Court Opinion

ID: 4363974
Source: CourtListenerOpinion
Date Created: 2019-02-01 18:02:11.943958+00
Date Added: 2024-06-11T14:49:04.594433
License: Public Domain

FOR PUBLICATION

   UNITED STATES COURT OF APPEALS
        FOR THE NINTH CIRCUIT

 U.S. COMMODITY FUTURES TRADING                     No. 13-17403
 COMMISSION,
                 Plaintiff-Appellee,                  D.C. No.
                                                   4:11-cv-04577-
                      v.                                CW

 JAMES DEVLIN CROMBIE,
              Defendant-Appellant.                    OPINION

       Appeal from the United States District Court
           for the Northern District of California
      Claudia Wilken, Senior District Judge, Presiding

          Argued and Submitted December 19, 2018
                  San Francisco, California

                      Filed February 1, 2019

 Before: Ronald M. Gould and Marsha S. Berzon, Circuit
       Judges, and Frederic Block, * District Judge.

                    Opinion by Judge Berzon

    *
      The Honorable Frederic Block, United States District Judge for the
Eastern District of New York, sitting by designation.
2                    U.S. CFTC V. CROMBIE

                          SUMMARY **

                  Commodity Exchange Act

    The panel affirmed in part and vacated in part the district
court’s judgment in favor of the Commodity Futures Trading
Commission (the “Commission”) in a civil enforcement
brought against James D. Crombie, concerning false
statements made to the National Futures Association
(“NFA”) during a March 2011 investigation.

    The Commission alleged that by making misstatements
to the NFA, Crombie violated 7 U.S.C. § 13(a)(4) of the
Commodity Exchange Act, which makes it unlawful
“willfully” to make false statements or provide false
documents to certain regulatory organizations, including the
NFA. The district court determined that Crombie on four
separate occasions willfully violated § 13(a)(4).

    The panel held that the district court erred in applying
the civil meaning of “willfully,” not the generally applicable
criminal meaning. The panel further held that the meaning
of “willfully” as used in § 13(a)(4) cannot sensibly vary
depending on whether it is relied upon directly, in a criminal
fraud case, or by incorporation into § 13a-1(a), in a civil
case. The panel concluded that in § 13(a)(4) “willfully”
must have the traditional meaning ascribed to the term in the
context of criminal prohibitions against fraud: “intentionally
undertaking an act that one knows to be wrongful.” United

    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
                    U.S. CFTC V. CROMBIE                        3

States v. Tarallo, 380 F.3d 1174, 1188 (9th Cir. 2004),
amended by 413 F.3d 928 (9th Cir. 2008).

    Although the district court did not apply the heightened
criminal standard for willful conduct, the panel nonetheless
affirmed the grant of summary judgment to the Commission
on the § 13(a)(4) claims after applying, de novo, the correct
meaning of “willfully.”

    Concerning the remedies imposed by the district court,
the panel held that the district court properly awarded
restitution. The panel vacated in part the district court’s
order issuing a permanent injunction against Crombie. The
panel held that as to §§ 4 and 5(a), (d), (e), (f), and (g) of the
permanent injunction, the connection between the violations
found and the prohibitions were sufficiently self-evident;
and the panel concluded that the district court’s inclusion of
those future restraints on Crombie was not an abuse of
discretion. The panel held that as to §§ 5(b) and (c) of the
permanent injunction, the path from the violations found to
the prohibitions ordered was not clear; and the panel
remanded for further explanation as to those parts of the
injunction.
4                     U.S. CFTC V. CROMBIE

                             COUNSEL

Jared L. Gardner (argued), Perkins Coie LLP, Anchorage,
Alaska; Lauren Elizabeth Watts Staniar, Perkins Coie LLP,
Seattle, Washington; for Defendant-Appellant.

Martin B. White (argued), Assistant General Counsel;
Jonathan P. Robell, Senior Trial Attorney; Robert A.
Schwartz, Deputy General Counsel; Jonathan L. Marcus,
General Counsel; Daniel J. Davis, General Counsel;
Commodity Futures Trading Commission, Washington,
D.C.; for Plaintiff-Appellee.

                              OPINION

BERZON, Circuit Judge:

    We are asked in this case to answer a recurrent question:
What is the meaning of “willfully” in a federal statute? This
malleable term may in some cases create difficult questions
of statutory interpretation. See, e.g., Ratzlaf v. United States,
510 U.S. 135, 141 (1994). Here, it does not. As we shall
explain, in 7 U.S.C. § 13(a)(4), a provision within the
Commodity Exchange Act (“Act”), “willfully” must have
the traditional meaning ascribed to the term in the context of
criminal prohibitions against fraud: “intentionally
undertaking an act that one knows to be wrongful.” 1 United
States v. Tarallo, 380 F.3d 1174, 1188 (9th Cir. 2004),
amended by 413 F.3d 928 (9th Cir. 2005).

     1
       All statutory citations unless otherwise noted are to provisions of
the Commodity Exchange Act, 7 U.S.C. § 1.
                       U.S. CFTC V. CROMBIE                            5

                                    I

   This appeal arises from a civil enforcement action
brought by the Commodity Futures Trading Commission
(“Commission”) against James D. Crombie. In March 2010,
Crombie co-founded Paron Capital Management, LLC
(“Paron”), an investment firm. Paron used a computer
model developed by Crombie to invest in certain futures 2 on
behalf of clients. The Commission alleged that Crombie
misled potential investors by misrepresenting in marketing
materials the past performance of Paron’s computer model
and misstating the amount of assets already under Paron’s
management, in violation of 7 U.S.C. §§ 6b(a)(1) and 6o(1). 3

    2
       “Futures” are contracts that allow an investor to purchase a
particular commodity—such as crude oil, natural gas, corn, soybeans or
wheat—at a set future date for a set price. Paron traded stock market
index futures, which are futures contracts based on the future price of a
specific stock market index, such as the S&P 500 or the Dow Jones
Industrial Average. The Act covers these futures. See 7 U.S.C. § 1a(35);
Commodity Futures Trading Comm’n & Sec. & Exch. Comm’n, Release
No. 34-49469, Joint Order Excluding Indexes Comprised of Certain
Index Options from the Definition of Narrow-Based Security Index
(Mar. 25, 2004), https://www.sec.gov/rules/exorders/34-49469.htm.

    3
        Section 6b(a)(1)(A)–(B) provides:

          It shall be unlawful— (1) for any person in or in
          connection with any order to make, or the making of,
          any contract of sale of any commodity in interstate
          commerce or for future delivery that is made, or to be
          made, on or subject to the rules of a designated
          contract market, for or on behalf of any other person
          . . . (A) to cheat or defraud or attempt to cheat or
          defraud the other person; [or] (B) willfully to make or
          cause to be made to the other person any false report
6                    U.S. CFTC V. CROMBIE

The Commission also alleged that Crombie made false
statements to the National Futures Association (“NFA”)
during a March 2011 investigation by that industry group
into Paron. The Commission claimed that by making these
misstatements to the NFA, Crombie violated 7 U.S.C.
§ 13(a)(4), which makes it unlawful “willfully” to make
false statements or provide false documents to certain
regulatory organizations, including the NFA. 4

   The Commission filed suit in the Northern District of
California in September 2011. After discovery, the district
court granted summary judgment to the Commission. The
court determined that Crombie violated § 13(a)(4) on four

        or statement or willfully to enter or cause to be entered
        for the other person any false record.

7 U.S.C. § 6b(a)(1)(A)–(B).

    Section 6o(1) provides:

        It shall be unlawful for a commodity trading advisor,
        associated person of a commodity trading advisor,
        commodity pool operator, or associated person of a
        commodity pool operator, by use of the mails or any
        means or instrumentality of interstate commerce,
        directly or indirectly—(A) to employ any device,
        scheme, or artifice to defraud any client or participant
        or prospective client or participant; or (B) to engage in
        any transaction, practice, or course of business which
        operates as a fraud or deceit upon any client or
        participant or prospective client or participant.

7 U.S.C. § 6o(1).
    4
     The Commission also brought claims against Paron. Those claims
were settled in September 2012.
                     U.S. CFTC V. CROMBIE                             7

separate occasions, and that Crombie also violated
§§ 6b(a)(1)(A)–(B) and 6o(1). 5

    Because the Commission did not request any relief in its
summary judgment motion, the district court ordered the
Commission to file a motion for requested relief and a
proposed judgment. The Commission filed that motion and
a proposed order and judgment two weeks later, in August
2013.

      In November 2013, the district court granted the
Commission’s motion in an order that almost entirely
adopted the language of the Commission’s proposed order,
without explaining why the particular relief was chosen. The
order requires Crombie to pay a $750,000 civil penalty to the
Commission and $746,460.28 in restitution, plus pre- and
post-judgment interest, to Paron clients. The order also
permanently enjoins Crombie from violating various
provisions of the Act, as well as from engaging in a broad
range of conduct related to the trading of investments
regulated by the Act. 6 Among other provisions, the order
permanently enjoins Crombie from “directly or indirectly
. . . [e]ntering into any transactions involving commodity
futures, options on commodity futures, commodity options
. . . , security futures products, swaps, . . . and/or foreign
currency . . . for his own personal account or for any account
in which he has a direct or indirect interest,” or “[h]aving

    5
      The district court also denied summary judgment as to additional
claims that Crombie violated § 13(a)(4) by making other false statements
to the NFA. The Commission did not pursue these additional claims
against Crombie.
    6
      The court granted the injunction and ordered the restitution
requested by the Commission. With regards to the civil penalty, the
Commission had requested that the court impose a civil fine of $980,000.
8                     U.S. CFTC V. CROMBIE

any commodity futures, options on commodity futures,
commodity options, security futures products, swaps, and/or
[foreign currency] contracts traded on his behalf.”

                                   II

   Crombie now appeals the district court’s grant of
summary judgment to the Commission. We review this
challenge de novo. See, e.g., Rocky Mountain Farmers
Union v. Corey, 730 F.3d 1070, 1086 (9th Cir. 2013).

                                   A

    On summary judgment, the district court determined that
Crombie on four separate occasions willfully violated
§ 13(a)(4). Crombie does not contest that he made false
statements to the NFA during its investigation of Paron. He
argues only that the district court misinterpreted the meaning
of “willfully” for the purposes of the § 13(a)(4) claims, and
that under the correct standard, there are genuine issues of
material fact as to whether he acted willfully when he made
three separate false statements to the NFA during its
investigation of Paron. 7

                                   1

    “The word ‘willfully’ is sometimes said to be ‘a word of
many meanings.’” Bryan v. United States, 524 U.S. 184, 191
(1998) (quoting Spies v. United States, 317 U.S. 492, 497
(1943)). But the proper meaning of “willfully” in § 13(a)(4)
is unambiguous.

    7
       Crombie does not contest that, under either standard, he willfully
made false representations to the NFA with regards to a fourth category
of false information.
                   U.S. CFTC V. CROMBIE                        9

    Section 13(a)(4) is a criminal statute, with stiff penalties.
“It shall be a felony punishable by a fine not more than
$1,000,000 or imprisonment for not more than 10 years, or
both, together with the costs of prosecution, for . . . . [a]ny
person willfully to falsify, conceal, or cover up by any trick,
scheme, or artifice a material fact, make any false, fictitious,
or fraudulent statements or representations, or make or use
any false writing or document knowing the same to contain
any false, fictitious, or fraudulent statement or entry to a
registered entity, board of trade, or futures association,” such
as the NFA. 7 U.S.C. § 13(a)(4). The Act also gives the
Commission the ability to enforce this criminal provision via
civil suit. 7 U.S.C. § 13a-1(a), (d). Section 13a-1(a)
provides that whenever any person “has engaged, is
engaging, or is about to engage in any act or practice
constituting a violation of any provision of [the Act] or any
rule, regulation, or order thereunder, . . . the Commission
may bring an action . . . to enjoin such act or practice, or to
enforce compliance with [the Act] . . . .”

    “As a general matter, when used in the criminal context,
a ‘willful’ act is one undertaken with a ‘bad purpose.’”
Bryan, 524 U.S. at 191. There are certain contexts in which
a showing of bad purpose requires a showing that the
defendant knew his actions were unlawful. See id. at 192;
see also Ratzlaf, 510 U.S. at 140–46. But as to statutes that
criminalize the making of false or misleading statements and
other fraudulent activity—conduct that is obviously
wrongful—we have repeatedly held that “‘willfully’ . . .
does not require that the actor know specifically that the
conduct was unlawful.” Tarallo, 380 F.3d at 1188 (emphasis
omitted); see also United States v. English, 92 F.3d 909,
914–16 (9th Cir. 1996). Rather, a defendant makes false
statements “willfully” for purposes of a criminal statute
prohibiting such statements if the defendant knew the
10                  U.S. CFTC V. CROMBIE

statements were false when made, “or else made them with
a reckless disregard for whether they were false.” Tarallo,
380 F.3d at 1188–89.

      In contrast, in civil contexts, a person acts “willfully” if
she “intentionally does an act which is prohibited,—
irrespective of evil motive or reliance on erroneous advice
. . . .” Lawrence v. CFTC, 759 F.2d 767, 773 (9th Cir. 1985)
(quoting Flaxman v. CFTC, 697 F.2d 782, 787 (7th Cir.
1983)). When adjudicating the § 13(a)(4) claims on
summary judgment, the district court applied the civil
meaning of “willfully,” not the generally applicable criminal
meaning. The Commission maintains that the district court
was correct, because the Commission is pursuing violations
of § 13(a)(4) via a civil suit. We cannot agree.

    The term “willfully” appears in § 13(a)(4), a criminal
provision of the Act, not in § 13a-1(a), the provision of the
Act permitting civil enforcement. Nor does § 13a-1(a)
prescribe a separate mens rea that applies in civil-
enforcement proceedings. It just states that the Commission
may bring an action to enforce compliance with “any
provision” of the Act. 7 U.S.C. § 13a-1(a).

    Given this context, the meaning of “willfully” as used in
§ 13(a)(4) cannot sensibly vary depending on whether it is
relied upon directly, in a criminal fraud case, or by
incorporation into § 13a-1(a), in a civil case. And because it
appears in a criminal statute, “willfully” means
“intentionally undertaking an act that one knows to be
wrongful; ‘willfully’ in this context does not require that the
actor know specifically that the conduct was unlawful.”
Tarallo, 380 F.3d at 1188. A defendant makes false
statements “willfully” under this standard if the defendant
knew the statements were false, “or else made them with a
reckless disregard for whether they were false.” Id.
                  U.S. CFTC V. CROMBIE                    11

                             2

    Although the district court did not apply this somewhat
heightened criminal standard for willful conduct, we
nonetheless affirm the grant of summary judgment to the
Commission on the § 13(a)(4) claims after applying, de
novo, the correct meaning of “willfully.” For each of the
three claims disputed by Crombie, we are convinced that
there is no genuine dispute of material fact as to whether
Crombie acted willfully under the Tarallo standard.

    During the NFA’s investigation, Crombie provided the
NFA with statements purporting to show the value of
accounts Crombie had managed between 2006 and 2008 as
part of a prior venture called JDC Ventures (“JDC”). The
statements provided by Crombie stated that the JDC-
managed accounts were worth over $13.8 million in
February 2008, and over $24 million in December 2008. In
fact, the accounts had a steady balance of only $40 from late
2007 onward; had no trades in 2008; and closed in February
2008. At his deposition, Crombie testified that he was aware
of the day-to-day performance of the accounts he had
managed.

    These facts unequivocally establish that when Crombie
provided the NFA the inaccurate account statements, he
acted willfully. Crombie either knew the statements he
provided to the NFA misrepresented the value of the JDC-
managed accounts, or he provided those statements to the
NFA “with a reckless disregard for whether they were false.”
Tarallo, 380 F.3d at 1188.

    During the NFA’s investigation, Crombie also
misrepresented the nature of a $200,000 payment Crombie
made to Paul Porteous in May 2009. Crombie told the NFA
that he had paid Porteous $200,000 in exchange for
12                U.S. CFTC V. CROMBIE

Porteous’s share in JDC. In fact, as Crombie later admitted
during this litigation, Crombie owed Porteous $1.15 million,
and the $200,000 payment was made in partial repayment of
that debt. Again, these facts make clear that Crombie either
“made statements [to the NFA] that he knew at the time were
false, or else made them with a reckless disregard for
whether they were false.” Id.

    Finally, Crombie told the NFA during its investigation
that Steven Lamar had paid JDC $300,000 in exchange for
certain financial advice JDC provided to Lamar’s hedge
fund. In his statement, Crombie told the NFA that the
$300,000 payment was made in two separate transfers, one
of which was a $50,000 transfer made on May 4, 2009. Later
in the investigation, however, Crombie told the NFA that the
$50,000 payment made on May 4, 2009, was an investment
in JDC. Eventually, during litigation, he admitted that the
$50,000 payment was in fact a loan made to JDC by Lamar’s
hedge fund.

    Crombie argues that, because he used the terms “loan”
and “investment” interchangeably, he was not acting
willfully when he made these false representations. But
Crombie did not initially describe the $50,000 payment as
either an investment or a loan; he first described the payment
as a fee for services rendered. This description was
undoubtedly false, and Crombie had to know the description
was false. There is thus no genuine issue as to whether
Crombie acted willfully when he misrepresented the nature
of the $50,000 payment to the NFA.

                              B

   The district court was also correct to grant summary
judgment to the Commission on its claims that Crombie
misled investors in violation of 7 U.S.C. §§ 6b(a)(1)(A)–(B)
                   U.S. CFTC V. CROMBIE                     13

and 6o(1), two provisions of the Act that prohibit certain
fraudulent conduct in connection with the trading of
commodities and futures.

    The basic facts underlying these claims are as follows:
Paron’s marketing materials stated that Paron managed
$35 million, including one account with $20 million. But
Paron in fact managed only $15 million. The largest
managed account contained only $6 million. The marketing
materials also misrepresented certain performance figures
for the JDC-managed accounts. For example, Paron
represented in the marketing materials that JDC-managed
accounts generated returns of 38.6 percent in 2008; but as
discussed above, those accounts in fact had a steady balance
of $40 starting in late 2007; had no trades in 2008; and closed
in February 2008.

    Crombie does not dispute these facts. He argues only
that there is a genuine dispute of material fact regarding
whether Crombie possessed the mental state necessary to
violate § 6b(a)(1)(A)–(B).

      Section 6b(a)(1)(A)–(B) makes it unlawful for any
person “to cheat or defraud,” or “willfully to make or cause
to be made to [another] person any false report or statement”
in connection with certain commodity-related transactions.
A showing of scienter is necessary to establish a violation
§ 6b(a)(1)(A)–(B); in other words, the defendant “must have
known that he was cheating” or “known the report was
false,” as the case may be. CFTC v. Savage, 611 F.2d 270,
283 (9th Cir. 1979). Savage further held that “[k]nowledge
. . . exists when one acts in careless disregard of whether his
acts amount to cheating, filing false reports, etc.” Id.

   Crombie maintains that he did not know he was cheating,
under subsection (A), or making any material false
14                  U.S. CFTC V. CROMBIE

statements, under subsection (B), because he reasonably
relied on reports created by third-party accountants that
purportedly verified the 38.6 percent figure, as well as the
other representations regarding the performance of the JDC-
managed accounts. This contention fails.

    First, the third-party accountants’ reports did not provide
any basis for Crombie to believe that Paron in fact managed
$35 million in total assets, or to believe that Paron managed
a $20 million account. So Crombie knew that he was making
false statements when he misrepresented the amount of
assets managed by Paron. See id.

    Second, Crombie testified that he was aware of the day-
to-day performance of the accounts JDC managed. Crombie
was thus aware that the accounts JDC managed consistently
had $40 in assets while open in 2008, and closed completely
in February of that year. Even though Crombie received
third-party reports that purported to verify the 38.6 percent
performance figure, he could not have legitimately believed
that the accounts JDC managed had generated 38.6 percent
returns, given what he knew about those accounts. Thus, he
acted with the requisite scienter—he knew the performance
figures he was representing were false. See id.

     Crombie similarly argues that there is a genuine dispute
of material fact regarding whether Crombie possessed the
mental state necessary to violate § 6o(1). Section 6o(1), like
§ 6b(a)(1)(A)–(B), makes unlawful fraudulent conduct
committed in connection with commodity transactions. But
unlike § 6b(a)(1), § 6o covers only a limited set of regulated
people: “commodity trading advisor[s]”, “commodity pool
operator[s]”, and their “associated person[s].” For this
limited class of people covered by § 6o(1), the Commission
need only show that “the violator . . . acted intentionally. . . .
If the trading advisor or commodity pool operator intended
                     U.S. CFTC V. CROMBIE                           15

to do what was done and its consequence is to defraud the
client or prospective client[,] that is enough . . . .” 8 Savage,
611 F.2d at 285. All of the evidence suggests Crombie acted
intentionally when providing the false and misleading
marketing materials to potential clients; no evidence
suggests otherwise. Thus, there is no genuine dispute as to
whether he acted intentionally.

                                  III

    Crombie also challenges the propriety of the remedies
imposed by the district court. We review the remedies
issued by a district court for an abuse of discretion. See
Grosz-Salomon v. Paul Revere Life Ins. Co., 237 F.3d 1154,
1163 (9th Cir. 2001).

                                  A

    The pertinent remedy provision, 7 U.S.C. § 13a-1(a),
provided at the time of Crombie’s statutory violations that
“the Commission may bring an action . . . to enjoin [a
violation of the Act], or to enforce compliance with [the
Act], or any rule, regulation or order thereunder.” Section
13a-1 also provided that the Commission could seek civil
penalties for violations of the Act. 7 U.S.C. § 13a-1(d); see
    8
      Relying on the Seventh Circuit’s decision in Commodity Trend
Service, Inc. v. CFTC, 233 F.3d 981, 993–94 (7th Cir. 2000), Crombie
argues that § 6o(1) requires a showing that the defendant acted with
negligence. See id.; see also Messer v. E.F. Hutton & Co., 847 F.2d 673,
677–79 (11th Cir. 1988) (holding that § 6o(1)(A) includes a scienter
requirement). This argument is foreclosed by Savage. 611 F.2d at 285.
Moreover, even if § 6o(1) required a showing of negligence or scienter,
it would nonetheless be appropriate to grant summary judgment to the
Commission for the same reasons it is appropriate to grant summary
judgment under § 6b(a)(1)(A)–(B).
16                    U.S. CFTC V. CROMBIE

also 17 C.F.R. § 143.8(b). Although § 13a-1 did not
explicitly so state, both this circuit and other circuits have
long held that district courts have the authority to order
traditional equitable relief in actions brought under § 13a-1,
as part of their authority to enforce compliance with the Act. 9
See CFTC v. Co Petro Mktg. Grp., Inc., 680 F.2d 573, 583
(9th Cir. 1982); CFTC v. Hunt, 591 F.2d 1211, 1222–23 (7th
Cir. 1979); see also CFTC v. Wilshire Inv. Mgmt. Corp.,
531 F.3d 1339, 1344 (11th Cir. 2008) (citing cases). More
specifically, Co Petro Marketing Group held that the district
court could under § 13a-1 properly order an accounting of
profits and disgorgement of those profits. 680 F.2d at 583.
An accounting and disgorgement of profits is a classic form
of restitutionary relief. Restatement (3d) of Restitution and
Unjust Enrichment § 51 cmt. e (2011) [hereinafter
Restatement of Restitution]; see also id. §§ 3, 51(4); Wilshire
Inv. Mgmt., 531 F.3d at 1344 (holding that an order of
restitution was authorized under § 13a-1).

    Crombie does not challenge whether the amount of the
restitution order rests on an accurate calculation of losses
suffered by Paron’s investors. Instead, he maintains that the
entire methodology was incorrect, because restitution “does
not take into consideration the plaintiff’s losses, but only
focuses on the defendant’s unjust enrichment.” Wilshire,
531 F.3d at 1345.

     9
      In 2011, Congress amended 7 U.S.C. § 13a-1 as part of the Dodd-
Frank Act to state explicitly that district courts in actions brought under
§ 13a-1 could “impose . . . equitable remedies,” including “restitution to
persons who have sustained losses proximately caused” by violations of
the Act. Dodd-Frank Wall Street Reform and Consumer Protection Act,
Pub. L. 111–203, title VII, § 744, 124 Stat. 1376, 1735 (2011). Neither
party contends that the amended version of the statute applies here, so
we do not consider whether it does.
                     U.S. CFTC V. CROMBIE                          17

     Crombie’s view of the limits of a restitutionary remedy
is too narrow. Restitution is a remedy designed to prevent a
defendant from unjustly enriching himself at another’s
expense. Restatement of Restitution §§ 1, 3, 49. Where a
defendant has profited from his wrongful actions, restitution
can take the form of an order requiring the defendant to
disgorge those wrongfully gotten profits and transfer them
to the victims. Id. § 51(4); see also Co Petro Mktg. Grp.,
680 F.2d at 583.

    But there are instances in which a defendant does not
ultimately reap any profits from his wrongful conduct, and
others where even though the defendant obtained some
profit, the “loss suffered by the victim is greater than the
unjust benefit received by the defendant . . . .” FTC v. Figgie
Int’l., Inc., 994 F.2d 595, 606 (9th Cir. 1993) (quotation
omitted); see also FTC v. Stefanchick, 559 F.3d 924, 931
(9th Cir. 2009). 10 In these circumstances, restitution can be
coupled with the equitable remedy of rescission, which
undoes a faulty transaction. See Figgie Int’l., 994 F.2d at
606–07; 1 Dobbs, Law of Remedies § 4.3(6) (2d ed. 1993);
Restatement of Restitution § 54; see also Commerce Planet,
815 F.3d at 603.

   Here, coupling these two remedies was appropriate.
Customers who entered into agreements with Paron did so
because of fraudulent misrepresentations by Crombie, such

    10
        The Federal Trade Commission Act, like the Commodity
Exchange Act, grants courts broad authority to prevent fraudulent
conduct violating that act. See FTC v. Commerce Planet, Inc., 815 F.3d
593, 598 (9th Cir. 2016); Figgie Int’l., 994 F.2d at 605. Cases
interpreting the Federal Trade Commission Act rely on traditional
principles of equity that apply across statutory regimes, so their
reasoning is persuasive here.
18                     U.S. CFTC V. CROMBIE

as the misrepresentations as to the amount of assets under
management and the past performance of funds managed by
Crombie. See pp. 12–15, supra. Based on these facts,
rescission of the contracts entered into as a result of fraud
was an appropriate equitable remedy. Concomitantly, an
order that Crombie pay back to the investors the money that
they invested in Paron as part of the rescinded transaction
less the amount already returned by Paron was proper. 11 The
amount Parons’ clients invested with Paron less the amount
returned by Paron is equivalent to the amount Paron’s clients
lost because they invested with Paron.

    The district court did not spell out this reasoning. But
the Commission submitted a declaration explaining how the
restitutionary amount adopted by the district court was
arrived upon. As noted, Crombie only challenges the legal
propriety of the Commission’s victim-based theory of
restitution, not the calculation of the restitution amount if the
approach taken is permissible. As we have concluded that
the method of determining restitution used by the district
court was legally permissible, to require a further
explanation by the district court would be an empty
formality. Cf. Traxler v. Multnomah Cty., 596 F.3d 1007,
1016 (9th Cir. 2010) (remand was required where there was
no reasoned decision and “[t]he record does not permit us to
infer a rationale”).

     11
        To effectuate the order of restitution, the district court appointed
the NFA as a monitor with the power to “collect restitution payments
from Crombie” and to “determine the manner of distribution of such
funds in an equitable fashion to Crombie’s and/or Paron’s customers or
clients identified by the [Commission].”
                   U.S. CFTC V. CROMBIE                     19

                              B

    Although we affirm the restitution order, we vacate in
part the district court’s order issuing a permanent injunction
against Crombie. To evaluate a district court’s decision
under the abuse of discretion standard, “we must be able to
ascertain how the district court exercised its discretion.” Id.
at 1015. Where the connection between the terms of an
injunction and the violations sought to be remedied is
apparent, we are usually able to ascertain the basis for the
district court’s restrictions sufficiently that no further
explanation is needed for purpose of appellate review. When
that evident link is missing, however, “we must remand to
that court to reconsider its decision and to set forth its
reasons for whatever decision it reaches, so that we can
properly exercise our powers of review.” Id. (quoting Blue
Cross & Blue Shield of Ala. v. Unity Outpatient Surgery Ctr.,
Inc., 490 F.3d 718, 724–25 (9th Cir. 2007)).

    Here, the district court adopted the Commission’s
proposed injunction in toto and provided no specific
explanation as to why it adopted any of the suggested
provisions. Much of the Permanent Injunction restrains
Crombie from violating various provisions of the Act. Other
provisions forbid him from engaging in trading in covered
financial products and registering to do so. As to all such
provisions—§§ 4 and 5(a), (d), (e), (f), and (g) of the
Permanent Injunction—the connection between the
violations found and the prohibitions are sufficiently self-
evident that we can—and do—conclude that the district
court’s inclusion of those future restraints on Crombie was
not an abuse of discretion.

   As to two other sections of the Permanent Injunction,
however, the path from the violations found to the
prohibitions ordered is not as clear. Sections 5(b), and (c) of
20                U.S. CFTC V. CROMBIE

the Permanent Injunction forbid Crombie from engaging in
covered transactions “for his own personal account or for
any account in which he has a direct or indirect interest,” or
from having any such trades made on his behalf. As we
cannot readily discern how these prohibitions are connected
to preventing future violations similar to those that Crombie
has committed, we cannot conduct meaningful abuse of
discretion review without further explanation. We therefore
remand for further explanation as to those parts of the
Permanent Injunction.

  AFFIRMED IN PART, VACATED IN PART, AND
REMANDED.