court did not follow this court's instructions and remained first with respect to the trustees fraudulent transfer claim this court remey ended for consideration of the bank of new york's good faith for value affirmative defense under section five forty eight c citing the two leading circuit level decisions on this defense the m n l business machines case and the sherman case this court held that the legal standard the district court was to apply and remain and was whether the bank the loan the entire transfer or a lien in this case was a valid that's correct your honor because that voided the bank's good faith defense here what happened is the bank was on notice through the one f o r's that it could have reviewed and in fact the testimony was that it did review those monthly that the accounts were under segregated and the district court found that the bank knew that sentinel was using the loan for its own proprietary purposes section six a two of the commodity exchange act and regulation one point two zero zero provides that you cannot use customer segregated property to secure the loan or the credit of any other person so by taking money out of the segregated accounts when they were under segregated that necessarily violated the commodity exchange act because the bank knew that that loan was for centinels own purpose and the reasons in june of two thousand and seven there were reasons found in the district court's decision to call that authorization into question first as the district court finds in its first decision which incorporates into the second during that conversation mr bloom stated that sentinel acted only as agent for its customers not its principal so in other words it was telling the banker something they knew to be untrue that it was not engaged in proprietary trading secondarily he also states during that conversation and this is clear from centinels papers with its customers that it promised its customers same day liquidity that they could get their assets out and the same day and the bank knew and certainly knew by june that sentinel was not repaying the loan on a daily basis so it couldn't be providing same day liquidity those things that it knew the bet that district court found objectively should have caused the bank to question what it was being told in august when you couple that with the fact that the bank knew that sentinel had relatively no capital of its own three million dollars that the court found the bank knew that they were engaged in proprietary trading that the court found that the bank knew objectively that sentinel was violating segregation requirements it leads to the conclusion that under an objective basis the bank lacked good faith and what the district court did hear when it was a good faith defense is it says were using an object it was using an objective standard but then it proceeds in the very next paragraph to say that the reason why there was a proof of good faith by the bank was that the banks subjectively believed what eric bloom had told them a year earlier that's subjective belief is exactly what the sherman court eminent business machines this court said in his footnote number two is what is irrelevant the court also indicates that it's making its determination based and is it possible that you think you read that e mails expressing it concerns solely about the bank security rather than suggesting any wrongdoing by you know i mean  wrong it says twenty million instead of two million or three million with only that amount of collateral given the size of the loan balance and given the bank's knowledge that it was used for proprietary trading mr rogers is saying well where can they get the collateral for this it has to be coming from the customer segregated accounts the testimony at trial and this is where you know the district court judge says well all the bankers lied but that's ok these lies were about material things about whether they knew about segregation and things that they obviously knew given the division of the bank that they were in mr lott testifies that they spend quite a bit of time and make a considered response that's a testimony at trial to that e mail to focus  that mr rogers already knew which was that if securities went into the clearing account there was a lien so it was really a non response there's nothing in that e mail that says have we properly perfected a lien in the clearing accounts  security agreement grant us a security interest in those accounts the common english reading of that is that the bank is on suspicion that there's a problem and that's in fact what the district court said that they're worse that he was hurt exactly by sentinel's customers there out over half a billion dollars what effectively happened you know is that is the if we agree with you about equitable a different that part of it is the same remedy we also ask that the banks unsecured claim that would remain if you avoided their liens or equitably subordinated them that that be put behind the claims of other creditors and we would submit that that is an equitable result given that that's what should have happened in the first place the bank is walking away if they're if this decision stands with three hundred plus million dollars of property that should have been held in the segregated accounts what's your position is to the degree of wrongdoing on the banks part necessary to invoke equitable support nation is recklessness enough i think it's unfair advantage taking and where this court's instructions about deliberate indifference or reckless goes to the state of the knowledge of this court in the criminal context in the civil context in pubes knowledge to a party if they are deliberately indifferent or reckless  finding out the truth and we would submit that if you believe the bankers and we think that in fact they knew they were deliberately indifferent at a minimum to what was going on here and that imputes upon them knowledge under this court's case law on a lot of different fridays they effectively stuck their hand head in the sand because it wasn't in their best interests to know the facts and they did this during the summer of two thousand and seven where they were trying to do was manage themselves into a better position the report purchased securities were fizzles physical securities that were highly illiquid liquid they were basically junk securities and that's what the bank would have had of nina and many of those securities mister reid has not been able to sell to this day so instead what they did is they said we don't like these securities we require you to give us high grade corporate securities government securities they knew they had daily position reports with regard to what collateral assets were under all of the sentinel accounts they knew the only place those types of securities could come from was from the customer security account so they effectively if you believe them turned a blind eye and ignored that perhaps sentinel didn't have the right to do that while goading sentinel wants to do it into doing it and then walked away with what was the highest grade collateral and found themselves in a fully secured position and if you look at all of the very number paragraphs that the district court finds this is findings of fact and you go back to what those telephone calls are you can see for example on aug ninth sentinel tries to put some of the collateral back in a collateral account into a segregated account and the bank officer if you go to that tape recorded conversation says no you can't do that on july thirty first when sentinel move some of the government securities tries to get them back into a separate account mr law one of the senior bankers is on the phone with s within seven minutes and shortly thereafter sentinel takes government securities out of a different segregated account and moves it back to the collateral account clearly what the bank is doing here is managing its position to get ahead of everyone else and the court erred because it did not apply an objective good faith standard with regard to the fraudulent transfer claim and it didn't apply the case law that this court has found dealing with deliberate indifference and recklessness with regard arguably depends on who are culpable jewels of your honor yes in the abstract i would agree with that however based upon the facts of this case i think that the facts as found by district by the district court support that culpable mental state essential of the bank received what it knew was stolen property that central had no authority to desegregate those accounts and the court failed to apply th court's instructions on remey and both with the good faith and with the equitable subordination it didn't apply the correct legal labels to that conduct what do you make of the rogers letter you have gotten my copy of  but right there isn't the e mail your honor the june thirteenth when you will what we make of it is that it shows that the bank knew and suspected and therefore objectively was an inquiry notice was deliberately indifferent because it basically states how consent no have three hundred million dollars of collateral when it's only got three million dollars of its own assets the bank bank of new york is the largest custodian in the world accounts the the reasons that the district court judge gives for why they should have thought that was ok was this conversation from a year earlier where they knew mr bloom was saying things that were not truthful and would call into question the customer authority if you look at that conversation mr bloom says at several times it's in our separate appendix at page thirty eight and thirty nine he says that several times we must keep true segregation for our s c m customers so he tells the bank they have to keep segregation there's nothing in there that suggests because he says he's not engaged in proprietary trading that there's any pledging of securities that's authorized for centinels proprietary trading the nature of centinels business which he tells them about in that phone call in which they otherwise know about because they signed see f t c letters would suggest that there couldn't be customer authorization what sentinel did is it had accounts for f c m's that they could treat as if they were segregated account so the customers permission that matters here are the customers of sentinels customers and because f c m's are allowed to pool segregated accounts as long as they keep the segregation you would have had to have had every customer of every one of sentinels customers authorizing the violation of the segregation requirements to reach the conclusion that the just recording was a customers so most post they would be parties who invested their money w what kind of other companies individuals and parties who trade in the commodities market and then commodities firms would use sentinel as a place where they could invest their segregated farms and so the nature of that business would have told the bank that they couldn't possibly have had the consent that they were supposedly inferring from this conversation a year earlier and there's no evidence the bank ever investigated they had the ability to ask for any documents they had the ability to go into their premises and look at whatever they wanted as evidence but wait by what they did on august fourteenth and fifteenth when they stormed the doors because they were upset that settlement closed they could have called customers they had the given sat no assets that belong to their own customers and those are subject to the cea segregation requirements and then there are other customers f c m house accounts hedge funds high net worth individuals fraudulent transfer claim i get the sense that on remand judge say gold just did not want to impose y ability on the bank even if that was the logical import of the factual findings he had already made given the legal clarifications we made in the prior appeal is my impression off base i mean it just seems if speak up i'm sorry your honor the court here did not look at the good faith because you said some very strange things very strict huge there were instances during trial which bank employees gave testimony i did not believe you know in this case law is on the witness stand coming from the mouths of some bank your own witnesses do not leave me to infer that the truth would lied about how careful they were and tried to make themselves look better what the judge said is that they weren't lying when they said they did not believe the cut sentinel was doing anything well doesn't say that  was from his first opinion and yes the witnesses appear to have difficulty accounting for their own motivation what is that me out what he's saying your honor his many years later had many years later he can't remember but you have to remember that mr rogers is a senior credit person he's not in charge of the day to day relationship with because he wrote this memorandum and he wrote it or wrote the e mail because his job is to ask do we have enough collateral for our loans to support our loans and that's what he was asking do we have enough collateral that's his job as the credit guy he asked the sentinel relationship people who know a lot more about the situation and they responded to him and said yes we do we  have rights over everything in our lino bill accounts let's go back again to mr rogers e mail just for a moment even if his concern was about the bank security when he's raising the i think that remain and your honor i believe that the judge said that the bank was not  demonstrate that by the middle of june at least one bank employee was suspicious and others should have known the sentinel was violating segregation rick worms so they should have no so what why didn't loan day only mr rogers seems to be wondering how sentinel is managing to find three hundred million in capital to secure the loan and m m s and well so forth anyway particularly  given judge cycles original observations of the bank could and should have looked at this more closely it seems to me that the at all but found the bank was still an inquiry notice prior prior to the  whether you know that's the first of the second in the original opinion i judge was was talking about a constructive notice he said if they had read the one half hours if they had done that they would have seen it on re man and he said but they didn't look at the white half arsed they didn't know that they were each issues and therefore they warrant an inquiry notice and that they weren't negligent now in terms of where they were financially what he found on remained was that yes they had had a rough patch but that the bank believed that they were looking for alternatives to replace the repo financing that it fallen through and  they did not believe that sentinel at that point was insolvent and again we have to look at back at the point at which these transfers a woman may launch to rogers or email their response by mr law who was the setting the relationship manager was yes we have rights over everything in the renewable i was the reply from  relationship people do we really have rights over all of this collateral and the answer that he gets is yes we do the wall is the basis of their answer because the bank had rights over everything that was in  it into the leaning forward how that reliance was much less reasonable in the summer of two thousand and seven that it was in two thousand and six because  beginning at that point in time and its repub counter parties had returned some of these securities but that doesn't mean i mean the bank didn't have a crystal ball so they didn't know what was going to happen in august when the credit markets fro which is what happened to sentinel but your honor it's not just eric blum say so what you have here is the fact that everyone knew that customer securities were being used and no one questioned at the sophisticated customers didn't question it the auditors didn't question it the regulators who did yearly examinations of the sentinel to make sure that they were properly segregated they didn't question it everybody knew that set no had i was doing proprietary trading everybody knew that they were following a leveraged investment strategy on behalf of their customers and therefore could use customer securities for that strategy that's what the bank reasonably believed and the fact that nobody ever said you can reasonably believe that any permissions judge didn't find that the bank had ever seen documents are testing that that was true don't you find it highly unusual for a bank to make what amounted to a one for six hundred million dollar loan on the basis of oral representations that well could easily be false and of course we're full well your honor it's not just the more representations in the custom representations were what the district judge rely on and that seems ok and also your honor because the account agreement the way it's set up every time sentinel moves money it's representing to the bank that he has the authority to do that and if you don't everybody who's engaged in s now your honor i'm talking about the come out of this act because they they say that you have a duty as a matter of law and that maybe the c f t c was depending on the bank to find this but the fact is it was a regulated entity and the one common problem with government services you can't pay the government employees for finding  bank on that document he sent it to sat non central send it back and said here's our year and one half hour and our audited financials they tied together they use these bankers your honor are not experts in life i further found that reasonably prudent person taking a closer look at the various reports reports that riff beeld with relatively cursory review the sentinel was violated segregation but he said they weren't being prudent bankers he was not saying that they had a duty to look to protect sentinel so let's do it because we know what we know your honor at you asked a question early on about recovering and it made it maybe entirely from the bankers perspective they engage in so many transactions and so few of them are frauds that reading these documents doesn't repay the time needed but it does seem to me that if the bank takes that position that it has to swallow the laws in the cases where it easily could have prevented the loss by reading the documents well your honor the yet again judge take a found on remand that even a diligent in crude wouldn't have figured this out but then what does it mean to say that even a relatively around the judge just as kind of a failsafe talked about what the damages would be on equitable support nation and he said they were about forty million dollars and on the fraudulent transfers an issue we haven't gotten to but is in the  that the trustee had to show which fraudulent transfers are talking about because specific securities were transferred in those fraudulent transfers the trustee has to show that they were improperly is the transfer wrong for your honor is the theory of the case and its summary judgment we had a dispute about whether the trustee had to do specific transfers or whether he could just take the position that they're all bad and the trustee we said you had to do the specific risk and the trustee said you know what you're right i'm only going to do these five specific transfers of specific securities and that was the way the case was tried it was the way it was appealed that was all the proof that those five were bad and so if they want to avoid the liens on those transferred securities they have to trace them and they never did that honor just briefly with risp back to the section five fifty point section five fifty doesn't apply here because we were avoiding liens on property that was in the trustees possession as this court found in its first decision the trustee had proved a prime a facia case to avoid the bank's lien on the collateral account there's no tracing requirement in section five fifty one or in section five fifteen we would submit that those arguments are more than error with regard to a colloquy about what was or was not in the second supplemental opinion we believe your honor judge posner you are correct the holder of the second opinion includes the first opinion the district court in his opening section of his second supplemental  incorporates everything that he said in the first decision and then incorporates everything this court said in its in its decision so those are the findings of the court there was not one jot of additional evidence the bank didn't seek to come in and present any additional evidence that was the record on which this case was decided and we would agree with judge roll inners observation that what the district court was trying to do was weave a way around findings he had made at a time when he was much closer to the