14-2224 Commodity Futures Trading Commission v. Jbw Capital, LLC; John B. Wilson

United States Court of Appeals
For the First Circuit
Nos. 14-2173
14-2224
COMMODITY FUTURES TRADING COMMISSION,
Plaintiff, Appellee/Cross-Appellant,
v.
JBW CAPITAL, LLC; JOHN B. WILSON,
Defendants, Appellants/Cross-Appellees.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Torruella, Lynch, and Barron,
Circuit Judges.
Philip M. Giordano, with whom Siobhan M. Tolan, Giordano &
Company, P.C., and Reed & Giordano, P.A. were on brief, for
appellants.
Ajay B. Sutaria, Counsel, Commodity Futures Trading
Commission, with whom Jonathan L. Marcus, General Counsel, and
Robert A. Schwartz, Deputy General Counsel, were on brief, for
appellee.
January 29, 2016

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LYNCH, Circuit Judge. In this commodity trading fraud
case brought by the Commodity Futures Trading Commission ("CFTC"
or "Commission") against John B. Wilson and JBW Capital LLC
("JBW"), the Massachusetts federal district court granted on
summary judgment the CFTC's request for a finding of liability,
and imposed injunctive relief and civil penalties. It declined to
award restitution, as measured by loss to pool participants. As
a result, both sides have appealed.
Specifically, Wilson and JBW contest the district
court's conclusion that they are liable under the Commodity
Exchange Act ("CEA") for failing to register with the CFTC, in
violation of 7 U.S.C. § 6m(1), and for violating two commodity
fraud provisions, §§ 7 U.S.C. 6b(a)(1) and 6o(1). They claim that
there are disputed issues of material fact, that the district court
erred as a matter of law in its analysis of scienter under 7 U.S.C.
§ 6o(1)(A) and (B), and that the district court was required to
give them an evidentiary hearing with regard to remedies and civil
penalties. The CFTC cross-appeals, arguing that the district court
erred in its decision not to award restitution. We affirm.
I.
On review of an order granting summary judgment, we
recite the facts "in the light most favorable to the nonmoving
party." Del Valle-Santana v. Servicios Legales De Puerto Rico,
Inc., 804 F.3d 127, 129 (1st Cir. 2015). Here, in violation of

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the Federal Rules of Appellate Procedure, Wilson and JBW 1 have
provided no recitation of the facts with citations to the record,
instead devoting almost their entire brief to simply asserting
there are many issues of fact in their argument section. 2
Nonetheless, we have tried to recite the facts from the record in
the light most favorable to Wilson.
On July 23, 2007, JBW (which stands for "John B. Wilson")
was registered as a Massachusetts limited liability company. JBW's
Operating Agreement stated that its "specific business purposes
and activities contemplated by the founders of this LLC" included
to "invest in stocks, bonds, derivatives, commodity futures,
financial futures, stock index futures, options on stocks, and
options on futures."
Wilson was listed as the only registered agent in the
Operating Agreement and the Certificate of Organization, and in an
affidavit, Wilson said that he was the "manager and sole
1 Collectively, Wilson and JBW will be referred to as
"Wilson" unless specified otherwise. JBW is vicariously liable
for Wilson's "act[s], omission[s], or failure[s]." 7 U.S.C.
§ 2(a)(1)(B). See Stotler & Co. v. CFTC, 855 F.2d 1288, 1292 (7th
Cir. 1988).
2 Federal Rule of Appellate Procedure 28(a)(6) requires "a
concise statement of the case setting out the facts relevant to
the issues submitted for review . . . with appropriate references
to the record." Wilson also violated Federal Rule of Appellate
Procedure 28(e) throughout his brief by not citing to pages of the
appendix for "[r]eferences to the parts of the record contained in
the appendix."

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administrator" of JBW. Wilson was also listed as the only manager
in the Operating Agreement, which said that except as otherwise
specified or provided under state law, "all management decisions
relating to the LLC's business shall be made by and be the sole
responsibility of the Manager." Wilson testified 3 that he was the
only person with trading authority over JBW's account.
Wilson did not register as a commodity pool operator
("CPO") with the CFTC, nor did he file a notice with the National
Futures Association ("NFA") stating he was exempt from
registration. Before his tenure with JBW, Wilson had been
registered with the NFA from about 2005 to 2006 as an associated
person of Tradex Group LLC. He also previously had a personal
commodity futures account, which Wilson testified was not
profitable.
In September 2007, Wilson's brother and a number of
acquaintances invested in JBW. Wilson referred to these investors
as "founders." Their investments were used to create a fund, and
JBW began trading in October 2007, in part using an algorithm
called the "Humphrey Program." By January 2008, JBW had thirteen
investors and approximately $369,890 in contributions. According
3 Wilson became subject to various investigations by
different government entities. He testified in CFTC depositions,
a state "on the record interview," and state administrative
hearings. The record in federal court contains depositions and
examinations from various proceedings at which Wilson testified.

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to a CFTC Division of Enforcement investigator, JBW's bank records
showed that between 2007 and 2008, at least twenty-five investors
deposited about $2 million in JBW's bank account.
Wilson testified that he did not tell his investors that
he "had limited experience trading on commodities," though he
agreed that he "had limited experience." There was no requirement
that the investors have trading experience, and as far as Wilson
was aware, the investors, other than his brother, had "no
experience in futures trading." He said that he told some, but
not all, of the investors about the risks involved with commodity
futures trading, and there was no document of any kind given to
investors describing the risks of engaging in commodity futures
trading.
JBW began trading in October 2007 and stopped trading in
September 2009, and its account at MF Global, Inc., a commodity
broker, was closed in May 2010. Wilson lost almost $1.8 million
in trades and returned about $227,000 to investors.
Wilson e-mailed investors with JBW's Net Asset Value
("NAV") on a weekly, biweekly, or quarterly basis. On at least
four instances, Wilson's e-mails overstated JBW's value. First,
a December 1, 2007, e-mail stated that as of November 30, 2007,
"Today's NAV" was $159,460.95, while JBW's November 30, 2007, bank
statement listed its "Account Value at Market" as $147,281.51.
Second, a December 21, 2007, e-mail stated that as of December 21,

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"Today's NAV" was $180,071.71, while JBW's December 31, 2007, bank
statement listed its account value at market as $177,385.40. 4
Third, a March 1, 2008, e-mail said that "Today's NAV" was
$566,076.07, while JBW's February 29, 2008, bank statement listed
its account value at market as $553,523.54. Fourth, a May 30,
2008, e-mail said that "Today's NAV" was $2,029,271.45, while JBW's
May 30, 2008, bank statement listed its account value at market as
$1,041,399.80.
As to this last egregious overstatement, Wilson said
that the amount provided as "Today's NAV" in the May 30, 2008, e-
mail was an "estimate," but he acknowledged that the word
"estimate" did not appear anywhere in the e-mail.
A series of e-mails in September 2008 misrepresented
JBW's value and then tried to explain the misrepresentation. On
September 13, 2008, Wilson e-mailed investors that "Today's NAV"
was $2,475,941.00. However, the e-mail did not include that two
days earlier -- on September 11, 2008 -- JBW had lost
$1,045,632.91. JBW's account value at market on September 13,
2008, was actually about $1,149,628.82. 5 On September 22, 2008,
4 That account statement reflects that JBW did not
complete any trades from December 21, 2007, through the end of the
month.
5 This was the account value at market on Friday, September
12, 2008. Wilson testified that he did not remember from where he
got the $2,475,941 number he gave to investors as "Today's NAV."

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Wilson e-mailed investors apologizing for not informing them about
the $1 million loss on September 11, stating "I . . . want to
apologize for not reporting the $1M loss of 9/11 in my weekly
report." Wilson wrote that his "intention was not to deceive but
to 'roll' the loss into the next week and hopefully show some
recovery." He continued, "[c]learly, a recovery was not the case
because I experienced the second major loss on the following
Monday." Specifically, on September 15, 2008, JBW lost
$990,390.00. In his September 22, 2008, e-mail, Wilson said that
he would send a report later in the month "explain[ing] how [he]
plan[s] to recover from this." A September 2008 trading statement
listed JBW's account value at market and balance at the end of the
month as $10,943.34.
On September 30, 2008, Wilson sent investors an e-mail
with the subject "Recovery Plan." It stated that Wilson would
transfer $200,000 of his "personal funds to the trading account
for the beneficial interest of each investor of record on 9/6/08
(the 'high water mark'). As a result, each investor will recoup
approximately 9% of their loss on day one." The e-mail included
that "[t]he automated trading program will be modified with a 'stop
loss order' feature to avoid accumulation of losing positions
(which got us in trouble in the first place)." Wilson also said
that he would segregate contributions from new investors.

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Wilson did transfer $200,000 of his personal funds to
JBW, but he "did not have the time to" modify the trading program
to include a "stop loss order," nor did he segregate the funds
from new investors.
On September 15, 2008, a new pool participant, Daniel
Mann, invested $100,000 in JBW. 6 When Wilson initially spoke to
Mann about the fund in May or June of 2008, the fund was showing
a strong performance. In September, Wilson told Mann over the
phone that JBW had taken a loss, but he "did not specify what the
loss was" -- which, by September 15, was about $2 million. Wilson
said that he felt "a moral obligation to tell [Mann] there had
been a loss," but he "told him nothing other than it was a loss.
[Mann] didn't inquire further," and agreed to invest his money
with Wilson "regardless." When Mann made his investment, Wilson
said to him that the fund was worth about $2 million, which Wilson
knew was inaccurate, but Wilson was afraid that otherwise Mann
would not invest the money. 7 Wilson also did not include Mann on
the September 22 e-mail to investors that informed them of the
losses suffered in mid-September. On September 26, 2008, Wilson
6 The check for $100,000 was dated September 15, 2008.
Wilson sent an e-mail to Mann on September 17 acknowledging receipt
of the check and saying that he would "be depositing the funds in
the next few days."
7 JBW's September 15, 2008, "daily commodity statement"
listed its account value at market as $227,550.94.

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sent an e-mail to Mann, saying that Wilson would "monitor [Mann's]
$100K investment in such a way that if any time the equity fall[s]
10% [Wilson] will insure all funds are in cash, and will contact
[Mann] for further direction."
JBW suffered further losses after Mann's investment. On
December 12, 2008, Wilson e-mailed Mann telling him that the NAV
of Mann's investment on that day was $120,867.40. JBW's balance
at the end of that day was approximately $42,409. Three days
later, on December 15, 2008, Wilson e-mailed Mann a "Certificate
of Beneficial Interest" dated September 28, 2008. The Certificate
said that Mann's $100,000 constituted a 3.76% beneficial interest
in JBW. 8 On September 28, 2008, around $10,000 was in the fund.
Wilson testified that he had "calculated [Mann's] $100,000 as a
percentage of the high watermark of the fund," which was about
$2.5 million. He testified that he calculated it this way because
it was his "intent all along . . . to recover the entire fund back
to . . . the 2.3 or $4 million that [he] consider[ed] the high
watermark with [his] own contribution of $200,000 trading
separately and contributing into the fund." He said "[i]t was a
grievous error on [his] part showing the power of [his] addiction."
8 If Mann's $100,000 contribution constituted a 3.76% in
JBW, then JBW's value as of September 28, 2008, would have been
about $2,659,574.

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In December 2008, JBW lost $92,154.45, leaving its balance and
account value at market at $120,867.40.
Mann made a second investment of $100,000 around
December 16, 2008. Wilson testified that before placing Mann's
second investment in the fund, he had told Mann that JBW had
suffered further losses since the first investment but that he had
made up the losses. However, Wilson also testified that he did
not disclose that JBW had lost more than $2 million in September
2008 and that he did not recall telling Mann that the Certificate
of Beneficial Interest he had sent on December 15, 2008, was
inaccurate. On February 2, 2009, Wilson e-mailed Mann that Mann's
balance was $224,812.23 on January 31, 2009. JBW's bank account
statement from January 30, 2009, listed its balance at $278,079.61,
and its account value at market at $198,767.19. 9 On February 25,
2009, Mann sent an e-mail to Wilson stating that "of course, [he]
want[s] the same downside limit of 10% loss on the 2nd 100,000
that [he] had on the original 100,000." Wilson testified that he
did not honor the ten percent stop-loss provision, and Mann's
investment was ultimately lost.
9 At one point in the record, there is an interview where
Wilson suggests Mann's money could be in a sub-account. He says,
"I'm not -- I'm not positive, but I know -- I may -- I may have
moved the money from the sub account up to the master account, I
can't remember." Wilson makes no mention of this in his briefs,
and, in any event, it does not affect our analysis.

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II.
On September 28, 2012, the CFTC filed a complaint against
Wilson and JBW in the federal district court of Massachusetts,
alleging violations of 7 U.S.C. § 6m(1) (CEA § 4m(1)); 7 U.S.C.
§ 6b(a)(1)(A)–(C) (CEA § 4b(a)(1)(A)–(C)); and 7 U.S.C. § 6o(1)(A)–
(B) (CEA § 4o(1)(A)–(B)). 10 The CFTC moved for summary judgment
on February 27, 2014, requesting a permanent injunction,
restitution, and civil monetary penalties. The district court
granted the CFTC's motion for summary judgment in an order dated
May 16, 2014. CFTC v. Wilson, 19 F. Supp. 3d 352, 364 (D. Mass.
2014). It granted the CFTC's requests for injunctive relief and
civil penalties and determined that "[i]n the absence of a showing
by the CFTC of any personal gain on Wilson's part as the result of
the fraud, the appropriate measure of a civil penalty is the
statutory per-violation amount, rather than a trebling of the
investors' losses (as the CFTC proposes)." Id.
On May 27, 2014, the CFTC filed a motion for partial
reconsideration with respect to restitution, in which it contended
that "under the circumstances of this case as well as First Circuit
precedent, restitution should be calculated by reference to the
customers' losses." The district court denied the motion in an
10 The Enforcement Section of the Massachusetts Securities
Division had filed an administrative complaint against Wilson in
2011 for violations of chapter 110A of the Massachusetts General
Laws, the Massachusetts Uniform Securities Act.

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order dated July 17, 2014. CFTC v. Wilson, 19 F. Supp. 3d 352,
365–66 (D. Mass. 2014). It found that "[t]he additional cases
cited by the CFTC neither compel an order of restitution as a
matter of law, nor are the facts of those . . . cases analogous to
those in this case," id. at 365–66, and concluded that its
disagreement with the CFTC was a "difference of opinion," id. at
366. On October 5, 2014, the district court issued a final
judgment for a permanent injunction and a civil monetary penalty
in the amount of $2,860,000. This appeal and cross-appeal
followed.
III.
"We review orders for summary judgment de novo,
assessing the record in the light most favorable to the nonmovant
and resolving all reasonable inferences in that party's favor."
Packgen v. BP Expl., Inc., 754 F.3d 61, 66 (1st Cir. 2014) (quoting
Barclays Bank PLC v. Poynter, 710 F.3d 16, 19 (1st Cir. 2013)).
"Summary judgment is appropriate when 'there is no genuine dispute
as to any material fact and the movant is entitled to judgment as
a matter of law.'" Id. (quoting Fed. R. Civ. P. 56(a)). "By its
very terms, this standard provides that the mere existence of some
alleged factual dispute between the parties will not defeat an
otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material fact."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986).

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A. Failure to Register as a CPO
Under 7 U.S.C. § 6m(1), with certain exceptions, "[i]t
shall be unlawful for any commodity trading advisor or commodity
pool operator, unless registered under this chapter, to make use
of the mails or any means or instrumentality of interstate commerce
in connection with his business as such commodity trading advisor
or commodity pool operator." 7 U.S.C. § 6m(1). Those claiming to
be exempt from this requirement must file an electronic notice
with the NFA. 17 C.F.R. § 4.13(b)(1). Wilson did not register as
a CPO, nor did he file a notice of exemption with the NFA. Wilson
agrees that "[i]t is undisputed that JBW Capital was a commodity
pool," 11 and that he did not register as a CPO with the CFTC or
NFA. He also does not claim he qualifies under any exception to
registration.
Instead, Wilson contends that there were disputed facts
as to his reliance on and engagement of "several professionals,"
and that "[t]he record below demonstrates that [he] sought out,
11 As "manager and sole administrator" of this pool,
Wilson, who received funds for the purpose of trading commodity
futures, was a commodity pool operator. See 7 U.S.C. 1a(11)(A)(i).
Wilson was listed as the only registered agent and manager for JBW
in its Operating Agreement, which said that "all management
decisions relating to the LLC's business shall be made by and be
the sole responsibility of the Manager." Wilson was also the only
person with trading authority over JBW's account and made all
"executive decisions." This suffices to qualify Wilson as a CPO.

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engaged and relied upon the advice of the Professionals." 12 We
assume that Wilson has not waived the argument that liability for
failure to register requires scienter. 13
We agree with the district court that "the registration
requirement does not contain a 'state of mind' limitation to
liability." Wilson, 19 F. Supp. 3d at 360; cf. CFTC v. British
Am. Commodity Options Corp., 560 F.2d 135, 142 (2d Cir. 1977)
(describing § 6m as a "flat prohibition . . . against using the
facilities of interstate commerce to give commodity advice unless
registered" and concluding that the district court had erred in
requiring "proof of fraud or misconduct" to grant an injunction).
We also note that failure to register under the analogous
Securities and Exchange Commission registration provision, 15
U.S.C. § 80b-3(a), has been held to be subject to strict liability.
See, e.g., Sheldon Co. Profit Sharing Plan & Trust v. Smith, 828
F. Supp. 1262, 1284 (W.D. Mich. 1993) (citing SEC v. Blavin, 557
12 Wilson also argues that there were "Disputed Material
Facts as to the Founders of JBW Capital," which relate to "Wilson's
control of the JBW entity." This argument is meritless; Wilson
does not explain how the "Founders'" involvement with JBW is
relevant to whether Wilson, in his capacity as the manager and the
only registered agent of JBW, violated the CFTC's registration
requirement. See Anderson, 477 U.S. at 247–48.
13 Wilson has not helped himself by presenting no serious
argument that violation of the CPO registration requirement
requires scienter. Indeed, Wilson does not develop this argument,
even in his reply brief, after the CFTC explicitly said that strict
liability should apply and that Wilson had waived any claim to the
contrary.

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F. Supp. 1304 (E.D. Mich. 1983), aff'd, 760 F.2d 706 (6th Cir.
1985)). Because CPO registration is a strict liability offense,
Wilson cannot raise a reliance on professionals defense, even
granting him the questionable factual assumption that such a
defense would be available in his case. We affirm the district
court's decision that Wilson is liable under § 6m(1).
B. Commodity Fraud
Wilson was held liable under two commodity fraud
provisions: (1) 7 U.S.C. § 6b(a)(1), a general fraud provision,
which makes it unlawful "for any person, in or in connection with
any order to make, or the making of, any contract of sale of any
commodity," inter alia, to cheat, defraud, willfully make a false
report or statement, or willfully deceive or attempt to deceive
another person "in regard to any order or contract"; 14 and (2) 7
U.S.C. § 6o(1), "a parallel statute forbidding fraud and
misrepresentation by commodity trading advisors" and CPOs. See
Stotler & Co. v. CFTC, 855 F.2d 1288, 1291 (7th Cir. 1988). Under
§ 6o(1), it is unlawful for a CPO, inter alia, to "employ any
device, scheme, or artifice to defraud any client or participant
or prospective client or participant" or "engage in any
transaction, practice, or course of business which operates as a
14 Prior to June 18, 2008, these provisions fell under 7
U.S.C. § 6b(a)(i)-(iv). See CFTC Reauthorization Act of 2008,
Pub. L. No. 110-246, § 13102, 122 Stat. 2189, 2194–95 (2008). We
refer to the current version of 7 U.S.C. § 6b.

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fraud or deceit upon any client or participant or prospective
client or participant." 7 U.S.C. § 6o(1)(A)–(B).
1. 7 U.S.C. § 6b(a)
Liability attaches under 7 U.S.C. § 6b(a) when there is
"(1) the making of a misrepresentation, misleading statement, or
a deceptive omission; (2) scienter; and (3) materiality." CFTC v.
Hunter Wise Commodities, LLC, 749 F.3d 967, 981 (11th Cir. 2014)
(quoting CFTC v. R.J. Fitzgerald & Co., 310 F.3d 1321, 1328 (11th
Cir. 2002)). Wilson does not dispute the elements required to
prove a violation of § 6b(a).
Wilson does raise numerous issues with the district
court's determination that based on the undisputed facts, Wilson
violated this anti-fraud provision. These claims are meritless.
Wilson clearly made numerous false and misleading
statements and reports, including those in his e-mails to investors
about "Today's NAV," those about his recovery plan, and those in
his communications to Mann about Mann's investment. Indeed, Wilson
acknowledges that "[t]he evidence showed that Wilson sent certain
emails to Investors, which were incomplete or inaccurate in several
respects." 15
15 Later in his brief, Wilson appears to abandon this
position and contend -- without identifying any record evidence to
support his assertion -- that "the CFTC has failed to submit any
material, undisputed evidence of a misrepresentation in value in
Wilson's periodic emails. The record of this case demonstrates
that Mr. Wilson did not misrepresent the value of JBW Capital in

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As to scienter, Wilson argues that the record does not
show "knowing misconduct or severe recklessness," and so does not
support a finding of scienter. Our circuit has held that liability
under § 6b can be found based on recklessness. See First Commodity
Corp. of Boston v. CFTC, 676 F.2d 1, 4, 6–7 (1st Cir. 1982)
(explaining that § 6b has a "specific willfulness, or 'scienter'
requirement," id. at 4, and that "willful" behavior includes
"reckless" actions in the commodities fraud context, id. at 6–7).
"A 'reckless' misrepresentation is one that departs so far from
the standards of ordinary care that it is very difficult to believe
the speaker was not aware of what he was doing." Id. at 6–7.
There is ample evidence in the record for us to determine that
Wilson acted recklessly, without reaching whether he did so
knowingly. 16
his periodic emails, and reported an accurate valuation of a
fluidly priced security to a marked-to-market value." We agree
with the CFTC that the "fluidly priced security" argument is
meritless, as Wilson had daily statements with JBW's value.
Further, the evidence in the record demonstrates that Wilson made
other false or misleading statements to investors, including an e-
mail on September 13, 2008, not informing investors about the
losses suffered two days earlier -- a fact that Wilson acknowledged
he did not tell investors, and made a number of inaccurate
statements to Mann, including one in which Wilson acknowledged he
gave Mann a "fictitious" number.
16 Parts of the record suggest that some of Wilson's false
statements to investors were a result of his "addiction." Wilson
makes no argument in his brief suggesting his "addiction" should
serve as a defense to scienter, and any such argument would be
meritless.

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For example, Wilson testified that the September 13,
2008, e-mail stating that "Today's NAV" was $2,475,941 was an
intentional statement and admitted that the e-mail was
"[a]bsolutely not" accurate when it was sent out. He also
characterized the amount provided as "Today's NAV" in the May 30,
2008, e-mail as an "estimate" even though the word "estimate" did
not appear anywhere in the e-mail. Further, Wilson admitted that
when he told Mann what percentage Mann's investment was of the
fund in 2008, he gave Mann "a fictitious number" -- "it was
basically $100,000 of two and a half million." He admitted he did
not tell Mann that there was in fact not $2 million in the fund
because of "[f]ear, simple as that" and a concern that Mann would
not invest the money if he learned the truth. Further, Wilson
acknowledged that he needed Mann's money to help regain the losses
JBW had suffered. Wilson admitted that when he received funds
from Mann and told Mann that he would deposit the funds in the
next few days, he did not tell him about the losses that JBW
suffered in the preceding days. Wilson said that he "incorrectly
based" Mann's beneficial interest in the company as stated in the
Certificate of Beneficial Interest "on the high watermark of the
fund . . . [b]ecause [his] intent all along was to recover the
entire fund back to the 2.3 or $4 million that [he] consider[ed]
the high watermark . . . . It was a grievous error on [his] part
showing the power of [his] addiction."

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Wilson protests that he must have lacked scienter
because "if [he] had intended to act fraudulently, he would have
liquidated his own position in JBW long before . . . September
2008." This argument fails. Wilson could have acted recklessly,
whether or not intentionally, with regard to false or misleading
statements, even as his money remained in the fund. Indeed, his
own testimony explains that he made the misrepresentations in order
to attract and retain investors. Wilson admitted that he did not
tell Mann about the losses incurred because of "fear" Mann would
not invest in the fund otherwise. Wilson's e-mail to investors
explaining why he failed to inform them of the September 11, 2008,
loss revealed a similar motivation of not wanting to scare
investors. He wrote that his "intention was not to deceive but to
'roll' the loss into the next week and hopefully show some
recovery. Clearly, a recovery was not the case . . . ." Whether
or not Wilson's "intention" was "to deceive" investors, he
knowingly sent an e-mail that he admitted understated JBW's actual
value on September 13, 2008. 17
The cases that Wilson relies on from the securities
context to support his claim that he lacked scienter because his
17 To the extent Wilson is arguing that he relied on
professionals to comply with "regulatory and compliance
requirements," this claim fails, as he points to nothing in the
record suggesting he consulted with anyone before making the
inaccurate statements at issue.

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money remained in the fund do not apply here. In In re Worlds of
Wonder Securities Litigation, the Ninth Circuit affirmed the
district court's grant of summary judgment to the defendants with
regard to the plaintiffs' claims under § 10(b) and Rule 10b-5 of
the 1934 Securities Exchange Act. 35 F.3d 1407, 1424–28 (9th Cir.
1994). With regard to one group of defendants, the company's
officers, the court found that "[t]he plaintiffs produced no direct
evidence of any scienter on the part of the [officer defendants]"
and instead sought to "rely on speculative inferences that arise
from the [officer defendants'] allegedly suspicious conduct." Id.
at 1425. There, the court found that "[t]he detailed risk
disclosure in the . . . [p]rospectus negates an inference of
scienter." Id. With regard to another group of defendants, the
directors and major shareholders, the court noted that it was faced
with "mere speculation and conclusory allegations." Id. at 1427
(quoting In re Worlds of Wonder Sec. Litig., 814 F. Supp. 850, 871
(N.D. Cal. 1993)). It then found that under the facts of that
case, "[e]ven if the evidence was sufficient to permit an inference
that one or more of the defendants had access to inside
information, the defendants' actual trading would conclusively
rebut an inference of scienter." Id. As to the directors and
major shareholders, there was no evidence that any of the
defendants intentionally or recklessly engaged in fraudulent
conduct, only that the defendants had access to "undisclosed

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adverse, material information" when they sold the company's
securities. Id. Here, however, Wilson's own statements viewed
most favorably to him provide direct evidence not only that he had
accurate information about JBW's performance but also that he
intentionally or recklessly withheld that information from
investors, in at least one instance out of fear of losing a
potential investor. And so, the fact he kept his funds in JBW
cannot rebut a finding of scienter here.
As to materiality, there is no doubt that the
misrepresentations were material. A statement or omission is
material "if there is a substantial likelihood that a reasonable
[investor] would consider it important" in making an investment
decision. See TSC Indus., Inc. v. Northway, Inc., 426 U.S. 438,
449 (1976). Here, it is clear that there was a substantial
likelihood that a reasonable investor would have considered
information about "Today's NAV," the value of the fund on the
market, and the recovery plan as important to his or her investing
decisions. See Bruhl v. Price Waterhousecoopers Int'l, 257 F.R.D.
684, 697 (S.D. Fla. 2008) ("The fact that a hedge fund investor
would consider factors other than the NAV statements, or the fact
that some investors would have access to different data, does not
eliminate the NAV statements as a relevant and material matter to
be considered in the investment calculus."); SEC v. Princeton Econ.
Int'l Ltd., 73 F. Supp. 2d 420, 424 (S.D.N.Y. 1999); cf. R.J.

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Fitzgerald & Co., 310 F.3d at 1332 ("Given the extremely rosy
picture for profit potential painted . . . , a reasonable investor
surely would want to know -- before committing money to a broker
-- that 95% or more of RJFCO investors lost money.").
Wilson suggests that the inaccurate statements were
immaterial because "the evidence is undisputed that no Member of
JBW Capital sought to buy or sell his or her membership interests
in JBW, or attempt[ed] to buy or sell such JBW membership interest,
in reliance of such emails and in contravention to the provisions
of the Operating Agreement," and "[t]he evidence submitted by the
CFTC demonstrated that none of the Investors pulled their funds in
September 2008." Similarly, Wilson argues that "[t]he evidence
showed that not only were these events disclosed to Mann, but that
he continued to hold his investment for months after disclosure,
thereby ratifying the transactions."
However, reliance is not an element required to prove a
violation of § 6b(1). See Slusser v. CFTC, 210 F.3d 783, 786 (7th
Cir. 2000) (suggesting that the actions proscribed by § 6b(a) "may
be condemned . . . without proof of reliance"). Wilson's arguments
therefore miss the mark because they do not address whether his
misrepresentations were material but instead discuss whether
investors actually acted on material information or omissions.
Finally, Wilson asserts that the district court erred in
granting summary judgment on the commodity fraud provisions "due

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to the absence of material, undisputed evidence that demonstrated
any misrepresentation of the Appellants was 'in connection with'
any order to [m]ake, or making, a future contract." See 7 U.S.C.
§ 6b(a)(1). He contends that "there [were] no transactions which
were 'in connection with'" the September 2008 e-mails. This claim
fails as well. Wilson concedes that "[a]ctionable
misrepresentations include those made to persons when soliciting
funds." See Saxe v. E.F. Hutton & Co., 789 F.2d 105, 110–11 (2d
Cir. 1986); Hirk v. Agri-Research Council, Inc., 561 F.2d 96, 103–
04 (7th Cir. 1977). And Wilson admitted that he made false
representations to Mann out of "fear, simple as that" that Mann
would not invest his money otherwise, and that he needed Mann's
money to regain losses JBW incurred. This statement alone would
be sufficient to find a violation of § 6b(a), as it was "in
connection with . . . the making of, [a] contract of sale of [a]
commodity." 7 U.S.C. § 6b(a)(1). How many misrepresentations
there were does not change our affirmance, as Wilson does not
sufficiently raise a challenge to the amount of civil monetary
penalties imposed. 18 See United States v. Zannino, 895 F.2d 1, 17
(1st Cir. 1990).
18 Wilson does argue that the district court erred by
denying his "request for an evidentiary hearing as to relief,
including civil penalties and injunctive relief." However, Wilson
does not explain what an evidentiary hearing would provide on a
motion for summary judgment that could not be introduced through
stipulations or other written submissions.

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Further, other circuits' case law makes clear that
"[t]he plain meaning of [§ 6b's] broad language cannot be ignored."
Hirk, 561 F.2d at 104 (explaining that "[b]y its terms, Section
[6b] is not restricted in its applications to instances of fraud
or deceit 'in' orders to make or the making of contracts," id. at
103–04, but also "encompasses conduct 'in or in connection with'
futures transactions," id. at 104); see R&W Tech. Servs. Ltd. v.
CFTC, 205 F.3d 165, 173 (5th Cir. 2000) (examining the legislative
history of § 6b and concluding that the provision should be
construed "broadly rather than narrowly").
Wilson's knowingly or recklessly issuing "account
statements that fraudulently misrepresented the NAV" of pool
participants' investments also violated § 6b(a). See CFTC v.
Arjent Capital Mkts. LLC, No. 12-CV-1832, 2013 WL 3242648, at *5
(S.D.N.Y. Mar. 19, 2013); see also CFTC v. PMC Strategy, LLC, 903
F. Supp. 2d 368, 377 (W.D.N.C. 2012) ("Delivering, or causing the
delivery of, false account statements to pool participants
constitutes a violation of the [Commodity Exchange] Act . . . .");
cf. Princeton Econ. Int'l Ltd., 73 F. Supp. 2d at 422–24 (finding
that letters overstating the accounts' NAV "certainly were in
connection with later 'sales'"). 19
19 As for Wilson's remaining contentions -- ranging from
claims that accountant Lillian Gonzalez's testimony provides
material facts in dispute to claims that Mann's testimony creates
material facts in dispute -- these do not raise genuine issues of

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2. 7 U.S.C. § 6o(1)
Under § 6o(1), it is unlawful, inter alia, for a CPO
"(A) to employ any device, scheme, or artifice to defraud any
client or participant or prospective client or participant; or (B)
to engage in any transaction, practice, or course of business which
operates as a fraud or deceit upon any client or participant or
prospective client or participant." 7 U.S.C. § 6o(1)(A)–(B).
Wilson agrees that § 6o(1) "is a comparable provision [to § 6b(a)]
regarding fraud and misrepresentations only by CPOs and [commodity
material fact relevant to whether Wilson violated the commodity
fraud provisions. See Anderson, 477 U.S. at 247–48. For example,
Mann's background as an experienced investor who conducted due
diligence on JBW prior to investing does not change our analysis
of whether Wilson made materially false or misleading statements
with scienter. "[T]he substantive law will identify which facts
are material. Only disputes over facts that might affect the
outcome of the suit under the governing law will properly preclude
the entry of summary judgment. Factual disputes that are
irrelevant or unnecessary will not be counted." Id. at 248.
To the extent Wilson is asserting an affirmative defense
of "ratification," this claim fails as well. As an initial matter,
other than one Delaware Chancery Court opinion from 1930, Wilson
provides no support for his argument that ratification applies as
a defense in CFTC enforcement actions. Either way, his argument
fails on the merits, as other than one e-mail in September 2008
-- which did not even disclose the full amount of the losses --
and the oblique reference in his brief to "disclosures to Mr. Mann
in January and February of 2009," Wilson points to no evidence in
the record appendix that demonstrates that he indeed disclosed the
extent of his misrepresentations to investors.
Wilson's argument that "the District Court erred in that
the Investors of JBW Capital have waived their right to rescission
due to the failure to bring a claim within the statute of
limitations" for tort-based claims in Massachusetts is irrelevant
to the CFTC's action under the CEA.

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trading advisors]." The major differences between § 6b(a) and
§ 6o include (1) that § 6o(1) requires "use of the mails or any
means or instrumentality of interstate commerce"; and (2) § 6o(1)
applies specifically to commodity trading advisors and CPOs. See
Princeton Econ. Int'l Ltd., 73 F. Supp. 2d at 424. 20
Wilson was a CPO. He has admitted to using the telephone
and e-mails as an officer of JBW. That ends the matter. Cf.
Stotler & Co., 855 F.2d at 1291 (explaining that § 6o "is a parallel
statute [to § 6b] forbidding fraud and misrepresentation by
commodity trading advisors").
IV.
We review "a district court's decision to grant or
withhold an equitable remedy . . . for abuse of discretion." State
St. Bank & Trust Co. v. Denman Tire Corp., 240 F.3d 83, 88 (1st
20 Wilson challenges the district court's statement that
§ 6o(1)(B) does not require proof of scienter. Our circuit has
stated that § 6o "does not depend on scienter," and that the
"provision outlaws conduct that merely 'operates' as a fraud, and
thus suggests that scienter is not the sine qua non of all
statutory liability for 'fraud.'" First Commodity Corp. of Boston,
676 F.2d at 6; see also Messer v. E.F. Hutton & Co., 847 F.2d 673,
679 (11th Cir. 1988) (per curiam) (noting that the language of
§ 6o(1)(B) tracks Securities Act of 1933 § 17(a)(3) and Investment
Advisers Act § 206(2), "which have been interpreted as not
requiring proof of scienter" and finding "no reason to distinguish
the interpretations of these analogous statutory provisions from
the interpretation of Section 6o(1)(B)"). We need not address
Wilson's argument here further because, as discussed above, we
find that the facts taken most favorably to Wilson demonstrate he
had scienter with regard to a number of the misrepresentations.

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Cir. 2001). Under 7 U.S.C. § 13a-1(d)(3), the court may impose
equitable remedies including restitution and disgorgement. 7
U.S.C. § 13a-1(d)(3).
To be clear, restitution, as the CFTC seeks it, includes
total losses suffered by the victims. Disgorgement is limited to
"the amount with interest by which the defendant profited from his
wrongdoing." SEC v. MacDonald, 699 F.2d 47, 54 (1st Cir. 1983)
(en banc) (quoting SEC v. Blatt, 583 F.2d 1325, 1335 (5th Cir.
1978)). While some of the language used by the district court
appears not to recognize the distinction, 21 in the end we believe
its decision not to award restitution to the victims rested on
different grounds. The court did not, as the CFTC asserts, hold
it lacked authority to order restitution, but rather explained
that it was not compelled to order restitution in light of the
CFTC's presentation.
In its memorandum and order on the CFTC's motion for
summary judgment, the district court stated, "[i]n the absence of
a showing by the CFTC of any personal gain on Wilson's part as the
result of the fraud, the appropriate measure of a civil penalty is
the statutory per-violation amount." Wilson, 19 F. Supp. 3d at
364. In a footnote, it said that the CFTC requested disgorgement
and restitution, and that "the court's jurisdiction under [7 U.S.C.
21 We urge the district court to more clearly define these
concepts in the future.

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§] 13a-1 includes equitable remedies such as disgorgement and
restitution." Id. at 364 n.16. It then went on to quote FTC v.
Verity Int'l Ltd., 443 F.3d 48 (2d Cir. 2006), and say, "the
appropriate measure for restitution here is 'the benefit unjustly
received by the defendants.'" Wilson, 19 F. Supp. 3d at 364 n.16
(quoting Verity, 443 F.3d at 67). The district court explained
that "no evidence has been presented with regard to the amount of
retained profits or ill-gotten gains. The court therefore declines
to enter an order of restitution." Id.
The CFTC filed a motion for partial reconsideration of
the judgment with respect to restitution, arguing that the district
court erred as a matter of law by relying on Verity, a case that
our circuit has explained represents "an exception limited to the
situation 'when some middleman not party to the lawsuit takes some
of the consumer's money before it reaches a defendant's hands.'"
FTC v. Direct Mktg. Concepts, Inc., 624 F.3d 1, 14 (1st Cir. 2010)
(quoting Verity, 443 F.3d at 68). In its memorandum and order on
the CFTC's motion for partial reconsideration, the district court
stated that this "First Circuit precedent essentially affirm[s]
the discretion of a district court to fashion a remedy tailored to
the facts of a given case." Wilson, 19 F. Supp. 3d at 365. The
district court explained that it "was not persuaded by the CFTC's
argument that restitution should be awarded," and quoting Trabal
Hernandez v. Sealand Servs. Inc., 230 F. Supp. 2d 258, 260 (D.

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P.R. 2002), referred to its disagreement with the CFTC as "a
difference of opinion." Id. at 366.
On appeal, the CFTC maintains that the district court
erred as a matter of law and so abused its discretion by concluding
restitution was unavailable. We disagree. Our reading of the
district court's decision is that it viewed its decision not to
award restitution as an exercise of discretion -- not that it
lacked authority to do so. In Direct Marketing, we explained in
the context of deceptive advertising that "the law allows for broad
discretion in fashioning a remedy." 624 F.3d at 14. And that is
what the district court did. It explained that under the facts of
this case, where the CFTC presented "no evidence . . . with regard
to the amount of retained profits or ill-gotten gains," it
"declines to enter an order of restitution." Wilson, 19 F. Supp.
3d at 364 n.16. Indeed, the district court clarified that its
decision was a matter of discretion when, in its decision on the
CFTC's motion for reconsideration, it explained that Direct
Marketing "essentially affirm[s] the discretion of a district
court to fashion a remedy tailored to the facts of a given case."
Id. at 365.
The CFTC has argued to us that the error was one of law,
an argument we have rejected. It has otherwise not argued on the
facts how this choice not to order restitution was an abuse of
discretion, other than saying other courts have chosen to grant

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restitution in similar circumstances. In the absence of such an
argument, we cannot say there was an abuse of this discretion.
We affirm the district court's grant of summary judgment
and the relief it ordered.

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