U.s. Securities & Exchange Commission v. Imran Husain

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
U.S. SECURITIES & EXCHANGE
COMMISSION,
Plaintiff-Appellee,
v.
IMRAN HUSAIN,
Defendant-Appellant,
and
GREGG EVAN JACLIN,
Defendant.
No. 21-55859
D.C. No.
2:16-cv-03250-
ODW-E
OPINION
Appeal from the United States District Court
for the Central District of California
Otis D. Wright II, District Judge, Presiding
Argued and Submitted September 21, 2022
Pasadena, California
Filed June 13, 2023

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2 USSEC V. HUSAIN
Before: Kim McLane Wardlaw and Sandra S. Ikuta,
Circuit Judges, and Kathryn H. Vratil,* District Judge.
Opinion by Judge Vratil;
Dissent by Judge Wardlaw
SUMMARY**
Federal Securities Law
The panel reversed the district court’s imposition of a
civil penalty in the amount of $1,757,000 against Imran
Husain in the Securities and Exchange Commission’s civil
enforcement action against Husain and his attorney for
violations of federal securities laws.
The district court held that Husain had violated federal
securities laws and imposed equitable statutory remedies,
including a civil penalty of $1,757,000.
The parties disagreed what standard of review applied to
the factual findings which underlay the district court’s
determination of the amount of the civil penalty in this
case. The panel held that the Fed. R. Civ. P. 56 principles
that applied to requests for injunctive relief and whether to
assess a second-tier penalty for violation of the securities
laws applied equally to the district court’s determination of
* The Honorable Kathryn H. Vratil, United States District Judge for the
District of Kansas, sitting by designation.
** This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.

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USSEC V. HUSAIN 3
the amount of a civil penalty. As with all relief under the
Securities Act of 1933 and the Securities Exchange Act of
1934, this court reviews the district court’s choice of remedy
for abuse of discretion. But on a summary judgment motion,
the district court can impose a civil penalty only if it
determines that no genuine issues of material fact exist, and
all factual uncertainty is resolved in favor of the non-moving
party. The panel concluded that the district court necessarily
abuses its discretion in granting summary judgment on the
amount of a civil penalty if material issues of fact are in
dispute.
Husain argued that the district court did not correctly
determine the amount of his gross pecuniary gain under 15
U.S.C. §§ 77t(d)(2), 78u(d)(3)(B). The district court
determined that Husain’s gross pecuniary gain of $1,757,000
was undisputed. The panel held that Husain’s declaration
that legal fees of $287,500 were paid from the proceeds from
the sale of five shell companies established a genuine issue
of material fact whether such proceeds should be attributed
to his—rather than his attorney’s—gross pecuniary
gain. Because Husain established a genuine issue of
material fact whether he received or controlled the entire
amount of the proceeds, the district court erred in finding on
summary judgment that his gross pecuniary gain was
$1,757,000.
The panel further held that Husain identified genuine
issues of material fact on two additional factors that the
district court considered in imposing the civil penalty: the
degree of Husain’s scienter and his recognition of the
wrongful nature of his conduct. Ultimately, the district court
may conclude that Husain’s statements are not credible and
that the Assistant U.S. Attorney’s assessment in his criminal
case was incorrect, but the district court erred in reaching

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4 USSEC V. HUSAIN
such a conclusion on this record. The panel therefore
reversed the district court’s grant of summary judgment on
the amount of the civil penalty, and remanded.
Dissenting, Judge Wardlaw wrote that the disputed facts
that the majority identifies are relevant only if the statutes
authorizing civil penalties are read to require that courts
trace the final disposition of ill-gotten gains to each
individual defendant. This is a misreading of the statutory
text and the court’s precedent, which holds that defendants
are liable for the funds they receive as well as the funds they
distribute. Additionally, recent precedent forecloses the
majority’s understanding that a district court should not
weigh a defendant’s credibility on summary judgment under
the civil penalty factors identified in SEC v. Murphy, 626
F.2d 633, 655 (9th Cir. 1980), especially on a record of
admitted and undisputed violations of the securities
laws. She would hold that the district court did not abuse its
discretion in assessing an award of maximum civil penalties
of $1,757,000 against Husain.
COUNSEL
Daniel R. Walfish (argued) and Rachel Penski Fissell,
Walfish & Fissel PLLC, New York, New York; George B.
Newhouse Jr., Richards Carrington LLC, Los Angeles,
California; for Defendant-Appellant.
Jeffrey A. Berger (argued) and Roberto A. Tercero, Senior
Litigation Counsels; Michael A. Conley, Solicitor; Dan
Berkovitz, General Counsel; Securities and Exchange
Commission; Washington, D.C.; Amy J. Longo, Ropes &
Gray LLP, San Francisco, California; for Plaintiff-Appellee

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USSEC V. HUSAIN 5
OPINION
VRATIL, District Judge:
Imran Husain and his attorney, Gregg Evan Jaclin,
created publicly-traded shell corporations and sold them to
privately-held companies. The Securities and Exchange
Commission (SEC) filed suit against Husain and Jaclin for
violations of the Securities Act of 1933 (Securities Act),
15 U.S.C. § 77a et seq., the Securities Exchange Act of 1934
(Exchange Act), 15 U.S.C. § 78a et seq., and SEC Rule 10b-
5, 17 C.F.R. § 240.10b-5. On cross motions for summary
judgment, the district court held that Husain had violated the
securities laws and imposed equitable statutory remedies,
including a civil penalty of $1,757,000. The district court
found that as a matter of undisputed fact, Husain had
received $1,757,000 in gross pecuniary gain from his
violations and used that amount for the civil penalty. On
appeal, Husain challenges the amount of that penalty. We
have jurisdiction under 28 U.S.C. § 1291 and reverse.
I. Factual And Procedural Background
From 2008 to 2012, Husain and Jaclin created and
controlled nine shell companies. For each company, Husain
acted as an undisclosed control person and recruited other
individuals to serve as nominal CEOs. Husain controlled
each company and the activities of each CEO, and he had
final authority over all matters involving the shells. Husain
also helped organize private placement offerings for the
shares of the shells and paid people to recruit “straw
shareholders.”
Husain conducted initial public offerings for the stock of
each shell, so that the shares could trade publicly. At his

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6 USSEC V. HUSAIN
direction, each shell filed one or more registration statements
on SEC Form S-1. Some 50 registration statements were
misleading because they did not disclose Husain’s role as the
controlling person. On Jaclin’s advice, Husain kept his
name off the registration statements to avoid suspicion and
attention from the SEC.
Between 2008 and 2012, in coordination with Jaclin and
outside auditors, Husain directed the preparation of various
SEC filings related to eight of the shells. These SEC filings
contained material misrepresentations and omissions
regarding the business purposes of the shells, Husain’s role
as the control person and promoter, the nature of the straw
shareholders and puppet CEOs and, in two instances, the
existence of merger plans.1 In total, Husain oversaw the
SEC filings of more than 35 materially false and misleading
periodic reports.
Husain understood that the shells were valuable because
they allowed their buyers—which often were privately-held
corporations with ongoing businesses—to control the shares
and corporate actions of the companies. After the sale of
each shell, the puppet CEO resigned and the new owner
installed new management. Husain sold seven of the shells
through reverse mergers.2
1 Husain directed, reviewed and approved SEC filings for the Health
Directory, Inc. and Movie Trailer Galaxy, Inc. shells, falsely claiming
that neither company had merger plans, even though purchasers had
already placed sales proceeds into escrow.
2 A reverse merger is a transaction in which a privately-held corporation
acquires a publicly-traded corporation, thereby allowing a private
corporation to transform into a publicly-traded corporation without an
initial stock offering. SEC v. M & A West, Inc., 538 F.3d 1043, 1046

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USSEC V. HUSAIN 7
Once the shell companies were sold, the sales proceeds
flowed to an escrow account, pursuant to an escrow
agreement signed by nominee-representatives that Husain
appointed. The escrow agent then paid Jaclin’s firm’s legal
fees. After paying the legal fees, the escrow agent wired the
proceeds to the nominee-representative’s bank account.
Alternatively, some proceeds were paid to the offshore
accounts of two entities, Liric and Ucino, that the SEC
claimed were owned or controlled by Husain. The sales of
five shell companies (Ciglarette, Inc., Rapid Holdings, Inc.,
Resume in Minutes, Inc., Movie Trailer Galaxy, Inc., and
Health Directory, Inc.) within the five-year statute of
limitations period generated gross proceeds of $1,787,000.3
Together, Husain and Jaclin tried to conceal their
scheme. They communicated with each other through email
accounts in the names of the puppet CEOs and hired a
computer consultant to destroy emails between them. In
2012, Husain coached the puppet CEO of PR Complete
Holdings, Inc. on how to testify before the SEC and
instructed her to testify falsely by leaving his name out of it.
(9th Cir. 2008). As in the reverse mergers at issue here, the public shell
company has minimal assets and liabilities and no actual operations. Id.
3 According to Husain’s answer in the civil action, “he and Jaclin sold
five shel[l] companies to purchasers and realized gross proceeds in
connection with such sales of $1.6 or thereabouts. From these proceeds
various entities, including attorney Jaclin, were paid expenses in
connection therewith. Defendant otherwise denies that he netted $2.25
million in proceeds for such sales as alleged in” this paragraph. Later in
the answer, Husain “denie[d] that the proceeds totaled $2.25 M. [He]
admit[ted] that net proceeds were approximately $1.6 million after
expenses owing to attorney Jaclin, auditors, market makers, and other
vendors were paid.”

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8 USSEC V. HUSAIN
In May of 2014, a grand jury returned an indictment
which charged Husain with obstruction of SEC proceedings
in violation of 18 U.S.C. § 1505 and conspiracy to obstruct
such proceedings in violation of 18 U.S.C. § 371. On
October 14, 2014, Husain pleaded guilty to the conspiracy
charge. As part of the factual basis for the guilty plea,
Husain admitted that from 2008 to at least 2012, SEC filings
for several shells which he controlled did not disclose his
role. Husain also admitted that he recruited nominal CEOs
who did not actually control the companies.
In May of 2017, based on Husain’s ongoing cooperation
in the criminal case, a grand jury indicted Jaclin for
securities crimes.4 Meanwhile, in 2016, the SEC filed this
civil enforcement action against Husain and Jaclin.5 From
4 Specifically, the grand jury indicted Jaclin on charges of conspiracy to
commit securities fraud and falsify information submitted to the SEC,
securities fraud in violation of 15 U.S.C. §§ 78j(b) and 78ff, submitting
false filings to the SEC in violation of 15 U.S.C. §§ 77q(a), 77x, 78j(b)
and 78ff, concealing material facts from the SEC in violation of 18
U.S.C. § 1001(a)(1), submitting false filings to the SEC in violation of
18 U.S.C. § 1001(a)(3) and obstructing SEC proceedings in violation of
18 U.S.C. § 1505.
5 Claims 1 and 2 of the First Amended Complaint assert that Husain
offered and sold the shell companies in unregistered offerings in
violation of Section 5(a) and 5(c) of the Securities Act, and aided and
abetted such violations. Claims 4, 5, 7 and 8 assert that Husain
committed fraud in the offer or sale of the shell companies in violation
of Sections 17(a)(2) of the Securities Act, Section 10(b) of the Exchange
Act and SEC Rule 10b-5, and aided and abetted such violations.
Claims 3 and 6 assert that Husain engaged in a scheme to defraud in the
offer or sale of the shell companies in violation of Sections 17(a)(1) and
17(a)(3) of the Securities Act, Section 10(b) of the Exchange Act and
SEC Rule 10b-5. Claim 9 asserts that Husain aided and abetted
registration violations under Section 15(d) and Rules 12b-20, 15d-1 and
15d-13 of the Exchange Act. Claim 10 asserts control person violations

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USSEC V. HUSAIN 9
May of 2017 through August of 2019, while the criminal
case was proceeding against Jaclin and Husain was awaiting
sentencing, the district court stayed the civil enforcement
action. Shortly after the district court lifted the stay, Jaclin
consented to the entry of judgment. The district court
imposed an injunction on Jaclin and ordered disgorgement
in the amount of $32,700.00 and interest in the amount of
$7,773.80, for a total of $40,473.80. The district court did
not impose a civil penalty on Jaclin.
In Husain’s criminal case, on November 12, 2019, the
district court sentenced him to three years of probation.
Jaclin pleaded guilty to obstructing SEC proceedings and
conspiracy to obstruct such proceedings, and on June 22,
2020, the district court sentenced him to three years of
probation with three months of partial home confinement.
In the civil enforcement action, on cross motions for
summary judgment, the district court held that Husain had
violated the Securities Act, the Exchange Act and SEC
Rule 10b-5, as asserted in Claims 1, 3, 4, 6 and 7. In
addition, it granted summary judgment on the issue of
equitable remedies: it permanently enjoined Husain from
violating securities laws, banned him from serving as an
officer or director of a public company for seven years,
barred him from participating in penny stock offerings for
seven years and imposed a civil penalty of $1,757,000.6
under Section 20(a) of the Exchange Act and Rule 10b-5 of the Exchange
Act. Except for Claims 7 and 10, the SEC asserts the same claims against
Jaclin.
6 The SEC’s motion for summary judgment had also sought
disgorgement, which the district court declined to order. Shortly after
the SEC filed its summary judgment motion, the Supreme Court decided
Liu v. SEC, 140 S. Ct. 1936 (2020), which—contrary to then existing

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10 USSEC V. HUSAIN
The district court found that based on the “totality of the
circumstances” and the factors set forth in SEC v. Murphy,
626 F.2d 633, 655 (9th Cir. 1980), a permanent injunction
was necessary to prevent Husain from violating the
securities laws. It determined that Husain had (1) “acted
with a high degree of scienter, over several years, in a
repeated pattern of wrongdoing;” (2) had gone “to great
lengths to conceal his shell factory scheme from regulatory
oversight;” (3) “only stopped his scheme because he got
caught, which gives rise to an inference of a reasonable
expectation of future violations;” and (4) failed to recognize
the wrongful nature of his conduct.
The district court noted that the Murphy factors also
favored a civil penalty. Because Husain’s conduct involved
fraud and deceit, the district court imposed a second-tier
penalty under the Securities Act and the Exchange Act.7 It
Ninth Circuit case law—held that a disgorgement award under 15 U.S.C.
§ 78u(d)(5) could not exceed a wrongdoer’s “net profits.” Id. at 1940,
1946. The district court denied the SEC’s request to take discovery on
the issue of disgorgement because it determined that the other equitable
remedies provided sufficient punishment and deterrence to Husain.
7 The Securities Act and the Exchange Act establish three tiers of civil
penalties: (1) a first tier for any statutory violation, (2) a second tier for
a violation that “involved fraud, deceit, manipulation, or deliberate or
reckless disregard of a regulatory requirement,” 15 U.S.C.
§§ 77t(d)(2)(B), 78u(d)(3)(B)(ii), and (3) a third tier for a violation that
both “involved fraud, deceit, manipulation, or deliberate or reckless
disregard of a regulatory requirement” and “resulted in substantial losses
or created a significant risk of substantial losses to other persons.” 15
U.S.C. §§ 77t(d)(2)(C), 78u(d)(3)(B)(iii). Each tier has a statutory cap,
which is the greater of (1) a fixed monetary amount (periodically
adjusted for inflation) and (2) the gross amount of pecuniary gain to
defendant as a result of the violation. 15 U.S.C. § 77t(d)(2) (civil
penalties for violations of Securities Act); 15 U.S.C. § 78u(d)(3)(B)
(civil penalties for violations of Exchange Act). The statutory cap for

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USSEC V. HUSAIN 11
found that $1,757,000 was the undisputed amount of
Husain’s gross pecuniary gain and granted the SEC’s request
for a civil penalty in that amount.8
Husain filed a motion to reconsider the amount of the
civil penalty, arguing that his “pecuniary gain” should take
into account expenses which Jaclin paid from gross proceeds
over which Husain had no control. Hussain argued that he
“did not realize (or ever receive) the gross payments.” The
district court denied the motion to reconsider, finding that it
merely reiterated arguments raised in Husain’s summary
judgment opposition and stating that in determining the
appropriate civil penalty, it had “thoroughly reviewed the
record and relevant legal authority.” The district court did
not directly address Husain’s argument that the gross
proceeds went to Jaclin and that Husain did not receive any
proceeds until Jaclin had paid other individuals and
expenses.
As noted, Husain argues that the district court erred in
granting summary judgment on the amount of the civil
penalty.
second-tier penalties, which the district court imposed here, is the greater
of $75,000 or “the gross amount of pecuniary gain to such defendant as
a result of the violation.” 15 U.S.C. §§ 77t(d)(2)(B), 78u(d)(3)(B)(ii);
17 C.F.R. § 201.1001(a) & Table I.
8 Husain and Jaclin sold five shell companies within the statute of
limitations period for total proceeds of $1,787,000. From this amount,
the district court subtracted $30,000 for attorney’s fees that it had
ordered Jaclin to disgorge. This calculation was in error because the
district court had actually ordered Jaclin to disgorge $32,700. Because
the district court erred on other grounds, we need not address this
discrepancy.

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12 USSEC V. HUSAIN
II. Standard Of Review
We review de novo a district court decision to grant
summary judgment. Evanston Ins. Co. v. OEA, Inc., 566
F.3d 915, 918 (9th Cir. 2009). Viewing the evidence in the
light most favorable to the non-moving party, we determine
whether genuine issues of material fact exist and whether the
district court correctly applied the substantive law. Id. at
918–19. As to the district court’s formulation of remedies
under the Securities Act and the Exchange Act, we review
for abuse of discretion. See SEC v. Murphy (Murphy II), 50
F.4th 832, 842 (9th Cir. 2022).
The parties disagree what standard of review applies to
the factual findings which underlie the district court’s
determination of the amount of the civil penalty in this case.
The SEC seeks review for abuse of discretion, and argues
that the district court did not apply the incorrect legal
standard and its underlying factual findings were not clearly
erroneous. Husain argues that although the substance of the
civil penalty is reviewed for abuse of discretion, the factual
predicates must be reviewed de novo because the district
court determined them on a summary judgment record.
We have not previously addressed this exact issue. In
the context of injunctive relief on a summary judgment
record, however, we have held that a district court cannot
“resolve any genuine factual issue, including credibility” and
must resolve “all factual inferences . . . against the moving
party and in favor of the opposing party.” SEC v. Koracorp
Indus., Inc., 575 F.2d 692, 698 (9th Cir. 1978). Stated
otherwise, a court may issue injunctive relief on a summary
judgment record, but not if the record reveals a genuine issue
of fact that is material to the grant of the injunction. Murphy,
626 F.2d at 655 (permanent injunctions may be granted on

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USSEC V. HUSAIN 13
summary judgment, given proper record). Likewise, to
determine whether the securities laws authorize a second-tier
civil penalty—which depends on whether defendant acted
with scienter—“a district court must determine whether
genuine issues of material fact exist, and must resolve any
uncertainty in favor of the non-moving party.” SEC v. M &
A West, Inc., 538 F.3d 1043, 1054 (9th Cir. 2008).
The Rule 56 principles that apply to requests for
injunctive relief and whether to assess a second-tier penalty
for violation of the securities laws apply equally to the
district court’s determination of the amount of a civil
penalty. As with all relief under the Securities Act and the
Exchange Act, we review the district court’s choice of
remedy for abuse of discretion. Murphy II, 50 F.4th at 842.
But on a summary judgment record, the district court can
impose a civil penalty only after it has determined that no
“genuine issues of material fact exist” and all factual
uncertainty is resolved in favor of the non-moving party. M
& A West, 538 F.3d at 1054; see Murphy, 626 F.2d at 655.
In other words, if “material issues of fact are in dispute,” the
district court necessarily abuses its discretion in granting
summary judgment o n the amount of a civil penalty.
Koracorp, 575 F.2d at 695.
III. Analysis
On the SEC’s motion for summary judgment, the district
court imposed a second-tier penalty of $1,757,000, which it
determined was the undisputed amount of Husain’s gross
pecuniary gain. On appeal, Husain argues that the district
court (1) did not correctly determine the amount of his gross
pecuniary gain, (2) did not view the factual record in the
light most favorable to him as the non-moving party and

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14 USSEC V. HUSAIN
(3) abused its discretion in imposing the civil penalty of
$1,757,000.9
A. Calculation Of Gross Amount Of Husain’s
Pecuniary Gain
The Securities Act and the Exchange Act set maximum
penalties for each violation. 15 U.S.C. §§ 77t(d)(2),
78u(d)(3)(B). Here, for a second-tier penalty, the district
court was authorized to impose a penalty which was the
greater of $75,000 or “the gross amount of pecuniary gain to
. . . defendant as a result of the violation.”10
As noted, the district court determined that Husain’s
gross pecuniary gain of $1,757,000 was undisputed.11
Husain argues that the district court erred because it
conflated the total sales proceeds from the sale of the five
9 The SEC argues that the district court did not need to consider Husain’s
argument about the amount of his gross pecuniary gain because he first
raised it in his summary judgment reply brief, after discovery had closed
and the SEC had completed briefing on its summary judgment motion.
In fact, Husain raised the issue in his opposition to the SEC’s summary
judgment motion, in his statement of genuine disputes of material fact
and in his declaration. Husain adequately preserved his objection to the
district court’s calculation of his gross pecuniary gain.
10 15 U.S.C. §§ 77t(d)(2)(B), 78u(d)(3)(B)(ii). Because Husain’s
violations occurred between March 4, 2009 and March 3, 2013, the fixed
statutory amount for a second-tier violation was $75,000. Table I to 17
C.F.R. § 201.1001.
11 The district court has discretion to determine the number of securities
violations on which to impose civil penalties. Murphy II, 50 F.4th at
848. Here, the district court did not specify the number of Husain’s
violations or address the fixed statutory cap of $75,000 for each
violation. It relied on its determination of Husain’s gross pecuniary gain
from the aggregate violations involving the five shell corporations which
were sold within the statute of limitations.

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USSEC V. HUSAIN 15
shell companies with the gross amount of his individual
gross pecuniary gain.12
The district court did not explain its conclusion that the
gross pecuniary gain of $1,757,000 to Husain was
“undisputed.” It apparently relied solely on Husain’s
concession that the sales prices of five shell companies
totaled $1,787,000. The district court did not explain how
Husain’s concession about total “sales” established the exact
same amount in “gross pecuniary gain” to him.
The SEC argues that the $1,757,000 in gross pecuniary
gain was undisputed because Husain admitted that (1) he had
final authority on all matters involving the shells; (2) he
appointed shareholder representatives for each shell and
representatives received sale proceeds from Jaclin’s escrow
account; and (3) the gross proceeds generated from the sale
of the shell companies amounted to $1,787,000.13 Viewed
in the light most favorable to Husain, however, these
admissions establish only that he and Jaclin received total
sales proceeds of $1,787,000.
The fact that Husain had final authority over the shells
and appointed shareholder representatives does not establish
that he controlled or constructively received the proceeds.
12 Husain also argues that despite the qualifier “gross” in the phrase
“gross amount of pecuniary gain,” the word “gain” suggests a deduction
for expenses. We need not address this argument because even if
business expenses are included in Husain’s “gross pecuniary gain,” he
has demonstrated a genuine issue of material fact whether he received
the entire $1,757,000 of sales proceeds.
13 The SEC argues that Husain forfeited his argument that he did not
control the selling shareholders or their representatives, but Husain
raised the issue in his statement of genuine disputes of material fact and
in his declaration.

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16 USSEC V. HUSAIN
The record indicates that the proceeds flowed to an escrow
account, and the escrow agent then wired the proceeds to the
nominee-representative’s bank account, less any amounts
owed for Jaclin’s firm’s legal fees. Husain submitted a
declaration stating that costs of $1,618,300 were paid from
the “yielded amount” from the sales of the shell companies.
Husain’s declaration stated that of the $1,618,300 in costs,
$287,500 was for legal fees.14 Viewing the evidence in a
light most favorable to Husain, before he received or had
control of any sales proceeds, Jaclin paid expenses to himself
and third parties whom Husain did not own or control.
In the district court, the SEC attempted to substantiate
the $1,757,000 amount by arguing that “[w]ire transfer
records show that two entities controlled by Husain, Ucino
and Liric, received proceeds from Jaclin’s firm.” The SEC
did not argue that Ucino and Liric received all of the
proceeds or cite evidence that Husain controlled either
entity. The district court did not cite evidence that Husain
controlled Ucino or Liric, and Husain’s declaration stated
that he did not. Again, the district court was required to
resolve these factual ambiguities in favor of Husain. The
14 The SEC relies on Husain’s answer, which states, “Defendant admits
he and Jaclin sold five shel[l] companies to purchasers and realized gross
proceeds in connection with such sales of $1.6 or thereabouts.” The SEC
alleges that in making this statement, Husain conceded that he received
$1.6 million. This is incorrect. In context, Husain’s answer indicates
that the sales of the shell companies generated gross proceeds of $1.6
million that went into an escrow account and from there (after deductions
for Jaclin’s firm’s outstanding legal fees) to third parties. Elsewhere,
Husain consistently stated that he did “not admit or agree that [his] net
proceeds, the amount that would be subject to an order of disgorgement
is $1.6 [million] or is anything close to it, as [he] has put forward his best
estimate based on documents available to him that suggests his net
proceeds from sales of the five companies [was] closer to $75,000.”

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USSEC V. HUSAIN 17
government does not cite, and we are unaware of, a rule that
the gain to entities controlled by a defendant is deemed to be
gain to the defendant personally, absent evidence that the
entities are the defendant’s alter egos. The government has
not shown that Ucino and Liric are alter egos of Husain.
On appeal, the SEC argues that the district court properly
determined that Husain’s gross pecuniary gain equaled the
total proceeds to the enterprise (i.e. Husain and Jaclin)
because “multiple defendants can each benefit from the same
dollar of gain, in which case each can be penalized for that
gain.” SEC v. Cole, 661 F. App’x 52, 54 (2d Cir. 2016)
(internal quotations and citations omitted). In cases of close
cooperation between defendants or where multiple
defendants mutually benefit from the same gains, some
courts have concluded that the “best calculation of a single
defendant’s gain may be the total gains obtained by the
group through that defendant’s violations.” SEC v. Fowler,
440 F. Supp. 3d 284, 299 (S.D.N.Y. 2020), aff’d as modified,
6 F.4th 255 (2d Cir. 2021), cert. denied, 142 S. Ct. 590
(2021); see SEC v. Amerindo Inv. Advisors Inc., No. 05 Civ.
5231 (RJS), 2014 WL 2112032, at *11 n.11 (S.D.N.Y. May
6, 2014) (civil penalties statutes focus on “gain to such
defendant,” but “multiple defendants can, and often do, each
benefit from the same dollar of gain”) (citations omitted),
aff’d, 639 F. App’x 752 (2d Cir. 2016).
We need not decide if, or under what circumstances, a
district court can use the total gain to all defendants as a
measure of an individual defendant’s gross pecuniary gain.
Here, the district court did not equate Husain’s gross
pecuniary gain with the total gain to Husain and Jaclin. In
fact, it deducted $30,000 from the total sales proceed to

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18 USSEC V. HUSAIN
account for the amount that Jaclin had to disgorge.15 In
addition, the district court did not address—and the
summary judgment record did not establish—that Husain
and Jaclin each gained all of the sales proceeds received in
Jaclin’s account or suggest that the amounts of their
individual gains were not reasonably ascertainable. Cf.
Amerindo, 2014 WL 2112032 at *11 n.11 (applying
aggregate gain to each defendant because “nearly impossible
to determine how the defendants divided their spoils” and
“any division of gain among them would be purely
arbitrary”). In any event, Husain’s declaration that legal fees
of $287,500 were paid from the sales proceeds establishes a
genuine issue of material fact whether such proceeds should
15 The district court adopted the SEC’s calculation that total proceeds for
Husain were $1,787,000 minus the amount that Jaclin had to disgorge
(approximately $30,000). The amount that Jaclin had to disgorge,
however, represented his “profits,” not necessarily his gross pecuniary
gain.
The dissent suggests that we have conflated the statutory
requirements for the calculation of disgorgement, which must be a
reasonable approximation of a defendant’s profits from a violation of the
securities law, see Liu, 140 S. Ct. at 1940–41, with the calculation of
civil penalties, which has no such requirement. In fact, the district court
linked the two requirements when—based on the SEC’s calculation of
Husain’s proposed disgorgement, i.e. the total sales proceeds minus the
amount of attorney fees that Jaclin had to disgorge—it determined that
Husain’s “gross pecuniary gain of $1,757,000 is undisputed.” Even
under the SEC’s pre-Liu understanding that the amount of disgorgement
is determined based on a defendant’s gross proceeds (not his profit), the
SEC assumed—without evidentiary support—that Jaclin agreed to
disgorge the amount of his “gross proceeds.” As explained above, based
on Husain’s declaration that legal fees of $287,500 were paid from sales
proceeds, he has raised a genuine issue of material fact whether Jaclin’s
gross proceeds were greater than $30,000.

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USSEC V. HUSAIN 19
be attributed to his—rather than Jaclin’s—gross pecuniary
gain.16
Because Husain established a genuine issue of material
fact whether he received or controlled the entire amount of
the sales proceeds for the five shell companies, the district
court erred in finding on summary judgment that his “gross
pecuniary gain” was $1,757,000.17
16 The dissent suggests that our ruling implicitly imposes a “tracing
requirement” for the disposition of ill-gotten gains. Contrary to the
dissent’s suggestion, however, the district court did not “calculate
Husain’s ‘gross pecuniary gain’ by using the total amount gained from
the sale of the shells.” Our ruling is limited to a review whether genuine
issues of material fact precluded entry of summary judgment on the
amount of a civil penalty based on the methodology that the district court
used in calculating that penalty. As explained above, the district court
adopted the SEC methodology and imposed a civil penalty of $1,757,000
based on its finding that this was the “undisputed” amount of Husain’s
gross pecuniary gain after it deducted Jaclin’s disgorgement (which
before Liu, the SEC equated with Jaclin’s “gross proceeds”). Because
the district court chose to calculate Husain’s civil penalty in this manner
(i.e. determining the gross proceeds flowing to Husain individually), we
need not address the dissent’s suggestion that the district court
alternatively could have imposed a higher civil penalty on Husain equal
to the collective gross pecuniary gain to Husain and Jaclin.
17 Husain argues that on remand, the SEC should not be permitted to take
further discovery to cure its failure to establish his gross pecuniary gain.
Here, we only address whether the district court properly granted
summary judgment on the civil penalty in the amount of $1,757,000, not
whether the district court can award such a penalty at a later proceeding
based on its resolution of disputed factual issues. In its discretion, the
district court may determine whether additional discovery should be
permitted.

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20 USSEC V. HUSAIN
B. Relevant Facts And Circumstances For Civil Penalty
Determination
In addition to the amount of his gross pecuniary gain,
Husain has identified genuine issues of material fact on two
additional factors that the district court considered in
imposing the civil penalty: the degree of Husain’s scienter
and his recognition of the wrongful nature of his conduct.
A district court must determine the amount of civil
penalties “in light of the facts and circumstances” of the
case. 15 U.S.C. §§ 77t(d)(2)(A), 78u(d)(3)(B)(i). In doing
so, courts consider the factors set out in Murphy. See
Murphy II, 50 F.4th at 847. The Murphy factors, which we
originally applied in determining whether injunctive relief is
appropriate, include (1) the degree of scienter; (2) the
isolated or recurrent nature of the infraction; (3) defendant’s
recognition of the wrongful nature of his conduct; (4) the
likelihood that future violations might occur because of
defendant’s professional occupation; and (5) the sincerity of
defendant’s assurances against future violations.18 Murphy,
626 F.2d at 655.
In finding that an injunction was appropriate—and
presumably in finding that a maximum civil penalty should
be imposed—the district court determined that (1) Husain
acted with a high degree of scienter, (2) he engaged in a
repeated pattern of wrongdoing, (3) he failed to recognize
the wrongful nature of his conduct and (4) he only stopped
because he got caught, which gives rise to an inference of
18 Husain argues that the district court erred in applying the Murphy
factors to determine the amount of the civil penalty. We need not reach
the issue whether the Murphy factors apply beyond injunctive relief,
because Husain waived this issue by not raising it below.

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USSEC V. HUSAIN 21
future violations. As to at least two of these factors, Husain
established a genuine issue of material fact.
As to whether Husain recognized the wrongful nature of
his conduct, the district court noted that Husain “has
repeatedly failed to acknowledge that there were victims of
his fraudulent scheme, and he refuses to take responsibility
for the impact of his illegal conduct on the market’s
integrity.” The district court did not identify victims other
than the SEC and general market integrity. Indeed, in
finding him liable, the district court relied nearly exclusively
on the theory that “Husain’s shell factory scheme clearly
undermined the integrity of the ‘securities industry’ as a
whole and the ‘public interest.’”
The district court did not address Husain’s declaration,
which admitted that he had deceived the SEC. The SEC
itself recognized that Husain had admitted at least part of his
wrongdoing: (1) that he violated the registration
requirements of Sections 5(a) and (c) of the Securities Act;
(2) that the SEC filings of the shell companies contained
material misrepresentations and omissions; (3) that he was
liable as a control person under Section 20(a) of the
Exchange Act; and (4) that he “did not act in good faith” as
to the Exchange Act violations. In addition, Husain
acknowledged that he was “remorseful and there [was]
virtually no chance of him repeating such conduct.” He
noted that the Department of Justice had reached the same
conclusion in his criminal case. Accordingly, the summary
judgment record did not establish as a matter of undisputed
fact that Husain “refuse[d] to take responsibility for the
impact of his illegal conduct on the market’s integrity.” The
district court erred in finding otherwise.

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22 USSEC V. HUSAIN
Husain did present evidence and argument that his
scheme had no direct victims because the shares of the shell
companies were not publicly traded while he was the control
person. Husain also summarized the Assistant U.S.
Attorney’s position in his criminal case, i.e. that “the shell
corporations were legal entities and . . . Mr. Husain did not
defraud investors.” The district court did not specifically
fault Husain for these arguments. Nor did it cite undisputed
evidence that Husain’s scheme victimized individual
investors.
Viewing the evidence in the light most favorable to the
non-movant, Husain’s scheme did not victimize any member
of the investing public and he took responsibility for
deceiving the SEC. Accordingly, Husain established a
genuine issue of material fact whether he recognized the
wrongful nature of his conduct.
As to scienter, Husain does not dispute that he acted with
some level of scienter, but he disputes the district court’s
conclusion that he acted with a “high degree” of scienter. In
the context of securities laws, “scienter” is generally defined
as the “mental state embracing intent to deceive, manipulate,
or defraud.” Ernst & Ernst v. Hochfelder, 425 U.S. 185,
193–94 n.12 (1976). Whether a defendant acted with
scienter is a “subjective inquiry,” which ultimately “turns on
the defendant’s actual state of mind.” Gebhart v. SEC, 595
F.3d 1034, 1042 (9th Cir. 2010).
In evaluating Husain’s scienter, the district court found
that “Husain acted with a high degree of scienter, over
several years, in a repeated pattern of wrongdoing.” The
district court noted that Husain “went to great lengths to
conceal his shell factory scheme from regulatory oversight”
and he “only stopped his scheme because he got caught,

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USSEC V. HUSAIN 23
which gives rise to an inference of a reasonable expectation
of future violations.” Husain submitted a sworn declaration,
however, which stated that “Mr. Jaclin [who was my
attorney] knew of the omission of this disclosure; indeed, he
advised me not to disclose it, saying it was not material and
that the SEC did not ‘need’ this information, although I now
realize that his advice was both wrong and illegal.” As noted
above, Husain presented evidence that he only intended to
deceive the SEC, not investors. Viewing the evidence in a
light most favorable to him, Husain raised a genuine issue of
material fact on the degree of scienter. See Vucinich v.
Paine, Webber, Jackson & Curtis, Inc., 739 F.2d 1434, 1436
(9th Cir. 1984) (“Summary judgment is generally
inappropriate when mental state is an issue, unless no
reasonable inference supports the adverse party’s claim.”).
In sum, Husain raised genuine issues of material fact on
at least two factors—scienter and contrition—that the
district court cited in imposing the civil penalty on a
summary judgment record.19 Ultimately, the district court
19 The dissent concludes that our ruling “could effectively preclude any
court from awarding injunctive relief or maximum civil penalties without
an evidentiary hearing, even for confessed violations of the securities
laws, because assessing the Murphy factors requires that the district court
weigh evidence of a defendant’s scienter and contrition.” Our ruling
does not reach so broadly. Indeed, in this case, Husain does not dispute
that the district court properly entered summary judgment on liability
and properly entered a permanent injunction. On the amount of a civil
penalty, however, because the district court did not view the record
evidence in the light most favorable to the non-moving party, it
necessarily abused its discretion in imposing a civil penalty of
$1,757,000. Even so, provided that a district court properly views the
evidence under Rule 56 of the Federal Rules of Civil Procedure, we do
not suggest that it would abuse its discretion by imposing the maximum
civil penalty on summary judgment.

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24 USSEC V. HUSAIN
may conclude that Husain’s statements are not credible and
that the Assistant U.S. Attorney’s assessment in his criminal
case was incorrect, but such a conclusion was inappropriate
on this record. See M & A West, 538 F.3d at 1055
(“summary judgment is singularly inappropriate where
credibility is at issue”) (quoting Koracorp, 575 F.2d at 699).
We therefore reverse the district court’s grant of summary
judgment on the amount of a civil penalty.20
REVERSED and REMANDED.
20 Husain also argues that the district court abused its discretion in
imposing the maximum civil penalty because it did not consider factors
other than those specified in Murphy such as (1) the absence of losses to
investors and (2) the disparity between his penalty of $1,757,000 and the
amount of Jaclin’s disgorgement ($40,473 including interest) and the
lack of the imposition of a civil penalty on Jaclin. Because we find that
Husain established genuine issues of material fact on at least two of the
factors that the district court did consider in determining the civil
penalty, we need not address Husain’s argument that the district court
erred in failing to consider additional factors. We note, however, that
during the remedy phase of the proceedings, the district court must
consider factors beyond those set forth in Murphy if such factors are
necessary to “assess the totality of the circumstances” of Husain’s
violations. Murphy II, 50 F.4th at 849 (quoting Murphy, 626 F.2d at
655); see 15 U.S.C. § 77t(d)(2)(A) (civil penalty amount “shall be
determined by the court in light of the facts and circumstances”); 15
U.S.C. § 78u(d)(3)(B)(i) (same).

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USSEC V. HUSAIN 25
WARDLAW, Circuit Judge, dissenting:
Imran Husain orchestrated a scheme to create publicly-
held shell companies in violation of the securities laws and
to sell them in reverse merger transactions that he concedes
violated Section 5(a) and Section 5(c) of the Securities Act.
The district court granted summary judgment to the SEC
based on Husain’s primary liability for those violations and
numerous other violations of the anti-fraud provision of the
Securities Act (Section 17(a)(2)) and the Exchange Act
(Section 10(b) and Rule 10(b)(5)), finding many material
misrepresentations, especially Husain’s failure to disclose in
dozens of SEC filings that he was the control person and
promoter of the shell companies. Nearly all of the facts
material to Husain’s liability under these statutes were
admitted by Husain in his answer and during the summary
judgment proceeding, and Husain does not appeal the district
court’s liability determination.
As equitable remedies, the SEC sought a permanent
injunction, a second-tier civil penalty, a permanent bar
against Husain from serving as an officer or director of a
public company, and disgorgement of the net profits from
the sale of the five shell companies sold within the statute of
limitations period. The district court granted the SEC the
permanent injunction, bars against certain securities-related
activities, and a second-tier civil penalty in the amount of
$1,757,000, following Husain’s admission that the “total
(gross) proceeds for the five companies amount to
approximately $1,787,000.” The district court denied the
SEC’s request for disgorgement, finding that the injunction,
the bars, and the civil penalty were “sufficient punishment
and deterrence” to address Husain’s violations under the
securities laws.

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26 USSEC V. HUSAIN
Even though the gross proceeds from the sales of the five
shell companies were indisputably $1,787,000, Husain
argues that the district court abused its discretion in
assessing a penalty in that amount less the amount that his
co-conspirator Jaclin paid in disgorgement. Husain asserts
that there are disputed issues of material fact because the
most the district court could lawfully award against him was
“the gross amount of pecuniary gain” to him from the
scheme, and there was no evidence that he personally
received the gross proceeds from the sale of the shell
companies.
While declining to decide how a defendant’s “gross
pecuniary gain” should be calculated under the civil penalty
statutes, the majority remands the case on the ground that
Husain’s “gross pecuniary gain” is “disputed.” However,
the disputed facts that the majority identifies are relevant
only if we read the statutes to require that courts trace the
final disposition of ill-gotten gains to each individual
defendant. That is a misreading of the statutory text and our
precedent, which holds that defendants are liable for the
funds they receive as well as the funds they distribute.
Contrary to the holding of the majority, this is a question of
law, not fact, and a question which the majority answers
incorrectly.
Husain next argues that the district court should not have
applied the Murphy factors to calculate the total amount of
civil penalties, but even if they were the correct factors to
apply, the district court misapplied them. See SEC v.
Murphy, 626 F.2d 633, 655 (9th Cir. 1980). The majority
assumes that the Murphy factors apply, but instead of
reviewing the district court’s weighing of the uncontroverted
record facts for an abuse of discretion, it conjures up
disputed facts as to “the degree of Husain’s scienter and his

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USSEC V. HUSAIN 27
recognition of the wrongful nature of his conduct.” The
majority effectively, and incorrectly, reviews each Murphy
factor separately and de novo, holding that courts should not
make “credibility” determinations at the summary judgment
stage as to a defendant’s scienter or contrition, even though
the majority’s approach is foreclosed by Murphy itself, as
well as our recent decision in SEC v. Murphy, 50 F.4th 832
(9th Cir. 2022) (Murphy II).
Because the majority’s approach is inconsistent with the
text, purpose, and history of the civil penalty statute, as well
as our binding precedent, and because the district court did
not abuse its discretion in weighing the Murphy factors on
this record of admitted and undisputed violations of the
securities laws, I respectfully dissent.
I.
The following facts are undisputed, and most, if not all,
have been admitted by Husain in his guilty plea to criminal
obstruction of justice and his filings in these proceedings.
Husain created multiple shell companies from
approximately 2008 to 2012, recruited friends and family to
serve as nominal CEOs, and then directed them to retain co-
conspirator Jaclin’s law firm to handle the public offerings.
Husain admitted that these were sham offerings. He
knowingly filed over 50 registration statements and
amendments with the SEC (on a Form S-1)1 that contained
material misrepresentations, and directed the shell
1 A Form S-1 requires issuers to disclose the purpose of a proposed
public offering of asset-backed securities, and requires the filer to
disclose the company’s officer, director, promoter, and control person.
See Boyce v. Soundview Tech. Grp. Inc., 464 F.3d 376, 380 n.4 (2d Cir.
2006). Husain did not disclose that he was the shell companies’ control
person on the relevant Forms S-1.

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28 USSEC V. HUSAIN
companies to file over 35 false and misleading statements
that failed to disclose Husain’s control of the companies.
Husain then sold seven of the shell companies in
transactions not registered with the SEC, which he admits
was a violation of Section 5 of the Securities Act. For the
five shell companies sold within the statute of limitations
period, Husain admits that “[t]he total (gross) proceeds for
the five companies amount to approximately $1,787,000[,]”
without accounting for costs of the sales. The purpose of the
scheme was to sell the shells to facilitate “reverse merger”
transactions, which allow privately traded companies to
become publicly traded without going through the ordinary
SEC registration process. While reverse mergers with shell
companies are not per se illegal, they are associated with
“the potential for investor harm” because there is a track
record of “shell companies being used in fraudulent and
manipulative schemes, such as pump-and-dump schemes.”
Publication or Submission of Quotations without Specified
Information, 85 Fed. Reg. 68124, 68153 (Oct. 27, 2020);
Securities Enforcement Remedies and Penny Stock Reform
Act of 1990, Pub. L. No. 101-429, § 502(8), 104 Stat. 931,
951 (1990) (finding that “‘reverse mergers’ with shell
corporations . . . are used to facilitate manipulation schemes
and harm investors”). Here, the district court found Husain
liable for at least two claims of fraud, determining that he
“engaged in a scheme to defraud as the co-mastermind of the
shell factory scheme” and “intentionally engaged in
fraudulent, deceitful, and criminal actions to enable the
public trading of the Shell Companies’ stock.”
Indeed, when the SEC began investigating the shell
companies, Husain concedes that he attempted to cover up
his conduct, creating false email accounts to communicate
with Jaclin and “scrubbing” his emails from Jaclin’s firm’s

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USSEC V. HUSAIN 29
computers. After the SEC subpoenaed the CEO of one of
the shell companies, Husain coached her testimony in order
to conceal his involvement in the scheme. As a result of the
overwhelming evidence against him, Husain cooperated
with a criminal investigation into his fraudulent conduct and
pleaded guilty to criminal obstruction of justice. In his guilty
plea, Husain admitted that:
(a) Husain hired Jaclin to advise him
regarding the formation of the shell
companies and to help prepare the corporate
documents, including SEC filings;
(b) from 2008 to at least 2011, Husain
“controlled various publicly traded ‘shell
corporations,’” and he “directed CEOs to
form many of these shell corporations and
controlled the actions taken by the CEOs;”
(c) Jaclin and Husain “agreed that [Husain]
should be considered as a ‘consultant’ only,
even though [he] exercised control over the
companies;”
(d) Husain kept his name off corporate
documents because Jaclin told Husain that
the SEC would be unlikely to approve the
registration statements if he were disclosed to
be an officer or controlling shareholder;
(e) under Jaclin’s guidance, Husain recruited
people whose “names appeared on the
corporate documents and bank accounts as
the company CEOs and officers but who did
not exercise any actual control over the
companies;”

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30 USSEC V. HUSAIN
(f) Jaclin was “fully aware” that Husain had
“final authority on all matters involving the
companies;”
(g) Husain knew that “the shell companies
[he] was creating were valuable because they
allowed the people who acquired them to
completely control the shares and corporate
actions that otherwise appeared to be
legitimate public companies;”
(h) Husain agreed with Jaclin and the
nominee CEO of PR Complete to obstruct the
proceedings of the SEC by concealing facts
surrounding [his] true involvement in PR
Complete; and
(i) specifically, with advice from Jaclin,
Husain “coached” the nominee CEO of PR
Complete “how to testify” in testimony
before the SEC, and “instructed her to testify
falsely by leaving my name out of it” and to
“withhold facts about my involvement” with
the company.
After Husain’s criminal conviction, the SEC filed an
enforcement action against Husain and Jaclin, and Jaclin
settled with the SEC, consenting to an injunction and paying
disgorgement in the amount of roughly $40,000, including
prejudgment interest. Husain did not settle, even as he
conceded that, as a result of his guilty plea, most of the
factual disputes “ha[d] been greatly reduced, if not largely
eliminated.”

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USSEC V. HUSAIN 31
II.
On summary judgment, in calculating the civil penalty
award, the district court first made the legal determination
that Husain’s “gross amount of pecuniary gain” could be
calculated as the total gross proceeds from the sale of the
shell companies, $1,787,000 less the amount that Jaclin paid
in disgorgement pre-interest. The majority reverses,
asserting that there is a genuine dispute of material fact
whether $1,757,000 represents “the gross amount of
pecuniary gain to [Husain] as a result of the violation.” Maj.
Op. 14 (quoting 15 U.S.C. §§ 77t(d)(2)(B),
78u(d)(3)(B)(ii)).
While the majority fails to define the statutory phrase
“gross amount of pecuniary gain,” the disputed facts it
identifies are relevant only if we assume the statute requires
deducting expenses and tracing the ultimate disposition of
gains to each individual defendant. Although the majority
characterizes this issue as a question of disputed fact, this is
a question of statutory interpretation to be determined by
reviewing de novo the text, purpose, and history of the civil
penalty statutes. See Murphy II, 50 F.4th at 842. And the
plain text of the statutes, and our precedent, allows the “gross
amount of pecuniary gain” to be calculated based on the
gross proceeds from the shell companies that Husain
controlled, absent business deductions, which was
undisputedly $1,787,000.
A.
The Securities and Exchange Acts authorize courts to
impose three tiers of civil penalties. See 15 U.S.C.
§§ 77t(d)(2); 78u(d)(3)(B). The statutory “tier determines
the maximum penalty, with the actual amount of the penalty
left up to the discretion of the district court.” SEC v. Kern,

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32 USSEC V. HUSAIN
425 F.3d 143, 153 (2d Cir. 2005). The district court must
exercise discretion to determine the amount of the civil
penalty “in light of the facts and circumstances” of a
particular case. See 15 U.S.C. §§ 77t(d)(2)(A);
78u(d)(3)(B)(i).
The district court may impose first-tier penalties for any
statutory violation. However, if a violation “involved
fraud, deceit, manipulation, or deliberate or reckless
disregard of a regulatory requirement,” the district court may
impose second-tier penalties. See id. §§ 77t(d)(2)(B),
78u(d)(3)(B)(ii).2 At the time of Husain’s violations, the
statute imposed a statutory cap for second-tier penalties of
either “$75,000” for “each such violation” or “the gross
amount of pecuniary gain to such defendant as a result of the
violation.” Id. §§ 77t(d)(2)(B), 78u(d)(3)(B)(ii); 17 C.F.R.
§ 201.1001, Tbl. I.3
Consistent with the plain text of the statute, the district
court properly calculated Husain’s “gross amount of
pecuniary gain” based on the aggregate proceeds of his
securities fraud, without deducting expenses. A “gross” gain
means the “entire” gain “[u]ndiminished by deduction,”
compared to a “net” gain, which means “[t]he final amount
remaining after all other amounts have been taken away;
esp., an amount of money remaining after a sale, minus any
2 The court may also impose a third-tier penalty for violations that
“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.” See 15 U.S.C. §§ 77t(d)(2)(C), 78u(d)(3)(B)(iii).
3 The statutory cap for a third-tier violation can also be calculated as the
defendant’s “gross amount of pecuniary gain.” See 15 U.S.C.
§§ 77t(d)(2)(C), 78u(d)(3)(B)(iii).

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USSEC V. HUSAIN 33
deductions for expenses, commissions, and taxes.”
Compare Gross, BLACK’S LAW DICTIONARY (11th ed.
2019); with Net, BLACK’S LAW DICTIONARY (11th ed. 2019).
Accordingly, if Congress intended courts to deduct business
expenses in calculating a civil penalty under the securities
laws, it would have phrased the statutory cap as the
defendant’s “net amount of pecuniary gain” instead of his
“gross amount of pecuniary gain.”
It was entirely proper under the plain text of the statute
for the district court to calculate Husain’s “gross pecuniary
gain” by using the total amount gained from the sale of the
shells. “[P]ecuniary gain” is simply defined as a “[g]ain of
money or of something having monetary value,” Pecuniary
Gain, BLACK’S LAW DICTIONARY (11th ed. 2019), and
Husain does not dispute that the sale of the shells generated
proceeds of $1,787,000. Husain argues that the statute does
not allow the “gross amount of pecuniary gain” to be
calculated as the “proceeds to the enterprise.” But this
argument ignores the fact that the “enterprise” in this case
did not exist separately from Husain, and instead constituted
a business that he and Jaclin formed, operated, and
controlled.4
4 The majority asserts that a genuine dispute of material fact exists
regarding Husain’s “gross amount of pecuniary gain” because the district
court deducted Jaclin’s pre-interest disgorgement settlement of $30,000
from the gross proceeds from the sale of the shell companies. Contrary
to the majority opinion’s suggestion, however, no legal authority
requires the district court to trace Husain’s “gross proceeds” to him once
the district court deducted Jaclin’s disgorgement. The district court
arguably awarded Husain a civil penalty below the acceptable statutory
cap of his “gross amount of pecuniary gain” of $1,787,000 by deducting
Jaclin’s disgorgement.

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34 USSEC V. HUSAIN
Indeed, under the securities laws, we have held that “[a]
person who controls the distribution of illegally obtained
funds is liable for the funds he or she dissipated as well as
the funds he or she retained.” SEC v. Platforms Wireless
Intern. Corp., 617 F.3d 1072, 1098 (9th Cir. 2010). Husain’s
“gain” can be appropriately calculated as the total “gain”
from the shell factory scheme he orchestrated, because he
concedes he was the control person disseminating the funds
from the sale of the shell companies. While civil penalties
may not be “imposed jointly and severally,” see SEC v.
Pentagon Capital Mgmt., PLC, 725 F.3d 279, 288 (2d Cir.
2013), the total gains amassed here may properly be used to
calculate Husain’s “gross amount of pecuniary gain”
because both Jaclin and Husain gained from each dollar of
the sale of the shell companies, even if they ultimately
disseminated those funds elsewhere. As the majority
opinion acknowledges, courts have routinely calculated civil
penalties based on gross pecuniary gains to all entities
involved in a scheme, recognizing that “where multiple
defendants mutually benefitted from the same gains, the best
calculation of a single defendant’s gain may be the total
gains obtained by the group through that defendants’
violations.” SEC v. Fowler, 440 F. Supp. 3d 284, 299
(S.D.N.Y. 2020), aff’d as modified, 6 F.4th 225 (2d. Cir.
2021), cert. denied, 142 S. Ct. 590 (2021); see also SEC v.
Cole, 661 F. App’x 52, 54 (2d Cir. 2016) (holding that the
district court did not abuse its discretion in awarding $12.2
million in civil penalties to each defendant, or the “total gain
to the fraudulent scheme”); SEC v. GTF Enter., Inc., No. 10-
CV-4258, 2015 WL 728159, at *2 n.2 (S.D.N.Y. Feb. 19,
2015) (holding that “such attribution of gains to an
individual defendant is proper” in calculating “gross
pecuniary gain”); SEC v. Interlink Data Network of Los

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USSEC V. HUSAIN 35
Angeles, Inc., No. 93-3073, 1993 WL 603274, at *13 (C.D.
Cal. Nov. 15, 1993) (awarding civil penalties of $12,285,053
based on the aggregate dollars invested in Interlink’s
common stock); SEC v. Amerindo Inv. Advisors, Inc., No.
05- 5231, 2014 WL 2112032, at *11 (S.D.N.Y. May 6,
2014).
That a civil penalty may be calculated based on the gross
proceeds to a scheme, without deductions, comports with the
purpose and legislative history of the civil penalty statutes.
Several years after empowering the SEC to seek penalties
for insider trading, Congress recognized that the SEC had
“very limited” authority to seek penalties for other violations
of the securities laws. H.R. Rep. 101-616, at 17 (1990). To
bolster the SEC’s enforcement authority, Congress passed
the Securities Enforcement Remedies Act and Penny Stock
Reform Act of 1990 “to strengthen and broaden the SEC’s
enforcement powers by authorizing new civil money
penalties for a range of securities violations.” S. Rep. No.
101-337, at 2 (1990). In amending the law, Congress
explicitly intended to award “substantial money penalties, in
addition to the disgorgement of profits . . . for the deterrence
of securities law violations that otherwise may provide great
financial returns to the violator.” H.R. Rep. No. 101-616, at
17 (1990). These remedies would empower “both the courts
and the Commission with greater flexibility to tailor a
remedy to the seriousness of the violation.” Id. at 18–19.
Husain’s proposed interpretation of “gross amount of
pecuniary gain” contradicts the express purpose of the civil
penalty statutes: to grant courts the power to award penalties
that punish and deter future violations of the securities laws.
Holding that a defendant’s “gross amount of pecuniary gain”
could not be interpreted as the gain to the “enterprise” would
essentially permit defendants like Husain to funnel the

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36 USSEC V. HUSAIN
proceeds of their fraud to entities that they themselves
established as part of the scheme, and then avoid civil
penalties by claiming they never received the money.
Indeed, this appears to be Husain’s gambit when he claims
that he did not “control” the offshore accounts of two entities
that received the “gross proceeds” of the sale of the shell
companies, even though he orchestrated and controlled the
sale.
Because the district court’s interpretation of “gross
amount of pecuniary gain” comports with the plain text,
purpose, and history of the civil penalty statutes, and our
precedent, the district court did not err in using the sale
proceeds from the shell companies in calculating Husain’s
“gross pecuniary gain.”
B.
The majority avoids interpreting the civil penalty statutes
by asserting that there are “genuine disputes of material fact”
as to whether $1,757,000 represents “the gross amount of
pecuniary gain to [Husain] as a result of the violation.” The
majority’s “disputed facts” amount to a dispute about how
the civil penalties statutes should be interpreted, and the
majority implies, without citing any precedent or authority,
that the statutes have a tracing requirement for the final
disposition of ill-gotten gains. But the “disputed” facts
identified by the majority are immaterial to the outcome of
the case.
The majority first states that Husain’s “admissions
establish only that he and Jaclin received total sales
proceeds of $1,787,000,” which create a genuine issue of
material fact about whether $1,757,000 represents Husain’s
or Jaclin’s “gross pecuniary gain.” Maj. Op. 15. In support,
the majority relies on “Husain’s declaration that legal fees of

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USSEC V. HUSAIN 37
$287,000 were paid from the sales proceeds” to argue that a
genuine issue of material fact exists regarding whether the
$287,000 spent on legal fees represents Jaclin’s or Husain’s
“gross amount of pecuniary gain.” Maj. Op. 18. The
opinion additionally cites Husain’s statements that he does
“not admit or agree that [his] net proceeds, the amount that
would be subject to an order of disgorgement is $1.6
[million] or is anything close to it” and his “best estimate”
of his “net proceeds . . . [is] closer to $75,000.” Maj. Op. 16
n.14.
However, it is immaterial whether Jaclin or Husain
pocketed the legal fees of $287,000, because Husain gained
from the value of the use of Jaclin’s legal services in the sale
of the shell companies, even if he did not retain $287,000 in
profit. Likewise, it does not matter whether Husain
“admit[s] or agree[s] that [his] net proceeds” are close to
$1.6 million because the statutory cap is Husain’s “gross
amount of pecuniary gain,” not his “net amount of pecuniary
gain.” As Husain admits, the purpose of the shell factory
scheme was to “realize[] gross proceeds in connection” with
the sale of the shell companies, and those proceeds are
therefore an appropriate measure of Husain’s “gross amount
of pecuniary gain.”
The majority opinion’s analysis conflates the statutes’
requirements for the calculation of disgorgement, which
must be a reasonable approximation of a defendant’s profits
from a violation of the securities law, see Liu v. SEC, 140 S.
Ct. 1936, 1940–41 (2020), with the calculation of civil
penalties, which has no such requirement.5 See SEC v.
5 The majority opinion suggests that the district court confused the two
requirements for disgorgement and civil penalties by basing its
calculation of Husain’s “gross proceeds” on “the SEC’s calculation of

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38 USSEC V. HUSAIN
Razmilovic, 738 F.3d 14, 31 (2d Cir. 2013). Calculating an
order of disgorgement requires more precision than an award
of civil penalties, because disgorgement is intended as
equitable relief and “equity never ‘lends its aid to enforce a
forfeiture or penalty.’” Liu, 140 S. Ct. at 1941 (quoting
Marshall v. Vicksburg, 82 U.S. 146, 149 (1872)). In other
words, disgorgement “simply restores the status quo,” id. at
1943 (cleaned up), while civil penalties are intended to be
punitive. See Official Comm. of Unsecured Creditors of
WorldCom, Inc. v. SEC, 467 F.3d 73, 81–82 (2d Cir. 2006)
(discussing H.R. Rep. No. 101-616 (1990)). Reading a
tracing requirement into the text of the civil penalty
statutes—as the majority heavily implies we should—would
contradict Congress’s express intent to afford courts wide
discretion in awarding substantial civil penalties for
violations of securities law.6
Husain’s proposed disgorgement.” Maj. Op. 19 n.15 (emphasis in
original). In fact, the district court properly construed the separate
requirements. The SEC originally asked the district court to award
$1,757,000 in disgorgement, or a “reasonable approximation” of
Husain’s profits via his proceeds, as well as $1,757,000 in civil penalties
equivalent to his “pecuniary gain.” Dist. Ct. Dkt. 97-1 at 20–23. In the
interim, the Supreme Court decided Liu, which clarified that
disgorgement should be limited to a defendant’s “net profits.” Liu, 140
S. Ct. at 1946. As the SEC had originally calculated Husain’s
disgorgement as his “gross proceeds,” the SEC requested that the district
court reopen discovery to determine Husain’s “net profits.” The district
court denied the SEC’s request for disgorgement, finding that the
$1,757,000 civil penalty—or Husain’s “gross proceeds”—was
“sufficient punishment and deterrence to address Husain’s violations of
the securities law.”
6 Husain separately argues that the Supreme Court’s decision in Liu
demonstrates that there is a “distinction between gross receipts and the
defendant’s ‘gross amount of pecuniary gain.’” In Liu, the Supreme
Court imposed two limitations on disgorgement. First, that a violator

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USSEC V. HUSAIN 39
It is similarly irrelevant that Husain disputes that he
controlled two of the offshore accounts—Ucino and Liric—
that received payments for the shell companies. Husain
admitted that, in the majority opinion’s words, he had “final
authority” over the shells, which he sold for the purpose of
profiting from his fraudulent scheme. Maj. Op. 5, 15. He
stated in his declaration that he “made no secret about the
fact or extent of [his] involvement as a ‘control person’ in
these transactions” and that, “[i]n all cases, [he] dealt
directly at some point with the purchasers/investors who
knew that [he] was the control person.” Husain also admits
that Ucino and Liric were “affiliated with” him, that he
“exercised influence” over them, and that he was the main
signatory on the Ucino account. The only evidence that
Husain did not “control” Ucino and Liric is his conclusory
statement in his declaration that he did not control them. But
“conclusory allegations unsupported by factual data are
insufficient to defeat . . . [a] summary judgment motion.”
could only be held liable “for benefits that accrue to his affiliates”
because a theory of joint-and-several liability would be “at odds with the
common-law rule requiring individual liability for wrongful profits.”
Liu, 140 S. Ct. at 1949. Second, the Court held that “courts must deduct
legitimate expenses before ordering disgorgement.” Id. at 1950.
But Liu addressed only disgorgement, not the imposition of civil
penalties, and disgorgement is not at issue in this case. Disgorgement
focuses on “simple gains,” not the “gross amount of pecuniary gains.”
Amerindo, 2014 WL 2112032, at *11. Indeed, “nothing in Liu disturbs
the Court’s power to order civil penalties.” SEC v. Penn, No. 14-581,
2021 WL 1226978, at *14 n.23 (S.D.N.Y. Mar. 31, 2021); see also SEC
v. de Maison, No. 18-2564, 21-620, 2021 WL 5936385, at *2 (2d Cir.
Dec. 16, 2021) (“By emphasizing that equitable disgorgement is limited
to the ‘net profits from wrongdoing,’ the Supreme Court severed any
equation of disgorgement amounts from the ‘gross amount of pecuniary
gain,’ that constitutes the maximum civil penalty for a third-tier civil
violation.” (internal citations omitted)).

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40 USSEC V. HUSAIN
Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912,
922 (9th Cir. 2001).
Accordingly, the majority’s asserted disputed “facts” are
material only if we depart from the courts’ interpretations of
“gross amount of pecuniary gain” to read a tracing
requirement into the text of the statute. And that is an
interpretation we must reject as the statutes’ plain text, as
well as precedent, has no such requirement for the
calculation of civil penalties. As the sale of Husain’s shell
companies undisputedly grossed $1,787,000, the district
court properly determined Husain’s “gross amount of
pecuniary gain” in the first instance, and it is unclear from
the majority opinion what relevant facts the district court
could uncover on remand.
III.
In addition to determining that Husain’s “gross
pecuniary gain” was undisputedly $1,787,000, the district
court determined that Husain deserved the maximum civil
penalty by weighing the five factors set out in Murphy,
which include assessing a defendant’s scienter and
contrition. The majority holds that Husain established
genuine issues of material fact regarding the “degree of [his]
scienter and his recognition of the wrongful nature of his
conduct.” Maj. Op. 20. The majority reasons that the
district court impermissibly assessed Husain’s “credibility”
when evaluating his contrition and scienter on a summary
judgment record. In doing so, the majority improperly relies
on SEC v. Koracorp Industries, 575 F.2d 692 (9th Cir.
1978), a case we have rejected as applying in this context.
While the majority correctly identifies the proper
standard of review for the determination of civil penalties—
abuse of discretion—it improperly reviews the district

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USSEC V. HUSAIN 41
court’s Murphy analysis de novo to reverse the court’s
weighing of the factors. Here, we have an uncontroverted
record as to Husain’s culpability. In such a case, our
precedent holds that the district court properly may balance
uncontroverted record facts to assess a defendant’s
credibility to determine a remedy on summary judgment.
See Murphy II, 50 F.4th at 847, 851. The majority does not
identify any evidence that warrants reversing the district
court on the “highly deferential standard” of abuse of
discretion. Gonzales v. Free Speech Coal., 408 F.3d 613,
618 (9th Cir. 2005).
A.
To determine a remedy for a violation of the securities
laws, the Murphy test requires that courts “assess the totality
of the circumstances surrounding the defendant and his
violations” and weigh “the degree of scienter involved; the
isolated or recurrent nature of the infraction; the defendant’s
recognition of the wrongful nature of his conduct; the
likelihood that, because of the defendant’s professional
occupation, future violations may occur; and the sincerity of
his assurances against future violations.” Murphy, 626 F.2d
at 655. While the Murphy court originally applied the test to
determine whether injunctive relief was appropriate, courts
in the Ninth Circuit “routinely consider the five factors
established in SEC v. Murphy” to calculate civil penalties.
SEC v. Wilde, No. 11-0315, 2012 WL 6621747, at *16 (C.D.
Cal. Dec. 17, 2012), aff'd sub nom. SEC v. Wilde, 669 F.
App'x 423 (9th Cir. 2016); see also SEC v. mUrgent Corp.,
No. 11-0626, 2012 WL 630219, at *2 (C.D. Cal. Feb. 28,
2012) (“Like a permanent injunction, civil penalties are
designed to deter the wrongdoer from similar violations in

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42 USSEC V. HUSAIN
the future, so courts frequently apply the factors set forth in
SEC v. Murphy.”).7
The majority opinion incorrectly states that “[w]e have
not previously addressed” what standard of review applies
to the district court’s weighing of factual findings under the
Murphy factors. Maj. Op. 12. As we held just last October,
we review “the district court’s remedies decision for an
abuse of discretion” absent a question of law regarding the
civil penalty statutes. Murphy II, 50 F.4th at 842 (citations
omitted); see also SEC v. Yang, No. 21-55437, 2022 WL
3278995, at *2 (9th Cir. Aug. 11, 2022) (affirming a civil
penalty of $1,938,600, noting that the district court did not
abuse its discretion in “determin[ing] that a gross pecuniary
gain penalty was appropriate in light of all the Murphy
factors”); SEC v. Feng, 935 F.3d 721, 737 (9th Cir. 2019);
Platforms Wireless, 617 F.3d at 1096.8
7 There is a wealth of district court orders in our circuit weighing the
Murphy factors to determine the amount of civil penalties, including
summary judgment orders. See, e.g., SEC v. CMKM Diamonds, Inc.,
635 F. Supp. 2d 1185, 1193 (D. Nev. 2009) (“Given the gravity of their
actions, the extent of their fraud, and the magnitude of their unjust
enrichment, penalties equal to each defendant's gross pecuniary gain is
warranted. The Murphy factors confirm the propriety of this
calculation.”); SEC v. Blockvest, LLC, No. 18-2287, 2020 WL 7488067,
at *5 (S.D. Cal. Dec. 15, 2020) (“[C]ourts frequently apply the Murphy
factors for permanent injunctions when assessing civil penalties.”); SEC
v. Flowers, No. 17-1456, 2018 WL 6062433, at *6 (S.D. Cal. Nov. 19,
2018) (same).
8 Our sister circuits additionally review a courts’ remedies decision under
the civil penalty statutes for an abuse of discretion on summary
judgment. See SEC v. Rajaratnam, 918 F.3d 36, 41 (2d Cir. 2019); SEC
v. Warren, 534 F.3d 1368, 1369 (11th Cir. 2008) (per curiam). The
Second Circuit has notably adopted a functionally identical version of
the Murphy factors to assess civil penalties, which are also reviewed for

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USSEC V. HUSAIN 43
In Murphy II, we held that a district court did not abuse
its discretion in imposing injunctive relief and civil penalties
for three individuals—including an award of $1,761,920 in
civil penalties—that were calculated under the Murphy
factors on a summary judgment record. Murphy II, 50 F.4th
at 842. First, we held that “[w]e review a district court’s
grant of summary judgment” on securities law violations “de
novo,” but review “the district court’s remedies decision for
an abuse of discretion” absent “legal issues, such as whether
a remedy violates a statute or the Constitution,” which are
reviewed de novo. Id. Relying on the wide scope of the
Murphys’ undisputed violations, we next held that the
district court did not “abuse its discretion” in awarding
substantial civil penalties. Id. at 849 (emphasis added).
Turning to the district court’s injunctive relief determination,
we held that the district court did not abuse its discretion in
determining the Murphys’ degree of contrition under the
Murphy factors, even in the face of their argument that “the
district court impermissibly weighed credibility at the
summary judgment stage by discounting their assurances
against future violations.” Id. at 851. As “the Murphys’
an abuse of discretion. In SEC v. Haligiannis, the court assessed a civil
penalty against a defendant in the amount of $15,000,000 on summary
judgment by looking to a number of factors, including “(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.” 470 F. Supp. 2d
373, 386 (S.D.N.Y. 2007) (citing Second Circuit cases). The Second
Circuit has reviewed a calculation of culpability under the Haligiannis
factors and affirmed a civil penalty award as high as $92,805,705, equal
to the amount of the defendant’s “gross amount of pecuniary gain” on
summary judgment. See, e.g., Rajaratnam, 918 F.3d at 45–46.

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44 USSEC V. HUSAIN
assurances are contradicted by their current involvement in
the securities industry and apparent failure to appreciate the
wrongfulness of their past conduct,” we held that “the
district court acted within its discretion by imposing
injunctive relief.” Id. at 852.
While in Murphy II we reviewed the district court’s
analysis of the Murphy factors for an abuse in discretion in
the context of injunctive relief on summary judgment, the
Murphy test likewise applies to civil penalties. Thus, we
review a district court’s Murphy factor analysis for an abuse
of discretion, even where a defendant disputes the district
court’s underlying determinations as to the degree of scienter
or contrition.
B.
There is no genuine dispute of material fact as to
Husain’s scienter, as he conceded his scienter in his guilty
plea to obstruction of justice, his sworn declaration in the
civil action, and his Opening Brief, which states in relevant
part that “it is a given here that Husain qualifies (for most of
the shell companies) for the second tier and had meaningful
scienter.” The majority contends that “Husain raised a
genuine issue of material fact on the degree of scienter”
because his sworn declaration blames Jaclin as his lawyer
for instructing him to lie on his SEC forms and indicates
“that he only intended to deceive the SEC, not investors.”
Maj. Op. 23. However, we have held that scienter under the
securities laws does not turn on a defendant’s “intent to
defraud” specific investors, see Vernazza v. SEC, 327 F.3d
851, 860 (9th Cir. 2003), but instead on whether a defendant
intended to engage in the unlawful scheme and make false
and misleading statements to the SEC. See Tellabs, Inc. v.
Makor Issues & Rights, Ltd., 551 U.S. 308, 319 (2007)

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USSEC V. HUSAIN 45
(describing scienter as “a mental state embracing intent to
deceive, manipulate, or defraud” (citation and internal
quotation marks omitted)); Platforms Wireless, 617 F.3d at
1092 (“Scienter can be established by intent, knowledge, or
in some cases ‘recklessness.’” (citation omitted)).
Here, it is undisputed that: Husain knowingly recruited
and installed nominal CEOs for shell companies that he
actually controlled and had final authority over; he
assembled straw shareholders who did not use their own
money to purchase the shares of shell companies; he
knowingly filed dozens of false registration statements and
reports with the SECs; and then obstructed justice by
coaching the testimony of the companies’ puppet CEOs,
creating burner e-email accounts, and hiring consultants to
scrub his emails—all to intentionally conceal his fraudulent
conduct. The district court weighed Husain’s declaration
against his uncontroverted and admitted actions, and found
that the evidence conclusively established that Husain
knowingly engaged in a fraudulent shell factory scheme
aimed at deceiving the SEC. As a result, the district court
did not abuse its discretion in finding that Husain acted with
a high degree of scienter.
C.
There is likewise no genuine dispute of material fact
regarding Husain’s contrition. The majority holds that
Husain created a genuine dispute of material fact regarding
his contrition because of his declaration, which claims that
he is “remorseful,” and because the district court failed to
identify “undisputed evidence that Husain’s scheme
victimized individual investors.” Maj. Op. 22.
The majority’s “disputed facts” are again disagreements
with how the district court balanced undisputed facts in the

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46 USSEC V. HUSAIN
record to assess Husain’s contrition. As we held in Murphy,
however, Husain should not be able to avoid liability by
creating unsubstantiated disputes of material fact in a sworn
declaration, including through mere “statements of
reformation.” Murphy, 626 F.2d at 656. Moreover, the
district court did acknowledge Husain’s expressions of
remorse, but weighed his claims of remorse against his
undisputed actions and other uncontroverted statements.
Importantly, the district court found that “Husain fail[ed] to
recognize the wrongful nature of his conduct” by failing to
“acknowledge that there were victims of his fraudulent
scheme” including the “impact of his illegal conduct on the
market’s integrity.”
There is no evidence in the record that Husain ever
admitted responsibility for the impact of his actions on
market integrity, and plenty of undisputed evidence that he
never took responsibility. For example, during the pendency
of this action, Husain labeled his conduct only a “mistake,”
blamed Jaclin by arguing that Jaclin’s conduct was “actually
more serious” than his, and then stated that he “did not cause
any investors or the investing public to experience losses.”
Indeed, Husain’s continued insistence that there were no
“victims” of his misconduct underscores his lack of
contrition. The securities laws are intended to protect not
only individual victims of fraud but also “‘to insure honest
securities markets and thereby promote investor
confidence.’” SEC v. Zandford, 535 U.S. 813, 819 (2002)
(quoting United States v. O’Hagan, 521 U.S. 642, 658
(1997)). Husain only expressed contrition for deceiving the
SEC, not for the impact of his actions on the public trust.
Further, as the district court noted, Husain “only stopped
his scheme because he got caught.” We have held that
“[p]romises of reformation and acts of contrition” are not

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USSEC V. HUSAIN 47
“conclusive or even necessarily persuasive, especially if no
evidence of remorse surfaces until the violator is caught.”
Koracorp Indus., 575 F.2d at 698. The district court
weighed Husain’s uncontroverted actions and statements
against the late-in-the-day statements of remorse in his
declaration and found Husain’s statements of remorse
lacking. Such an assessment of contrition under the Murphy
factors is not an abuse of discretion on summary judgment,
but exactly what the Murphy test demands to assess civil
penalties.
D.
The heart of the majority’s argument rests on the
proposition that any assessment of the defendant’s
“credibility”—including his degree of scienter or
contrition—is almost always inappropriate on a summary
judgment record. The majority’s logic could effectively
preclude any court from awarding injunctive relief or
maximum civil penalties without an evidentiary hearing,
even for confessed violations of the securities laws, because
assessing the Murphy factors requires that the district court
weigh evidence of a defendant’s scienter and contrition.9
9 The majority opinion also implies that the district court erred by failing
to assess Husain’s credibility “in the light most favorable to [him].” Maj.
Op. 23 n.19. But assessing a defendant’s scienter or contrition under the
Murphy factors on summary judgment does not mean giving a defendant
a free pass where there are no genuine disputes of material fact. Like
Husain, the defendants in Murphy and Murphy II disputed the degree of
their scienter and contrition in sworn declarations, yet we affirmed in
both cases that it was entirely proper for the district court to weigh those
declarations unfavorably against the defendants’ undisputed actions. See
Murphy, 626 F.2d at 656; Murphy II, 50 F.4th at 851. The majority
opinion’s logic effectively means that no district court could ever award
sweeping injunctive relief or maximum civil penalties on summary

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48 USSEC V. HUSAIN
And, as we held in Murphy and Murphy II, an evidentiary
hearing is not required to determine a remedy for violations
of the securities laws under the Murphy factors.
In Murphy itself, for example, the district court
concluded that injunctive relief was appropriate on a
summary judgment record. Murphy appealed, arguing that
his “statements of reform” in a sworn affidavit created a
genuine dispute of material fact regarding his contrition.
Murphy, 626 F.2d at 656. Murphy relied upon the same
passage from Koracorp Industries quoted by the majority,
which states that “courts have long recognized that summary
judgment is singularly inappropriate where credibility is at
issue.” 575 F.2d at 699. Distinguishing Koracorp
Industries, we rejected Murphy’s argument that “credibility”
could not be assessed on a summary judgment record:
Murphy’s argument cannot prevail. One
obvious problem with his position is that it
implies that a defendant may always defeat a
permanent injunction on summary judgment
if he merely states under oath that he will not
commit violations in the future. If the SEC
were to resolve all other issues on summary
judgment, such a rule could prevent the
Commission from attempting to gain
permanent injunctions on motions for
summary judgment in those cases when the
clearest violations have been committed . . . .
judgment, as every defendant would simply create dubious disputes of
material fact regarding their scienter or contrition in sworn declarations.

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USSEC V. HUSAIN 49
This case is clearly distinguishable from SEC
v. Koracorp Industries, Inc., [] on which
Murphy relies heavily. In Koracorp, this
court reversed the grant of a summary
judgment for defendants on the injunction
issue, because there was tremendous dispute
about the culpability of each of the
defendants, in addition to the question of the
bona fides of their statements of intent to
comply. It was impossible for the trial court
on summary judgment to balance the
culpability against the statement of
reformation. In Murphy’s case, however, his
culpability for the registration violation was
established conclusively, and the trial judge
could properly decide that he would grant the
permanent injunction whether he believed
Murphy or not.
626 F.2d at 656–57.
In Murphy II, we again rejected an argument that the
district court improperly weighed the defendants’
“credibility” by assessing their contrition, upholding the
grant of an injunction under the Murphy factors. Murphy II,
50 F.4th at 851. We distinguished Koracorp because “there
is no dispute here over the Murphys' role in the [] scheme,
and their culpability is not at issue.” Id. at 852. Similarly, in
SEC v. M & A West, Inc., 538 F.3d 1043 (9th Cir. 2008)—
which the majority also relies upon—the defendant’s
culpability was also at issue. There, the defendant Medley,
an underwriter, presented legal opinions that demonstrated
that he may have acted in good faith and did not understand
his actions violated securities laws. Id. at 1054. As

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50 USSEC V. HUSAIN
Medley’s scienter was genuinely in dispute, we remanded
his case for an evidentiary hearing. Id. at 1055.
But here, there is no genuine dispute as to Husain’s
culpability because he confessed to his actions and knowing
state of mind. And it is entirely permissible, and even
encouraged in the interest of judicial efficiency, for the
district court to weigh a defendant’s statements denying
responsibility against his uncontroverted actions and assess
a remedy under the Murphy factors on summary judgment.
IV.
Perhaps the majority’s concern in this case stems from a
sense that Husain received an outlier punishment for his
pattern of admitted misconduct. The majority’s sympathies
are misplaced, however, because civil penalties in excess of
$1 million are commonplace for violations of the securities
law, even on summary judgment.10 Here, Husain engaged
10 See, e.g., Murphy II, 50 F.4th at 848 (affirming tier-one civil penalties
of $1,761,920); SEC v. Alpine Sec. Corp., 982 F.3d 68, 85 (2d Cir. 2020)
(affirming that it was not an abuse of discretion to award tier-one civil
penalties in the amount of $12,000,000 on a summary judgment record);
Rajaratnam, 918 F.3d at 39 (affirming a civil penalty of $92,805,705 on
summary judgment); CMKM Diamonds, Inc., 635 F. Supp. 2d at 1194
(ordering on summary judgment a civil penalty of the defendant’s “gross
pecuniary gain” of $26,400,000); Haligiannis, 470 F. Supp. 2d at 386
(ordering on summary judgment a civil penalty of $15,000,000 equal to
the defendant’s pecuniary gain); SEC v. Kenton Capital, Ltd., 69 F. Supp.
2d 1, 17 (D.D.C. 1998) (imposing civil penalties of $1,200,000 on a
summary judgment record); SEC v. Invest Better 2001, No. 01- 11427,
2005 WL 2385452, at *5 (S.D.N.Y. May 4, 2005) (imposing a “civil
penalty of $1,273,731” on summary judgment); SEC v. Credit Bancorp,
No. 99-11395, 2002 WL 31422602, at *2–3 (S.D.N.Y. Oct. 29, 2002)
(authorizing a maximum penalty of “gross pecuniary gain” on summary
judgment); SEC v. Milan Grp., Inc., 124 F. Supp. 3d 21, 27 (D.D.C.
2015) (same).

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USSEC V. HUSAIN 51
in a years-long scheme aimed at defrauding the SEC and the
investing public, and only stopped his conduct after he got
caught. Considering “the facts and circumstances” of
Husain’s particular case, see 15 U.S.C. §§ 77t(d)(2),
78u(d)(3)(B), a penalty of $1,757,000 is proportional to the
degree of Husain’s misconduct, and certainly not an abuse
of discretion.
While the majority attempts to reframe this case as a
question of disputed fact, its approach is wrong as a matter
of law. Ignoring the plain text of the statute and past
precedent, the majority misinterprets the statutory
requirements under the securities laws for the calculation of
civil penalties. And recent precedent forecloses the
majority’s blinkered understanding that a district court
should not assess credibility on summary judgment, even
where that credibility assessment comes from weighing
undisputed and admitted facts and statements in the record.
If we accept the majority’s interpretation of the Murphy test,
it would likely “prevent the Commission from attempting to
gain [civil penalties] on motions for summary judgment in
those cases when the clearest violations have been
committed.” Murphy, 626 F.2d at 656. This will result in
wasteful evidentiary hearings and will thwart the SEC’s
ability to punish the most flagrant and obvious violations of
the securities laws.
Because the district court did not abuse its discretion in
assessing an award of $1,757,000 in civil penalties against
Husain, and the majority’s holdings are foreclosed by
controlling precedent, I respectfully dissent.

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