownership.
Relief Defendants have had every opportunity to
refute the SEC’s claim that Defendant actually owns
all of the frozen assets throughout the course of this
litigation, and yet have failed to do so. They cannot
establish ownership of these assets simply by again
complaining that the SEC has to prove that Mr. Ahmed
controlled and benefited from assets in Relief
Defendants’ names, without offering any evidence that
Relief Defendants in fact controlled and owned these
assets. On the other hand, the SEC does put forth
evidence that the seized assets belong to Mr. Ahmed
and were placed in the names of Relief Defendants as
nominees only, in an effort to protect and hide the
fraudulently obtained assets.
Even Relief Defendant’s own expert report found
that from 2004 through 2014, Ms. Shalini Ahmed
earned just over $1.9 million in gross income, and that
all other “non-suspect” sources of income, totaling
$62,758,960.96, belonged to Mr. Ahmed. (Ex. 15 (R.
Def.’s Expert Report [Doc. # 888-15]) to SEC’s Mot. for
Judgment ¶ 20.) Thus, 98.8% of all funds that the
Ahmeds received during the past fourteen years came
from Defendant. In light of these facts, it is difficult to
see, and neither Defendant nor Relief Defendants
provide any argument, much less a credible
explanation, how Ms. Ahmed and her children could
own more than $85 million in assets while Defendant
owns less than $6 million in liquid assets. (See
[Doc. 862-1] at 4.) Furthermore, the Ahmeds’ lavish
lifestyle greatly exceeded Ms. Ahmed’s earnings over
App. 101
this ten year period, as Ms. Ahmed admitted her living
expenses exceeded $46,000 per month. (See [Doc. # 69]
at 14.)
Moreover, in her interrogatory responses, Ms.
Ahmed claimed only to own a few assets,13 and never
supplemented this response to assert ownership of
anywhere near the $85 million of assets she now claims
belong to her and her children.14 Further undermining
her claim, Ms. Ahmed was unable to remember
receiving more than $25 million in checks from
Defendant, money she now claims to have managed (as
13
Ms. Ahmed asserted an ownership over only Unit 12A, Unit 12F,
and the GRAT:
Notwithstanding these objections, Ms. Ahmed states that
the asset freeze is inappropriate with respect to
compensation she earned over the course of her
employment, including grants of stock and retirement
account contributions; her personal contributions to the
marital estate; the Shalini Ahmed 2014 Grantor Retained
Annuity Trust; the assets of DIYA Holdings, LLC; the
assets of DIYA Real Holdings, LLC; her and her children’s
reasonable legal expenses; her and her children’s
reasonable living expenses; and any other assets that the
Commission cannot legally demonstrate should be subject
to the asset freeze.
(Ex. 16 (Interrogatory Responses) to Pl.’s Mot. for Judgment at 7.)
14
Ms. Ahmed also previously admitted it was Defendant who
purchased both the 2009 Cadillac Escalade and 2009 Porsche
Cayenne and that she did not know how he funded the purchases.
(Ex. 7 (Ms. Ahmed Depo.) at 50:11-22.)
App. 102
discussed below).15 Both Defendant and Ms. Ahmed
refused to testify about the transfer and placement of
assets into her name (aside from those that were
nominally placed into Ms. Ahmed’s name as a
contingency plan). Defendant invoked his Fifth
Amendment right against self-incrimination,16 and Ms.
Ahmed invoked the marital privilege.17
2. Relief Defendants’ Claimed Assets
Relief Defendants now claim to own the vast
majority of the frozen assets, yet fail to provide
evidence of this ownership or to meaningfully challenge
the SEC’s evidence that Defendant owned and
15
(See Ex. 7 (Ms. Ahmed Depo.) at 60:16-18 (“Q. Okay. Why did
Iftikar Ahmed write you a check for $500,000 on January 7th,
2013? A. I don’t remember.”); Id. at 61:2
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