Tradex Global Master Fund Spc Ltd, a British Virgin Islands limited liability company v. Benjamin Pui-Yun Chui

NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
TRADEX GLOBAL MASTER FUND
SPC LTD, a British Virgin Islands limited
liability company and TRADEX
GLOBAL ADVISORS LLC, a Delaware
limited liability company,
Plaintiffs-Appellants,
v.
BENJAMIN PUI-YUN CHUI,
Defendant-Appellee.
No. 16-16971
D.C. No. 3:15-cv-04744-WHA
MEMORANDUM*
Appeal from the United States District Court
for the Northern District of California
William Alsup, District Judge, Presiding
Submitted November 15, 2017**
San Francisco, California
Before: THOMAS, Chief Judge, and W. FLETCHER and PAEZ, Circuit Judges.
FILED
NOV 17 2017
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
* This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
** The panel unanimously concludes this case is suitable for decision
without oral argument. See Fed. R. App. P. 34(a)(2).

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Tradex Global Master Fund SPC, LTD. and Tradex Global Advisors LLC
(collectively, “Tradex”) appeal the district court’s order affirming the bankruptcy
court’s judgment, in an adversary proceeding, denying Tradex’s dischargeability
claim under 11 U.S.C. §§ 523(a)(4) and 523(a)(19) following a bench trial. We
affirm. Because the parties are familiar with the history of this case, we need not
recount it here.
A debt may not be discharged in a Chapter 7 bankruptcy if it results from a
violation of state or federal securities laws. 11 U.S.C. § 523(a)(19). To establish
that exception to discharge, the debt must (1) be “for” a securities law violation or
fraud in connection with a sale of a security, and (2) “result from” some judicial or
administrative proceeding or a settlement agreement. Id. In an extensive opinion
issued after a bench trial, the bankruptcy court held that Tradex had not satisfied its
burden to establish the exception.
Tradex does not appeal from that merits decision, but argues only that it
should have been granted summary judgment based on a Securities and Exchange
Commission “Order Instituting Administrative and Cease-and-Desist Proceedings”
(“the Order”) issued against Chui, contending that it satisfies the requirements of
11 U.S.C. § 523(a)(19) as a matter of law.
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However, as both the district and bankruptcy courts observed, Tradex was
required to establish that its debt actually “resulted from” the Order. 11 U.S.C. §
523(a)(19)(B). It did not. The SEC Order never mentions Tradex. Further, the
Order specifically provides that it was entered “[s]olely for the purpose of these
proceedings and any other proceedings brought by or on behalf of the Commission,
or to which the Commission is a party.” The Order thus plainly does not create
liability against Chui in favor of Tradex; at most, it creates liability against Chui in
favor of the SEC. The district and bankruptcy courts properly concluded that the
Order did not satisfy the requirements of 11 U.S.C. § 523(a)(19)(B).1
Tradex argues that 11 U.S.C. § 523(a)(19) permits the bankruptcy court to
engage in a “broad inquiry,” and that the court had the power to enter its own
judgment. Here, the bankruptcy court conducted a bench trial and made detailed
1To the extent that Tradex contends that collateral estoppel affords the SEC
Order preclusive effect independently of § 523(a)(19), we must reject it. The
doctrine of collateral estoppel cannot supplant the § 523(a)(19) statutory
requirements and grant a new independent avenue to a discharge exception.
Invocation of collateral estoppel cannot correct a § 523(a)(19)(B) deficiency.
Further, as the bankruptcy court noted, the SEC Order does not satisfy the
elements of collateral estoppel. The Order was limited to SEC proceedings and
provided that Chui was not admitting any liability. Thus, the issue of the Tradex
debt was not “actually litigated” before the SEC; there was no final judgment; and
Tradex was not a party nor, on the face of the Order, in privity with a party to the
administrative action. See IRS v. Palmer (In re Palmer), 207 F.3d 566, 568 (9th
Cir. 2000) (describing collateral estoppel elements).
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findings against Tradex on those issues, which Tradex does not appeal. Rather, the
only question on appeal is whether, as a matter of law, the SEC Order satisfied the
requirements of 11 U.S.C. § 523(a)(19). It did not.
We need not, and do not, determine any other issue urged by the parties,
including the question of the bankruptcy court’s scope of authority to enter a new
independent judgment—apart from the judgment of the non-bankruptcy
tribunal—on claims based on violations of securities laws under 11 U.S.C. §
523(a)(19).
AFFIRMED.
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