United States Court of Appeals

For the First Circuit

No. 23-1290

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff, Appellee,

v.

HAYDÉE YOLANDA SANCHEZ-DIAZ MONGE,

Relief Defendant, Appellant,

LUIS JIMENEZ CARRILLO, AMAR BAHADOORSINGH, JUSTIN ROGER WALL, 

and JAMIE SAMUEL WILSON,

Defendants,

MARTHA Y. JIMENEZ TRUST and CHARLES A. CARRILLO TRUST,

Relief Defendants.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF MASSACHUSETTS

[Hon. William G. Young, U.S. District Judge]

Before

Kayatta, Howard, and Rikelman,

Circuit Judges.

Brooks T. Westergard, with whom Jacob S. Frenkel and Dickinson 

Wright PLLC were on brief, for appellant.

Stephen Silverman, Appellate Counsel, with whom Megan 

Barbero, General Counsel, Michael A. Conley, Solicitor, and Kerry 

J. Dingle, Senior Appellate Counsel, were on brief, for appellee.
December 7, 2023
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RIKELMAN, Circuit Judge. In 2009, Yolanda Sanchez-Diaz 

divorced Luis Jimenez Carrillo and entered into a typical marital 

termination agreement, which included child support for the 

couple's five-year-old son and limited spousal support for her. 

After Carrillo moved away, they modified this agreement in 2016. 

Under the modified terms, Sanchez-Diaz took full physical and legal 

custody of their son and received increased child support and help 

with other expenses, including a new car.

In 2021, the Securities and Exchange Commission (SEC) 

sued Carrillo for securities violations he allegedly committed 

well after the couple divorced. It named Sanchez-Diaz as a relief 

defendant in the suit and sought to recover from her the value of 

the new car she had received four years earlier, claiming Carrillo 

paid for it with illicit funds. The SEC did not accuse SanchezDiaz of any wrongdoing but argued she had no legitimate claim to 

the car because she had not provided any consideration for it. 

The district court agreed and ordered her to pay almost $170,000, 

including interest. Because we conclude that the district court 

applied the wrong legal standard in evaluating the SEC's arguments 

and that Sanchez-Diaz provided value for the car by assuming fulltime care for the couple's son for six years, we reverse.
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I. BACKGROUND

A. Relevant Facts

Sanchez-Diaz married Defendant Luis Jimenez Carrillo in 

2001. The couple lived in California and had one child, a son, 

who was born in 2003. In July 2009, Sanchez-Diaz and Carrillo 

divorced and executed a marital termination agreement in 

California's San Diego Superior Court. The agreement required 

Carrillo to pay $1,500 per month in child support and $3,139 per 

month in spousal support, with the last spousal support payment 

due on August 1, 2012. It also provided for shared physical 

custody of their son, who at the time was five years old; Carrillo 

took care of their son every other weekend, and the parents 

alternated school holidays, vacations, and the son's birthday. In 

December 2009, Sanchez-Diaz and Carrillo executed an addendum to 

the marital termination agreement that extended spousal support 

payments for an additional six months, such that payments would 

end in February 2013.

In late 2013, Carrillo moved to Mexico. Sanchez-Diaz, 

who continues to reside in California, has had sole legal and 

physical custody of their son since early 2014.

In March 2016, when their son was almost thirteen years 

old, Sanchez-Diaz and Carrillo executed in Mexico a modified child 

support agreement, which they said reduced to writing their actual 

arrangement for their son's care since Carrillo had moved away. 
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Under the modified agreement, Sanchez-Diaz agreed to full legal 

and physical custody of their son. Carrillo agreed to pay 

increased child support of $10,000 per month, to pay for the 

medical and educational expenses of their son, to cover the repairs 

and maintenance for the home where Sanchez-Diaz and their son 

lived, and -- central to this case -- "to purchase a new vehicle 

and to sign ownership of it over to [Sanchez-Diaz] every three 

years." The agreement explicitly omitted any spousal support and 

was set to expire when Carrillo and Sanchez-Diaz's son turned 

nineteen or when he began university studies, whichever occurred 

earlier.

In April 2017, Sanchez-Diaz received from Carrillo a 

2017 BMW X5 M per their agreement. Around March or April 2020, 

she traded in the 2017 BMW and replaced it with a 2020 BMW X5 M.

B. Legal Proceedings

In August 2021, the SEC brought a securities enforcement 

action in the District of Massachusetts against Carrillo and three 

other named defendants, alleging they engaged in a multi-year 

securities fraud scheme. According to the complaint, from 2013 

to 2019, Carrillo defrauded investors by concealing that he, in 

concert with his co-defendants and others, controlled the 

securities of multiple publicly-traded companies.

The complaint named Sanchez-Diaz, along with two trusts, 

as relief defendants. The SEC did not allege any wrongdoing by 
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Sanchez-Diaz, but it sought equitable relief from her. It claimed 

that, in April 2017, Carrillo directed one of his offshore asset 

managers to transfer $134,500 to a car dealership to purchase the 

2017 BMW, which was titled to Sanchez-Diaz. As a result, the SEC 

asserted, Sanchez-Diaz "received proceeds of the defendants' 

unlawful acts, practices and schemes and should not be entitled to 

retain those illegally-derived proceeds."

The district court entered a partial consent judgment 

between the SEC and Sanchez-Diaz, in which she agreed not to 

contest that Carrillo purchased the BMW with funds from the alleged 

fraud. That left as the only open issue whether Sanchez-Diaz 

should be ordered to disgorge any ill-gotten gains she received.

Shortly thereafter, the SEC moved for an order requiring 

Sanchez-Diaz to pay disgorgement of $134,500, which represented 

the purchase price of the 2017 BMW, plus $35,304 in prejudgment 

interest, for a total of $169,804. The SEC argued that SanchezDiaz had no equitable claim to the car because the 2016 agreement 

"recite[d] no consideration" for Carrillo's promise to buy the 

car. It maintained that the car was merely a gift from Carrillo 

and that a relief defendant cannot keep a gift purchased with 

illegal profits.

Sanchez-Diaz opposed the motion, arguing that she 

provided valuable consideration for the BMW and, accordingly, had 

a legitimate claim to it. Specifically, she contended that 
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California law creates a legal presumption that she provided value 

for the car because it instructs that the mutual consent of parties 

who enter into a separation and support agreement is sufficient 

consideration for that agreement. She also submitted a 

declaration explaining that, in exchange for Carrillo's financial 

obligations under the agreement, which were undertaken for the 

benefit of the parties' son, she accepted full legal and physical 

custody of their son.

The district court granted the SEC's disgorgement 

motion. SEC v. Carrillo, 656 F. Supp. 3d 354, 356 (D. Mass. 2023). 

It concluded that the SEC satisfied its burden by showing that 

Sanchez-Diaz received ill-gotten funds in the form of the 2017 BMW 

and that she did not have a legitimate claim to those funds. Id.

at 355. It determined that the question before it was not "whether 

there existed 'consideration' in the contract law sense but whether 

Sanchez[-]Diaz provided substantially equivalent value in the 

bankruptcy law sense." Id. at 355-56. Applying that framework, 

the district court found as a matter of fact that "conspicuously 

absent in Sanchez[-]Diaz['s] defense is any persuasive argument 

that [she] 'provided services or value in exchange for' the BMW." 

Id. at 355 (quoting SEC v. Knox, No. 18-12058, 2022 WL 1912877, at 

*4 (D. Mass. June 3, 2022)). The district court also stated that 

Sanchez-Diaz's declaration did not "persuade[] [it] that she 

provided goods, services, or other substantially equivalent value 
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in exchange for the BMW." Id. at 356. It held that disgorgement 

was therefore appropriate and ordered Sanchez-Diaz to pay 

$169,804. Id.

Sanchez-Diaz timely appealed the district court's 

disgorgement order.

II. STANDARD OF REVIEW

"Disgorgement is an equitable remedy," and "[t]he 

availability of an equitable remedy presents a question of law 

engendering de novo review." In re PHC, Inc. S'holder Litig., 894 

F.3d 419, 435 (1st Cir. 2018). Accordingly, we review de novo 

Sanchez-Diaz's primary contention that disgorgement is not an 

equitable remedy available to the SEC. Because her contention 

that she has a legitimate claim to the car also must be "valid in 

fact," however, we review for clear error the district court's 

factual finding that she provided nothing of value in exchange for 

the car.1 See CFTC v. Kimberlynn Creek Ranch, Inc., 276 F.3d 187, 

192 (4th Cir. 2002) (reviewing for clear error factual findings 

entered after a hearing held to determine the legitimacy of a 

relief defendant's claim to ill-gotten funds).2

1 The SEC conceded at oral argument, in two separate 

exchanges, that the district court found that Sanchez-Diaz 

provided no value for the car.

2 In In re PHC, we first exercised de novo review and concluded 

that disgorgement was available. 894 F.3d at 438. We then 

evaluated under an abuse of discretion standard whether the 

district court had properly tailored the scope of the disgorgement 

order to address the wrongdoer's conduct. Id. at 438-39. Here, 
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III. DISCUSSION

Sanchez-Diaz urges us to reverse the district court, 

arguing primarily that she provided something of value in exchange 

for the BMW and, therefore, has a legitimate claim to it. She 

also contends that the district court erred in relying on 

bankruptcy law principles to evaluate the legitimacy of her claim.

Her arguments raise an issue of first impression for 

this court: When does a relief defendant have a legitimate claim 

to property purchased with ill-gotten funds such that equitable 

disgorgement would be unjustified? We begin our analysis by 

setting forth the correct legal standard for evaluating whether 

disgorgement against a relief defendant is an available equitable 

remedy. We then apply that standard to this case.

A. When Is Equitable 

Disgorgement Available Against Relief Defendants?

The SEC proceeds against Sanchez-Diaz as a relief 

defendant. As the SEC acknowledges, relief defendants are "thirdparty non-wrongdoers." SEC v. Ahmed, 72 F.4th 379, 407 (2d Cir. 

2023). "In the context of securities enforcement actions, [they] 

are individuals who are not accused of having violated the 

by contrast, scope of relief is not at issue. Instead, after 

setting out its understanding of the legal test for the 

availability of disgorgement, the district court concluded as a 

matter of fact that Sanchez-Diaz provided no value in exchange for 

the car. Consistent with our precedent, we review that factual 

finding for clear error. See United States v. Maglio, 21 F.4th 

179, 186 (1st Cir. 2021).
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securities laws themselves, but who are believed to be in 

possession of profits from such violations." SEC v. Smith, 710 

F.3d 87, 90 n.2 (2d Cir. 2013). Consistent with this 

understanding, the SEC has never contended that Sanchez-Diaz 

engaged in any wrongful conduct or that she had any knowledge of 

Carrillo's alleged fraud. Indeed, according to the complaint in 

the underlying enforcement action, Carrillo's fraudulent scheme 

started six years after he and Sanchez-Diaz separated.

We have not previously articulated a legal rule about 

when a relief defendant in a securities enforcement action may be 

subject to equitable disgorgement. The Second Circuit, however, 

has set forth such a rule. Under its precedent, "[f]ederal courts 

may order equitable relief against a person who is not accused of 

wrongdoing in a securities enforcement action where that person: 

(1) has received ill-gotten funds; and (2) does not have a 

legitimate claim to those funds." SEC v. Cavanagh, 155 F.3d 129, 

136 (2d Cir. 1998). Several other circuits have adopted this rule 

as setting forth the two critical conditions that must be satisfied 

for a court to order equitable disgorgement against a relief 

defendant. See, e.g., Kimberlynn Creek Ranch, 276 F.3d at 192 

(quoting Cavanagh); SEC v. George, 426 F.3d 786, 798 (6th Cir. 

2005) (same); SEC v. Colello, 139 F.3d 674, 677 (9th Cir. 1998) 

(employing similar rule); SEC v. Cherif, 933 F.2d 403, 414 n.11
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(7th Cir. 1991) (same). Importantly, the parties agree this twopart rule controls here.

After careful review, we conclude this two-part rule 

makes good sense in light of the plain language of the applicable 

statute, the equitable principles behind disgorgement, and the 

nature of relief defendants. First, the Securities and Exchange 

Act permits the SEC to seek, and courts to order, "any equitable 

relief that may be appropriate or necessary for the benefit of 

investors." 15 U.S.C. § 78u(d)(5). The statute specifically 

provides for disgorgement, stating that "[i]n any action or 

proceeding brought by the [SEC] under any provision of the 

securities laws, the [SEC] may seek, and any [f]ederal court may 

order, disgorgement." Id. § 78u(d)(7). Federal courts have 

jurisdiction to "require disgorgement" under that provision "of 

any unjust enrichment by the person who received such unjust 

enrichment as a result of" a securities law violation. Id.

§ 78u(d)(3)(A)(ii) (emphasis added); see also George E. Palmer, 

Law of Restitution § 1.1 (3d ed. 2023) (defining unjust enrichment 

as "a very broad and flexible equitable doctrine, based on the 

principle that it is contrary to equity and good conscience for 

the defendant to retain a benefit that has come to [them] at the 

expense of the plaintiff").

Second, courts considering disgorgement orders in 

securities enforcement actions have focused on the equitable 
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principle of unjust gain. They have imposed disgorgement as a 

remedy to "forc[e] a defendant to give up the amount by which [they 

were] unjustly enriched" through violations of securities laws. 

SEC v. Contorinis, 743 F.3d 296, 301 (2d Cir. 2014) (first 

alteration in original) (quoting FTC v. Bronson Partners, LLC, 654 

F.3d 359, 372 (2d Cir. 2011)); see also SEC v. Sargent, 329 F.3d 

34, 40 (1st Cir. 2003); Dan B. Dobbs & Caprice L. Roberts, Law of 

Remedies: Damages, Equity, Restitution § 4.1(1) (3d ed. 2018) 

(noting that the remedy of disgorgement is measured by a 

defendant's unjust gains). As they have explained, a function of 

disgorgement is to "recover ill[-]gotten gains for the benefit of 

the victims of wrongdoing, whether held by the original wrongdoer 

or by one who has received the proceeds after the wrong." Colello, 

139 F.3d at 676. As an equitable remedy, however, "disgorgement 

of improper profits" is "limited to 'restoring the status quo and 

ordering the return of that which rightfully belongs' to" another. 

Braunstein v. McCabe, 571 F.3d 108, 122 (1st Cir. 2009) (quoting 

Tull v. United States, 481 U.S. 412, 424 (1987)). Because of this 

equitable limitation, disgorgement is properly applied only 

against third-party non-wrongdoers "who are in possession of funds 

to which they have no rightful claim." SEC v. Ross, 504 F.3d

1130, 1141 (9th Cir. 2007); see also Contorinis, 743 F.3d at 306–

07 (noting this application is "consistent with disgorgement's

remedial purpose . . . [of] ensur[ing] illegal actions do not yield 
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unwarranted enrichment even to innocent parties"). If, by 

contrast, a relief defendant has a rightful claim to the funds, 

disgorgement is inappropriate. Ross, 504 F.3d at 1142.

Third, the two-part rule accounts for the nature of 

relief defendants. "[T]he lack of a legitimate claim to the [illgotten] funds is the defining element of a nominal [or, 

alternatively, relief] defendant." Colello, 139 F.3d at 677. The 

definition of a relief defendant is one who "holds the subject 

matter of the litigation in a subordinate or possessory capacity[,] 

as to which there is no dispute" -- and thereby lacks a legitimate 

claim to the property at issue. Id. at 676 (quoting Cherif, 933 

F.2d at 414). That is why, courts have explained, relief 

defendants may "be joined to aid the recovery of relief" without 

an additional assertion of subject matter jurisdiction: they have 

possession but "no ownership interest" in the funds at issue and 

are joined simply to facilitate collection. Kimberlynn Creek 

Ranch, 276 F.3d at 191 (quoting Cherif, 933 F.2d at 414).

For all these reasons, we are persuaded by the reasoning 

of our sister circuits and hold that the SEC may obtain 

disgorgement from Sanchez-Diaz only if (1) she received ill-gotten 

funds, in the form of the 2017 BMW, and (2) she has no legitimate 

claim to those funds, i.e., to the BMW. The SEC, as the party 

seeking disgorgement, must establish both elements by a 

preponderance of the evidence. See Steadman v. SEC, 450 U.S. 91, 
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103-04 (1981); SEC v. World Cap. Mkt., Inc., 864 F.3d 996, 1004 

(9th Cir. 2017).3 When a relief defendant such as Sanchez-Diaz 

contests the SEC's request for disgorgement, however, she must put 

forward a claim that is both legally and factually valid and cannot 

rely solely on conclusory assertions. See Kimberlynn Creek Ranch, 

276 F.3d at 192 n.5.

The parties do not dispute that the first element is met 

here because Sanchez-Diaz has effectively conceded that the 

proceeds of the underlying fraud paid for the BMW. Accordingly, 

this case hinges on the second element -- whether Sanchez-Diaz has 

a "legitimate claim" to the 2017 BMW. See Cavanagh, 155 F.3d at 

136. We turn our attention to that element now.

B. Identifying a "Legitimate Claim"

We have not developed guidelines for what qualifies as 

a "legitimate claim" to unlawfully obtained proceeds, but our 

sister circuits have. Again, we find their reasoning persuasive 

and rely on it here.

3 Although the parties dispute who bears the burden of proving 

the relief defendant's legitimate claim or lack thereof, neither 

provides substantial briefing on this question. Additionally, we 

have not found any case law that persuasively argues that the 

individual should bear the burden of proof when the government 

brings a claim seeking to disgorge assets or property in the 

individual's possession. Even if we are incorrect and SanchezDiaz had the burden of proof, she would have met it here based on 

the largely undisputed facts before the district court.
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To possess a legitimate claim to ill-gotten funds, a 

relief defendant must provide something of value in exchange. See

CFTC v. Walsh, 618 F.3d 218, 226 (2d Cir. 2010) ("[R]elief 

defendants who have provided some form of valuable consideration 

in good faith in return for proceeds of fraud are beyond the reach 

of the district court's disgorgement remedy."4 (citing Janvey v. 

Adams, 588 F.3d 831, 834–35 (5th Cir. 2009))); Palmer, supra,

§ 19.7 (explaining that courts generally agree that "an innocent 

person who obtains a benefit through the wrongful act of a third 

person" can be ordered to pay restitution "to the one at whose 

expense the benefit was obtained, unless, in addition to [their]

innocence, the recipient is protected because [they] gave value").5

That value can come in different forms. It can include 

providing goods or performing services in exchange for 

4 To be sure, the federal court in Walsh certified a 

particular question of New York state law to New York's highest 

court -- whether a spouse can be considered a "good faith purchaser 

for value" when she relinquishes future claims to marital property 

that consists almost entirely of proceeds of fraud. 618 F.3d at 

231-32. But the Walsh court agreed with the legal principle 

critical for our purposes here -- that when a relief defendant 

provides value in return for assets, those assets are not subject 

to disgorgement. See id. at 226.

5 The SEC has never argued that Sanchez-Diaz had any knowledge 

of Carrillo's fraud such that she would not qualify as "an innocent 

person." To the contrary, the SEC repeated at oral argument that 

it was not alleging that Sanchez-Diaz was aware of the fraud. 

Thus, notice of the underlying fraud is not at issue in this case, 

and we do not analyze how such notice could impact the parties' 

arguments.
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compensation, such as when an employee performs work for an 

employer. See Kimberlynn Creek Ranch, 276 F.3d at 191–92 (finding 

that salary payments received in return for services rendered to 

an employer "constitute[] one type of ownership interest that would 

preclude proceeding against the [employee] as a nominal 

defendant"); Ross, 504 F.3d at 1142 (holding that relief defendants 

who were employed as sales agents for a company that violated 

securities laws had "presumptive title" to the commissions they 

"received [as] compensation in return for services rendered").

Value also can come from giving up a legal claim. 

Indeed, multiple courts have explained that a spouse may provide 

something of value by giving up, as part of a divorce agreement, 

a legal claim to marital property or child or spousal support. 

See Walsh, 618 F.3d at 226 (explaining that a relief defendant may 

provide value by relinquishing legal claims to marital property 

through a negotiated separation agreement); cf. Scholes v. 

Lehmann, 56 F.3d 750, 755-58 (7th Cir. 1995) (stating that a spouse 

who received proceeds of fraud could provide more than nominal 

consideration through "discharge of [her former husband's] . . . 

obligations of child support and the like arising from their 

divorce").

By contrast, courts agree that when a relief defendant 

receives property "as a gift," there is no "'legitimate claim' 

sufficient to immunize the property from disgorgement." Walsh, 
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618 F.3d at 226; see also George, 426 F.3d at 798; Cavanagh, 155 

F.3d at 137. Consistent with the need to distinguish between 

gifts and value-backed exchanges, a relief defendant must provide 

more than nominal value to demonstrate a legitimate claim. See

Restatement (Third) of Restitution and Unjust Enrichment § 68, 

cmt. c, illus. 4 (Am. L. Inst. 2011). For example, in Janvey, the 

Fifth Circuit held that creditors who signed a written agreement 

granting them "certain rights and obligations" with respect to 

funds, before the SEC enforcement action began, had a legitimate 

claim and were improper relief defendants. 588 F.3d at 834–35. 

By contrast, in World Capital Market, the Ninth Circuit upheld a 

disgorgement order when the evidence showed that the named 

defendant's alleged $5 million loan to the relief defendant was a 

sham designed to minimize the amount of the named defendant's 

assets. 864 F.3d at 1004–05. To support its ruling, the court 

pointed to the fact that the relief defendant disclaimed any legal 

obligation to repay the loan. Id.

Accordingly, to exclude the possibility of a gift, the 

value that a relief defendant provides in exchange for ill-gotten 

gains must be more than nominal in relation to the funds received. 

But no federal disgorgement precedent suggests that the value must 

be substantially equal. Rather, courts have viewed their task as 

"merely ensuring a non-specious claim to the funds." CFTC v. 

WeCorp, Inc., 848 F. Supp. 2d 1195, 1205-06 (D. Haw. 2012) 
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(rejecting agency's argument that relief-defendant attorney did 

not have a legitimate claim to a retainer because he did not 

provide services that were "reasonably equivalent" to the 

retainer's value); see also Kimberlynn Creek Ranch, 276 F.3d at 

192 (explaining that a specious claim of ownership will not allow 

individuals who hold funds on behalf of wrongdoers to avoid 

disgorgement). This is for good reason. Under general equitable 

principles, innocent third parties can assert a defense to 

restitution claims premised on unjust enrichment by demonstrating 

that they gave value in return. Palmer, supra, § 16.6; 

Restatement (Third) of Restitution and Unjust Enrichment § 68 

cmt. c (Am. L. Inst. 2011). As long as the individual provided 

more than nominal consideration, courts generally refrain from 

inquiring into the adequacy of the consideration. See Restatement 

(Third) of Restitution and Unjust Enrichment § 68, cmt. c, illus. 

4 (Am. L. Inst. 2011); Dobbs & Roberts, supra, § 4.6(2) (explaining 

that, even if one party received a payment worth more than the 

value of the debt it discharged in return, the party may still 

have a defense to restitution and that courts are correct not to 

investigate the value of the right to recover against the debtor); 

Palmer, supra, § 16.6 (referencing pragmatic reasons for declining 

to inquire into the worth of a valid claim one party has 

discharged, including the difficulties of ascertaining value).
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The district court here, however, took a different 

approach. It determined that the relevant question was not 

"whether there existed 'consideration' in the contract law sense 

but whether Sanchez[-]Diaz provided substantially equivalent value 

in the bankruptcy law sense."6 Carrillo, 656 F. Supp. 3d at 355-

56. The SEC's argument at the disgorgement motion hearing seems 

to have inspired the district court's bankruptcy-law framing. The 

SEC contended that Sanchez-Diaz did not give "equivalent value in 

exchange" for Carrillo's obligation to provide her with a car, and 

the question of whether she gave "equivalent value" was the central 

issue before the district court.

6 The concept of "reasonably equivalent value," meaning 

"roughly equivalent value," is central to the law of fraudulent 

transfer under the Bankruptcy Code, in which a bankruptcy trustee 

can undo and recover a transfer of property from a debtor to a 

third party. 2 Bankruptcy Law Manual § 9:36 (5th ed. 2023). The 

Bankruptcy Code permits a trustee to recover transfers that a

debtor made before the debtor declared bankruptcy if the trustee

can show, among other things, that at the time of the transfer, 

the debtor "received less than a reasonably equivalent value in 

exchange for such transfer or obligation." 11 U.S.C. 

§ 548(a)(1)(B)(i); see In re Palladino, 942 F.3d 55, 58-59 (1st 

Cir. 2019). Although the term "reasonably equivalent value"

appears in the statute's text, it is not defined in the statute, 

so courts have given it meaning. See In re R.M.L., Inc., 92 F.3d 

139, 153 (3d Cir. 1996) (explaining that courts consider factors 

such as the fair market value of the item received by, or the 

services performed for, the debtor compared to the actual price 

paid; the existence of an arm's-length relationship between the 

debtor and the transferee; and the good faith of the transferee). 

Critically, the term "reasonably equivalent value" does not appear 

in the text of the SEC disgorgement statute.
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Neither the district court nor the SEC has cited support 

for the application of this bankruptcy-law framing to SEC 

disgorgement motions. After careful consideration, we also find 

no basis for it in the language of the operative federal statute 

or in precedent, including the cases cited by the district court. 

Instead, those cases merely stand for the well-accepted principle 

that a relief defendant has a legitimate claim to property or funds 

only if they have provided some consideration, such as in the form 

of goods or services, in exchange.

To be sure, when parties have disputed whether the relief 

defendant has a legitimate claim based on services rendered, lower 

courts have examined the amount of money a relief defendant 

received in light of the services purportedly provided. See, 

e.g., WeCorp, 848 F. Supp. 2d at 1202; SEC v. Erwin, No. 13-cv03363, 2022 WL 2063227, at *3–4 (D. Colo. June 8, 2022); SEC v. 

Nadel, No. 11-0215, 2016 WL 639063, at *29 (E.D.N.Y. Feb. 11, 

2016); SEC v. End of the Rainbow Partners, LLC, No. 17-cv-02670, 

2019 WL 8348323, at *7 (D. Colo. Nov. 25, 2019). Courts have 

taken a particularly close look in cases in which relief defendants 

have received substantial sums of money for ministerial tasks. 

See, e.g., Erwin, 2022 WL 2063227, at *3–4; Nadel, 2016 WL 639063, 

at *29; End of the Rainbow Partners, 2019 WL 8348323, at *7. The 

courts' inquiries, however, were aimed at distinguishing earned 

compensation from gratuitous transfers. See, e.g., Erwin, 2022 
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WL 2063227, at *3–4. The courts did not require that the relief 

defendants furnish "equivalent value" to assert a legitimate 

claim. And no case that we have found suggests that, if a relief 

defendant provides more than nominal value, the court should 

nevertheless scrutinize if that value were truly sufficient, by 

some market-based or other external measure. 

Indeed, "disgorgement is a distinctly public-regarding 

remedy, available only to government entities seeking to enforce 

explicit statutory provisions," and the applicable statutory 

provision here focuses on the concept of unjust enrichment. 

Bronson Partners, 654 F.3d at 372; see also 15 U.S.C. 

§ 78u(d)(3)(A)(ii). A disgorgement order is aimed at requiring 

the return of that which belongs equitably and in good conscience 

to another. Braunstein, 571 F.3d at 122. It is, therefore, 

available against innocent third parties. Ross, 504 F.3d at 1141. 

If a relief defendant has provided some value that is more than 

nominal in exchange for an asset, however, they do have a rightful 

claim to that asset, even if some accounting could suggest they 

obtained it at a discount. Launching small-scale adjudications 

on how much of the relief defendant's discount is valid or the 

precise fair market value of the relief defendant's services would 

require the relief defendant to satisfy a mathematical analysis, 

rather than determine the relevant question of whether they have 

a just claim. Compare Janvey, 588 F.3d at 834–35 (finding that 
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the existence of a creditor-debtor relationship before the 

enforcement action was itself enough to give relief defendantcreditors a legitimate ownership interest in proceeds received 

through the agreement), with In re Palladino, 942 F.3d at 59 

(confronting a valid creditor-debtor relationship in the 

bankruptcy law context and then, nevertheless, proceeding to 

examine whether the debtors' transfer provided reasonably 

equivalent value to creditors); see also Dobbs & Roberts, supra,

§ 4.1(1) (contrasting restitutionary recovery through remedies 

like disgorgement with recovery of damages).

To sum up, we conclude that a relief defendant in an SEC 

enforcement action has a legitimate claim to funds if (i) they 

have provided something of value in exchange, whether that be 

services as an employee or an agreement to give up a legal claim, 

as just two examples, and (ii) the value they provided is more 

than nominal in relation to the money received.7 With that legal 

standard in place, we turn to whether Sanchez-Diaz satisfies it.

7 In so holding, we emphasize that "more than nominal" is not 

an absolute number. Rather, courts should determine in the 

context of a particular case whether the value that a relief 

defendant provided is more than nominal in relation to the funds 

received. For example, five dollars for a new Rolls Royce would 

not be more than nominal. Courts evaluating the services that a 

relief defendant has provided have used this type of analysis by 

evaluating whether the money the relief defendant received is 

related to the scope and duration of the services. See, e.g., 

Nadel, 2016 WL 639063, at *29.
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C. Application

Sanchez-Diaz received the car through the parties' 

modified child custody and support agreement. Under that 2016 

agreement, (i) Carrillo agreed to cover a number of expenses 

involved in raising their son, including transportation, and (ii) 

Sanchez-Diaz agreed to sole legal and physical custody of their 

son. We conclude that, through this agreement, Sanchez-Diaz 

conveyed much more than nominal value in exchange for Carrillo's 

promise to purchase the 2017 BMW. Accordingly, we determine that 

the district court clearly erred in holding otherwise.

1. Acceptance of Legal and Physical Custody

By accepting sole legal and physical custody of their 

son under the 2016 agreement, Sanchez-Diaz agreed to be fully 

responsible for every aspect of their son's life for the next five 

to six years -- i.e., until he turned nineteen or started college. 

The significant effort involved in raising a child, and the 

obligation of full legal and physical custody, certainly 

constitutes the provision of value in exchange for Carrillo's 

monetary support, including the car. 

Our conclusion rests not only on a practical 

understanding of the realities of raising a child but also on 

decades of research and legal recognition of what caring for a 

child entails. For instance, California law presumes, in the 

context of child support, "that a parent having primary physical 
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responsibility for [a child] contributes a significant portion of 

available resources for the support of [that child]." Cal. Fam.

Code § 4053(i). Similarly, research has long documented the 

significant time single parents spend on childcare and household 

activities. On average, single parents can spend as much as sixand-a-half hours per day with their children, not counting the 

time spent engaged in housework. Sarah M. Kendig & Suzanne M. 

Bianchi, Single, Cohabitating, and Married Mothers' Time with 

Children, 70 J. Marriage & Fam. 1228, 1237 (2008); D’Vera Cohn,

Gretchen Livingston & Wendy Wang, After Decades of Decline, A 

Rise in Stay-at-Home Mothers, Pew Rsch. Ctr. 21 (Apr. 8, 2014), 

https://www.pewresearch.org/social-trends/wpcontent/uploads/sites/3/2014/04/Moms-At-Home_04-08-2014.pdf. 

And, of course, it is well understood that parents and caregivers

are central to creating the conditions that allow for a child's 

healthy development, including through the time they spend 

directly with that child. See Beth A. Kotchick & Rex Forehand, 

Putting Parenting in Perspective: A Discussion of the Contextual 

Factors That Shape Parenting Practices, 11 J. Child & Fam. Stud. 

255, 255 (2002). The important contributions that parents make 

to their family by caring for their children are also recognized 

in the equitable distribution of property upon divorce. See Barth 

H. Goldberg, Valuation of Divorce Assets § 10:4 (2023).
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Accordingly, this case is very different from cases in 

which a relief defendant provided limited menial tasks in exchange 

for a large sum of money, suggesting that the money was merely a 

gift. See, e.g., Erwin, 2022 WL 2063227, at *3–4. It is also 

different from situations in which a wrongdoer uses a relief 

defendant as a mere conduit to hide proceeds from the underlying 

illegal activity. See, e.g., World Cap. Mkt., 864 F.3d at 1004–

05. Here, the car was just one of the resources Carrillo committed 

to provide through a valid child support and custody agreement. 

And as Sanchez-Diaz explained in her declaration below, she 

primarily used the car to drive their son to and from school and 

extracurriculars -- i.e., in fulfillment of the custodial 

obligations she had under the agreement. See Janvey, 588 F.3d at 

834–35.

The SEC contends, however, that Sanchez-Diaz did not 

provide any value in return for the BMW because she did not 

undertake new obligations through the 2016 agreement. It claims 

that she had already accepted custody of the parties' son under 

the earlier 2009 marital termination agreement. But the SEC 

overlooks a major change in circumstances that occurred after 2009: 

Carrillo left the country and moved to Mexico in late 2013. Under 

the 2009 agreement, Carrillo consented to a set schedule for 

sharing the care of their son: he had the son every other weekend 

and on alternating school holidays, school vacations, and 
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birthdays. After Carrillo moved to Mexico and since early 2014, 

however, Sanchez-Diaz, who continued to reside with their son in 

California, had sole physical custody. She and Carrillo then 

executed the 2016 agreement to reflect their new arrangement for 

the care of their son, which had been in effect in practice since 

Carrillo left the country.

The district court discussed neither Sanchez-Diaz's 

obligations under the 2016 agreement nor the change in 

circumstances after Carrillo left the country, both of which 

Sanchez-Diaz detailed in her declaration. Rather, the district 

court simply rejected her declaration and concluded that SanchezDiaz had provided nothing of value, even though the SEC did not 

contest the basic facts of the 2009 and 2016 agreements or that 

Carrillo moved out of the country in late 2013.

2. Forbearance on a Legal Claim

In addition to accepting sole legal and physical custody

of their son, Sanchez-Diaz conveyed a second form of value under 

the 2016 agreement: She gave up the right to return to court to 

seek modification of the 2009 child support order and instead 

agreed to resolve the issues at stake through a settlement with 

Carrillo. An agreement to forbear on a legal claim constitutes 

an exchange of value that gives a relief defendant a legitimate 

claim to assets received in return. See Walsh, 618 F.3d at 222, 

226. Although the SEC hints there is something suspicious about 
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the 2016 agreement given its allegation that Carrillo's fraud began 

in 2013, renegotiation of child support orders in light of changed 

circumstances is, in fact, a normal occurrence. See Cal. Fam. 

Code § 3651(a) (providing that an order of child support "may be 

modified or terminated at any time as the court determines to be 

necessary"); Determining Child & Spousal Support § 6:37 (2023) 

("[A]ll states permit modification of child support on a showing 

of changed circumstances since the entry of the prior order.").

Importantly, between the 2009 and 2016 agreements, 

Carrillo moved to Mexico, and their son neared his teenage years. 

The increased cost of raising older children is one common reason 

that parents seek modification of a child support order. See J. 

Thomas Oldham, Abating the Feminization of Poverty: Changing the 

Rules Governing Post-Decree Modification of Child Support 

Obligations, 1994 BYU L. Rev. 841, 845 (explaining that parents 

should be able to request modification of child support when their 

children age, given that "most families spend more on teenage 

children than they do on younger ones"); see also Robert D. 

Broughton, Jr., Modification of Child Support Orders Under the 

Uniform Interstate Family Support Act (UIFSA), Army Law. Dec. 2004, 

at 57 (explaining that modification of a child support order can 

be warranted because "[t]he costs of raising a child, the needs of 

a child, and the financial circumstances of the parents may all 

change dramatically over time," and an agreement entered when a 
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child is young may not account for the costs of raising a 

teenager).

Because, in return for the resources she received 

through the 2016 child support agreement, Sanchez-Diaz (i) 

provided services, by taking on sole legal and physical custody of 

their son, and (ii) surrendered a potential legal claim, the 

district court's factual finding that she provided no value is not 

"plausible in light of the record viewed in its entirety." United 

States v. One Star Class Sloop Sailboat, 546 F.3d 26, 35 (1st Cir.

2008) (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 

573-74 (1985)). Instead, "we are left with a 'strong, unyielding 

conviction that the district court was mistaken.'" Benham v. 

Lenox Sav. Bank, 292 F.3d 46, 48 (1st Cir. 2002) (quoting Indus. 

Gen. Corp. v. Sequoia Pac. Sys. Corp., 44 F.3d 40, 46 (1st Cir. 

1995)).

D. Disgorgement Is Not Available Against Sanchez-Diaz

In summary, Sanchez-Diaz provided value in exchange for 

the car. The value she provided was more than nominal and 

therefore satisfies our legal standard. The district court erred 

as a matter of law by evaluating if that value was "substantially 

equivalent" in the bankruptcy law sense. And its finding that 

Sanchez-Diaz provided no value at all, despite the facts in the 

record showing that she took on full legal and physical custody of 

the parties' son and gave up a legal claim against her ex-husband, 
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was clearly erroneous. Accordingly, no basis exists to subject 

Sanchez-Diaz to disgorgement.8

IV. CONCLUSION

For all these reasons, we reverse the district court's 

disgorgement order.

8 Because we conclude that disgorgement against Sanchez-Diaz 

is not an available remedy and reverse on that ground, we need not 

address her arguments that the remedy the SEC seeks from her is 

punitive or that requiring her to pay disgorgement violates her 

Fifth and Eighth Amendment rights.