nonetheless imposed a draconian three point eight million dollar civil penalty against mr valdez the civil penalty was calculated pursuant to a methodology that violated the plain terms of the underlying authorization statutes for two distinct reasons all statutes and securities act of one nine hundred thirty three and the securities exchange act of one nine hundred thirty four with respect to an imposition of a third tier civil penalty set a maximum civil penalty with suspected two prongs and only the second prong is relevant here and that holds that that the problem is that the civil penalty maximum civil penalty should not exceed quote the gross amount of the cuny or again to such defendant as a result of the violation in the first instance we have this court needs to determine what those two such defendant me now two courts of appeals have already looked at this issue the court of appeals for the held that the language to such defendant means that the court is obliged to conduct an analysis of the peculiar again to that specific defendant on whom the civil penalty is being imposed but that's not what happened here perhaps because there was no trial in this case and the court relied solely on findings of fact based on a preliminary injunction hearing the only fact finding in the record with respect to what the court deemed to be between here again was the net amount that the three corporate th defendants two corporations and mr valdes had received from investors as of the date of the appointment by the court of the receiver that's effectively the same penalties because the receiver was still doing his job he had collected millions of dollars that still be had still had to be distributed to investors and he had made subsequent distributions after his appointment the court recognized with respect to discouragement that that was indeed the case that it was premature because we didn't yet know what the investors out of pocket losses was were so the court imposed a very modest discouragement then said bill would revisit this once the receiver is done with his work and ultimately subsequent the receiver made a final distribution and the court recognized that there were no out of pocket investor losses and therefore no disgorgement was warranted with the spec to mr valdez but with respect to the civil penalty the court did not give any attention to the receiver's efforts it merely took a number in the record from the preliminary injunction hearing that was the dollar amount of net investor payments to the defendants as of the date of the receiver's appointment and ignored the fact that subsequent to the receiver's appointment the receiver had rick hendrick turn to investors more than three and a half million dollars three point one billion dollars of which was the liquidation of particular securities that had been purchased by the defendants and held for the investors at all times in trust by u s bank the court didn't do any so perhaps the court got confused between disgorgement and civil penalty but any event recognized the premature nature of the motion with respect to discouragement but went ahead and just took that somewhat arbitrary number of three point eight c with respect to this so on the first point sorry then how are we punishing him if we don't saddle them with some sort of oh absolutely a civil penalty is one tier warranted here the what i'm asking the court to oblige the district court to do is to hold a hearing to determine which it never did and which is wasn't in the record again perhaps because we relied solely on the printer injunction hearing to near again what money did he receive he got salary he had some expenses paid he may have received some fees but that's the analysis that needs to be done as to what his  was an analysis that the district court never undertook now i'm not saying that there might not be monies that were received by the evolution entities the two defendants the two corporate defendants that might not after showing factual showing there were two defendants and an individual just like here and the court imposed joint and several liability as to the corporation and the individuals and so the f c c is and yet in the second circuit said that's inappropriate you can't do that you have to have a such defendant and corporate entities that they control one could be an adult was the monies received by the corporate entities and then subsequently conclude monies there after we then went to the individual defendant or somehow he basically all this money was used to purchase securities that were held for investors at all time under the control of the internet under the control of the entity look controlled by the individual that's correct but the point is that what is it still requires an independent analysis of that going again to such defendant it's not you just don't look through the corporate entity you have to shows the government has to have some kind of analysis some kind of shelling and this is what the district court in the i c c huf in florida found you have to show a game causation you have to show that the individual defendant benefited from the culinary game you know she was wearing the record you asked the district court to make particular findings that weren't me but what happened here is i'm somewhat unusual and perhaps this is why we're in the this is the problem is that there was a preliminary injunction hearing  granted leave to its role and then the parties all stipulated before i was involved that they would be they would basically move to final judgment based on the record as it existed then from the primary injunction he district were to be ignored your stipulation to go with your predecessor stipulation to go with this record and his did convene a hearing and created a record in all that that c s e sees burden this is their burden of proving compliance with  valdes benefited from that you want us your your remedy that you seek if you hit a home run here would be that we would break kate the penalty and send it back to the district court to hold a hearing second piece of this and i'm asking the court to provide and why this judge why the civil penalty was improper under the statute and why the i would hope that that if the finds that the hearing needs to be held off for some guidance as to this is what is  again in this context and the f c c basically just took a the net number as of the received his appointment it ignored the fact that there was three point one million dollars in securities held  faced with this motion was this what this application is woefully premature you've appointed receiver judge the receivers to be collecting millions of dollars we need to ascertain what the impact of the receiver's efforts are at the end of the day before we can ascertain what  again two sets defended with respect to the three point one million dollars it's a pure question of law and in the discourse your students your jurisprudence that is something that can be addressed by this court notwithstanding the failure to raise it below but under the circumstances here where the court basically sort of blindsided the defendants and acknowledged that it was premature not to go to final judgment with respect to everything on the recei already amassed millions of dollars liquidated these securities had third party claims outstanding that it was premature to do it but then in that circumstance to have the court find that the disgorgement was unwarranted to do be no disco required because of all the money they returned the nonetheless take that discouragement number as of the receiver date and impose it as a civil penalty no one could have anticipated that your honor it was it would be really manifestly unfair under that circumstance such analysis was conducted at the preliminary injunction hearing and that's perhaps why we're faced with that problem here but the s e c it's their burden and if they had understood what their obligations were to meet these final  imposition of a penalty they should not have stipulated that this they were going to rest on the facts that had previously been determined they should have requested a news issue a hearing and then we could have had a full adjudication of findings of fact as to valdes personally benefited from and again i'm not trying to if they were monies received by the evolution entities that he controlled that he personally benefit from benefited from that could be a component piece of the civil penalty calculation but there are no other cases that where you just take a lump sum of investment money sent to the investment entities and that's deemed a peculiar again to the individual these but it's undisputed millett three million case was that he misrepresented the risk the risk nature of the profile of the investor of the securities that's it he was never accused of taking any interest or money but there were some allegations that miscarries and exchange commission i will go back and look clarify a little bit what happened below first of all at the preliminary injunction hearing the parties agreed before the hearing began that that hearing would entered the record at page eight seventy four so then getting back to the substance of the arguments beginning with his joint several liability argument that argument was waived and it also fails on the merits because the were essentially functioned as one unit since such that the entities gain was about as he says now that the question done an independent analysis but in fact the evidence and of court's findings were already findings first most importantly the court found that about his own to control the entities which was never disputed second as further evidence that he treated the entities gainst as his own he used those funds regularly for personal which is clear but he's kind of it he's making a slightly more subtle argument here than that and that is that given that even at the time he was arrested so you could say well let's use that number because they're after we you know we made him be good and so that can't really count in his favor he's saying even at that moment there's this three million dollars sitting in us bank in trust for these people why does he not get the benefit of that even if we otherwise kind of tag him with the wrong as of the point of arrest or the point of the receivers or point or whatever understood that might be the case if in fact the strips had been held for the benefit of the investors but the record shows that that was not the case that in fact they were held for the benefit of valdez and that he controlled them at it was dictated by the agreements governing the notes that the trustee would have no discretion responsibility over the management of the loans and that evolution would maintain all of that so you're saying this is that what was held is the equivalent of a bank account you know  bank account of damien val they're sitting at u s bank and him saying well i was hoping that that was that was for all these people of course the days caught you're saying discordant after credit that kind of argument even if it had been made which it kind of won but it was and in fact there's evidence undisputed evidence below that that characterization is incorrect because first of all it's undisputed that all of the cash flow from the notes wint to evolution which kept it for its own accounts and not not setting also undisputed and there's also the three million at u s bank you're saying how did i understand he's taking the proceeds from self but how is he treating the three million that's in us bank or that they're holding the title to as his he's well the what was the  point one million didn't come until after the receiver had sold the strips so what with the three point one million also gives him credit for is of course the effort of the receiver to get value out of the scripts that he was again trading as  pretty good for example because it's lucky both for the investors and for vendors because that means that he doesn't he didn't have to go into his pocket to pay any discouragement because his entities essentially paid for him by and through the receiver so he was like in both senses  and that's because it again to the skin was caught early on but again certainly in that with regard to the penalty which is based which is intended to punish it it certainly should not be taking into account what what the investors eventually got back purchasing in part were i was strips a component piece of an s b a loan that only a portion of which was guaranteed by the government that was the crux of the misrepresentation the court found so it's not in any way the case this is not a person this is not a made money from this president it's a nominal trustee in terms of u s banking and second of all he's taking all the proceeds and keeping him that is her art that's not what's in the record it's not it's in the record at all and you can look at the record and i can cite the pages but that's not supported by the record to extent the only allegations here were there were some expenses personal expenses a boom were arguably improper and that they were pretty grand as i remember now that was at most it's one hundred thousand dollars that's what we're talking about and he mr valdez made a salary of fifty thousand dollars a year and maybe had some expenses that the court would find were perhaps not or could be deemed personal rather than business but it's a penalty actress to the bahamas entertainment is four thousand dollars a month houston apartment cetera ok all told we're talking about one hundred thousand dollars in expenses are you saying that would be the write down the amount or whatever this meant in there in the accord that would be a legitimate component piece of a hearing that the court could find absolutely and his salary could lose his salary and any benefit fees and he received those could be properly the gains but you know again but the the statute requires an assessment of his  all three so it's used the term joined several so the f c c said oh it doesn't that doesn't apply here because here the district the dish record declined to impose the penalty on the two corporate entities but that's just that's not the but that's not the crux of what the of the entities proceeds that evolution got that they spent on something other than mr valdez other than paying back prior investors and other than mr valdez was there anything evolution was doing with the money it was  nothing improper your honor and that's what without what i'm trying to get at is you're is trying to separate out valdez from evolution on your aggregation argument or your joint several argument and i'm trying to see how they're separate sounds like evolution is just kind of running using evolution to run his life and that sounds like they're not that separate you don't it's not like a piercing a corporate veil situation these are legitimate investment vehicles holding investor phones purchasing legitimate bona fide securities then held the u s bank the analysis benefit of tax if it landed somehow directly or indirectly he got a tangible financial benefit a picture here again that's fair game the district court could use that to calculate impose the penalty we have no problem with that but here these are three million dollars and the i c c said the receiver basically it's good works brought this money at no it did was basically hold an option and sell the securities the securities were there before the receiver was appointed nothing changed it's just the liquidation and to pick an arbitrary date and say you only get credit for when the body is returning to the investors before the receivers appointed but the fact that years these securities are sitting there purchased for investors would have ultimately what been sold if m