district court's decision dismissing this action for failure to plead the requisite stronger friends of c enter should be reversed in this court should sustain the click of a complaint on its to novo review contrary to the decision of the district court the facts alleged in the complaint give rise to the requisite strong and friends that the defendants knew or recklessly disregarded that the defendants had made materially false and misleading statements regarding the riskiness of x f x e m inks business model and moreover since the judgment was entered in the district court there's been significant newly discovered evidence revealed in a series of settled regulatory proceedings against f x the m and the defendant draw a native which reads that so i didn't have to be again the one to say i have a threshold question ok seems to me your best arguments suffer from give there in your reply brief for the first time and they're based on things that aren't in the record now if both of those are right why are we here why didn't you dismiss this  without prejudice to reinstating it after your motion for reconsideration that relied on these new arguments and new materials in the district court but first let me say that the regulatory proceeding issues were first address to the reply brief because those settlements occurred after the initial briefs settlements i've heard some of them occurred i think after the initial brief but the all the charges have been brought certainly prior well your honor that is true but the allegations in the complaint in the enforcement proceeding that was filed in the southern district were on technical violations of the c f t c procedures what what is the new evidence that we're relying on in connection with our we did file a rule we did file a motion in front of the district district court for an indicative for ruling and a motion to amend then under rule sixty two that the district court has not taken any action with respect to that motion that motion is still sitting in the district court nevertheless we believe based upon the law and cited in our brief that this court can take judicial notice of the sea f t c enforcement orders that were entered and also take  to respond to any of the things that form your strongest arguments until the ten minutes we will get it today and sees me there ought to be a solution for that while your honor again are they will address i'm sure the  what is it that you live with while there are many million be specific city that goes to this because it seems to me you make a general argument  this was riskier then be said but riskier of and what i mean they do have a different situation than the people who are creating themselves and most of what they say is we are less risk even people who are trading themselves they're not saying in some overall sense business isn't also risky business in some way so i find that argument the point that could have been raised is that the specific position at that t respect of a swiss franc had become something so dramatic that that should have been told and that they had enough knowledge of that but i have looked hard and fast on your complaint to find where you make that claim and you don't really make it i mean you talk about the risk factors at a forty nine and then it is certain point including for who you are it's a yes that is  part of the general risk of the business the nearest thing you come to it is red when you said there have been no material changes but they said in a way there is no material change to focusing directly on what is the real key to this that they were holding that their clients were holding a huge amount of to certain time and that probably a sensible  business would have said that but i don't see in your complaint anything that says if you were allowed to amend you know the court said would you like to amend and you didn't demand to specify now that's my problem there there was a lot in there your honor some let me just take it very quickly since the light is going off there are two aspects of the risk that was not disclosed and one of them your honor has just articulated which is the  again made on the swiss franc euro pair and that is in our initial complaint that was dismissed by judge wood and i would refer the court to the section on page twelve it's eight twenty eight of the appendix which talks about f c m f x e m's one billion dollars on the euro swiss franc pair and let me just point out that that at the time the complaint was filed we believe that that to be one billion dollars based upon the defendant's own s o c filings the materials that were filed to the c f t c enforcement action in front of judge forrest here in the southern district reveal that the bet was not a billion dollars it was more than twice that it was two point two billion dollars so but that is an aspect of why we say that there was sufficient facts in the complaint to find that the statements regarding the risk of the model was  but we also are to use goes again to the risks involved in vis general model it doesn't go to the specifics of vis particular risk that's a very we'd have respect to the model your honor prefaced your remarks by saying you know they their risk was somehow different and that's the whole point your honor it was not they had market risk even though the defendants repeatedly denied to the market that they had market risk from the bets that the customers were making they did because they entered into two separate transactions every time the customers made a trade f x c m took the other side of its customers transaction and then it simultaneously entered into a second transaction with the bank with the lip quiddity provider and because a fixed c m had this no debit policy where they had guaranteed they would not pursue the customers for the question is can one read what they said as to love boat vs fact when they said the visit was a list risky business  the business it doesn't mean it wasn't risky that it was just not the business of the directory or the misstatement jarana was even more precise they precisely said we do not have market risk we are not exposed to the change in the market level of a position moving up and down that's what they said and that was absolutely not true this risk they were taking was not credit risk it was not counterparty risk it was market risk and they repeatedly said it wasn't because they wanted to portray the business as less risky than the ordinary business with all the transactions where you describe were revealed none of the those who secret  had given the risk disclosures that they made and i would urge the court to look very carefully at the risk disclosures that were made by the defendants because if you look at them in context they were not specific disclosures that affect taking market risk with respect to these trades they talked about competitiveness they talked about if there wasn't liquidity in the market we won't be as competitive as our fellow about this from the ten q these methods m probably prevent losses particularly as they relate to extreme market movements like if the swiss national bank were to lie about its monetary policy which may be significantly greater than historical changes in market prices  could go on isn't that uprising people of a market risk now you are again they're talking about about a volatile levy in the market here this was a specific risk that arose from the lifting of the cap on the swiss on the public and say this isn't going to happen but this holding these defendants responsible this case is not a bad about whether or not they could have predicted when the swiss bank was going to remove the cap this case is about whether or not they misrepresented the risks of their model and they absolutely did that your honor by denying that they had any market risk even though they absolutely were the party on the hook in the event that there was a market loss with respect to these trades and there's nothing in the sea of t c proceedings make clear these defendants have nothing but a history of deceit as to all of their consistency is the regulators the customers and the investors this is what it is in the f t c that is material we're not assuming it is admissible assuming it is before us now and so it is another question but the fact that these are not nice guys are nice specifically look we've got an awful lot of swiss francs out there that may hit is because that was something that had come but that i get in i don't see in your complain good morning your honour's may it please the court my name is paul the set and i represent the defendant police and it's our position that the sure this court should affirm the dismissal because planets fail to meet the heightened pleading standards on the element of c enter which district court judge would landing in time to make a lot of money which is the most we're out of c f o mr land eighteen months before the d pegging of the currency sold some number of shares amounting to two or three million dollars whereas the c e o mr new of didn't sell one share throughout the class period and watched one hundred ten million dollars and knowing understanding in some small sales can't really bolster sea enter inference when you have a c e o who didn't sell at all and lost that magnitude of money i think the plan is recognize that and start to bring in the sales of actually to non defendants and they  who are insiders but who are not tied to the fraud whatsoever and planners conveniently forgot to allege and we pointed out in our briefs that collectively those two non defendants also lost money in the in the magnitude of one hundred forty million dollars all together those three lost close to half a billion dollars clearly they did not see the risk coming up plaintiffs keep talking about judge would notice that there's there's no motive here and so and the plan is pretty much acknowledged as they put it at the end of their brief and slap a disclaimer on it saying we're not really relying on that it clearly cuts against them on motive so then the real quick i tend to agree with you that you know the motivation here because these were fraudsters they were such at foster's they lost hundreds of millions of dollars but but still what about the kind of reckless disregard that can be the equivalent of intentional deceit indicated in part by the fact that two of your competitors did hedge this possibility and apparently escaped the debacle as a result well you're ok good question there is no severe recklessness here at all this company disclosed the exact wrist that caused the losses in its every ten k fully disclosed that its agency model was such and i either they do not understand the f c c values or haven't read them but there is no market risk market risk is a defined term in foreign exchange trading that you suffered the risk of the gain or loss on a train based on the market price f x e m had offsetting trades it was market neutral it had counterparty or credit risk which is another defined term which is if the counter party doesn't fulfill its obligations there could be risk their net is exactly what happened here f x e n disclosed that in the remote event that there is a and the competitors who are acting or don't put much weight on that in a particular way to say here is a situation where what is normally not a  and i was trying to get her to tell me that they did in she sort of went around it what you the nearest thing that comes to it is where in fact defendants had normally assume catastrophic and foreseeable credit liquidity operational and regulatory capital risks in connection with the company's one sided highly leveraged one million dollar bet  background of saying that the question for me is is that enough to meet and be complaining it is not your honor and the reason is context plaintiffs do not disclose the context in the initial complaint or the many complaint it's a billion dollar long bet on the euro swiss franc pair and then with the recent materials that again are outside the record it jumps to two billion the context is effect c m traded trillions of dollars per year on fifty nine different currency pairs in the fourth quarter of two thousand and fourteen the last quarter before the deep pegging it was one point four trillion dollars of trades on fifty nine currency pairs if you just do the math that's about eight billion dollars on fifty nine currency trades a one billion or two billion position is not extraordinary there's no context here but those numbers come right out of the f c c files they don't provide the context they scream with exclamation points of one billion or two billion but in there is no significant risk and what the company was warned about by c w one was potentially the dipping was going to happen when everybody knew that this was national bank when they put it in said it was temporary but they provided the head fake your honor as you said two days before they said this was a cornerstone of the swiss monetary policy and then they pull out and most forex traders didn't either this is why we call it a black swan event because move would be fine but he even said something less he said one hundred pips which is one percent move he was forecasting a one percent move and said it may be down the road even if at most the company thought it would probably be a nine percent move or similar their technology and their seat belt trading technology had already worked they had a track record that level of volatility each currency change was different from another and you don't think that on because it's the timing the manner in the impact and the way it was done the timing with the head fake saying that we weren't going to do it the manner doing it completely with pulling the peg without a floor or some step down caused a market crash and the suspension of liquidity that nobody saw coming to the magnitude of ten thousand pips that's what happened no one predicted that it was unpredictable and forseeable the company disclosed the risk of its business model that in a normal market event we can handle things but in the event of what happened which is extreme volatility any suspension of liquidity we may suffer losses which unfortunately that's what happened so with that your honor i think you to your original question no the company was not there were no risks that it was aware of that it did not disclose it disclosed the very risks that caused the losses which takes this case out of the none of those are clickable here this was a black swan event and it really isn't just that it is the issue should be was the company aware that an event might happen where its seat belt technology would not work and it would suffer losses and didn't or and that they had different groups which is it to remove or no is vetting correct yes that is absolutely incorrect market risk when they use the term market risk they defined it as the risk of exposure from the price of the position moving up and down and that's market risk from the volatility is that right exactly right your honor and the so this is not credit or counter party risk this is a very very important distinction and they use these terms in this manner in order to persuade investors that they did not have the same level of risk as for example a deal or as your honor was mentioning earlier they try to distinguish themselves from their competitors by saying don't say the same level they do have a significant risk that it is not the same risk is somebody who's buying and selling it is different i risk i respectfully disagree your honor because of the large amount of leverage that is used in this kind of trading because the price movements the f x price movements are so miniscule you have to trade with a large a large amount of leverage in order to make it certain situations their technology was such that it helped them to avoid it but here where they had a two point two billion dollar long euro bet where when the cap was removed whenever that was and again we're not arguing that they had a duty to predict when the cap was removed what we're saying is that when the cap was removed as it certainly would be at some point in time the price of a swiss franc was going to appreciate against the euro and f x yen was going to be left holding the bag because no matter the market understand that before the swiss national bank would allow there to happen there'd be some preview there'd be saying something like you know we are considering  reserve bank does and there would be a leader of time in which the market would just take account of the fact that the cap was coming off rather than three days before it comes out they say we're never taking it off it doesn't matter your honor that the issue is whether or not they lie about their model and how risky it was that's the issue in the case council is addressing you know this was a surprise to the market doesn't matter the issue is were they truthful when they told investors we don't have market risk we have all of these systems in place they protect us that was not true and it wasn't true because they had built up this enormous two point two billion dollars long bet on this volatile currency pair and that's and that those fact that can't be denied and counsel refer to the seat belts the seat belts worked they they prevented the customers trades from being  from being completed at these dislocated market prices the only loss they suffered was the market loss they were exposed to all along the fourteen or fifteen percent difference in the price that