FOR PUBLICATION

UNITED STATES COURT OF APPEALSFOR THE NINTH CIRCUIT

SECURITIES AND EXCHANGE

COMMISSION,Plaintiff-Appellee,

v.

WORLD CAPITAL MARKET, INC.;WCM777 INC.; WCM777 LTD.,DBA WCM777 Enterprises, Inc.;MING XU, AKA Phil Ming Xu,

Defendants,

and

VINCENT J. MESSINA, ReliefDefendant; INTERNATIONAL

MARKET VENTURES, ReliefDefendant,

Defendants-Appellants.

No. 15-55325

D.C. No.2:14-cv-02334-

JFW-MRW

OPINION

Appeal from the United States District Courtfor the Central District of California

John F. Walter, District Judge, Presiding

Argued and Submitted January 10, 2017Pasadena, California

Filed March 21, 2017

SEC V. MESSINA2

Before: Richard C. Tallman and Michelle T. Friedland,Circuit Judges, and David A. Faber,* District Judge.

Opinion by Judge Tallman

SUMMARY**

Securities and Exchange Commission / Disgorgement

The panel affirmed the district court’s final judgment asto appellants Vincent J. Messina and International MarketVentures, who contested their liability as “relief defendants”arising from the Securities and Exchange Commission’s(“SEC”) enforcement action against Phil Ming Xu andXu-related entities for federal securities law violations arisingout of a fraudulent investment scheme.

The SEC file a motion for an order of disgorgementagainst appellants, alleging they received $5 million of thetens of millions of dollars Xu unlawfully raised throughinvestor deposits worldwide. Appellants alleged that theyreceived those funds as a loan.

The panel held that the district court properly assertedjurisdiction over appellants as relief defendants to determinethe legal and factual legitimacy of appellants’ claim to the $5

* The Honorable David A. Faber, United States District Judge for theSouthern District of West Virginia, sitting by designation.

** This summary constitutes no part of the opinion of the court. It hasbeen prepared by court staff for the convenience of the reader.

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million. The panel held that the SEC made the requiredshowing that: (1) appellants received ill-gotten gains; and(2) appellants did not have a legitimate claim to those funds. The panel rejected appellants’ contention that once theyadvanced a facially colorable claim to the disputed funds asloan proceeds, the court was immediately divested ofjurisdiction to adjudicate the legitimacy of their claim.

The panel held that the district court did not clearly err infinding that the $5 million transfer from Xu to Messina as aloan was a sham. The panel also held that the record amplysupported the district court’s conclusion that the fundstransferred to Messina and International Market Ventureswere ill gotten as a matter of law. The panel further held thatthe district court did not err in holding International MarketVentures jointly liable for the portion of those ill-gotten fundsthat it received.

The panel rejected appellants’ procedural challenges tothe manner in which the district court adjudicated thedisgorgement proceedings. The panel also held thatappellants were afforded sufficient due process during therelief defendant proceedings before the district court.

COUNSEL

Maranda E. Fritz (argued) and Tammy P. Bieber, ThompsonHine LLP, New York, New York, for Defendants-Appellants.

Daniel Staroselsky (argued), Senior Counsel; Randall W.Quinn, Assistant Attorney General; Jacob H. Stillman,Solicitor; Michael A. Conley, Deputy General Counsel; Anne

SEC V. MESSINA4

K. Small, General Counsel; Securities and ExchangeCommission, Washington, D.C.; for Plaintiff-Appellee.

OPINION

TALLMAN, Circuit Judge:

We address an issue of first impression involving theSecurities and Exchange Commission’s ability to disgorge ill-gotten funds from so-called “relief defendants.” VictorMessina and International Market Ventures (“IMV”), contesttheir liability as relief defendants in the SEC’s enforcementaction against Phil Ming Xu and various Xu-related entitiesfor federal securities law violations arising out of a fraudulentinvestment scheme. The SEC claims that Messina and IMVreceived $5 million of the tens of millions of dollars Xuunlawfully raised through investor deposits worldwide, butMessina and IMV assert that they received those funds as aloan.

The question presented is whether putative reliefdefendants may divest a district court of jurisdiction toproceed against them using summary procedures simply byasserting a claim of entitlement to the disputed funds in theirpossession. Messina and IMV argue that a facially colorableclaim is sufficient to destroy relief defendant jurisdiction, andthat to seek disgorgement from them, due process requires theSEC either to join them as party defendants or bring aseparate action against them. Messina and IMV also arguethat the SEC failed to show that the funds the district courtordered disgorged are proceeds of monies unlawfullycollected from United States investors.

SEC V. MESSINA 5

We conclude the district court properly exercised itsjurisdiction to determine the legal and factual legitimacy ofMessina and IMV’s claim to the $5 million. The court actedcorrectly under our precedent approving the invocation ofrelief defendant procedures in SEC enforcement actions anddid not clearly err in finding, following a two-day evidentiaryhearing, that Messina and IMV had no legitimate claim to thefunds. The evidence demonstrates that far more than$5 million was raised by Xu and his various entities in theUnited States, and the court correctly concluded that thefunds sought were proceeds of illegal activity and subject todisgorgement. Finally, the district court did not abuse itsdiscretion in later ordering disgorgement from Messina andIMV as relief defendants. We have jurisdiction and affirm.

I

Phil Ming Xu, together with his corporations includingWorld Capital Market, Inc., WCM777 Inc., and WCM777Ltd. (collectively, “WCM”), ran a multi-level marketingbusiness ostensibly selling investors membership unitsproviding access to cloud computing services. Xu and WCMpromised investors returns of up to 60 percent over a 100-dayperiod. WCM did not provide any actual products or servicesand had no significant legitimate revenue-generating businessoperations. Instead, Xu and WCM used money from newinvestors to pay existing investors and to buy real propertyand golf courses for Xu and associated third parties. Forensicaccountants established that investor funds deposited intovarious Xu- and WCM-affiliated bank accounts betweenJanuary 2013 and March 2014 totaled $57,175,385. Xu was

SEC V. MESSINA6

the mastermind who controlled the Ponzi scheme.1 He laterstipulated to liability for securities law violations, andjudgment in favor of the SEC was ultimately entered againstXu in the amount of $57,260,683.88.

Relief defendant Vincent Messina began working with Xuin June 2013, providing legal advice regarding tax, corporate,and immigration matters. During this time, Messina was alsogeneral counsel to relief defendant IMV in Washington, D.C. IMV’s President, Gary Messina, is Vincent Messina’snephew.2

By the fall of 2013, Messina was well aware that Xu andWCM were under investigation by the SEC for securities lawviolations. Xu instructed WCM’s chief operating officer tokeep Messina apprised of the Commission’s investigation “sothat Mr. Messina could help Mr. Xu protect his assets.” OnDecember 17, 2013, WCM disbursed $200,000 to Messina,who deposited it into a lawyers trust account at Wells FargoBank. Although no contract reflects the purpose of thistransfer, according to Messina the funds represented fees forhis services related to the formation of a political action

1 The term “Ponzi scheme” originates from a fraudulent investmentscheme created by Charles Ponzi in December 1919 in Boston. SeeCunningham v. Brown, 265 U.S. 1, 7 (1924). The SEC defines a Ponzischeme as “an investment fraud that involves the payment of purportedreturns to existing investors from funds contributed by new investors.” Fast Answers – Ponzi Schemes, U.S. Securities and ExchangeCommission, http://www.sec.gov/answers/ponzi.htm (last visited Mar. 14,2017).

2 To avoid confusion, we refer to Gary Messina by his full name andto Vincent Messina as “Messina.”

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committee (“PAC”) requested by Xu.3 Messina signed aConsulting Contract with IMV on January 10, 2014, retainingGary Messina and IMV to assist with work related to theformation of the PAC. The fees for IMV’s services werelisted as “Two Hundred Thousand Dollars consisting of twopayments: (1) One Hundred Thousand Dollars upon theexecution of this agreement and (2) One Hundred ThousandDollars on June 1st 2014.” No money was transferred toIMV on the date of the execution of the agreement.

By February 2014, Xu’s outside securities law counsel,Scott Warren, was in settlement discussions with the SEC onbehalf of Xu and WCM. Messina, learning that Warren hadrecommended settling with the SEC for $64 million, textedXu on February 6, 2014, advising him to “drop Scott”because the proposed settlement sum was “ridiculous.” Messina also wrote:

By the way the SEC does not have the powerto bring a criminal charge. That is thedecision of the US Attorney which is entirelyseparate from the SEC. Perhaps the newcounsel can delay the negotiations so thatyour assets seem less. I have tried to look atyour transactions from the standpoint ofrearranging them, but have not been able toget the required information.

3 An undated Statement of Account provided by Messina lists$121,800 due and owing for his work related to Xu’s PAC. Messina hasnot explained why he commingled $200,000 in earned fees by depositingthe funds into a trust account, typically employed to hold client funds tocover future legal work.

SEC V. MESSINA8

Xu responded: “Ok.”

Three weeks after this text exchange, Xu transferred $5million from the bank account of ToPacific Inc. (another Xuentity funded by WCM investor deposits) into Messina’sBank of America attorney-client trust account. Xu wasToPacific Inc.’s sole director and the signatory on its bankaccount. Xu asked Messina to hold the funds for futurebusiness endeavors. Messina responded that he would notsimply hold the funds, and instead prepared and executed adocument Messina characterizes as a loan agreement the dayafter the transfer which, in its entirety, reads:

This Agreement (“Agreement”) is entered intoon February 27, 2014, between Vincent J.Messina and Ming Xu.

FOR VALUE RECEIVED, Vincent J.Messina promises to pay to Ming Xu withoutrecourse the sum of Five Million Dollars($5,000,000) with interest computed at fivepercent (5%) per annum, interest and principaldue on January 2, 2019 at his place ofbusiness.

That transfer from Xu to Messina was recorded as an“uncategorized expense” in ToPacific’s books and a payeewas not specified. Messina testified before the district courtthat the loan was in furtherance of previously discussedproposals to set up a fund for future investments in Africa, the“no recourse” language in the agreement meant that he coulddo whatever he wanted with the money in terms ofinvestment ventures, and he had no personal legal obligationto repay Xu, although he had a “moral obligation” to do so.

SEC V. MESSINA 9

Nine days after Xu transferred the $5 million to Messina,Xu sent a text message to him requesting the return of themoney to help fund a settlement with the SEC. Messinarefused, stating: “The money has already been wired out andis i[n] accordance with the note I signed.” In actuality, as ofMarch 6, 2014—when Xu requested the recall of funds—Messina still held almost all of the $5 million in a series ofpersonal and client trust accounts and had transferred only$125,000 to IMV and $100,000 to Mohammed el FatihSaeed, who was in charge of IMV’s correspondent office inthe United Arab Emirates. Despite Xu’s request, Messinawent on to use seven different bank accounts to distributeapproximately $3 million of the funds to various businesspartners and associates. Relevant here are Messina’sadditional transfers of $125,000 to IMV on March 10, 2014;$350,000 on March 24, 2014; and $400,000 on March 29,2014.

According to Gary Messina’s testimony, $100,000 of theclose to $1 million IMV received from Messina during thistime represented fees for IMV’s services under the January2014 PAC Consulting Agreement and the remainder “relatedto a potential business venture that would be undertaken aspart of an agreement with CNC Consulting.”4 On April 1,2014, acting on instructions from Messina, Gary Messinawired $840,485 of the funds to a bank account in Canadamaintained by Andrew Savor. Gary Messina testified thatSavor was the agent for CNC Consulting in Canada.

4 CNC Consulting was another entity affiliated with IMV andWCM—in this case through Scott Choi, a senior vice president at IMVwho was slated to run WCM’s operations in Hong Kong.

SEC V. MESSINA10

Meanwhile, the SEC initiated enforcement proceedingsagainst Xu and WCM in Los Angeles district court. OnMarch 27, 2014, the Commission filed its complaint againstXu and WCM, and the court appointed a statutory receiverand issued a temporary restraining order freezing all of Xu’sand WCM’s assets and accounts (including ToPacific’saccounts). After discovering Xu’s February 26 transfer of$5 million to Messina, the receiver contacted Messina onMarch 30 and provided him with a copy of the temporaryrestraining order. Subsequent negotiations betweenMessina’s attorney at Thompson Hine LLP, the receiver, andthe SEC resulted in Messina’s transfer of the approximately$2 million remaining from the funds he had received from Xuto Thompson Hine’s client trust account to hold in escrowpending further order of the court. Gary Messina also wired$100,000 of Xu’s funds to Thompson Hine’s trust account.

The SEC amended its complaint against Xu and WCM onMay 7, 2014, adding Messina and IMV as relief defendants. On May 21, the district court ordered Messina and IMV’sassets frozen and authorized expedited discovery. Messinaand IMV filed a motion to dismiss on June 2, 2014, arguingthey were not proper relief defendants because they had alegitimate claim to the $5 million they received from Xu. The district court denied the motion to dismiss on July 10, butordered a Rule 12(b)(1) evidentiary hearing to resolvedisputed issues of fact related to the legitimacy of Messinaand IMV’s claims to the funds. On July 30, 2014, Xuseparately consented to the entry of judgment against him and

SEC V. MESSINA 11

disgorgement and a civil penalty in an amount to bedetermined by the court upon motion by the SEC.5

Following expedited discovery, the district court held itsRule 12(b)(1) evidentiary hearing on September 5 and 17,2014, during which it heard testimony from six witnesses,including Vincent and Gary Messina. One hundred thirty-eight exhibits offered by the SEC and twenty-five exhibitsoffered by the relief defendants were admitted into evidence. The district court made an adverse credibility finding againstVincent Messina, noting that his testimony seemed “contrivedand evasive” and that his “long, rambling, non-responsiveanswers to simple, straightforward questions were designedto avoid directly answering questions that would be harmfulto his position.” Ultimately, the court concluded afterlistening to the witness that it was left “with the distinctimpression that Vincent Messina was prepared to saywhatever he deemed necessary in an attempt to hold on to the$5 million.” The court ruled that Messina had no legitimateclaim to the $5 million because the loan agreement with Xuwas a sham and that IMV likewise had no legitimate claim to$941,505 of the $1,050,000 it received from Messina. Thecourt also concluded, however, that the SEC had failed tocarry its burden to demonstrate Messina and IMV were notentitled, respectively, to $200,000 and $108,495 for theirwork related to Xu’s requested PAC.

5 The district court entered final judgment against Xu on December6, 2016, in the amount of $57,260,683.88, from which any sumsultimately disgorged from Messina and IMV as relief defendants were tobe deducted. Xu did not appear in court to contest the amount ofjudgment. The district court entered final judgment against WCM onNovember 23, 2016, in the amount of $87,793,384.02.

SEC V. MESSINA12

On January 12, 2015, the SEC filed a motion for an orderof disgorgement against Messina and IMV. After fullbriefing, the district court granted the motion without furtherhearing on February 4, 2015, and ordered Messina todisgorge $5 million, with IMV jointly liable for $941,505 ofthat amount. Final judgment against Messina and IMV wasentered on February 20, 2015, and they timely appealed. Wehave jurisdiction under 28 U.S.C. § 1291.

II

Messina and IMV’s primary contention on appeal is thatthe district court lacked subject matter jurisdiction todetermine the legitimacy of their claim to the $5 millionMessina received from Xu. They also argue the district courterred in its factual findings, improperly ordereddisgorgement, and denied them due process.

We review a district court’s exercise of subject matterjurisdiction over relief defendants de novo. See SEC v.Colello, 139 F.3d 674, 675 (9th Cir. 1998). We review thedistrict court’s underlying factual findings on jurisdictionalissues, however, for clear error. See United States ex rel.Hartpence v. Kinetic Concepts, Inc., 792 F.3d 1121, 1126–27(9th Cir. 2015) (en banc) (“Where the district court relied onfindings of fact to draw its conclusions about subject-matterjurisdiction, we review those factual findings for clearerror.”); see also Commodity Futures Trading Comm’n v.Kimberlynn Creek Ranch, Inc., 276 F.3d 187, 192 (4th Cir.2002) (reviewing for clear error factual findings entered aftera hearing to determine the legitimacy of a relief defendant’sclaim to the disputed funds).

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Generally, a district court’s decision to awarddisgorgement is reviewed for abuse of discretion. Colello,139 F.3d at 675. The court’s order of disgorgement in thiscase, however, resulted in part from its conclusion that theundisputed forensic evidence tracing the investor moneydemonstrated as a matter of law that the funds Xu transferredto Messina were ill gotten. We review that conclusion denovo because it involves the application of law to facts notdisputed at the hearing.6 Id.

III

The SEC is authorized by both the Securities Act of 1933and the Securities Exchange Act of 1934 to bring civilenforcement actions seeking equitable relief in the form ofinjunctions against those committing violations of the Acts. See 15 U.S.C. §§ 77t(b), 78u(d)(1). In such actions, federalcourts may grant “any equitable relief that may be appropriateor necessary for the benefit of investors,” 15 U.S.C.§ 78u(d)(5), including disgorgement of the gains obtainedfrom securities law violations. See, e.g., SEC v. PlatformsWireless Int’l Corp., 617 F.3d 1072, 1096 (9th Cir. 2010). Courts may also exercise their broad equitable powers toorder disgorgement from non-violating third parties who havereceived proceeds of others’ violations to which the thirdparties have no legitimate claim. In such circumstances,these non-violating third parties are referred to as “reliefdefendants” or “nominal defendants.” Colello, 139 F.3d at676.

6 Consistent with that approach, the district court treated the SEC’smotion for disgorgement as one for summary judgment, and the partiesagree that this court accordingly should review the resulting order denovo. See id.

SEC V. MESSINA14

In the context of an SEC enforcement action, a reliefdefendant “is a person who ‘holds the subject matter of thelitigation in a subordinate or possessory capacity as to whichthere is no dispute.’” Id. (quoting SEC v. Cherif, 933 F.2d403, 414 (7th Cir. 1991)). Accordingly, a relief defendant is“not a real party in interest,” id., and “can be joined to aid therecovery of relief without the assertion of subject matterjurisdiction” because he or she “has no ownership interest inthe property which is the subject of litigation,” Cherif,933 F.2d at 414. As we have previously recognized, “theparadigmatic example of a nominal defendant is ‘a bank ortrustee [that] has only a custodial claim to the property,’”however “the term is broad enough to encompass personswho are in possession of funds to which they have no rightfulclaim, such as money that has been fraudulently transferredby the defendant in the underlying securities enforcementaction.” SEC v. Ross, 504 F.3d 1130, 1141 (9th Cir. 2007)(quoting Colello, 139 F.3d at 677).

To assert jurisdiction over—and ultimately obtaindisgorgement from—Messina and IMV as relief defendants,the SEC was required to demonstrate that Messina and IMV(1) received ill-gotten funds and (2) do not have a legitimateclaim to those funds. Colello, 139 F.3d at 677. We agreewith the district court that the SEC made both of the requiredshowings in this case and we hold that asserting jurisdictionover Messina and IMV as relief defendants was proper.

A

Messina and IMV contend that once they advanced afacially colorable claim to the disputed funds as loanproceeds, the district court was immediately divested ofjurisdiction to adjudicate the legitimacy of their claim and

SEC V. MESSINA 15

proceed any further against them as relief defendants. Theyinsist they would have to be named as defendants either in theSEC’s underlying civil enforcement action against Xu and theXu-related entities or in a stand-alone lawsuit, with all of therights attending a civil action. We disagree.

Messina and IMV filed a Rule 12(b)(1) motion to dismissfor lack of subject matter jurisdiction, challenging the factualpredicate for the court’s relief-defendant jurisdiction—namely, the legitimacy of their claim to the $5 millionreceived from Xu. In adjudicating a motion to dismiss underFederal Rule of Civil Procedure 12(b)(1), “if the existence ofjurisdiction turns on disputed factual issues, the district courtmay resolve those factual disputes itself.” Leite v. Crane Co.,749 F.3d 1117, 1121–22 (9th Cir. 2014). We see no reasonto treat a factual dispute any differently in the context of arelief defendant proceeding. We therefore conclude that thedistrict court properly conducted a Rule 12(b)(1) evidentiaryhearing to evaluate the legitimacy of Messina and IMV’sclaims to the funds at issue.

In Messina’s contrary view, the putative loan agreementgave him “presumptive title” to the money and the receivertherefore could not proceed against him as a relief defendant;rather, the receiver could disgorge the $5 million only bydemonstrating that Messina himself had violated thesecurities laws. See Ross, 504 F.3d at 1142. But this positionbegs the question because it necessarily assumes the loan wasnot a sham—the very issue the district court resolved in theRule 12(b)(1) hearing in deciding whether to allow theproceedings against Messina and IMV as relief defendants tocontinue. See Colello, 139 F.3d at 677 (“[T]he lack of alegitimate claim to the funds is the defining element of anominal defendant.”). Relief defendants cannot defeat

SEC V. MESSINA16

jurisdiction simply by asserting an ownership interest in thedisputed funds; rather, as the Fourth Circuit has explained,they must assert an interest both “recognized in law” and“valid in fact.” Kimberlynn Creek Ranch, Inc., 276 F.3d at192 (rejecting relief defendant’s ownership claim as “notfactually valid”). We join the Fourth Circuit in so holding. Otherwise, any third party with a custodial claim to theproceeds of securities violations committed by others wouldbe able to defeat relief defendant jurisdiction “simply bystating a claim of ownership, however specious.” Id.

Our holding in Ross does not compel a differentconclusion. In that case, it was undisputed that the purportedrelief defendant, a salesman for the company accused ofviolating securities laws, received funds in the form ofcommissions on his sales of unregistered securities—that is,“he received compensation in return for services rendered.” 504 F.3d at 1142. We recognized that the salesman hadpresumptive title to the funds just as “any other employee orvendor,” and it was on that basis that we reversed the districtcourt’s exercise of jurisdiction over him as a relief defendant. Id. Here, by contrast, the facts demonstrating presumptivetitle are disputed; indeed, whether the $5 million Messinareceived represented the proceeds of a valid loan or wasinstead an attempt to make Xu’s assets “seem less” was hotlycontested. Messina and IMV’s reliance on U.S. CommodityFutures Trading Commission v. WeCorp, Inc., 848 F. Supp.2d 1195 (D. Haw. 2012), is similarly misplaced. In WeCorp,the district court found an attorney had a legitimate claim tofunds received following the circulation of an email offeringlegal services because the undisputed evidence demonstratedthe attorney had actually performed work in exchange for thepayment. See id. at 1201–03. No such undisputed evidenceis present here.

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Nor are we persuaded by the cases Messina and IMV citeto support their argument that the purported existence of aloan agreement, without more, is sufficient to establishpresumptive title and destroy relief defendant jurisdiction. Those cases are inapposite because, just as in Ross andWeCorp, each rests on an undisputed underlying factualpremise of legitimacy missing in this case. In SEC v.Founding Partners Capital Management, for example, it was“undisputed that [the purported relief defendant] received theloan proceeds pursuant to written loan agreements”establishing a valid debtor-creditor relationship executedeight years prior to the SEC enforcement action. 639 F.Supp. 2d 1291, 1294 (M.D. Fla. 2009). Similarly, in Janveyv. Adams, it was “undisputed that the [purported reliefdefendants] received the [funds] pursuant to writtencertificate of deposit agreements . . . well before theunderlying SEC enforcement action.” 588 F.3d 831, 834–35(5th Cir. 2009).

Here, the relevant facts were disputed; the district courtreceived extensive documentary evidence and heardconsiderable testimony regarding Messina’s dealings withXu, WCM, and IMV, including evidence about the creationof the disputed loan agreement, and ultimately determinedthat Messina’s ownership claim was not factually valid—i.e.,it was not a legitimate loan upon which to base a cognizableclaim. To conclude that the district court lacks jurisdiction toengage in such factfinding after the mere invocation of aclaim of entitlement to the funds would effectively eliminatethe relief defendant procedure in SEC enforcement actions inany case involving a disputed claim to funds alleged to be theproceeds of securities fraud. We decline to take such a step,and hold that the district court appropriately adjudicated thelegal and factual validity of Messina and IMV’s claim to the

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$5 million to determine whether it had jurisdiction over themas relief defendants.

B

Having concluded that it was proper for the district courtto adjudicate the legitimacy of Messina and IMV’s claim, wenext hold that there was no clear error in the district court’sfinding that the $5 million transfer from Xu to Messina as aloan was a sham. Over the course of a two-day evidentiaryhearing, the court assessed more than 150 exhibits and heardtestimony from six witnesses, including Vincent Messina andGary Messina, whose credibility the court was in the uniqueposition to evaluate. See Valenzuela v. Michel, 736 F.3d1173, 1176 (9th Cir. 2013) (noting that where findings of factturn on credibility determinations, “the findings receiveheightened deference in light of the fact finder’s uniqueopportunity to observe the demeanor of the witnesses”(internal quotation marks omitted)). We will not disturb thedistrict court’s factual findings absent a “definite and firmconviction that a mistake has been committed.” McClure v.Thompson, 323 F.3d 1233, 1240 (9th Cir. 2003). Our reviewof the record yields no such conviction.

In concluding the loan agreement was a ruse designed tokeep $5 million of Xu’s money out of the reach of the SEC,the district court relied not just on its rejection of Messina’sincredible testimony, but also on impeaching evidence suchas: Messina’s text message to Xu advising him to delay theSEC negotiations so that they could make his assets “seemless”; Xu’s transfer of the $5 million less than three weekslater, before any discussion of a potential loan, along with acontemporaneous request for Messina to “hold” the money;the cursory agreement prepared by Messina after the transfer,

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which lacked the normal provisions of a valid loanagreement; ToPacific’s record of the transfer as an“uncategorized expense” without a listed payee; theagreement’s promise to repay Xu rather than ToPacific;Messina’s testimony that he had no personal legal obligationto repay the $5 million; and Xu’s request to Messina to returnthe $5 million just nine days after the transfer. The court didnot clearly err in evaluating this evidence and, accordingly,we affirm its finding that the loan transaction was a sham.

C

In its February 4, 2015, disgorgement order, the districtcourt concluded that the $5 million transferred from Xu toMessina and the $941,505 Messina subsequently transferredto IMV were ill gotten as a matter of law. We affirm becausethe unrebutted forensic analysis traced the source of thetransferred funds. There was no error in the court’s ultimateconclusion that the monies were the proceeds of unlawfulactivity or that IMV should be held jointly liable for the$941,505 of those funds it received.

The SEC provided unrebutted declarations from thereceiver and the SEC accountant responsible for theCommission’s forensic accounting investigation showing thatthe only significant source of funds in Xu and WCM’s bankaccounts, including the ToPacific account from which fundswere transferred to Messina and then on to IMV, wereproceeds from Xu and WCM’s fraudulent investment scheme. For example, the SEC accountant’s sworn declaration filed onAugust 22, 2014, describing her work in tracing the depositsof investor funds and transfers between Xu and WCMaccounts, supported her conclusion that the records showedno “appreciable source of revenue other than apparent

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payments from investors in the WCM777 offerings.” Likewise, the receiver swore in her August 22, 2014,declaration that she had found no evidence that “theReceivership Entities had any actual revenue-generatingbusiness operations related to the WCM777 or ToPacificprograms, other than the pyramid-like scheme for raisingmoney.”7

Messina and IMV did not offer any evidence to controvertthe SEC’s analysis of Xu’s and Messina’s bank accounts, nordid they proffer any evidence potentially available to themthrough additional discovery that could raise a triable issue offact regarding the source of the funds ultimately transferredto Messina and IMV. Although they now argue the receiver’sfinal forensic accounting report filed on February 27, 2015,was not available to them before the district court entered itsorder of disgorgement, Messina and IMV point to noinformation in the final report that creates a triable issue offact questioning the source of the funds. Indeed, that reportlargely restates the earlier information provided to the districtcourt in the receiver’s numerous interim reports, and in thereceiver and SEC accountant’s pre-hearing declarations andlive testimony during the evidentiary hearing. That recordamply supports the district court’s conclusion that the fundstransferred to Messina and IMV were ill gotten as a matter oflaw.

7 Similar evidence was presented in an earlier declaration by the SECaccountant filed on March 31, 2014, which detailed her analysis of Xu andWCM accounts in support of the SEC’s application for a preliminaryinjunction. The SEC also filed a second declaration by the receiver insupport of its motion for an order of disgorgement on January 12, 2015,in which the receiver confirmed her prior findings regarding the source ofthe funds in the Xu and WCM accounts and provided additionalsupporting information characterizing the money in the ToPacific account.

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The district court likewise did not err in holding IMVjointly liable for the portion of those ill-gotten funds that itreceived. The relief defendants argue that IMV neitherpossesses nor benefitted from the funds it received andsubsequently transferred, and that it therefore should not besubject to the disgorgement order. The district court was freeto reject this argument because ongoing possession of thefunds is not required for disgorgement. See PlatformsWireless, 617 F.3d at 1098 (“A person who controls thedistribution of illegally obtained funds is liable for the fundshe or she dissipated as well as the funds he or she retained.”);SEC v. JT Wallenbrock & Assocs., 440 F.3d 1109, 1116 (9thCir. 2006) (“The manner in which [the recipient of ill-gottenfunds] chose to spend the illegally obtained funds has norelevance to the disgorgement calculation.”); see also Colello,139 F.3d at 677 (approving the use of relief defendantprocedures even where the disputed funds were “paid over toothers” by the relief defendant after their receipt). Thedistrict court also found that the equities weigh in favor ofholding IMV jointly liable because Gary Messina willinglydissipated the funds despite knowing they were the subject ofan ongoing SEC investigation and a dispute between Messinaand Xu. The evidence—including the evidence showing theextent to which IMV was intertwined with Xu, WCM, andMessina—substantially supports the district court’sconclusion.

IV

In addition to contesting the amount of disgorgementordered by the district court, Messina and IMV also mount aseries of procedural challenges to the manner in which thedistrict court adjudicated the disgorgement proceedings. Essentially, Messina and IMV argue that the district court

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abused its discretion by refusing to extend the briefingschedule or to adjourn its ruling until after the receiver’s finalreport was issued. They argue that as a result, the districtcourt did not yet know the total amount of the fraud, theamount of fraudulent gains outstanding, or the amount overwhich the SEC would ultimately be able to establishterritorial jurisdiction.

First, we reject Messina and IMV’s argument that thedistrict court erred in ordering disgorgement from them asrelief defendants before entry of a final judgment of the totalamount to be disgorged by Xu. They point to no authority insupport of their argument and, regardless, ignore the wealthof undisputed evidence available to the district courtdemonstrating that close to $60 million of investor fundswere collected as “deposits into the United States dollarportion of” the Xu and WCM bank accounts as a result ofXu’s scheme. Xu had already consented to entry of judgmentagainst him for his alleged securities violations, and all thatremained was for the district court to determine the totalamount of the investor funds Xu would be ordered todisgorge.8 Once the district court found that Messina andIMV were proper relief defendants, it was not an abuse ofdiscretion to order them to disgorge this small fraction ofthese proceeds.

8 That number ultimately was fixed at $57,260,683.88. To the extentthe relief defendants are concerned with the potential for double recoveryby the SEC, that concern is assuaged by the district court’s provision that“Xu shall receive a credit for any sums paid by [the relief defendants] ontheir disgorgement and/or prejudgment interest obligations.”

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Nor did the district court err in rejecting the reliefdefendants’ related extra-territoriality argument.9 Messinaand IMV assert that under Morrison v. National AustraliaBank Ltd., 561 U.S. 247 (2010), Section 10(b) of theExchange Act, 15 U.S.C. § 78j(b), applies only to domestictransactions, and that the district court did not know at thetime it entered the order of disgorgement against the reliefdefendants what percentage of Xu’s ill-gotten funds derivedfrom securities transactions in the United States.10 Evenassuming that the SEC can only seek disgorgement of fundsrelated to domestic securities transactions, the undisputedevidence here shows that far more than $5 million in investortransactions took place in the United States. See AbsoluteActivist Value Master Fund Ltd. v. Ficeto, 677 F.3d 60, 69(2d Cir. 2012) (explaining that under Morrison, “a securitiestransaction is domestic when the parties incur irrevocableliability to carry out the transaction within the United States

9 Given that relief defendants are not real parties in interest, Ross,504 F.3d at 1141, it is not apparent that a relief defendant would havestanding to challenge generally the SEC’s territorial jurisdiction over thefunds at issue in the underlying enforcement action. But Messina andIMV frame their extra-territoriality argument as a complaint about themanner in which the district court handled the disgorgement proceedingsagainst them. Specifically, they argued that the district court abused itsdiscretion by ordering disgorgement before the receiver’s final reportissued because the court had not yet determined the total amount of ill-gotten gains at issue in the underlying SEC action. We address theargument in that posture.

10 The SEC argues in response that Congress overrode the Morrisondecision when it enacted Section 929P(b) of the Dodd-Frank Wall StreetReform and Consumer Protection Act, Pub. L. No. 111-203, 124 Stat.1376. The SEC did not raise this argument below, and we need notaddress it here. See Arduini v. Hart, 774 F.3d 622, 634 n.12 (9th Cir.2014) (“We generally do not consider issues raised for the first time onappeal.”).

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or when title is passed within the United States”).11 Accordingly, the district court properly exercised itsdiscretion in ordering the relief defendants to disgorge the$5 million they had received from Xu. We therefore affirmthe disgorgement order in its entirety.

V

Messina and IMV were afforded sufficient due processduring the relief defendant proceedings before the districtcourt. Our precedent recognizes “a truncated form of processvis-à-vis” relief defendants. Ross, 504 F.3d at 1141. No lessimportantly, the process afforded Messina and IMV here wassubstantial. Messina was contacted by the receiver on April1, 2014—just four days after the SEC filed its case against Xuand WCM—and Messina, represented by counsel, enteredinto negotiations with the receiver and the SEC over the nextfew days that resulted in his deposit of the remainingcontested funds into escrow. Messina therefore had notice ofthe underlying action against Xu and WCM almostimmediately and cannot claim he was unaware of his ownpotential liability by April 2014. Messina and IMV wereformally named by the SEC as relief defendants and servedwith the First Amended Complaint a month later. They weregranted expedited discovery, and they participated fully in theRule 12(b)(1) evidentiary hearing, where they wererepresented by able counsel, and where they testified,

11 We have yet to address what constitutes a domestic transactionunder Morrison, but the Second Circuit’s analysis of this issue in Ficetois instructive. Given the undisputed evidence regarding the scale andscope of Xu and WCM’s operations in the United States, we consider itbeyond peradventure that far in excess of $5 million was raised viadomestic transactions under any reasonable interpretation of Morrison.

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examined witnesses, and offered documentary evidence. Wehold that Messina and IMV were provided a constitutionallysufficient opportunity to litigate their rights.

Messina and IMV again point to their late receipt of thereceiver’s forensic accounting report as proof that theproceedings were unfair. Again, we disagree. Even if it waserror to enter the disgorgement order before the final forensicreport issued, Messina and IMV have not explained how theywere prejudiced by that error. Throughout the proceedingsbefore the district court, Messina and IMV had unfetteredaccess to the receiver’s numerous interim reports as well asthe receiver and SEC accountant’s detailed declarations andtestimony. The final forensic accounting report largelyrestates and further corroborates the previously disclosedinterim conclusions demonstrating the existence andfunctioning of a large and successful Ponzi schemeorchestrated by Xu. Moreover, we see no exculpatoryinformation helpful to the relief defendants’ position in thefinal report, nor have relief defendants identified anything inthe report that would have materially assisted their positionsduring the evidentiary hearing or in resisting disgorgement. As the district court correctly noted, the relief defendants“had more than an adequate opportunity to conductdiscovery” and “failed to identify the particular facts [] theyreasonably expect[ed] to obtain with further discovery, orexplain why those facts would preclude granting the SEC’sMotion for Order of Disgorgement.” On the facts before us,we hold the relief defendants were provided adequate dueprocess to litigate their claims.

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VI

The Final Judgment as to relief defendants Vincent J.Messina and International Market Ventures is AFFIRMED. Costs on appeal are awarded to the Securities and ExchangeCommission.