want to thank the court for its courtesy due to my delay but far more important i'd like to reserve three minutes for rebuttal ok i have help here that let you know when you're getting down to three ok thank you very much  far more important than any of that is i think that this court in this case is presented with an example of a relief defendant proceeding run completely amo this case just crystallizes what can go wrong in a relief defend an action that this court knows all too well is intended for a very limited purpose back calera this court really took on the issue of whether the s e c would be permitted to use a relief to finn a proceeding to go after individuals or entities other than mere custod that i knew to defend or not parties but they are holding funds that the f c c alleges to be the proceeds of illegal activity then why wouldn't they be proper subjects of a relief defendant proceed because the reasoning of this court from polo through ross through the we court case that involved attorneys through founding partners that involved people who got loans all of those cases have a very consistent theme which is in a truncated relief defendant process one cannot properly adjudicate a claim to property and so if one is asserting a claim theory they were just holding the money according to s c c and to contest that there was a twelve b one hearing a factual hearing where each side could argue about whether they were just holding the money or whether something else was going on and the court had a hearing and looked at documents and and decided that they were just holding the money and i don't know understand you to be really arguing that anything was wrong with that fact finding that proceeding what was wrong with that proceeding to figure out whether they were just holding the money here's what happened i ended up in front of a freight train the complaint was filed in may i filed my motion to dismiss in june it was my view that under this court's reasoning and again if the relief defendant process can be expanded as it was in this case there are a lot more individuals like me that are going to go through what i went through so that i mean i think you don't like the court's determination that they were just holding the money right but in terms of a fact finding process to determine whether the court believed they were just holding the money or not i haven't understood what your problem is with how the court proceeded in answering that question the court in cologne laid out what's wrong with rel proceedings and this case was an example i did not know of any claim or charge that was being asserted because there was no claim i ended up after filing the motion in  may basically being told that that motion was denied but that there were disputed issues that would be resolved now my view is under this court's prior holdings once you find that there are disputed issues of fact regarding a claim conceal this money from they s e c me absolutely not what happened and again what i was defending against what i ended up in a hearing about was not elements of a cause of action i was trying to defend against this concept of a sham what does that and what does how does one defend that i'll tell you how i defended it in every single way the facts of this demonstrated not the court believe your client i mean so your client came and said this was a real wound on the court found your client not to be credible and found that it was not real and that it was a sham and all of the steps of that that twelve  terminate and you still haven't said i mean it sounds like you're saying you don't understand that's what it was going to be about but in the motion to dismiss ruling the court said we still have these factors views about whether it was a real loan and so i'm going to have a hearing and then that's why what was confusing about that first of all i think that this court i think this is really going to be a departure if this court sustains what happened here i think it is a departure of let's let me ask a little bit about the procedural process and both sides admitted exhibits quite a few of them which were which this court admitted into evidence and at the conclusion of that hearing the district court limited its findings to whether or not your clients were in fact in possession of the proceeds of activity and whether or not they had a legitimate claim for money and that's all the court decided so let me ask you this what i dish and  all process do you feel relief defendants are do that the district court did not afford in this case first of all just in terms of the timing the judge issued his decision on july tenth saying the hearing would go forward the first week of september that gave me given the fact that i had no decision at that point and that the discovery paul would be march of the following year that gave me weeks in  and i'll walk you through what actually happened that decision comes down on july tenth i then have a period of literally three to four weeks to try to get whatever discovery i can and i did the best i could understand i was i was taking depositions and i got you not able to get that you thought you needed by september for the hearing all of the analysis with respect to that the transfers to to pacific my client received money about whether the loan was a valid loan that you didn't yet get by september what i needed at that point was just additional documents additional documents additional documents from the receiver to try to get a picture of the transaction what i had was saying that you wanted the final forensic report from the from the receiver is that what you're complaining now by the time the judge issued this decision look at the split then the se c then filed a motion for judgment not not care to know that can we just in september this is the huge decision i think for you is are you a relief defendant or not that we've got the disgorgement later that you may have we can talk about that right but just as to whether you're relieved defend nt because the loan was not about that's what the district court found you are trying to say that you didn't have the information you needed and in september to dispute that but what information where you lacking when we when we went into the hearing on september fifth and i'm sure you've reviewed the transcript we didn't even know what the hearing was yes i don't know if you reviewed it but the first thing they did and i thought that the decision from july explained what that hearing would be about so the for the first part of it is both sides were taking completely different positions in terms of what was going to be litigated what the what was litigated was whether the loan was valid so what information were you lacking as to whether the loan was a valid loan in september at that point i the only two people that had information regarding the loan were my client and ming hsu i mean she was subject to a cooperation agreement and so at that point i did my best to present all the evidence with respect to the loan i presented messina i present to gary messina now at the end of the day there's no doubt judge walker absolutely thought that this was a sham but what i got your client mr vincent miss believe the only issue before this court is the question that was presented in cologne what is meant by whether or not an individual like my client i can assert a legitimate cla because i will i will tell you the court basis of an adverse credibility determination and this one paragraph quote unquote loam that your client was not credible and alone was a sham and that it was essentially entered into to hide assets i understand but my view is that freight train should never have gotten there and let me just tell you why because this is the issue that i think is before the court there are two different phrases in the s e c brief first is mine in terms of what coloe said in my view coloe says if you articulate a legitimate claim then you cannot be said that the district courts have jurisdiction over relief defendants if the relief defendants are just holding the money for someone else if they don't have an ownership interest in the money correct we can usually decide jurisdictional issues in twelve you want hearings if there's a fact  there was a fact it was the lone real or not that fact why can't it be determined in a twelve the one hearing to figure out whether the court has jurisdiction over early for defendant or not you're saying it should just mean colorable so you can't have a hearing at all but we don't treat other jurisdiction that way we have a hearing and we figure out whether it's true or not because relief defendants are inevitably going to be hit by these freight trains you're not saying yes he said you haven't explained yet what why it's an unfair freight train you haven't said anything that you didn't know yet about the loan that would allow us to determine as a matter of fact whether the loan was real or not in september the judge had a hearing to figure out whether they really had a property interest in the loan or not and he said they don't and so far i haven't heard  needed what other information you needed to contest that the frustration i'm having is the government is very clear that what they want you to hold is that the purpose of a relief defendant proceeding is resulting in the claim to the property what i'm trying to suggest is far more important than whether you think my client is a good guy or a bad guy this proceeding was a freight train and i have litigated against the finder right about what was wrong with the factual process of determining whether the loan was valid or not can you tell me what process you would have had if we called it something else i mean he had a whole hearing with witnesses and evidence about what was wrong with that hearing i needed two minutes ago all right i saw it and needed an opportunity to depose ming hsu and take it to determine what are the documents and what is the evidence and i tried  before the country not at that point he was a fully cooperating with the f c c to tell the court that i can't yet have this hearing because i haven't been able to locate the witness or what did you say to the court about not having a hearing until you found this deposition i objected many many times to what i felt was a rush through this proceeding but did you say specifically there's this thing that i need that i haven't yet had can we have a continuance until i can do it i believe so i can double check facts number one the the five million dollar transfer from mr shute to mr messina was not a valid loan it was a sham transaction designed to hide money from the government and secondly the district court correctly held that the undisputed evidence showed that the only significant source of funds for mr hsu to make that transfer came from the unregistered and fraudulent securities offering that mr z orchestrated using the world capital market entities to purchase the second part about whether there was any dispute about whether the money was ill gotten funds i think you've agreed that should be viewed as a summary judgment determination is that correct honor so you started your argument saying it was not an abuse of discretion but it seems to me at least as to that second part that we're reviewing summary judgment we do that to no avail i'm not sure why you started with abusive discuss well that i know some of our case law talks about abuse of discretion but i'm kind of not sure that that language really applies in this situation where it seems like everyone is agreeing that was really a summary judgment germination well because the ultimate decision whether to awar discretionary decision that i follow i magically know from the summary judgment i mean basically once they i mean once you figured out that they're just holding the money that's the first thing that will be one issue once we're in a relief defended proceeding and then we have the summary judgment determination purpose of the hearing was to require the f c c to establish the two elements that we laid out in that case that must be shown and i'm i'm reading from one thirty nine  third six seventy seven and that is first yes you see my show that the nominal defendant has received ill gotten and secondly that he does not have a legitimate claim to those funds right isn't that what the district court decided in september and then left the question of the amount of the discord no your honor so what the district court decided in september was solely the issue of whether the transfer this non recourse loans that mr messina testified he has no legal obligation to repay was a valid loan or was a sham transaction and the reason we got there and i think this is a response of some of the procedural arguments that my friend on the other side has raised is this was not this was not news to anyone mr messina even when mr  issued we simply asked for the money back and another lawyer to whom the money went he gave it back mr messina said not he went to extraordinary lengths to dissipate the assets to his friends and associates then in april twenty fourth the district court held a hearing on our motion for asked for it and the district court said at that hearing i think the key issue in this case is whether this is a valid loan i don't think this is a valid loan but i authorize both parties to engage in expedited discovery on that issue so that's april twenty fourth we file our complaint may seventh the hearing doesn't take place until september by that point more than four months  with that characterization of what happened because i mean i just your court took their motion to dismiss for lack of jurisdiction said it was denied but then also said but i need to have a hearing on the fact is related to this question but i think your on it was appropriate for the reasons that your honor identified earlier which is that if you file a twelve the  was that was the ruling was in response to that argument what the district court held and this is consistent with all of the relief and case law is you have a hearing to decide whether this money that is in the police defendant possession whether the relief the fund has a legitimate claim to it or not and the courts have subject matter jurisdiction to decide that and as we point out in our brief sometimes we lose sometimes we win but the court has jurisdiction to decide whether we're right or wrong  courts always have jurisdiction to figure out their jurisdiction right it's whether they have jurisdiction over relief defendants depends on whether the relief defendant has a legitimate claim to the money or not isn't that right as a way to look at it and you know i think it's it's about this when she gets back up what i thought i understood her argument to be that if if the party holding the fun's responds to your relief defendant motion by saying i have a legitimate entitlement to this money that you cannot then go forward with the relief defend an action against them you're going to have to file some sort of an end syllabary proceeding i'm not sure what it would be denominated because you wouldn't be naming them as parties i guess unless your theory is they're aiding and abetting the securities fraud violations right but i'd almost be in the nature of enter a plea or action if it were a bank that complaint as we did fear and the relief the fund and says no i do have a claim to these assets i performed services and response then that's it you have to dismiss the case and you can't have a factual hearing about that and that's just contrary to relief the found the case law all of the relief defendant cases that i'm aware of the case as we said in their brief at least they come up because there is a factual dispute because people say oh i but i don't know that that's true so i mean maybe we'll agree with you that it doesn't make sense to say that colorable argument is enough and that what really needs to be done is what was done here a fact finding to determine whether it's real whether the claim to the money is real or not but but your claim that the case is resolved this i don't know how that could be true because there was no evidence because they've got to remember there was no evidence and there was no fact a through there was nothing and then ross is totally on the other side and ross there was you know far on the other end of the spectrum so our court has these two cases that are on the ends of the spectrum and i don't know where in the middle we have a case that talks about what to do about whether it's when it's you need a fact finding what case from the ninth circuit or you point to that has a fact finding about this well in cologne there wasn't a fact finding this result in summary judgment so because there were no disputes of material fact  circuit and that's actually a really difficult case that had to be basis to support you but we don't have a ninth circuit case that says how the ninth circuit defines legitimate at the end that you look to whether there is legitimate right to the money and the court found that there was no dispute of material fact that khloe didn't have such a right so i guess i interpret that cas is a little bit to speak an abstract about due process but in all they don't make my hypothetical directed to the facts of this case sure do you agree that due process was satisfied based on the procedure that the district court followed here absolutely and ordering expedited discovery and a contested hearing at which witnesses testified and exhibits were introduced and it in devon absolutely right i mean there is a and this is respect it's really the opposite of cross your honor because they're relieved defendants are named in the complaint they file an answer labor asserted they play move to dismissed they're authorized to take expedited discovery their parties they have an opportunity to litigat considered the summary judgment motion before the receiver's report was complete why wasn't that problematic just procedurally it wasn't problematic procedurally because the facts that again eight months had passed since both sides were authorized to take expedited discovery and the release defendants they cross examine the receiver at that september hearing they had every opportunity was right no i understand that's true that's true but nothing changed since the since the second determination was about whether the funds were ill gotten that's a different question than the september hearing so why i need the receiver's report to figure out where the funds were coming from and and the court explained why and that is they had opportunity even after that hearing and by the way everybody knew that after that hearing we would be filing a motion assuming that we want on the whether the loan was valid issue  they had every opportunity to sue to seek discovery from the receiver if they thought it inadequate they could have filed a motion to compel they didn't avail themselves of any of that and then said four days before the close of even assuming  some of those investors were overseas that was there tracing to figure out what this five million came from overseas no your honor and that's not require when there's a situation such as this when the it were not required to try to you know break out within that one pot of money which amounts went to the relief defense though if you knew that say the pot of money had one hundred million dollars in it and you knew that half of the hundred million fifty million capers is a fifty million came from domestic could you receive could you get one hundred million back because you could just count all of it over and over as from the right fifty could you could we receive a no no but but but if so suppose the relief defendants are absolutely right as to what that silly domestic liability is that's seventeen million dollars that's bigger than the five if that was right so could you get five from ten people though i get fifty on the theory that well five is less than seventeen so i'll get fifty no no i'm not headed so how do we know that you haven't done that in this case that well there's just no there's no basis for that you know we haven't really we've i mean we haven't like it without tracing how do we know that the five million that you've gotten comes from within the seventeen and that you haven't gotten it multiple times you're out of there we we haven't we haven't gotten it i'm just struggling a little bit and isn't the answer doesn't matter as long as you can show that more than five million were raised by domestic investors in the ponzi scheme the fact that two pacific transferred five million out of ponzi scheme funds it doesn't really matter whether they came whether the five million can be traced to hong kong investors or to u s bases that's that's exactly what i'm saying your honor and i was trying to to say that so you're saying it doesn't matter if it come if the five million came from foreign sources or domestic sources when it's because you can't as long as more than five million right when it's commingled like this yes but ok so seventeen million were raised domestically came from domestic sources and a lot more came from foreign sources so you're saying five million is less than seventeen million can you say that in four different cases and collect twenty million on the theory that five is less than seventeen no we can't collect more than nine out of unjust enrichment but we haven't done that and we know that just because there were other relief defendants in this case no there are other released defendants and we know in this record how much money you collected from them well so there is in the record or at least in the record in the district court how much the receiver has collected but those are two distinct concepts because the receiver is there to unwind the entities and the receiver isn't you know the receiver domestic investors i believe so your honor but i'm not confident the receiver recently filed a motion regarding the claims process where that's laid you i'm going to try to address two questions that i've heard ok but the first one is i am a stubborn as a mule as you can probably tell and i do believe to be stubborn as long as you've got a good legal argument i understand and so now i'm going straight back to ross which is what i have in page twenty five of my brief in wrong the employees said i got this money legitimately c obviously disagreed if what we're talking about today were the rule then that would have gone could've gone through a truncated proceeding in let's just figure it out but what is what violation cannot occur in a summary relieved defendant was accused of an actual violation your client wasn't so that's a big distinction isn't it my client ultimately was accused of all kinds of violations and same as th that's correct i never had anything to shoot at and so the hearing in and out being is this legitimate i don't know the elements of legitimate is this a sham you provided goods and business expenses i have to pay off and bribe officials i come to hire right and i have to kill informants and that all costs money i should be able to business expenses before you hit me with the tax ended up being accused of is all kinds of culpability and i was trying to go back to answer your question what was it that i wanted that i didn't have when i walked into that hearing in september and as i sat over there i was just reliving it because it was a strange process but here's what i didn't have i didn't have any claim against my client i didn't have any i make them a relief defendant so that's ok let's put that aside i mean you had to we need an answer about what you needed to know that you didn't yet know as to whether the loan was legitimate i needed to understand what the government's claim was in terms of why that loan was illegitimate i had to go or why it could be invalidated i had gone through contract law and briefed it to a fare thee well for the court in terms of i thought his arc it was this wasn't my holding proceed this was a legitimate five million dollar loan that was made to me and this document memorialized my legal obligations under the long exactly the problem of the courts all right that was there were many factors i think the court cited south and of them in finding it was a sham but one of which was that the money actually was expanse on the books of two pacific as some sort of uncategorized it wasn't shown as a loan receivable and the note was to zoop personally rather than to to pacific the source of the funds and there were five other factors including that damaging  email in which your client basically said we need to make your assets seem last which he claims was for tax purposes but the court discredited that and said no this is motive we don't hide things from the government and obviously our position was that's completely nonsensical why would you bring five million dollars in from an offshore entity if that were what this was all about to the country you know it doesn't take a great imagination to imagine money laundering so that the money was going to go to africa for whatever business ventures you know we're contemplating at the time i mean i think it's a see that's just another way of hiding if that was the true motivation behind what and yet the evidence showed a business relationship alone document immediate disbursement the one thing that was really clear here is then it's messina was no puppet tissue whatever their a sham this agreement a fact finding this was a real loan i mean you're disputing that but how how would we as an appellate court say that it was clear what and again that's why i keep going back to the law when you get through when that just write out a long document in any case and that'll be the end of the matter wouldn't know because then we have all kinds of your own as we're asking what would have otherwise happened if the court had not decided could just go forward in a relief proceeding and adjudicate this we had two months of proceedings in front of judge snyder and then judge walker the receiver initially was filing a fraudulent transfer claim this is normal i can i know how to litigate that it has claims that are a real that have case law and so that was being done but they didn't quite get geared up to do that at that point chris and the judge this was before judge snyder before judge walker said that the f c c are right i guess you're going to do your adversarial proceeding just like they did against any number of other recipients of funds and there were claims the could be to relieve defendants period but our court has recognized that there is such a proceeding so we are bound by that of the three judge panel no no i love the i love the concept but also believe that it will be eliminated if everyone can just write a little on agreement this is judge favors point i mean it is soon as your your argument is you can defeat any relief to find a proceeding as soon as you have any colorable notion of a basis for a claim to the money right i look at it from the other point of view parties in interest rate at this and there is no one here found your client was just a custodian because the loan was a sham once he buy it by leap from by leapfrogging over this yes you can always find that you don't have a legitimate right by going on to the merits of it and then coming back and saying you know what you didn't have a legitimate right in first place the question is is that how the issue of the legitimacy of the claim is supposed to be adjudicated what would you recipients of funds in order to recover those funds in this case there's it's simple ever certain proceedings nothing fancy i guess for me to process them point how would that have been any different than what the district court pursued here there would have been discover defendant claim oh oh the cons i was i was defending against an idea i was defending against an idea that the judge that judge walker clearly factual record shows under california law alone transaction that could be invalidated under california law consistent with legal principles that they would have had to