In the

United States Court of Appeals

For the Seventh Circuit

No. 19-1243

SECURITIES AND EXCHANGE COMMISSION,

Plaintiff-Appellee,

v.

GARY S. WILLIKY,

Defendant-Appellant.

Appeal from the United States District Court for the 

Southern District of Indiana, Indianapolis Division.

No. 1:15-cv-00357-WTL-MJD — William T. Lawrence, Judge.

SUBMITTED SEPTEMBER 16, 2019* —

DECIDED NOVEMBER 8, 2019

*

 We have agreed to decide this case without oral argument because the

briefs and record adequately present the facts and legal arguments, and oral

argument would not significantly aid the court. Fed. R. App. P. 34(a)(2)(C). 
2 No. 19-1243

Before BAUER, BRENNAN, and ST. EVE, Circuit Judges. 

BAUER, Circuit Judge. Gary Williky appeals a judgment

in favor of the Securities and Exchange Commission (“SEC”)

that followed a bifurcated settlement agreement regarding

Williky’s fraudulent conduct while working for the Indianabased company Imperial Petroleum, Inc. (“Imperial”). This

court addressed the details of Imperial’s fraudulent scheme in

United States v. Wilson, 879 F.3d 795 (7th Cir. 2018). Imperial

fraudulently purchased finished biodiesel and resold it while

claiming government incentives and tax-credits available to

companies producing biodiesel from raw feedstock. Jeffery

Wilson, Imperial’s ex-CEO, hired Williky to artificially inflate

Imperial’s stock through a series of “wash and match trades”

and “scalping” emails. In the 1990s, Williky similarly engaged

in a pattern of “wash and match trades” for another company

led by Wilson. As part of Imperial, Williky acquired millions

of shares of its stock but failed to lawfully report his ownership

levels when his shares surpassed five percent. At issue in this

appeal is Williky’s conduct once the Imperial fraud unraveled.

By July 2011, Williky knew Imperial misrepresented the source

of its biodiesel to investors and, by November, knew the

complete extent of Imperial’s fraud. Williky sold off the

entirety of his Imperial shares by February 27, 2012, and

avoided a loss of $798,217.

The SEC sued to permanently enjoin Williky from violating

federal securities law, to enjoin Williky from acting as an

officer or director of a public company, and to disgorge his

financial gains. The SEC further sought to impose financial

penalties, including a civil penalty for Williky’s insider trading.

Before Williky faced his deposition, he entered into a bifur-
No. 19-1243 3

cated settlement with the SEC, conceding his involvement in

the fraudulent scheme and agreeing that the district court

would determine the financial remedies to be assessed. The

SEC requested the statutory maximum civil penalty of

$2,394,651 for insider trading, calculated as three times

Williky’s avoided losses. Williky objected, arguing that the

SEC’s proposed judgment ignored his cooperation with

various governmental agencies investigating Imperial’s fraud.

The district court denied the request for the maximum civil

penalty as excessive and entered a judgment of $1,596,434,

equal to two times the avoided losses. On appeal, Williky

argues that the judgment still ignores his cooperation as a

whistleblower and is thus an abuse of discretion. We find that

the district court adequately assessed the value of Williky’s

cooperation and affirm. 

I. BACKGROUND

In 2009, Gary Williky entered into confidential negotiations

with Imperial’s ex-CEO Jeffery Wilson and accepted a financial

public relations role with Imperial. In reality, Wilson hired

Williky to artificially inflate Imperial’s stock through illegal

market manipulation. This was not the first time Wilson and

Williky engaged in securities fraud. Williky’s long-standing

relationship with Wilson dated back to the 1990s. Williky

settled a lawsuit with the SEC for illegal “wash and match

trades” that he committed for another company led by Wilson.

SEC v. Williky, et al., 94-cv-2088 (N.D. Tex.). Although Williky’s

involvement in the Imperial scheme is not directly at issue in

this appeal, we recount some of his fraudulent activities as

context for Williky’s insider trading.
4 No. 19-1243

Williky first sought to artificially raise Imperial’s stock price

by increasing its trading volume through “wash and match

trades.” Wash trades refer to trades that occur without a

change in beneficial ownership. Match trades, or “matched

orders,” are trades in which orders are entered with the

knowledge that substantially equivalent orders will be made

by the same or different person. These fraudulent tactics create

a false perception of market activity that does not reflect the

true supply and demand for the securities. Inflating the

volume of trades attracts additional market participants and

thereby artificially increases stock price. Williky used multiple

brokerage accounts in his and his wife’s names to conduct

a series of at least twenty “wash and match trades” from

March 4, 2010, to January 11, 2012. On many days within this

time period, Williky was responsible for between 50% to 100%

of Imperial’s trading volume. 

Second, Williky personally sent out “scalping” emails

touting the potential value of Imperial’s stock without disclosing his own relationship to Imperial or his intention to contemporaneously sell Imperial stock. Williky sent these emails out

to more than 200 recipients. In the days following the emails,

Williky sold Imperial stock and earned profits of over $60,000.

During this time, Williky acquired millions of shares and at

many points owned more than five percent of the company’s

stock without disclosing his ownership levels as required by

federal securities law.

By July 10, 2011, Williky learned that Imperial was lying to

investors about its biodiesel production. Specifically, a confidential memo informed Williky that Imperial was using

partially processed oil or fat to make biodiesel. This informa-
No. 19-1243 5

tion directly contradicted representations Williky had previously made that the fuel came from raw feedstock. Moreover,

a hedge fund informed Imperial that it would not invest since

the production of biodiesel from such materials failed to

qualify for the government incentives that Imperial claimed.

By November 18, 2011, Williky learned the complete extent of

Imperial’s fraud after the new Imperial CEO, John Ryer,

secretly recorded a conversation with the owner of Imperial’s

main suppler, Joe Furando. Ryer told Williky that Imperial was

purchasing finished fuel from Furando’s company and later

provided Williky with the tape. While in possession of all this

confidential information, Williky sold off the entirety of his

shares by February 27, 2012, avoiding a loss of $798,217.

As he sold his shares, Williky contacted federal authorities

with the hopes of becoming a whistleblower. However, though

Williky believes he provided the critical information that

toppled Imperial, the SEC presented evidence that it and other

federal agencies believed the Imperial scheme was already

unraveling. Williky anonymously called the Environmental

Protection Agency on December 27, 2011, to discuss suspected

wrongdoing without naming Imperial. Although Williky

claims this led to the investigation of Imperial, the SEC began

investigating Imperial as early as November 2011 and interviewed its first witness on January 23, 2012, weeks before

Williky first reported Imperial’s violations on March 13, 2012.

Williky also contends that on this day he provided authorities

with the confidential tape recording between Ryer and

Furando, which he argues was the “smoking gun” that led to

the indictment and conviction of several co-conspirators in the

Imperial scheme. Furthermore, Williky says that as part of his
6 No. 19-1243

productions to the SEC, he provided 36 documents that were

ultimately used in Wilson’s trial.

On March 2, 2015, the SEC charged Williky with violating

federal securities laws through market manipulation and

insider trading. On August 10, 2015, the district court sua sponte

administratively closed the case pending the resolution of the

criminal actions related to the Imperial scheme. The case was

reopened on January 19, 2017, but Williky did not file his

answer to the complaint until February 21, 2017, only after the

SEC had moved for a clerk’s entry of default. Once discovery

commenced, Williky objected to the deposition of himself and

his wife because of scheduling issues that the district court

found had “absolutely no basis.” Finally, instead of facing his

deposition, Williky entered into a bifurcated settlement with

the SEC in which Williky would accept the SEC’s proposed

injunctions, and the district court would determine the

financial remedies to be assessed against Williky based on the

facts of the complaint. 

The SEC thereafter filed its motion for financial remedies,

requesting the disgorgement of $2,101,334 in ill-gotten gains

plus $427,931 in prejudgment interest, along with a civil

penalty for insider trading of at least $2,394,651. Williky

objected to the request for a civil penalty at the statutory

maximum of three times his avoided losses on the basis that it

“completely ignore[d] his cooperation with multiple governmental agencies as well as his whistleblowing activities.” The

SEC argued Williky’s claims of cooperation were exaggerated,

but even if true, would not warrant a substantial reduction in

the civil penalty. The district court found that the request for

the maximum penalty was “excessive” and instead decided
No. 19-1243 7

that a “penalty of $1,596,434, equal to two times the amount of

disgorgement, is appropriate.” The district court explained this

was not the first time Williky had to settle a securities fraud

dispute and that Williky had not taken responsibility for his

actions by claiming he only committed insider trading because

he was stressed and not thinking clearly. Finally, the district

court found Williky’s cooperation was “of limited value.”

Williky then filed a motion for reconsideration arguing the

court did not accurately determine the extent of his cooperation. The district court denied the motion, having found “no

misapplication of law” and characterizing Williky’s arguments

as a “disagreement with the conclusion and a bare assertion

that the conclusion must have been due to a mistaken reliance

on the evidence.”

II. DISCUSSION

Williky appeals the civil penalty of $1,596,434 for insider

trading and asks this court to order a penalty of no more than

$798,217. Williky argues that the trial court incorrectly assessed

the value of his cooperation with federal authorities and

ignored the fact he entered into a bifurcated settlement, which

further proved his cooperation. 

Along with other circuits, we review the district court’s

decision to impose a civil penalty for abuse of discretion. SEC

v. Happ, 393 F.3d 12, 32 (1st Cir. 2004); SEC v. Rajaratnam, 918

F.3d 36, 41 (2d Cir. 2019); SEC v. Life Partners Holdings, Inc., 854

F.3d 765, 781 (5th Cir. 2017). A court abuses its discretion only

if “the record contains no evidence upon which the court could

have rationally based its decision; the decision is based on an

erroneous conclusion of law; the decision is based on clearly
8 No. 19-1243

erroneous factual findings; or the decision clearly appears

arbitrary.”United States v. Z Investment Properties, LLC, 921 F.3d

696, 698 (7th Cir. 2019) (numerical ordering omitted).

Both parties concur that in determining a civil penalty for

violations of federal securities law, the court should generally

consider factors such as: “the seriousness of the violation; the

defendant’s scienter; the repeated nature of the violations;

whether the defendant has admitted wrongdoing; the losses or

risk of losses caused by the conduct; any cooperation provided

to enforcement authorities; and ability to pay.” SEC v. Zenergy

Int’l, Inc., 2016 WL 5080423, at *16 (N.D. Ill. Sept. 20, 2016)

(numerical ordering omitted); see also SEC v. Custable, 1996 WL

745372, at *2–5 (N.D. Ill. Dec. 26, 1996), aff’d, 132 F.3d 36 (7th

Cir. 1997). These factors are certainly relevant, but we should

also point out that the civil penalty for insider trading comes

from its own independent statutory provision, the Insider

Trading Sanctions Act. 15 U.S.C. § 78u-1(a)(2). Whereas typical

civil penalties follow a three-tier system that are assessed per

violation or are otherwise limited to the gross amount of illgotten gain, the Insider Trading Sanctions Act calculates the

penalty as a multiple of the losses avoided due to insider

trading. It is therefore clear that the overriding concern of the

civil penalty against insider trading is to “effect general

deterrence and to make insider trading a money-losing

proposition.” Rajaratnam, 918 F.3d at 41.

In this light, Williky’s focus on the nobility of his whistleblowing endeavors misses the mark since the civil penalty’s

main design is to deter insider trading, not to encourage

whistleblowing and cooperation after the fact. Thus, absent

any evidence of extraordinary cooperation, the most pertinent
No. 19-1243 9

facts on record are that Williky is a recidivist federal securities

law offender who attempted to avoid responsibility in his

district court proceedings and, on appeal, still fails to admit

any wrongdoing related to insider trading. Given all of the

facts and circumstances, the district court properly determined

that a civil penalty was necessary to serve as an effective

deterrent. Even when considering the factors the parties

proposed, Williky has only addressed the cooperation he

provided to federal authorities and made assertions about his

innocence that are precluded by the terms of the bifurcated

settlement stating he would accept the complaint as true.

The district court also properly weighed the value of

Williky’s cooperation. Williky argues that the award of two

times the disgorgement amount “ignored Williky’s cooperation

with multiple governmental agencies as well as his whistleblowing activities.” Rather, the district court explicitly stated

that his cooperation was of limited value. Williky further

contends that the tape and evidence he provided were directly

used in the indictment, prosecution and conviction of the

criminal defendants in the Imperial fraud. The SEC argues that

Imperial was under investigation before Williky’s tip, that

Williky never admitted his wrongdoing in his interviews with

federal authorities, and that he was not an essential part of the

criminal prosecution since he was not called to testify in

Wilson’s criminal trial. The SEC adds that all the documents

that Williky provided were only given in response to compulsory subpoenas. Here, the district court assessed the value of

Williky’s cooperation and determined his overall conduct did

not warrant the maximum statutory penalty. We do not agree
10 No. 19-1243

that the district court abused its discretion in deciding to

impose a civil penalty of two times Williky’s avoided losses. 

Finally, Williky also argues that he is entitled to a reduced

penalty because he entered into a bifurcated settlement with

the SEC. Williky seems to view this as another example of his

cooperation and claims that the SEC consequentially spent

little to no funds to prosecute him. Williky then cites a string of

district court opinions to assert that courts assessing penalties

in bifurcated settlements either do not assert a penalty or

assert a penalty equaling the ill-gotten gain. Not only are all

of these cases about the general statute providing for civil

penalties as opposed to the Insider Trading Sanctions Act, but

not one of the cited cases discusses the bifurcated settlement as

a basis for determining the civil penalty. Regardless, even if

entering into a bifurcated settlement may be a means of

cooperation that merits consideration, Williky has been notably

uncooperative throughout the course of litigation, from failing

to answer the complaint in a timely manner to attempting to

object to his deposition on flimsy grounds. The litigation

has been pending for multiple years and the SEC has undoubtedly spent significant resources in litigating the matter against

Williky. Allowing Williky to flagrantly commit insider trading

and then settle to avoid civil penalties would create a perversive incentive that undermines the purpose of the statute. 

III. CONCLUSION

We conclude that the district court did not abuse its

discretion in deciding to impose a civil penalty of $1,596,434 on

Williky. The court adequately assessed the extent of Williky’s

cooperation and whistleblowing activities when it determined
No. 19-1243 11

to set a civil penalty equal to two times the amount of the

losses he avoided. The judgment of the district court is 

AFFIRMED.