morning your honour's i think you would be helpful to start with a little examination of the relationship between scaff on the one hand and kwan and his investment advisers on the other actually recognised the distinction between between kwan an essay an acorn on the one hand as active person as active participants in the fraud versus scaff on the other hand which is entirely passive as court actually explained that the evidence presented by the f c c there show that skaf was an entity that quote didn't do anything active was just a big pool of money that goes into a bank account and sits there and did nothing for itself and it was little more than a piece of paper in that your honor so i believe actually comports with a couple things here one the governing fund occupants and two industry practice in the investment manage that makes total sense ron this is a this is an investment advisory entity yes you see suit kuan the n s a and acorn out of the box why because they're the actual active decision makers here skaf is just this passive vehicle what is scale skaf is actually just a vehicle that is own by the by the actual investors they purchased membership interest in scout every investment decision conversely is made by kwan is made by sie is made by acorn here and in addition to the government fund occupants you also have acorn  which obligated acorn to perform due diligence services and risk management services on behalf of scout that's the the threshold issue that was before the trial court who's doing what for the investors who's providing due diligence who's providing risk management services your honour's a respect with cement that's not scout that actually is the bad actors that's s a a through quality that's what the c recognized when they first actually brought their action now they didn't actually tellingly amend their complaint for over a year later it doesn't really make sense because automatically when you really think about it when  passive entity what does that mean that they somehow participated in a fraudulent scheme to defraud themselves no again all investment decisions are made by kwan on behalf of s that's even when you go to industry practice there's a reason why investment advisors oh fiduciary duties to the fund it's precisely that there's a reason why they have separate vehicles it's because the investment advisor is making all active decisions on behalf of the actual font the fun doesn't do anything active as this court specifically recognised it's just a vehicle so what happens with the investment manager in is industry if there's a notion that somehow the fund itself separate apart from it's an investment advisor is making affirmative represent patients is performing due diligence the jury recognized us that they were there are they were the active participants in the fraud it's kwan it's s a a it's actually acorn because they're the ones that actually have to perform the services at issue what was was quiet an agent of again your honor i think is far is the agent issues concerned i would submit that actually it's in reverse i think it's that  in a way was an agent of quantum again from the standpoint of skaf not taking any affirmative role i know the f c c was trying to argue there's a frankly didn't follow this because again i don't follow house gaffe would be an agent finding whether scattered self violated ten b or twenty five now again with respect to the entire practice in the logic of those hard limits it is just very difficult to see because again as this court recognized when you don't have when you have a fund that is again doesn't do anything active which every fund in the hedge fund marketplace actually does you're a wholly reliant upon your investment advisor that's the point who's the person that's driving the bus it's quiet there's no doubt about that that's what the investors are relying upon so when you start to think about it and really break down the arguments they're saying that's gast made affirmative misrepresentations on what basis they actually tried to discuss the fact that there are documents on scouse letterhead  of course there's documents on scouse letterhead it's the fund it's an l l c yes it's an r c but the i o c doesn't do anything affirmative like every fund in the marketplace it's when you look through the principals right you aren't exactly who's the investment advisor so every investment advisor out there is has their track record and you follow the best investment advisors this was in this case kwan people were following consequence lead but the notion again that then when you have to look at the investment advisor on one hand again under the governing fund arguments everybody understands exactly how the fund worked it was all investment decisions were made so going to provide the due diligence on the loans we're going to actually provide risk management services on behalf of skaf that's the point all investment decisions were made on behalf of staff and all risk management services were made on behalf of scale so now let's backtrack and think about what the f c c is actually alleging here the fact is is that you have a passive entity that somehow is making affirmative representations to its own investors it's a logical it's a logical or industry practice it's a logical end of the government fund accounts and frankly it's a logical as this court itself is recognized as a shepherd what what is the holding you're seeking from this court and what relief specifically do you think we can provide to the restaurant what we are submitting again is that it's the second part of the argument is that certainly the preferred and the class a investors are not many situated we want to uphold the governing fund ockham's because again as the receiver agreed in the first if you ation with us you see it was we are going to be beholden to the jury's verdict distribution according to the governing fund documents which receiver agreed to do if in be informed by the actual jury verdict he conversed we swept it under the rug and despite this late court's actual language and understanding of the role of skaf just stipulated to a judgment he went against his work this is a situation that ultimately again from an investment management perspective this up this overturns the kind of i think it's any business rachana to be honest because when you come in and you know that in the capital stack you come out first now there's a couple other differences the preferred also had a guaranteed rate of return but everybody was in were victims in this ponzi scheme there all the all the money's got in gold this is actually true this is a great point it's actually not a ponzi scheme yes even concedes that frankly basically sixty percent scheme this was a situation so that most of the money was put in the patters sixty percent or so forty percent was not and alternately it's a situation here where we have a liquidation preference and a guaranteed rate of return those contractual preferences neither one of which one we're actually on neither one how is that equitable when the actual receivership it's clear that judge my gum really did not need to strictly apply the underlined it's in fact the distinction that counsel wants to make here is that he had a slightly different promise his clients did somebody else and that they had a priority of payment but there was an illusory promise that promise was not real any more than the promises made to the class a shareholders were real because underlying all of this at the center of it at the core of the apple w an actual check to see if there was underlying equipment underlie the and there was not the petters transactions that's the core of this the core of this is fraud and when you have fraud the judge the judge montgomery had the responsibility to make an equitable assessment of what ought to happen with the limited proceeds that we had in making that decision she had the right and the obligation to recognize that the preferred had already been paid out roughly fifty percent of their discouraging the classy shareholders from getting payouts they got a preference they got a fifty percent preference i could have started clawback actions i could have clawed money back i could have recommended a rising tide payback where they didn't get any more money until everybody had fifty percent which never would have happened the judge had all of these factors in front of or she had to make an equitable just decision she made that it's before you on abuse of discretion i don't think you can find a of discretion the judge also made a decision of as part of the equitable plan about the payment of the cost of defending this appeal if it's not successful that was not objected to at the trial court level and he never responded and he never objected the issue is not before you but if it were it's not analyzed as a fee shifting traditional penalty for bad behavior by a party is just part of the equity here that when the classes are already getting only thirteen percent they shouldn't have to pay for the cost to disappear let me turn to to a third issue in the world platter all of stoppel wasn't used i noticed on the in the argument here today but that's essentially what the courts being fine because i can turn to the other part of this which is there were actually two stipulations i stand in the shoes of staff before that first trial i could have stipulated to the entry of judgment it's kept it's like i could have  anything other then after that trial was over i would be guided by the results and make further decisions with respect to what i would recommend to the court why do you say it was reasonable in light of the verdict to stipulate to live the same reason i think this court has already said in the in the first case and i come back with a recall in a clitoral stopping or something else to this court didn't say that staff is nothing more than than a piece of paper in its proper decision here it said as far as the jury would know when that first case skaf may have been nothing more than than a little piece of paper because in that first case the evidence was not concentrated on skaf the court found a judge might gum or found coming up in this documents made these very representations i've talked to you about today and i know that in the first trial those misrepresentations are where the jury had before would have found that the other parties had committed securities fraud so in those circumstances  it was very reasonable to assume we'd come to the same result if if i had pushed forward to trial and in fact we know because judge my government has addressed this very issue of the impact of the first trial on on the stipulation and on the plan we know she would have ruled against me a fighter suited the arguments that counsel is the security here today so what i would have had to do was go to trial at a trial that i thought was inevitably going to be lost i would lose it i would those issues and all of that to favor three investors because that's all we're talking about three investors here who had already been paid out fifty percent of of their investment with other people's money i think also i  understand where you're human is that gas is not couldn't even be liable so independent of the jury's verdict in the kwan case that it's passed through entity that  i couldn't disagree with that more the offering documents her scalp letter he doesn't scare off representations made through their agents of course they'd have to be made through their offices and agents that is the evidence that would have gone before the jury in the second case in there is it's there's no possibility that they could not have been found guilty for libel there's questions i see i've got about ten seconds left here so i'll sit this is a misrepresentation case and the misrepresentations were made in scabs offering documents those were clearly attributable to skaf and so we think c f is clearly liable for the misrepresentations that occur in the documents in its own offering documents and to the extent that decisions decisions were made by by koran that are relevant here i think i heard appellants counsel say that decisions were made by kwan on behalf of  f that is an admission that kwan was an agent of staff and we think under ordinary principles of agency and corporate liability the decisions and the actions of the agency are attributable to the corporation remember that c it's a corporate entity and it's just basic corporate law that skaf would be liable the other thing i'd mention on this is that the reason the commission amended its complaint to add scap as a defendant when it did was because the supreme court shortly close relationship with the fund and there the case was against the investment advisor and the court said in a misrepresentation case that the investment adviser couldn't be held liable for misrepresentations that were made in the funds prospectus and that the liability there was really the funds liability under ten b five b which prohibits making misrepresentations was really in the court's view in janice the fund that made the misrepresentations and therefore the liability and so if you apply that  important to step back and understand what this would look like if the appellants when the parents are really trying to to argue here is that we should have a trial we should related to the question of whether there was fraud here and resources should be expended on investors behalf all to determine whether skaf this hedge fund entity committed fraud but we've already had one trial the trial skaf wasn't  part of the trial kuan was a party but but that trial showed that misrepresentations were made that the statements in the offering documents were false that they were material and  and that they were made with scienter and all the other elements of fraud here it's just really this kind of technical question of scats liability that we don't think is a difficult question to begin with that wasn't resolved by that first trial and i think it would be absurd to have another full trial to resolve that one question expend all of these resources when we all know we have fifty nine investors here who were defrauded by kwan and  skaf and on that point i'll just say one other thing about the investors we think judgment montgomery made a reasonable decision here to approve the distribution plan with appropriate distribution to all fifty nine investors who were defrauded here and we think it would be it would not be fair for the book of that money to go to just three investors the appellant's here particularly given that those three investors pulled out fifty percent of their investment before the the fraud was discovered and the fund unwound and so they've already recovered fifty percent where most of the other investors have recovered nothing so far what were the circumstances under which they  that decision to withdraw fifty percent early there was some reference to trying to head off the class investors was there anything untoward about that process i wouldn't alleges there was anything untoward about it i don't know precisely what they knew and precisely why they decided to withdraw when they did so we're not alleging that it was improper for them to withdraw it may just have been good luck on their part but it's good luck that the other class investors didn't have we do know that other class a investors had trouble with drawing there their efforts to withdraw were thwarted by kwan or he delayed so at same time i'm sorry appreciate that and you have your full so let me just address a couple things quickly first with respect to these redemptions everybody had a right to redeem this is an automatic right for any investor they talk about the preferred recovery fifty percent redemption matrixes never placed into recovery in fact the number of the investors also received they also redeemed and some of whom even as yes he admits actually also redeemed over fifty percent of their investment the notion is let's think about fairness here if our liquidation preference is honored we get one hundred percent if we don't we go down to thirteen percent like with everybody else if our liquidation preference is honored that class a investors their recovery is only reduced by five percent where's the actual fairness in that with respect to the fee issue  obviously we think it runs afoul fuqua in addition there is no actual authority excited cited by judge montgomery in addition to that just from an inherent fairness standpoint there's only one group of investors that was actually in appeal this was the class peon pesters and we certainly have a good faith basis to bring an appeal as with any sort of investor so the notion that we have to actually foot the receiver species for it was raised i didn't have time to reply and it was i was raised to the first time not in papers and the last thing your honor others and with offering documents who were the offering documents actually prepared for prepared by actually essaying kwan not the investors that's not the situation here they don't prepare their own documents thank you or i see my time's up thank you mr lawson apologize for appearing to cut off your argument