PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 14-4299

_____________

IN RE: STEVEN S. BOCCHINO,

aka Steven Silvio Bocchino

aka Steven Bocchino

aka Steven S Bocchino, III

aka Steven Silvio Bocchino, III

aka Steven Bocchino, III, Debtor

U.S. Securities and Exchange Commission

v.

Steven S. Bocchino, 

Appellant

_______________

On Appeal from the United States District Court

for the Middle District of Pennsylvania

(D.C. Civil No. 3-14-cv-00662)

District Judge: Honorable James M. Munley

_______________

Submitted Pursuant to Third Circuit LAR 34.1(a)

June 24, 2015
2

Before: CHAGARES, KRAUSE and VAN ANTWERPEN, 

Circuit Judges.

(Filed: July 23, 2015)

J. Zac Christman, Esq.

Newman, Williams, Mishkin, Corveleyn, Wolfe & Fareri

712 Monroe Street

P.O. Box 511

Stroudsburg, PA 18360

Counsel for Appellant

Tracey Hardin, Esq.

Josephine T. Morse, Esq.

United States Securities & Exchange Commission

100 F Street N.E.

Washington, DC 20549

Patricia H. Schrage, Esq.

United States Securities & Exchange Commission

200 Vesey Street, Suite 400

New York, NY 10281

Counsel for Appellee

_______________

OPINION OF THE COURT

_____________ 

VAN ANTWERPEN, Circuit Judge.
3

Steven S. Bocchino appeals the final decision of the 

District Court for the Middle District of Pennsylvania

affirming the Bankruptcy Court’s order of 

nondischargeability of civil judgment debts pursuant to 11

U.S.C. § 523(a)(2)(A). Bocchino v. SEC, No. 3-14-cv-00662,

2014 WL 4796425 (M.D. Pa. Sept. 26, 2014). For the reasons 

that follow, we will affirm the decision of the District Court.

I. FACTUAL BACKGROUND AND PROCEDURAL 

HISTORY

Bocchino limits his appeal to two discrete legal rulings

and does not challenge the Bankruptcy Court’s or the District 

Court’s factfinding.

1 Therefore, the following facts are

undisputed.

Bocchino worked as a stockbroker. The 

nondischargeability order at issue relates to civil judgments 

against Bocchino for two private placement investments he 

solicited in 1996 while affiliated with a brokerage firm.2 The 

first investment involved an entity known as Traderz 

Associates Holding, Inc. (“Traderz”). Bocchino learned from 

a superior that Traderz “might go public” and that the 

endeavor was supported by “some commitment” from a 

 

1

(See Appellant’s Br. at 4 (“[T]here were no disputes 

of facts before the Bankruptcy Court or the District Court, 

and all issues were decided as a matter of law.”)).

2 A “private placement” is a sale of securities to a 

relatively small number of select investors as a way of raising 

capital, as opposed to a “public issue,” whereby securities are 

made available for sale on the open market.
4

popular fashion model. In re Bocchino, 504 B.R. 403, 407 

(Bankr. M.D. Pa. Dec. 23, 2013). Based solely on these facts, 

and without any other independent investigation into the 

quality of the entity, Bocchino immediately sought 

investment from clients. Bocchino received over $40,000 in 

commissions from Traderz sales. The second private 

placement involved Fargo Holdings, Inc. (“Fargo”). The 

exact source of Bocchino’s information regarding Fargo is 

unclear. Bocchino claimed that he knew about Fargo from an 

associate at the brokerage firm. Bocchino also claimed that he 

initially learned of Fargo by meeting a day trader affiliated 

with the entity. Nevertheless, Bocchino only obtained cursory 

documentation about the entity before soliciting sales. He did 

not conduct any independent investigation into the quality of 

the investment. This lack of investigation occurred despite 

Bocchino’s awareness that Fargo’s principal’s “full-time ‘job’ 

was law student.” In re Bocchino, 504 B.R. at 408. Bocchino 

received $14,000 in commissions for his clients’ stock

purchases in Fargo.

3

Both Traderz and Fargo turned out to be fraudulent 

ventures. The principals of each entity were criminally 

convicted, and the anticipated value of the investments 

vanished. In the early 2000s, the Securities and Exchange 

Commission (“SEC”) brought two civil law enforcement 

actions in the U.S. District Court for the Southern District of 

New York against those who sold investments in the entities. 

SEC v. Goldman Lender & Co. Holdings et al., 98-CV-7525 

 

3 Bocchino emphasizes that he independently inquired 

into Fargo’s financial health. We find this fact 

inconsequential, as he did not conduct this investigation until 

after he received payments from clients. 
5

(JGK) (“Goldman Action”) and SEC v. Nnebe et al., 01-CV5247 (KMW) (“Nnebe Action”). The Goldman Action alleged 

that Bocchino had violated Section 17(a) of the Securities Act

and Sections 10(b) and 15(a) of the Securities Exchange Act

for inducing investors via high pressure sales tactics and 

material misrepresentations. The court entered a default 

judgment ordering Bocchino to pay $35,090.00 in 

disgorgement, $14,779.70 in prejudgment interest, and 

$35,090.00 in civil penalties. Similarly, the Nnebe Action

alleged Bocchino violated Sections 5(a), 5(c), and 17(a) of the 

Securities Act and Sections 10(b), 15(a), and Rule 10b-5 of 

the Securities Exchange Act. The court entered a default 

judgment consisting of $14,800.00 in disgorgement, 

$4,207.85 in prejudgment interest, and $75,000.00 in civil 

penalties. In total, Bocchino was liable for $178,967.55.

After Bocchino filed for Chapter 13 bankruptcy 

protection in 2009, the SEC petitioned the Bankruptcy Court 

for a judgment that the Goldman Action and Nnebe Action

judgments were nondischargeable. The SEC argued that the 

funds were “obtained by . . . false pretenses, a false 

representation, or actual fraud” under 11 U.S.C. 

§ 523(a)(2)(A). After post-trial briefing, the Bankruptcy 

Court ordered the civil penalties discharged under 11 U.S.C.

§ 1328(a)(2), but retained the remaining $68,877.55 as 

nondischargeable pursuant to 11 U.S.C. § 523(a)(2)(A).

The Bankruptcy Court recognized that Bocchino 

believed that his statements to prospective investors were

true. Accordingly, it found that “Bocchino did not knowingly 

make any false statements.” In re Bocchino, 504 B.R. at 405.

However, the Bankruptcy Court continued its inquiry into the 

application of § 523(a)(2)(A). The Bankruptcy Court relied 
6

upon In re White, 128 F. App’x 994, 998–99 (4th Cir. 2005)

(per curiam) (unpublished), for the proposition that the 

scienter requirement of § 523(a)(2)(A) may be satisfied by 

grossly reckless behavior. The Bankruptcy Court also 

reasoned that stockbrokers are akin to fiduciaries and the 

Restatement (Second) of Torts generally supports a finding of 

fraudulent misrepresentation for a reckless disregard for the 

truth. The Bankruptcy Court further noted that the Supreme 

Court found that grossly reckless conduct satisfied the 

scienter requirement for defalcation under § 523(a)(4) of the 

Bankruptcy Act. Bullock v. BankChampaign, N.A., 133 S.Ct. 

1754, 1757 (2013). The Bankruptcy Court described 

Bocchino’s actions as “egregious” and “grossly reckless” in 

pursuit of his “own greedy purpose, i.e., commissions.” In re 

Bocchino, 504 B.R. at 408. “Not only was [Bocchino]

negligent, but extremely reckless. As an experienced

stockbroker, he knew, or should have known, that an 

independent investigation into the quality of the product he 

was selling was imperative.” Id. Bocchino appealed. He 

challenged (1) the Court’s application of the grossly reckless 

standard to satisfy the scienter requirement of § 523(a)(2)(A),

and (2) the Court’s finding that his actions were the 

proximate cause of his clients’ losses.

On appeal, the District Court affirmed the Bankruptcy 

Court in its entirety. First, the District Court found that 

holding grossly reckless behavior nondischargeable under 

§ 523(a)(2)(A) accords with the overall policy goal of the 

Bankruptcy Act—to limit the opportunity of a fresh start to 

the “honest but unfortunate debtor.” Bocchino, 2014 WL 

4796425, at *2 (quoting Grogan v. Garner, 498 U.S. 279, 

286–87 (1991)). The District Court also found Bullock, 

related Third Circuit cases, and In re White persuasive. In 
7

consideration of Bocchino’s proximate cause claim, the Court 

applied general tort law principles to conclude that 

Bocchino’s clients had reasonably relied on his statements as 

their fiduciary, the investments failed, and the clients suffered 

losses. The Court reasoned that both the reckless and criminal 

activities of the principals were substantial factors in the 

clients’ losses, but because the failure of the entities was 

reasonably foreseeable upon the exercise of due diligence, the 

crimes were not superseding causes of the losses. 

II. DISCUSSION4

1. Standard of Review

“Because the District Court sat as an appellate court, 

reviewing an order of the Bankruptcy Court, our review of the 

District Court’s determinations is plenary.” In re Heritage 

Highgate, Inc., 679 F.3d 132, 139 (3d Cir. 2012) (quoting In 

re Rashid, 210 F.3d 201, 205 (3d Cir. 2000)). Therefore, we 

review the Bankruptcy Court’s legal determinations de novo

and review its factual determinations for clear error. Id.

2. Scienter

 

4 The Bankruptcy Court had jurisdiction pursuant to 28 

U.S.C. § 1334. The District Court had jurisdiction to review 

the final order of the Bankruptcy Court pursuant to 28 U.S.C. 

§ 158(a). We have jurisdiction to review the final order of the 

District Court pursuant to 28 U.S.C. § 158(d) and 28 U.S.C. 

§ 1291. 
8

The Bankruptcy Act provides a means for the 

insolvent to start anew. Grogan, 498 U.S. at 286. The Act 

limits this opportunity to those debtors who are “honest but 

unfortunate.” Id. at 286–87. The Act accomplishes this goal 

by requiring a creditor seeking to prevent a discharge to prove 

by a preponderance of the evidence that its claim meets one 

of the statutory exceptions to discharge. Id. at 287. The

exceptions are strictly construed. Id. at 286. Section 

523(a)(2)(A) of the Act states:

A discharge under section 727, 1141, 

1228(a), 1228(b) or 1328(b) of this title does 

not discharge an individual debtor from any 

debt . . . (2) for money, property, services, or 

an extension, renewal, or refinancing of 

credit, to the extent obtained by—(A) false 

pretenses, a false representation, or actual 

fraud, other than a statement respecting the 

debtor’s or an insider’s financial condition . 

. . .

11 U.S.C. § 523(a)(2)(A). The SEC argues that Bocchino’s 

gross recklessness satisfies the statute’s requisite knowledge 

and intent to deceive. Bocchino responds that the statute 

requires proof of actual intent to defraud.

5 Though we 

 

5

Interestingly, Bocchino concedes that recklessness 

may establish the requisite scienter for § 523(a)(2)(A). (See 

Appellant’s Br. at 7). Bocchino also admits that his conduct 

was reckless. (Id.). Nevertheless, Bocchino concludes that the 

Bankruptcy Court did not find the requisite scienter because it 

concluded that Bocchino did not knowingly make any false 

statements. (Id.). This argument does not comport with the 
9

implicitly approved of the SEC’s position in our 

consideration of In re Cohen, 185 B.R. 171 (Bankr. D.N.J. 

1994) (“Cohen I”), aff’d, 191 B.R. 599, 604 (D.N.J. 1996) 

(“Cohen II”), aff’d, In re Cohen, 106 F.3d 52 (3d Cir. 1997) 

(“Cohen III”), aff’d, 523 U.S. 213 (1998), we did not dedicate 

any substantial treatment to the issue. Therefore, the scienter 

requirement of § 523(a)(2)(A) remains, largely, an issue of 

first impression. We conclude that gross recklessness satisfies

the scienter requirement of § 523(a)(2)(A).

First, we look to this Circuit’s precedent. In Cohen III, 

we reviewed a district court conclusion that a defendant’s 

misrepresentations about the legal amount of rent that could 

be charged for an apartment satisfied § 523(a)(2)(A)’s 

scienter requirement. The petitioner, though well aware of 

landlord-tenant laws favorable to him, claimed ignorance of 

rent control provisions in a systematic effort to overcharge 

renters. Cohen III, 106 F.3d at 54. The district court 

interpreted § 523(a)(2)(A) to require that:

 

Bankruptcy Court or District Court holdings. The Bankruptcy 

Court explicitly stated that Bocchino’s conduct was 

“extremely reckless” and, therefore, “the SEC has met its 

burden of establishing the nondischargeability of sums 

assessed . . . .” In re Bocchino, 504 B.R. at 408. The District 

Court also identified the incoherence of Bocchino’s 

argument. Bocchino, 2014 WL 4796425 at *3 (“Though 

appellant acknowledges at the outset that ‘an intent to deceive 

may be found upon a finding of recklessness,’ he, somewhat 

confusingly, argues that ‘actual wrongful intent to deceive’ is 

also required. Both statements, however, cannot be true . . . 

.”). Therefore, we interpret Bocchino’s argument to be that 

§ 523(a)(2)(A) requires actual intent to defraud. 
10

(1) the debtor obtained money, property or 

services through a material 

misrepresentation; (2) the debtor, at the 

time, knew the representation was false or 

made with gross recklessness as to its truth; 

(3) the debtor intended to deceive the 

creditor; (4) the creditor reasonably relied on 

the debtor's false representations; and (5) the 

creditor sustained a loss and damages as a 

proximate result of the debtor's materially 

false representations.

Cohen II, 191 B.R. at 604 (emphasis added) (quoting In re 

Poskanzer, 143 B.R. 991, 999 (Bankr. D.N.J. 1992) (internal 

quotation marks omitted). On appeal, we approved of this 

formulation: 

We have carefully considered both the facts 

and the law and we find no error in the 

district court’s conclusion that Cohen 

committed fraud within the meaning of 11 

U.S.C. § 523(a)(2)(A) . . . . [T]he district 

court applied the correct principles of law . . 

. . [W]e affirm without discussion the 

district court’s order affirming the 

bankruptcy judge’s findings of fraud under 

[] the bankruptcy code.

Cohen III, 106 F.3d at 55. 

Section 523(a)(2)(A) does not explicitly state what 

level of reliance, materiality, or intentionality is required. 

Field v. Mans, 516 U.S. 59, 68 (1995). The language of the 
11

Section, however, has only changed slightly through the 

Bankruptcy Act’s amendments. Id. at 65. The Supreme Court 

has stated that this relatively slow evolution instructs us that 

the terms “are common-law terms, and . . . they imply 

elements that the common law has defined them to include.” 

Id. at 68–70. The fact that Congress did not enumerate 

specific elements does not negate its intent to import their 

common law significance. Id. Therefore, we look to the 

Restatement (Second) of Torts for guidance. Id.; see also, 

e.g., In re Biondo, 180 F.3d 126, 134 (4th Cir. 1999) (citing 

Restatement (Second) of Torts § 525). As the Restatement 

describes the scienter requirement:

A misrepresentation is fraudulent if the 

maker (a) knows or believes that the matter 

is not as he represents it to be, (b) does not 

have the confidence in the accuracy of his 

representation that he states or implies, or 

(c) knows that he does not have the basis for 

his representation that he states or implies.

Restatement (Second) of Torts § 526. Absent statutory 

restrictions, we have maintained that acting with a reckless 

disregard for the truth establishes scienter for securities fraud. 

McLean v. Alexander, 599 F.2d 1190, 1197 (3d Cir. 1979)

(superseded by statute); see also Institutional Investors Group 

v. Avaya, Inc., 564 F.3d 242, 267 (3d Cir. 2009) (noting 

heightened pleading standard of the Private Securities 

Litigation Reform Act may still be met with sufficient 

circumstantial evidence of reckless behavior). Allowing gross 

recklessness to satisfy the scienter requirement would also 

accord with other circuits who have considered the issue. See 

In re Rembert, 141 F.3d 277, 280 (6th Cir. 1998) (requiring 
12

proof that “the debtor obtained money through a material 

misrepresentation that, at the time, the debtor knew was false 

or made with gross recklessness as to its truth”); Mayer v. 

Spanel Int’l, Ltd., 51 F.3d 670, 673–75 (7th Cir. 1995) (“[A] 

creditor must prove that the debtor obtained the money 

through representations which the debtor either knew to be 

false or made with such reckless disregard for the truth as to 

constitute willful misrepresentation.”); In re White, 128 F. 

App’x at 998–99 (4th Cir. 2005) (“A showing of reckless 

indifference to the truth is sufficient to demonstrate the 

requisite intent to deceive.”).6

We also draw support from the Supreme Court’s 

treatment of a related Bankruptcy Act provision. In Bullock v. 

BankChampaign, N.A., the Court interpreted § 523(a)(4) so as 

to include a prohibition on discharge for defalcation 

committed by gross recklessness. 133 S.Ct. 1754, 1759

(2013). Section 523(a)(4) prohibits discharge for debts 

obtained through “fraud or defalcation while acting in a 

fiduciary capacity, embezzlement, or larceny.” 11 U.S.C. 

§ 523(a)(4). On account of the term’s kinship with other 

statutory terms, including fraud, the Court reasoned that the 

culpable state of mind requirement was one “involving 

knowledge of, or gross recklessness in respect to, the 

improper nature of the relevant fiduciary behavior.” Bullock, 

133 S.Ct. at 1757. In so holding, Bullock also found support 

 

6 District courts within this Circuit have also adopted 

this position. See In re Purington, No. 12-4135, 2013 WL 

3442893, at *2–3 (D.N.J. July 9, 2013); In re Pandolfelli, 

Nos. 11-5179, 11-5231, 11-7031, 2012 WL 503668, at *7 

(D.N.J. Feb. 15, 2012); In re Reynolds, 193 B.R. 195, 200 

(D.N.J. Feb. 5, 1996). 
13

for the scienter requirements from the model penal code that 

imposes liability for willful blindness. Id. at 1759–60. 

Bocchino has not presented a compelling argument why the 

Supreme Court’s reasoning for § 523(a)(4) should not apply 

with similar force to § 523(a)(2)(A). 

We have also applied similar reasoning in other areas 

of the Bankruptcy Code. In In re Cohn, 54 F.3d 1108 (3d Cir. 

1995), we examined a similar question with respect to 

§ 523(a)(2)(B). That Section renders money obtained by 

materially false written statements nondischargeable. 11 

U.S.C. § 523(a)(2)(B). Though the statute contains an express 

“intent to deceive” requirement unlike § 523(a)(2)(A), we 

allowed a claimant to prove intent to deceive by showing, by 

a totality of the circumstances, reckless indifference or 

reckless disregard of the accuracy of information. In re Cohn, 

54 F.3d at 1119. Similarly, in In re Docteroff, we noted that 

“[b]ankruptcy courts have overwhelmingly held that a 

debtor’s silence regarding material fact can constitute a false 

representation actionable under [S]ection 523(a)(2)(A).” 133 

F.3d 210, 216 (3d Cir. 1997) (quoting In re Van Horne, 823 

F.2d 1285, 1288 (8th Cir. 1987) (collecting cases)). We echo 

Bullock by noting that uniformity in the federal law is 

important, and we have not been presented with a strong 

argument why the statute should be read differently than the 

related provisions of the Act. To read § 523(a)(2)(A) so 

restrictively as to sanction Bocchino’s gross recklessness

would be at odds with the general principles of the Act. 

Bullock, 133 S.Ct. at 1761. A debtor will rarely admit to 

intentional deception, thus intent is most often inferred from 

the totality of the circumstances. Palmacci v. Umpierrez, 121 

F.3d 781, 786 (1st Cir. 1997).
14

Therefore, we affirm the District Court’s holding that 

§ 523(a)(2)(A)’s scienter requirement was satisfied by 

Bocchino’s gross recklessness.

3. Proximate Cause

We have little trouble finding that Bocchino’s gross 

negligence was also the proximate cause of his clients’ losses. 

Proximate cause is a term of art, demanding sufficient 

connection between the injury and the conduct alleged. 

Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 

268 (1992). “At bottom, the notion of proximate cause 

reflects ‘ideas of what justice demands, or of what is 

administratively possible and convenient.’” Id. (quoting W. 

Keeton, D. Dobbs, R. Keeton, & D. Owen, Prosser and 

Keeton on Law of Torts § 41, p. 264 (5th ed. 1984)). 

Proximate cause includes both cause-in-fact and legal 

causation. Fedorczyk v. Caribbean Cruise Lines, Ltd., 82 F.3d 

69, 73 (3d Cir. 1996). Bocchino does not challenge that his 

actions were the cause-in-fact of his clients’ injuries. Legal 

cause is established where the loss was reasonably expected 

to result from reliance upon the misrepresentation. 

Restatement (Second) of Torts § 548A. There is no serious 

question on the facts that Bocchino failed to investigate the 

private placements before soliciting sales or that Bocchino’s 

clients would not have purchased the fraudulent stock absent 

Bocchino’s grossly reckless misrepresentations. A reasonable

review of the fundamentals of the ventures would have 

revealed that the placements were worthless. Therefore, 

proximate cause has been established.

Furthermore, we agree with the District Court that the 

actions of the principals of Traderz and Fargo were not a 
15

superseding cause. Bocchino, 2014 WL 4796425, at *8 (citing 

Staub v. Proctor Hosp., 131 S.Ct. 1186, 1192 (2011)). A 

superseding cause is “a later cause of independent origin that 

was not foreseeable.” Exxon Co., U.S.A., v. Sofec, Inc., 517 

U.S. 830, 837 (1996); Bouriez v. Carnegie Mellon Univ., 585 

F.3d 765, 771–72 (3d Cir. 2009) (quoting Restatement 

(Second) of Torts § 443). Where an actor’s conduct is a 

substantial factor in bringing about harm, an intervening force 

created by the actor’s negligent conduct will not suffice to 

break legal cause. Restatement (Second) of Torts § 443. We 

find that the collapse of the private placements was neither 

abnormal nor extraordinary given Bocchino’s lack of due 

diligence. Given the woeful state of the entities when 

Bocchino solicited the investments, we find that the losses 

were manifestly foreseeable. Moreover, not only has 

Bocchino failed to challenge any of the factfinding below, we 

note that nothing in the record indicates that the District Court 

committed clear error in concluding that the investments were 

destined for failure. 

III. CONCLUSION

For the foregoing reasons, we affirm the District 

Court’s order affirming the Bankruptcy Court’s order of 

nondischargeability.