In an unpublished decision, the U.S. Court of Appeals for the Ninth Circuit reversed a U.S. District Court for the Central District of California's decision on remedies. The Ninth Circuit remanded the case with instruction for further consideration of penalty and disgorgement amounts imposed on defendants accused of defrauding foreign investors seeking to obtain U.S. visas through the EB-5 Immigrant Investor Program.
Following a 2018 bifurcated settlement in which the defendants acknowledged their liability and agreed to have the appropriate remedies decided by the Court, the District Court granted the SEC a $15.5 million judgment which included more than $3 million in disgorgement and prejudgment interest. The Ninth Circuit reversed the remedies decision and remanded the case back to the District Court for further proceedings.
The Ninth Circuit reversed the District Court's Order of Disgorgement because it was unclear whether the decision complied with the Supreme Court's recent decision in Liu v. SEC, 140 S. Ct. 1936, 1940 (2020) in two ways. First, it was it was unclear whether the District Court had properly held the individual defendants jointly and severally liable for the disgorgement amounts. Second, it was unclear whether the disgorgement amounts ordered were "appropriate and necessary for the benefit of investors."
The Ninth Circuit also found that the District Court failed to adequately explain its rationale for granting the SEC's penalty request and did not discuss the factors set out in SEC v. Murphy, 626 F.2d 633 (9th Cir. 1980). The Ninth Circuit remanded the case to the District Court to consider whether the penalty amount requested by the SEC was appropriate.