next case of them morning united states commodities futures trading commission versus southern trust metals and othe first is the supreme court has reversed the foreseeability standard that judge king adopted and the reason that we believe that is reversible error is because the district court ignored the only explanatory variable for the customer losses in this case and that was the decline in market prices and silver and there was no other evidence to dispute that that was the cause and there was no violation based on the market price of silver that was alleged or that was found in the context of that argument do you distinguish between those investors who as far as i can tell wanted the precious metal and those who are in the futures market  well the futures market no big well let me let me answer the question because those things operate differently right yeah i think that the second part of your question if you're talking about the futures and options transactions  right there were different sets of investors here right some of them at least initially wanted futures and options contracts right that's right and some of them wanted the good the metal the silver right yes my question to you is in terms of your foreseeability loss argument do you distinguish between those two different sets of investors i don't because the proximate cause element was not satisfied for the futures and options for a very specific reason which is that this was a registration violation and whether we were registered as a futures commission merchant whether we had to be registers a futures commission merchant had no impact whatsoever on whether these customers made money or didn't make money on their investment and so the no there is no distinction and so our proximate cause and the entire rest to sion award are proximate cause it argument goes to the entire restitution for why let's say we agree with you on the people who are part of the unregistered future skee but what about those who wanted to buy metals and in fact just got options why wouldn't the proximate cause still apply that well to the proximate cause when applied to them because they weren't getting options remember the c f theses theory in this case and we you know disputed it we logged there was a summary judgment the short cut our ability to try that issue but  position with respect to the metals was that the metals existed the c f t c took the position these were derivative contracts and regardless of whether these customers own piece of silver sitting in a vault in london or a derivative contract it was tied to the market price of silver while i wait options are dropped since have expiration dates downplay yes whereas if i buy a b silver it could start there twenty years and if i just have an option contract on silver it's going to expire and if the price doesn't go up before my option expires on out a lock i that's right but there is no there was no contention in this case th e any customer was buying options with respect to the silver the c f he sees theory was they weren't buying the physical model they were buying a derivative contract in the physical price of  like the customers all but the ones who bought the op knew they were buying futures off they were actually behind the model that was what the representation lives well it the representation was they were going to buy physical metal by this if the c is not and has never claimed in this case that what in fact they were buying was futures contracts it was undisputed that they were buying futures contracts what they were saying was instead what the london dealers were offering allegedly was a derivative contract for a spot contract no but the point man is the part just as thought they were buying metals on account i mean actual property and so therefore they got out of the market went down that could haul them out all and so when the market goes back up and they could do this so the trading up and out had nothing to do if you're actually buying physical you know just how that well and that's what they thought they were buying correct yes and they weren't buying that and they weren't even buying it on even being bought metal that was being offered to them and that it was being said there were relationships between our london dealers and london banks that own the physical  your clients able to deliver any physical model we had the capability of delivery capability but was ever actual delivery ever made any of these investors well to southern trust metals metal was delivered with respect to the customers that testified at trial the customers that traded with the london dealers none of these customers and asked for delivery they were content and we told them in the very beginning that the delivery would be made in london or in hong kong or in new york and they were content with that they didn't want the delivery they wanted to speculate in the market price movements of physical silver but the important thing is is to answer your question judge hall it even if you accepted the c f he sees theory that this wasn't physical matter but this was a derivative contract in the in the physical metal this was not an option there it was not a futures there was no expiration date they could hold it in trade it just like having the bar of silver in the vault i think the point i'm trying to make is they didn't think they had already had possession of well i think that's what they thought based on the representations of southern trust metals had in its possession this silver and they were buying it document that we opened with customers specifically told them that the we had a third party dealer that was going to provide financing and that the metals would be delivered in london or hong kong or new york so there was never an expectation that southern trust metals was going to itself have the metals it was always going to be through an agent which dodd frank specifically allows for actual delivery to an age so that is the representation that we made and there was no evidence to support that that was a misrepresentation because that is what happened with respect to our london dealers but the proximate cause issue is even if you wanted to say customers were misled they bought derivative contracts instead of physical silver the that had no impact on whether they made money or lost money because it was undisputed derivative contracts are tied to the price of physical silver so if you have investor eg who owns a bar of vault in london and investor b who owns exactly the same amount of silver and that day the price of silver goes up they both made the same amount of money if the price of silver goes down they both lost the same amount of money and so for people to have physical possession of it are you a client of an trusts can deliver physical possession of it you can hold the silver whether it's being held in new york or wherever it's being hell there was no physical silver anywhere well that was a disputed issue that was added on summary judgment and which is one of the errors that we talked about i'm just going to prod your proximate cause i show ok yes and  why is it if in fact it was no sour for them to how to write to the market change why isn't the failure to deliver the sell are the proximate cause of the loss because none of the customers there was zero testimony that any customers asked for delivery to them personally in fact some of the customers testified expressly that they didn't want delivery they didn't want it in their home they wanted to speculate in the market price of silver and so that's that's where we get the restitution issue now we also have issues with respect to the restitution amount that was awarded because of the c f t c revealed for the very first time in closing argument and in post trial briefs what that number was and there was no evidence in the record no opinion testimony no calculations to support that and that should be a reversal on a completely separate grounds that they didn't present any evidence to support the numbers the amount of restitution that was awarded and  the third point that we want to make it goes to some of the questions that you've asked me about summary judgment there was evidence in the record goes to the core issue in this case that  the gold that the silver existed that the london dealers that we were we had relationships with had the ability to make delivery that's what they told us there was record evidence  and the district court in this case it nor that evidence weighed that evidence and entered a critical summary judgment that totally changed the complection of this case so that was also a  the other point that we want to make is that the relief the injunctive relief that was entered in this case was totally out of proportion to what  the evidence showed and the district court ignored evidence of our settlement with regulators before this case even started to issue the harshest remedy conceivable which is a lifetime ban from the industry and the last point of reversal that we have several of the issues of fraud there were materiality issues under goble because the misrepresentation your time is it ok about your rant t to morning and they please the court i'm an stooks here for the commodity futures trading commission which i call my c f t c for short and with me at counsel table is calling metzger who tried the case and is on the briefs wholesale fraud in the metals arena and they unlawfully brokered illegal futures trades and they were held liable rightly so for i restitution award of over two million dollars a civil monetary penalty and a lifetime ban on an appellate roberts gobion from ever again participating in markets that the c f t c regulates i submit that this judgment should affirmed in all aspects because the district court did not air well let's talk about restitution what is your theory now after bank of america with regards to proximate cause they should know what it means so i think if you ask any loss to any first year law student america what is proximate cause me they will say reasonable force the ability as this court did in the city of miami case and as the supreme court talked about in the tape and i am sure that that's right but causation is more than foreseeability more and more see a deliberate foreseeability is a means by which the law decides whether as a policy matter to impose liability and it's a way to limit and expand liability but it doesn't it's not causation you can't ignore the proximate requirement in proximate cause you can ignore cause either now or cost as you could have reasonably foreseen something that didn't occur that's right and you could have caused something that was in reasonably foreseeable in other words if it mr risk o b o here had not reasonably foreseen any of these losses could the yes because then reasonable foreseeability is not the standard right i think this i will say that you understand that if you if you adopt that standard and get us to adopt it in some cases you're going to be out of luck i don't think the standard is simply reasonably foreseeable than what i think it's more i think it is that the conduct as the court held in city of miami has to be both reasonably foreseeable but also who wanted to buy futures they got what they want bargain for they got they may have had to go through orally and buckley had tacked but they got their futures so the fact that the defendant was unregistered really didn't cause they're all i disagree with you judge gilman and i'll tell you why in this country if you want to broker a futures trade you have to be registered with the c r t c and that is because got what they bargained for well no in the futures and if you legally brokered futures trades these customers were placed at risk because they entered the market in an illegal transaction in order for they see you have to see to regulate in this market you we have to have people registered then you're always saying you're saying then that any registration violation automatically satisfies loss causation i'm saying that right because the failure to register doesn't let you regulate and that's the evil you're trying to regulate against so every time you've got a mere registration violation you've proven last causation even if the customer got the actual contract that he or she wanted i don't explain it that simply if i may explain i'll tell you how i see it and how i think the law operates in this arena on registration violations and proximate cause the moment these appellants accepted money to broker an illegal futures trade they violated the law the moment they charged their customers commissions and trading losses for these illegal trades they proximately cost of lawsuits losses for the commission or the or losses for the commission i know that's why i asked you i understand i completely understand the argument that if you have a registration violation even those customers who got the futures contracts they wanted might have a loss as to commissions charged by entering an unregistered broker dealer but what about the ultimate loss at the end of the transaction and i submit that that is  that the customer suffered that were caused by the violation because had they not illegally brokered the trade the customers would not have suffered while the district court would have gone elsewhere to get this the transaction well then they would have done it legally calm on the appellant's in this case told their customers that they were buying precious metal and they told them that they were going to loan them the money to buy the precious metal just like a home mortgage and in fact no one in this case ever had any metal the appellant's engaged in this elaborate scheme and charged their customers fees to open accounts the price of the purported price of a pre metal interest and fees and commissions interest on these fake loans that never existed it was all an elaborate scheme simply to take money from unwitting people so what happened when when they when they received money from people they took the money they filtered it through british virgin islands company in this british virgin islands company placed derivative positions in its own name in the u k with those two companies called hand tech in berkeley that you see in their briefs they're not parties to the case and tech in berkeley never owned any metal they were engaged in this over the counter it can't do in the united states so it was filtered through the british virgin islands and done in the u k all in the british virgin island company name with no connection to the customers of southern trust metal who were told and believed in this country that they were buying precious metal there was no precious metal those positions in that the testimony of the actors in the u k said no we were derivatives trading we didn't have metal we didn't make delivery of metal we didn't we don't have metal and neither did southern trust so the metals game is quite simple to understand it was an elaborate lie every penny that the customers put into it at five point thinking they were buying precious metal they should get back they should be returned to their status quo before they ever had the misfortune case the defendants never produced a complete set of their customer statements so it was impossible to piece together penny by penny what every customer put in and what they got  so in calculating the restitution award in this case we came up with a reasonable approximation which is what the law requires by looking at the trading losses that these u k firms were charging spreads and all manner of charges that the their salesman that their salesman testified were split fifty fifty but the salesman who were like telemarketers there's the salesman every w the salesmen were paid they were paid fifty percent of the fees and the commissions and charges that other interest was passed was charging their customers so if we took a look at the w two s of the salesman they said that half of that was the fees in the commissions  that their pay was fifty percent of the fees and commissions that we double that to represent a reasonably approximate the fees and commissions that customers were charged and we looked at the trading losses that the appellant suffered in their u k account is how much is interest i pay where i go on that after the trial was over when we were briefing the damage calculate the rest touche in calculations we submitted summary exhibits record one sixty four dash one dash two and three that's one six four one two and three these were this the calculations that we attached to our restitution award briefing and those are the calculations that we computed based upon all of the statements and evidence that that was admitted in the record statements and so we presented as the judge as the district court invited us to do an argument about how the calculation was done you say there was an absolute total misrepresentation causation cases that the appellant's fight are so off point if you know what i mean these last causation cases are about a misrepresentation or an omission that once it comes to light later causes the value of the investment to drop that factional scenario is absolutely not what happened here in the metals in the metals scheme customers were told they were buying metal and they weren't buying anything they were buying the privilege of being ripped off and all the appellants did was keep a book entry of what they were telling their customers and then they charge them with all this elaborate window dressing oh here's the interest on your loan here's the price spread because the price of silver has been moving it was all an elaborate lie and so saying that if the played the price of silver gone up and set it down you're saying these customers never would have received anything silver had gone up there was a risk i suppose that the appellant's would have owed their customers money and that's why they were hedging in the u k to cover the risk to themselves in case that happened but the way they operated with fees and commissions all these high charges for the privilege of being ripped off the customers virtually never in the money it's ever so much money siphoned off even if they were buying some metals it would have been enough to buy the amount of metals they were representing and that's the way we see it just fell and in the end will come in fifty percent commissions to telemarketers they were paying the telemarketers fifty percent of all the fees and charges that were pulled out of customer accounts that telemarketers got to keep fifty percent cannot tell by looking at some of the summary documents how much money  the people who were tricked into this metal scheme they bought the metal they paid a purchase price for it and then they paid all these fees and things so all of the purchase price i'm trying how much they put in the deal well i don't i don't know because we never got complete records from the appellant's on their customer account statements they destroyed them when they were under investigation they destroyed everything a lot of the records that we didn't get a complete set so what we did and under the law by roughly a million and a half for the probable ok i mean yes that is how well that is what we came up with right yes and the one time is a i want to say on proximate cause for the for the losses on the metals trading there is no attenuation here there is no concern that this is far afield from the violation every penny that those metals customers lost they lost because the appellant's made first of all her answer on the causation element is transaction causation it's proximate causes and the standard that we have here is given to us by congress in section thirteen a one it is a statutory standard of restitution the c f c previously never got and the language that they used for that the customer losses proximately caused by a violation is lifted directly at the door of pharmaceuticals this is loss causation that is the standard that congress required it's not just hey i i never would have entered into this  in from customers are they no longer around well she has said that we destroyed or not i have a question to other documents that show how much money you took in from customers buying metals yes but it and our government have the documents or you just have them the government has i'm an on have them the government has the issue that we have is there was never any  as the documents look like what are are they account statements that were given to the customers but in the documents that would show what the customers paid account statements by southern trust metals that were given to the customer they  c also has account statements from the london dealers from han tech and berkeley they had one hundred percent of this they had been doing calculations up to trial we were never able to take discovery in that and at trial they put none of their calculations into into evidence that i was surprised that she admitted the account statements of the customers didn't get admitted at trial those account statements  for hand tech in berkeley were put into the evidence the account statements i don't believe they ever admitted into evidence you count statements from southern trust metal except for the specific customers who testified  statements were in evidence and it showed excuse me that all this all the customers got their account statements there wasn't a single allegation in this entire case you understand the game account statements the question is whether the metals were there that you had delivery yobs are actual possession of that are reflected in the count statements how many customers test five customers testified and they aren't and nobody complained about not  getting account statements nobody complained that we asked for metal in we didn't get it the only thing they really complained about was we lost money which is not the violation and it goes back to our original point which is look the losses in this case were caused by declines in the price of silver and that was not any violation that was alleged in this case and applying the standard that the statute gives us they're not entitled to restitution there is no statute that says any violation of the c act and titles you to rest they didn't do that but i want to address also this issue of fake loans and fake transactions and it goes to your question judge hall there were thousands of account statements and record they showed transactions in the sub accounts with the london dealers and i want the court to understand that there was a sub account  it with the london dealers that was designated for each and every single customer and in that sub account the transactions were made in the c f t c it met those transaction for reflected immediately in the account statements of the customers nobody disputed that so for them to say the transactions weren't real in the loans were real customers got the benefit of these transactions one of the testifying customers  he had a seven thousand dollars gain within the first few weeks of his opening the account and that all goes to whether they were purchasing right to buy and sell whether we are purchasing to reverse the restitution and reverse the summary judgment thank you the last case in the morning m