Full opinion text
MEMORANDUM DECISION AND ORDER FRANK MAAS, United States Magistrate Judge. This case arises out of an insider trading scheme involving the family of defendant Zvi Rosenthal (“Zvi”), a former senior executive of Taro Pharmaceutical Industries, Ltd. (“Taro” or the “Company”), an Israeli company whose shares are traded on the NASDAQ national market. In a related criminal case, three members of the Rosenthal family, and David Heyman (“Hey-man”), a family friend, each pleaded guilty in connection with the insider trading scheme to a charge of conspiring to commit securities fraud. The plaintiff Securities and Exchange Commission (“SEC” or the “Commission”) has now moved for partial summary judgment with respect to four alleged instances of insider trading, seeking relief against Zvi, three of his sons, defendants Amir Rosenthal (“Amir”), Ayal Rosenthal (“Ayal”), and Oren Rosenthal (“Oren”), and two “relief’ defendants, Zvi’s daughter Efrat Rosenthal (“Efrat”), and his wife Rivka Rosenthal (“Rivka”) (together, the “Relief Defendants”). Zvi, Amir, Ayal, Oren, and the Relief Defendants are hereinafter referred to collectively as the “Defendants.” In July 2007, the parties consented to my exercise of jurisdiction over this case for all purposes pursuant to 28 U.S.C. § 636(c). (See Docket Nos. 48-49). For the reasons set forth below, I now grant in part and deny in part the Commission’s motion for partial summary judgment (Docket No. 129). I. Relevant Facts The following facts are either undisputed or set forth in the light most favorable to the Defendants. A. Defendants Zvi is married to Rivka and is the father of Amir, Ayal, Oren, and Efrat. (PL’s 56.1 Stmt. ¶ 9; Defs.’ 56.1 Stmt. ¶ 9). Between 2001 and 2005, Zvi was the Vice President of Materials Management at Taro. In that capacity, he had access to material nonpublic information concerning the Company. (PL’s 56.1 Stmt. ¶ 22; Defs.’ 56.1 Stmt. If 22). The Commission contends in its motion that he and others misused that nonpublic information on at least two occasions. The Commission further contends that Amir and Ayal, among others, also misused material nonpublic information concerning two other companies. B. Insider Transactions Involving Taro The first instance of insider trading related to Taro arises out of an announcement, on May 29, 2001, that the United States Food and Drug Administration (“FDA”) had approved Taro’s application to distribute a new generic drug, Clotrimazole/Betamethasone Diproprionate Cream USP (“CB Cream”). (Pl.’s 56.1 Stmt. ¶ 53; Defs.’ 56.1 Stmt. ¶ 53). Several weeks earlier, Taro learned from the FDA that CB Cream was in “first generic drug review,” a development which suggested that regulatory approval of the drug was imminent. (PL’s 56.1 Stmt. ¶ 54; Defs.’ 56.1 Stmt. ¶ 54). Subsequently, in the course of asking Amir to transport “some equipment” to Israel which Taro allegedly needed to complete the approval process, Zvi disclosed material nonpublic information to him concerning the pending FDA approval. (Ex. 20). Amir then used that information to trade in Taro securities for his own account, generating profits of $118,798 between May 17 and June 1, 2001. (Ex. 6 at 21, 92; D’Avino Deck ¶ 2 & Ex. 2). In July 2004, Zvi disclosed to Amir that Taro would not meet its second-quarter sales projections. (PL’s 56.1 Stmt. ¶¶ 22-23; Defs.’ 56.1 Stmt. ¶¶ 22-23). Knowing that Zvi’s disclosure violated his fiduciary duties to Taro, Amir nevertheless traded Taro securities in the accounts of his wife Noga Delshad (“Noga”), Noga’s father Bahram Delshad (“Bahram”), Zvi, and an entity known as Aragon Partners LLP (“Aragon”). (Ex. 20). Ayal, Oren, Efrat and Rivka were the limited partners of Aragon; Amir, in turn, controlled Aragon Capital LLC, Aragon’s general partner. (Compl. ¶¶ 17-18; PL’s 56.1 ¶ 14; Defs.’ 56.1 ¶ 14). After Amir tipped Heyman about the second-quarter Taro results, Heyman also traded Taro securities in his own account based on the insider information. (PL’s 56.1 Stmt. ¶¶ 49-50; Defs.’ 56.1 Stmt. ¶¶ 49-50). In addition, in violation of Taro’s written policies, Zvi himself sold 10,000 shares of Taro stock from his personal account in advance of Taro’s public disclosure of its second-quarter sales. (PL’s 56.1 Stmt. ¶ 41; Defs.’ 56.1 Stmt. ¶ 41; Compl. ¶¶ 27-28; Ex. 2 ¶¶ 11, 12). By trading ahead of Taro’s quarterly earnings announcement, Amir generated total profits of $962,906 in Aragon’s account, $214,946 in Noga’s account, $243,288 in Bahram’s account, and $31,143 in Zvi’s account. Zvi similarly avoided losses in the amount of $238,699 through his sales of Taro stock. Finally, by trading based on Amir’s tip, Heyman earned profits and avoided losses in the amount of $83,817. (D’Avino Decl. Ex. 2). C. Other Insider Transactions 1. Ernst & Young In April 2005, Heyman was employed at Ernst & Young (“E & Y”), where he was assigned to work on the proposed acquisition of a public company by another public company that was an E & Y client (“Project AA”), (PL’s 56.1 Stmt. ¶ 72; Defs.’ 56.1 Stmt. ¶ 72). In violation of his fiduciary duties to E & Y, Heyman disclosed the proposed transaction to Amir, who then sold the target company’s put options through the Aragon account. (PL’s 56.1 Stmt. ¶¶ 73, 74; Defs.’ 56.1 Stmt. ¶¶ 73, 74; D’Avino Decl. ¶ 2 & Ex. 2). At the time, Amir was a young associate at the law firm Thacher, Proffitt & Wood. Amir passed the tip about Project AA to his law firm supervisor, who also bet on a rise in the target company’s stock by purchasing call options. (PL’s 56.1 Stmt. ¶ 75). Ultimately, the transaction that Heyman improperly disclosed did not occur. (Id. ¶ 77; Defs.’ 56.1 Stmt. ¶ 77). Amir nevertheless generated proceeds in the amount of $78,220 through his sale of the target company’s puts. (D’Avino Decl. Ex. 2). 2. PriceWaterhouseCoopers Ayal is Amir’s younger brother. He completed a bachelor’s degree in management in 2001, a master’s degree in accounting in 2002, and all of the course work for a masters of business administration degree in January 2007. (PL’s 56.1 Stmt. ¶ 12; Defs.’ 56.1 Stmt. ¶ 12). New York University subsequently declined to grant Ayal the masters degree, however, after learning that he had pleaded guilty to the conspiracy charge. A suit brought by Ayal to challenge that decision is pending in this Court. See Rosenthal v. New York University, No. 08 Civ. 5338(LAK) (S.D.N.Y. filed June 12, 2008). In May 2005, Ayal was employed as an accountant by PriceWaterhouse Coopers (“PwC”) which assigned him to work on a proposed corporate merger involving PwC’s client as the target (“Project Victor”). During his guilty plea in the criminal case, Ayal admitted that he had provided nonpublic information concerning the proposed merger to Amir, “consciously turning] a blind eye” to the likelihood that Amir would use that information to trade. (Exs. 4 ¶ 26, 6 at 83-84; Compl. ¶¶ 107-09). In fact, after learning of the merger, Amir sold the target company’s put options through the Aragon account. Amir also tipped his law firm supervisor, who bought the target company’s call options. Amir later liquidated Aragon’s position after Ayal tipped him that the merger would not occur. (Compl. ¶¶ 109-11; Ex. 3 ¶ 53; Ex. 4 ¶ 26). Neither Amir nor Ayal realized any profits in connection with the trades related to Projects AA and Victor. (D’Avino Decl. Ex. 2). D. Criminal Case On February 8, 2007, in the United States District Court for the Eastern District of New York, Zvi, Amir, Ayal, and Heyman each pleaded guilty, before Judge John Gleeson, to a one-count criminal information, which charged that they had conspired, together and with others, to commit securities fraud, in violation of Title 18, United States Code, Section 371. (Ex. 6). During his guilty plea allocution, Amir conceded that he had traded on the basis of material nonpublic information furnished to him by Zvi, knowing that Zvi “was breaching his duty to Taro by giving [him] the information.” (Id. at 21). Amir cited both his trading in advance of the FDA’s announcement about CB Cream in 2001 and his trading before the public disclosure of Taro’s second-quarter sales results in 2004 as examples of his deliberate violations of the securities law. Amir also admitted that he tipped others, including Heyman, who had reciprocated by providing him with nonpublic information acquired at E & Y. (Id. at 21-22). Zvi was the second defendant to plead guilty. During his allocution, Zvi explained to Judge Gleeson that, “[b]etween 2001 and 2005,” he had “disclosed material, non-public information concerning Taro to Amir ..., knowing that with this information he may trade in Taro securities.” (Id. at 43). Zvi also acknowledged the correctness of an overt act in the information which alleged that he had provided Amir with material nonpublic information about Taro’s second-quarter sales results in 2004. (Id.). Next, as part of his plea, Heyman admitted that he had traded in Taro securities based on a tip from Amir, knowing that the information had been obtained from Zvi, who breached his fiduciary duty to Taro by disclosing the Company’s material nonpublic information to others. (Id. at 61). Heyman further conceded, in substance, that he had provided material nonpublic information to Amir concerning the proposed merger of two publicly-traded companies, in violation of his “fiduciary duties as an employee of [E & Y] and [as] a licensed CPA.” (Id.). Finally, as noted above, Ayal acknowledged during his plea that he had “agreed,” in 2005, to tell Amir the names of “two companies that were involved in a confidential acquisition,” knowing that Amir was an active securities trader, and therefore consciously turning a “blind eye” to the “obvious” fact that Amir would use the information to execute trades. (Id. at 83—84). On July 20, 2007, Judge Gleeson sentenced Zvi to sixty months in jail, Amir to thirty-three months in jail, and Ayal to two months in jail. (Exs. 9-11). The Judge also fined Zvi $100,000 and Amir $75,000, and required both sums to be paid by January 20, 2008. (Exs. 9, 10). Ayal was fined $5,000, but Judge Gleeson did not set a deadline for that payment to be made. (Ex. 11). The Judge also did not require any of the defendants to make restitution, after being advised that Zvi, Amir, and Ayal were negotiating a substantial settlement in this case, in which Amir’s lawyer predicted there would be “no liability issue,” so that the only remaining issues would be “gain and penalty.” (Ex. 7 at 6-7; see also Ex. 8 at 5-6 (remarks of Judge Gleeson) (noting counsel’s observation that the court should not be concerned about restitution because, “at the very least, [there mil] be disgorgement of the fruits of the crime on the SEC side of the proceedings”)). II. Partial Summary Judgment Motion Although the Amended Complaint alleges that there were other instances, the Commission’s motion for partial summary judgment focuses on the four episodes of insider trading detailed above. With the exception of Zvi’s liability in connection with Amir’s trading of Taro securities in advance of the CB Cream announcement in 2001, the Defendants largely concede the issue of liability. They strenuously object, however, to many of the forms of relief that the Commission seeks. III. Discussion A. Summary Judgment Standard Summary judgment is appropriate only when “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed.R.Civ.P. 56(c). The moving party has the initial burden of “informing the district court of the basis for its motion” and identifying the matter that “it believes demonstrate[s] the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the court concludes that “the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no ‘genuine issue for trial,’ ” and summary judgment must be granted. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting First Nat’l Bank of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968)). In deciding a motion for summary judgment, the court must “view the evidence in the light most favorable to the party against whom summary judgment is sought and ... draw all permissible inferences in favor of that party.” Fischl v. Armitage, 128 F.3d 50, 55 (2d Cir.1997). The court must accept as true the non-moving party’s evidence, if supported by affidavits or other evidentiary material. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252-56, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). It follows that “[c]onclusory allegations, conjecture, and speculation ... are insufficient to create a genuine issue of fact.” Kerzer v. Kingly Mfg., 156 F.3d 396, 400 (2d Cir.1998). In adjudicating a motion for summary judgment, “[t]he court’s function is not to resolve disputed issues of fact but only to determine whether there is a genuine issue of material fact to be tried.” Fischl, 128 F.3d at 55; see also Anderson, 477 U.S. at 255, 106 S.Ct. 2505 (“Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.”). “Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson, 477 U.S. at 248, 106 S.Ct. 2505. Accordingly, “[i]f the evidence is merely colorable ... or is not significantly probative ... summary judgment may be granted.” Id. at 249-50, 106 S.Ct. 2505 (citing Dombrowski v. Eastland, 387 U.S. 82, 87 S.Ct. 1425, 18 L.Ed.2d 577 (1967); Cities Serv. Co., 391 U.S. at 290, 88 S.Ct. 1575); see also Niagara Mohawk Power Corp. v. Jones Chem., Inc., 315 F.3d 171, 175 (2d Cir.2003) (the “ ‘mere existence of a scintilla of evidence’ ... is ... insufficient to defeat summary judgment”) (quoting Anderson, 477 U.S. at 252, 106 S.Ct. 2505). The summary judgment analysis is not altered by the fact that the plaintiff in this case is the Commission. See SEC v. Research Automation Corp., 585 F.2d 31, 33-34 (2d Cir.1978). Nor does the fact that the Commission seeks injunctive relief as part of its requested remedy change the analysis. Id. To the extent that the Court is asked to weigh questions of materiality, summary judgment may be granted only if “the omissions and misrepresentations in question are ‘so obviously important to the investor[] that reasonable minds cannot differ on the question of materiality.’ ” SEC v. Credit Bancorp, Ltd., 195 F.Supp.2d 475, 492 (S.D.N.Y.2002) (quoting Research Automation Corp., 585 F.2d at 35). Zvi, Amir, and Ayal are not represented by counsel in this proceeding. They nevertheless have submitted extensive papers prepared by Amir, who practiced law prior to his conviction and subsequent disbarment. (See Ex. 24 (“Amir Dep.”) at 99-101; In re Rosenthal, 64 A.D.3d 16, 880 N.Y.S.2d 603 (2009)). Despite the considerable legal skill reflected in the papers that Amir has prepared, he no longer is an attorney. Consequently, he and the others who rely on his papers to oppose the Commission’s motion are entitled to “special latitude.” See Bunkley-Claybrooks v. Shelly’s of New York, No. 07 Civ. 7727(JGK), 2009 WL 2486046, at *2 (S.D.NY. August 14, 2009); see also Estelle v. Gamble, 429 U.S. 97, 106, 97 S.Ct. 285, 50 L.Ed.2d 251 (1976) (pro se complaint should be held to a “less stringent standard[] than formal pleadings drafted by lawyers”); McPherson v. Coombe, 174 F.3d 276, 280 (2d Cir.1999) (pleadings should be read liberally and interpreted to “raise the strongest arguments that they suggest”) (quoting Burgos v. Hopkins, 14 F.3d 787, 790 (2d Cir.1994)). It nevertheless is settled law that “a pro se party’s ‘bald assertion,’ completely unsupported by evidence, is not sufficient to overcome a motion for summary judgment.” Odom v. Keane, No. 95 Civ. 9941(SS), 1997 WL 576088, at *3 (S.D.NY. Sept. 17, 1997) (quoting Carey v. Crescenzi, 923 F.2d 18, 21 (2d Cir.1991)). B. Substantive Law The Commission alleges that Amir, Ayal, and Zvi have violated Section 17(a) of the Securities Act of 1933 (“Securities Act”), Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”), and Rule 10b-5 thereunder in connection with their insider trading scheme. Section 17(a) of the Securities Act states that: It shall be unlawful for any person in the offer or sale of any securities ... by the use of any means or instruments of transportation or communication in interstate commerce or by use of the mails, directly or indirectly (1) to employ any device, scheme, or artifice to defraud, or (2) to obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading; or (3) to engage in any transaction, practice, or course of business which operates or would operate as a fraud or deceit upon the purchaser. 15 U.S.C. § 77q(a). Section 10(b) of the Exchange Act makes it illegal for “any person ... [t]o use or employ, in connection with the purchase or sale ... any manipulative or deceptive device or contrivance” in violation of the rules and regulations prescribed by the Commission. 15 U.S.C. § 78j(b). Rule 10b-5, promulgated thereunder, provides that: It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange, (a) To employ any device, scheme, or artifice to defraud, (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person, in connection with the purchase or sale of any security. 17 C.F.R. § 240.10b-5. The elements required to establish violations of Sections 10(b) and 17(a) are “essentially the same.” SEC v. Monarch Funding, 192 F.3d 295, 308 (2d Cir.1999). Thus, to be liable for securities fraud under either statute, a defendant must have “(1) made a material misrepresentation or a material omission as to which he had a duty to speak, or used a fraudulent device; (2) with scienter; (3) in connection with the purchase or sale of securities.” Id. In this action, because the Commission is the plaintiff, it need not prove loss causation, reliance, or damages in order to prevail on its claims. Credit Bancorp, 195 F.Supp.2d at 490-91. There are two established theories of insider trading: the “classical theory” and the “misappropriation theory.” United States v. O’Hagan, 521 U.S. 642, 652-53, 117 S.Ct. 2199, 138 L.Ed.2d 724 (1997). “The classical theory targets a corporate insider’s breach of duty to the shareholders with whom the insider transacts; the misappropriation theory outlaws trading on the basis of nonpublic information by a corporate ‘outsider’ in breach of a duty owed not to a trading party, but to the source of the information.” Id. Under the classical theory, an insider also is hable if he tips others with the intent that they will trade based on the nonpublic information. Dirks v. SEC, 463 U.S. 646, 659, 103 S.Ct. 3255, 77 L.Ed.2d 911 (1983). A tip-pee also assumes a fiduciary duty not to trade based on insider information when the “insider has breached his fiduciary duty to the shareholders by disclosing the information to the tippee and the tippee knows or should know that there has been a breach.” Id. at 660, 103 S.Ct. 3255. “In determining whether the insider’s purpose in making a particular disclosure is fraudulent, the SEC and the courts are not required to read the parties’ minds.” Id. at 663, 103 S.Ct. 3255. Rather, they may focus on “objective criteria,” such as a “relationship between the insider and the recipient [of the nonpublic information] that suggests a quid pro quo from the latter or an intention to benefit the particular recipient.” Id. at 664, 103 S.Ct. 3255. A close personal relationship between the tipper and a tippee who trades suffices because the “tip and trade resemble trading by the insider himself followed by a gift of the profits to the [tippee].” Id.; accord SEC v. Warde, 151 F.3d 42, 48-49 (2d Cir.1998): but see SEC v. Palermo, 99 Civ. 10067(AGS), 2001 WL 1160612, at *7 (S.D.N.Y. Oct. 2, 2001) (denying summary judgment although tipper and tippee were friends because conveyance of material nonpublic information and other elements of claim were not conceded). C. Application of Law to Facts 1. CB Cream The only area in which any of the Defendants disputes the SEC’s ability to prove its securities fraud claims relates to Amir’s trading in Taro securities shortly before the FDA announced its approval of CB Cream in May 2001. In essence, Zvi argues that he did not act fraudulently because he had a legitimate reason to make his disclosure to Amir—namely, to ensure that Amir would be able to fly to Israel on short notice to deliver certain equipment that Taro needed in order to secure the FDA’s approval. (Defs.’ Mem. at 37-38). Zvi also contends that his guilty plea allocution contains no admission of wrongdoing with respect to his conversation with Amir in 2001. (Id. at 38). Ironically, during his own guilty plea allocution, Zvi’s tippee—his son Amir—conceded that he knew his father was breaching his fiduciary duty to Taro by disclosing the information, that his father intended for him to “profit on the information,” and that his trading therefore was unlawful. (Ex. 6 at 21). The SEC contends that Amir’s statements during his guilty plea are admissible against Zvi under Rule 803(22) of the Federal Rules of Evidence. That rule, insofar as relevant, provides that the hearsay rule does not preclude the use of evidence of a “final judgment, entered after a trial or upon a plea of guilty ... [to a felony], to prove any fact essential to sustain the judgment.” Fed.R.Evid. 803(22). “What issues were decided in the criminal case is a question of law that ‘must be determined by the trial judge ... upon an examination of the record, including the pleadings.’ ” New York v. Hendrickson Bros., Inc., 840 F.2d 1065, 1081 (2d Cir.1988) (quoting Emich Motors Corp. v. Gen. Motors Corp., 340 U.S. 558, 569, 71 S.Ct. 408, 95 L.Ed. 534 (1951)). “A plea of guilty is an admission of all the elements of a formal criminal charge, and is itself a conviction as conclusive as a jury verdict.” In re Gaming Lottery Sec. Litig., No. 96 Civ. 5567 RPP, 2001 WL 204219, at *13 (S.D.N.Y. March 1, 2001) (citing La Magna v. United States, 646 F.2d 775, 778 (2d Cir.1981)). Here, the defendants in the Eastern District criminal case each were charged with conspiring to violate’ the securities laws, in violation of Title 18, United States Code, Section 371. The elements of that crime are that: (a) the conspiracy charged existed; (b) the defendant under consideration joined it knowing its unlawful purpose (or consciously avoided such knowledge); and (c) at least one overt act in furtherance of the conspiracy took place in the Eastern District of New York. See United States v. Santos, 541 F.3d 63, 70-71 & n. 7 (2d Cir.2008); Svoboda, 347 F.3d at 476, 482-83. The essence of the crime is, of course, the existence of an unlawful agreement. Svoboda, 347 F.3d at 476-77. Noticeably absent from the elements of the crime of conspiracy is any requirement that the conspirators have achieved their unlawful objective. See United States v. Feola, 420 U.S. 671, 694, 95 S.Ct. 1255, 43 L.Ed.2d 541 (1975); United States v. Frank, 520 F.2d 1287, 1290-91 (2d Cir.1975). Accordingly, because the actual transmission of material public information is not an element of an insider trading conspiracy, and therefore not essential to a judgment of conviction, Amir’s admission that he knew his father was violating his fiduciary duties to Taro by leaking information in advance of the CB Cream announcement is not admissible against Zvi under Rule 803(22). It follows that the Commission is not entitled to partial summary judgment against Zvi with respect to the 2001 trading on the theory that Zvi is bound by Amir’s concession that Zvi acted knowingly and with the intent that Amir use the information to trade. On the other hand, during his own guilty plea, Amir unquestionably admitted that he traded in advance of the CB Cream announcement on the basis of material nonpublic information, knowing that it had been disclosed to him by Zvi in violation of Zvi’s fiduciary duty to Taro. The Commission therefore has established that Amir is liable under Section 10(b) and Rule 10b-5 in connection with the 2001 trades. 2. ZOOJp Quarterly Earnings Whatever evidentiary deficiencies may exist with respect to Zvi’s liability for the trading in 2001 do not extend to the trading in mid-2004. Indeed, during his guilty plea allocution, Zvi unambiguously stated that he disclosed material nonpublic information about Taro’s second-quarter sales performance to Amir in 2004, knowing that Amir would use that information to trade. (See Ex. 6 at 43). Amir similarly admitted during his own guilty plea that he used his father’s tip not only to trade, but to tip Heyman. (Id. at 21; Defs.’ 56.1 Stmt. ¶ 50). It further is undisputed that Zvi sold 10,000 shares of Taro stock through his own account after learning of Taro’s disappointing second-quarter performance, but before Taro made any public disclosure of its earnings. (Defs.’ 56.1 Stmt. ¶¶41, 43). These facts suffice to establish that both Zvi and Amir violated Sections 10(b) and 17(a) and Rule 10b-5 in connection with their second-quarter 2004 Taro trades. 3. PwC While he was employed at PwC, Ayal received manuals that “emphasized the inappropriateness of insider trading.” (Ex. 32 at 40). As part of his guilty plea allocution, Ayal admitted that, despite these warnings, he gave Amir nonpublic information about a “confidential acquisition that [he] was working on” at PwC, and “turned a blind eye” to the fact that his brother would likely violate the securities laws by using that information to trade. (Ex. 6 at 84; Pl.’s 56.1 Stmt. ¶¶ 61-63; Defs.’ 56.1 Stmt. ¶¶ 61-63). Amir in fact sold the target company’s put options through the Aragon account based on that material nonpublic information. (Pl.’s 56.1 Stmt. ¶ 63; Defs.’ 56.1 Stmt. ¶ 63). Amir also tipped his law firm supervisor, who bought the target company’s call options. (PL’s 56.1 Stmt. ¶¶ 64-65; Defs.’ 56.1 Stmt. ¶¶ 64-65; Compl. ¶ 109; Ex. 3 ¶ 53). Amir later unwound Aragon’s positions after learning through a second tip from Ayal that the proposed merger was not going to occur. (Compl. ¶ 111; Ex. 3 ¶ 53). Although Ayal expressly denies that he acted intentionally, a showing of reckless behavior is sufficient in this Circuit to establish civil liability on the part of an alleged securities law violator. See Breard v. Schnoff & Weaver, Ltd., 941 F.2d 142, 144 (2d Cir.1991) (“For Rule 10(b)(5) [sic] purposes, scienter includes recklessness.”); SEC v. Solucorp Inds., Ltd., 274 F.Supp.2d 379, 418-19 (S.D.N.Y.2003) (scienter element under Sections 10(b) and 17(a)(1) “may be satisfied by proof of reckless conduct”); see also In re Amaranth Natural Gas Commodities Litig., 587 F.Supp.2d 513, 529 n. 97 (S.D.N.Y.2008) (“Second Circuit law, which permits scienter to be shown by recklesshess, continues to bind this Court” in Section 10(b) cases because the Supreme Court has expressly declined to reach the issue). Accordingly, inasmuch as Ayal concedes that he acted at least recklessly, the SEC is entitled to summary judgment on its Section 10(b), Section 17(a), and Rule 10b-5 claims with respect to the Project Victor-related trades executed by Amir and his law firm supervisor on the basis of Ayal’s tips. 4. E & Y After Amir tipped Heyman about Taro’s anticipated earnings announcement in the second quarter of 2004, Heyman returned the favor in early 2005 by tipping Amir about Project Victor—the possible acquisition of one public company by another public company—which was nonpublic information that Heyman had acquired in the course of his employment at E & Y and knew to be confidential. (Pl.’s 56.1 Stmt. ¶¶ 72-73; Defs.’ 56.1 Stmt. ¶¶72-73). It also is undisputed that Amir either knew or was reckless in not knowing that Heyman’s tip consisted of material nonpublic information that had been misappropriated from E & Y or, at a minimum, was being disclosed in violation of Hey-man’s fiduciary duty to E & Y and its clients. (Compl. ¶ 148; Ex. 3 ¶ 54). Amir nevertheless sold the target company’s put options through the Aragon account and passed the inside information to his law firm supervisor, who bought the target company’s call options. (PL’s 56.1 Stmt. ¶¶ 74-75; Defs.’ 56.1 Stmt. ¶¶ 74-75). Amir’s actions as both a tipper and a tip-pee therefore clearly establish that he violated Sections 10(b) and 17(a) and Rule 10b-5 in connection with Project Victor. IV. SEC’s Proposed Relief The SEC requests several forms of relief as a consequence of the conduct admitted by Zvi, Amir, and Ayal. First, the SEC seeks a permanent injunction against further securities laws violations by these defendants. (PL’s Mem. at 16-19). Second, the SEC seeks an order requiring the Defendants to disgorge the amounts that they obtained through the unlawful trading and to pay prejudgment interest thereon. (Id. at 20-27). Third, the SEC asks that the Court impose civil penalties on Zvi, Amir, and Ayal. (Id. at 27-32). Fourth, the SEC requests that Zvi be permanently barred from serving as an officer or director of a public company. (Id. at 33-34). Finally, the SEC asks the Court to enter final judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure with respect to the claims established by the guilty pleas of Zvi, Amir, Ayal, and Hey-man. (Id. at 34-37). As noted above, the Defendants do not dispute much of the Commission’s liability case. They nevertheless object to virtually all of the relief that the Commission seeks as part of its motion. I therefore turn to each form of relief requested by the Commission and the objections thereto. A. Injunction The Securities Act and the Exchange Act both authorize the issuance of a temporary or permanent injunction in a suit by the Commission without the posting of a bond if a person is “engaged or about to engage in any acts or practices” that violate the Act. 15 U.S.C. §§ 77t(b), 78u(d)(l). To obtain an injunction, the Commission thus “must demonstrate that there is a substantial likelihood of future violations of illegal securities conduct.” SEC v. Cavanagh, 155 F.3d 129, 135 (2d Cir.1998). In deciding whether to issue an injunction, and if so its scope, a court may examine the level of the defendant’s culpability, and whether the violations were systematic or isolated occurrences, whether the defendant has accepted responsibility, and whether, because of his occupation, the defendant might have an enhanced opportunity to commit further securities law violations. Id.; see also SEC v. First Jersey Sec., Inc., 101 F.3d 1450, 1477 (2d Cir.1996) (“[A]n injunction is particularly within the court’s discretion where a violation was ‘founded on systematic wrongdoing.’ ”) (quoting United States v. Carson, 52 F.3d 1173, 1184 (2d Cir.1995)). Zvi and Amir do not dispute that their conduct was sufficiently egregious and repetitive to warrant permanently enjoining them from future violations of the securities law. (Defs.’ Mem. at 17). Accordingly, the permanent injunction requested by the SEC with respect to Zvi and Amir will be granted. Ayal argues, however, that the SEC is not entitled to injunctive relief against him because his misconduct was limited to an “isolated incident and it is highly improbable that he will engage in future violations of the securities laws.” (Id.). In its papers, the SEC advances six arguments in support of its application for an injunction against future violations by Ayal. (Pl.’s Mem. at 17-18). First, the SEC contends that Ayal’s conduct involved a “high degree[ ] of scienter.” (Id. at 17). Second, the SEC asserts that Ayal lied about material facts because he stated in a letter to the Court dated February 5, 2008, that he “knew ‘for a fact that Amir did not have access to [one of his securities accounts],’ ” yet testified during his subsequent deposition “that Amir did have access to the account.” (PL’s 56.1 Stmt. ¶ 91). Third, the SEC alleges that Ayal misrepresented his securities experience on “at least one” of his brokerage account applications. (Id. ¶ 92). Fourth, the SEC contends that Ayal minimized his criminal culpability in the suit that he brought against New York University in an effort to compel that institution to grant him an MBA degree. (Id. ¶¶ 93—94). Fifth, the SEC argues that, as an accountant, Ayal is “likely to have access to material nonpublic information in the future.” (PL’s Mem. at 18). Finally, the SEC alleges that the risk of future violations is a concern because Ayal has been trading securities for approximately eight years and continues to trade mutual funds. (Id.). Although Ayal benefited from the misconduct of Zvi and Amir through his ownership interest in Aragon, the specific conduct that he has admitted—two reckless tips to his brother Amir about a proposed acquisition and its later abandonment— pales in comparison to their unlawful activities. Assuming that Ayal’s actions were, in fact, not intentional, as I must at this juncture, it also appears that he has accepted responsibility for his actions. The SEC disputes this, noting that Ayal has filed a suit seeking to compel NYU to grant him an MBA degree notwithstanding his criminal conviction. (Pl.’s Mem. at 19). Having reviewed the complaint in that case, which was, in any event, drafted by Ayal’s counsel, I do not agree that Ayal improperly attempted to minimize his own involvement in the insider trading scheme. Indeed, the complaint quotes the material portion of Ayal’s guilty plea allocution. (See Ex. 33). The key question is not Ayal’s acceptance of responsibility, but the likelihood that he will commit future securities law violations. In that regard, the SEC is correct that Ayal has not formally foresworn future securities law violations in his opposition papers. (See Pl.’s Reply Mem. I at 6). He is, however, a pro se litigant, who may well not have realized that such a statement could bolster his position. I also am not persuaded that Ayal should be distrusted simply because he conceded during a prior court conference that it would be very difficult for him to oppose a partial summary judgment motion seeking injunctive relief based on Project Victor. (See id. at 5) (contending that Ayal “reneged” on his “pledge not to contest the Commission’s request for an injunction against him”). Far more troubling is the fact that Ayal is—and remains—an accountant. The SEC maintains that by virtue of that credential, Ayal is “likely to have access to material nonpublic information in the future.” (Pl.’s Mem. at 18). The SEC further alleges in its Amended Complaint that Ayal is a licensed certified public accountant. (ComplY 11). However, Ayal has specifically denied this allegation, (Ex. 4 at ¶ 3), and the SEC has not provided the Court with any evidence that his denial lacks a factual basis. Ayal also apparently is not working as an accountant at present. Although an accountant certainly could become privy to material nonpublic information concerning a publicly-traded company during the course of his work, this possibility seems more remote if, as appears to be the case here, the accountant is not a certified public accountant. Furthermore, while Ayal evidently continues to trade securities for his own account, there has been no showing that this materially increases the likelihood that he will recidivate. By definition, someone who trades on nonpublic information needs an inside source. Here, unless Ayal secures future work as an accountant, he is unlikely to be able to repeat the misconduct that led to his guilty plea. For these reasons, the SEC’s application to enjoin Ayal from future securities law violations is denied. The SEC will, however, be permitted to renew its application at a later date if it believes that a fuller record warrants reconsideration of this issue. B. Disgorgement The SEC seeks disgorgement from several sources. First, the SEC seeks to recover $1,774,798 in profits from Zvi. (D’Avino Decl. Ex. 2). This sum consists of profits in the amount of $962,906 that Amir generated through his trading in advance of Taro’s second-quarter 2004 earnings announcement, plus profits for Noga in the amount of $214,946, for Bahram in the amount of $243,288, for Heyman in the amount of $83,817, and for Zvi himself in the amount of $269,841. (Id.). Second, the SEC seeks disgorgement from Amir in the amount of $1,536,099, which consists of all of the foregoing profits other than the $238,699 that Zvi netted through his own trading of Taro stock in advance of Taro’s second-quarter 2004 earnings announcement. (Id.). Finally, the SEC notes that, in May 2006, after the Aragon account had earned profits in the amount of $962,906 as a result of Amir’s illegal insider trades in advance of Taro’s second-quarter 2004 earnings announcement, Amir caused Aragon to make separate $500,000 cash distributions to Ayal, Oren, Efrat, Rivka, and himself. (Pl.’s Mem. at 20-21). The SEC therefore seeks to recover one-fifth of Aragon’s ill-gotten gains ($192,581) from each of the five defendants who received a distribution. (Id. at 26). Prior to the realization of any profits in the Aragon account resulting from insider trades in June or July 2004, the “total account value” of that account was $1,636,431. (R. Defs.’ 56.1 Stmt. ¶9). Furthermore, prior to the execution of the insider trades, Oren had made capital contributions to the Aragon account of at least $1,312,000, Efrat had made capital contributions totaling $631,000, and Ayal had made a capital contribution of $201,000. (Defs.’ 56.1 Stmt, at 3 ¶ 15; R. Defs.’ 56.1 Stmt, at 25-26 ¶¶ 2-5). The Defendants advance a number of reasons why disgorgement based on the Aragon trading either should not be required or should be limited to lesser amounts. Zvi and Amir argue that the amounts to be disgorged should be reduced by the taxes that they paid, and that they should not be jointly and severally liable for Heyman’s financial obligations. (Defs.’ Mem. at 33-36). In addition, Oren and the Relief Defendants maintain that there is no statutory authority to seek disgorgement from them, that the Amended Complaint in this action contains no claim for relief which would permit that remedy, and that there are, in any event, material factual issues that preclude an award of partial summary judgment against them at this juncture. (See R. Defs.’ Mem. at 1). None of these contentions withstands scrutiny. 1. Setoff for Taxes Relying on cases which stand for the proposition that disgorgement should not be a punitive remedy, Zvi and Amir maintain that any required disgorgement should be limited to their net profits, not their gross revenues, and that they (and presumably their codefendants) consequently should receive a credit for the capital gains taxes that they paid. (See Defs.’ Mem. at 33-34) (citing SEC v. First City Fin. Corp., 890 F.2d 1215, 1230 (D.C.Cir.1989) and SEC v. Grossman, No. 87 Civ. 1031(SWK), 1997 WL 231167, at *9 (S.D.N.Y. May 6, 1997)). Zvi and Amir further pledge not to seek a refund if this reduction is made. (Id. at 34 n. 28). However, they have not cited a single securities case in which such an offset was granted. They also have failed to produce any tax returns or other documents which would establish that they, in fact, paid the capital gains taxes or the amounts that they paid. They also have not shown that they are unable to recover any overpayments through future tax filings. For these reasons, and because the amount that a court orders to be disgorged need not be exact, I decline to grant the Defendants any credit for any capital gains taxes that they may have paid. See SEC v. Koenig, 532 F.Supp.2d 987, 994 (N.D.Ill.2007) (rejecting similar request); SEC v. Svoboda, 409 F.Supp.2d 331, 345 (S.D.N.Y.2006) (same). 2. Joint and Several Liability In January 2008, Heyman settled with the Commission pursuant to a stipulated Final Judgment which provided that he and a related partnership were liable to disgorge profits in the amount of $238,077, plus prejudgment interest in the amount of $40,556, or a total of $278,633. The Final Judgment further provided, however, that the Court would forego the imposition of a civil penalty and require the payment of only $47,000 in light of Heyman’s weak financial condition. (Ex. 14). Heyman also was enjoined from committing any further securities law violations. (Id.). Zvi and Amir contend that they should not be held liable for the $231,633 in disgorgement and prejudgment interest that Heyman failed to pay because the SEC waived its right to recover that sum by settling with Heyman for a lesser amount. (Defs.’ Mem. at 35-36). In support of this argument, Zvi and Amir cite McDermott, Inc. v. AmClyde, 511 U.S. 202, 114 S.Ct. 1461, 128 L.Ed.2d 148 (1994), an admiralty case, in which the Supreme Court held that the policy arguments in favor of the pro tanto rule, pursuant to which jointly and severally liable non-settling defendants receive a credit solely for the amount of their settling codefendants’ payments, were outweighed by those favoring the non-settling defendants receiving a credit for the settling defendants’ proportionate share of liability. Id. at 216-17, 114 S.Ct. 1461. The McDermott rule has since been applied to securities fraud cases. See, e.g., In re Del-Val Fin. Corp. Sec. Litig., 874 F.Supp. 81, 82 (S.D.N.Y.1995). The Commission responds that “Hey-man did not settle for less than his full liability because he was capitalizing on an attractive settlement offer; he settled for less than the full amount because he had no means to pay any more than that.” (Pl.’s Reply Mem. I at 13 (citing Ex. 14 ¶¶ 3, 4)). The Commission further reasons that even if Heyman had proceeded to trial and lost, it still could “look to Zvi and Amir for that portion of the judgment it could not collect.” (PL’s Reply Mem. I at 14). In that regard, it is significant that the settlement reflected in the Final Judgment regarding Heyman contains no order barring contribution claims. (See Ex. 14). Accordingly, if Heyman paid less than what is ultimately determined to be his proportionate share, Zvi and Amir will be able to sue him for contribution. The Commission maintains that the “risk of collection ... should be theirs, not the Commission’s.” (PL’s Reply Mem. I at 14 n. 12). The difficulty with the Commission’s argument is that it assumes that Heyman could pay only $47,000. While the Final Judgment recites that Heyman submitted a Statement of Financial Condition, dated as of August 21, 2007, which formed the basis for the Commission’s decision not to seek further sums from him, it does not appear that Zvi and Amir have been afforded an opportunity to test Heyman’s representations regarding his ability to pay. For this reason, the Court will deny the Commission’s application to require Zvi and Amir to disgorge a sum equal to Heyman’s remaining liability, but does so without prejudice to a renewed application for the same relief at a later stage of this suit. 3. SEC Statutory Authority Oren and the Relief Defendants argue that the Commission’s effort to recover funds from them is not authorized by statute. In its Amended Complaint, the Commission alleges in that regard that it is authorized to bring this action under three statutes: (a) Section 20(b) of the Securities Act, 15 U.S.C. § 77b (which authorizes the filing of an action to enjoin “acts or practices” that “constitute or will constitute” a violation of the Securities Act or the Exchange Act); (b) Section 21(d) of the Exchange Act, 15 U.S.C. § 78u(d) (which contains almost identical language); and (c) Section 21A of the Exchange Act, 15 U.S.C. § 78u-l (which authorizes the filing of an action against someone who engages in illegal insider trading). (Comply 6). As Oren and the Relief Defendants correctly note, Section 21(d)(5) of the Exchange Act, 15 U.S.C. § 78u(d)(5), also permits the Commission to seek equitable relief “for the benefit of investors” if it is authorized to bring an action under Section 20(b) of the Securities Act or Section 21(d)(1) of the Exchange Act. (R. Defs.’ Mem. at 7). Reasoning that they are not alleged to have violated any securities laws in connection with their dealings with Aragon, Oren and the Relief Defendants maintain that there is no statutory justification for requiring them to disgorge any portion of the $500,000 distributions that they received. (R. Defs.’ Mem. at 7-11). What these defendants overlook is that once jurisdiction over the subject matter of a suit brought by the Commission is established, the Court itself has the equitable power to order relief against someone who is not alleged to be a securities law violator if he “has received ill-gotten funds” and “does not have a legitimate claim to those funds.” SEC v. Cavanagh, 155 F.3d at 136; see also SEC v. Cherif, 933 F.2d 403, 414 (7th Cir.1991) (“nominal defendant” may be “joined to aid the recovery of relief without an assertion of subject matter jurisdiction only because he has no ownership interest in the property which is the subject of the litigation”); SEC v. The Better Life Club of Am., Inc., 995 F.Supp. 167, 181 (D.D.C.1998) (“Federal courts are empowered to exercise jurisdiction over securities claims against non-violators when necessary to ensure a complete remedy.”). Oren and the Relief Defendants argue that these decisions are not controlling because they do not “directly address” whether the Commission is authorized by statute “to bring a claim for relief against a person who has not violated the federal securities laws in which the SEC demands an order holding such non-violator ‘liable’ for payment of monies.” (R. Defs.’ Mem. at 8-9) (emphasis in original). There is no need for such authority, however, because the case law makes clear that the Court itself, in appropriate circumstances, has that inherent authority. Oren and the Relief Defendants also suggest that the prior decisions requiring disgorgement by “nominal” or “relief’ defendants are inapposite because none of them “involve an attempt by the SEC to, in effect, seize a distribution of funds that occurred nearly two years after the alleged insider trading occurred in an account that was not owned by the non-violator.” (Id. at 10). While this may be true, it is scarcely dispositive. In Cavanagh for example, the SEC sought to recover the proceeds of a scheme to defraud investors through the sale or attempted sale of unregistered shares of a public company on the basis of misrepresentations. Cavanagh, 155 F.3d at 132. The lead defendant, an investment banker, had distributed “hundreds of thousands” of the public company’s shares to his friends and relatives, among others, “often without consideration.” Id. One recipient of this largesse, from whom the SEC sought disgorgement, previously had directed that his shares be deposited into his wife’s account. Id. Thereafter, those shares were sold, generating $500,000 in proceeds which were transferred to the wife’s individual bank account without her knowledge. Id. at 137. Rejecting the wife’s efforts to retain these funds, the Second Circuit observed that allowing her to do so would enable “almost any defendant to circumvent the SEC’s power to recapture fraud proceeds, by the simple procedure of giving stock to friends and relatives without their knowledge.” Id. The transfers from Aragon to Oren and the Relief Defendants that Amir engineered in this case served the same purposes as the transfers in Cavanagh, which was to shield the proceeds of securities law violations from disgorgement. Although there may not be any case directly holding that disgorgement is proper when the funds at issue are held in the name of an entity, such as a limited liability partnership, which is not itself accused of any wrongdoing, there also is no authority indicating that any award of equitable relief in such circumstances is unlawful. I therefore reject the contention that the Securities Act or the Exchange Act bars this Court from requiring disgorgement of the proceeds of Amir’s illegal insider trades simply because those funds are now held by a “relief’ defendant. 4. Lack of a Specific Claim for Relief Oren and the Relief Defendants further contend that the SEC is not entitled to disgorgement because they have not been named in any claims in the Amended Complaint. They also maintain that the failure to name them in a claim for relief is “inconsistent with [the SEC’s] own practice in other insider trading cases involving relief defendants.” (R. Defs.’ Mem. at 13-14) (citing cases). Finally, they complain that the absence of a specific claim impedes their ability to determine the applicable law, suggesting, by way of example, that the law governing unjust enrichment claims in New York and New Jersey is inconsistent. (Id. at 14). A party generally is not entitled to summary judgment on a claim that it has failed to include in its pleadings. See Free v. Bland, 369 U.S. 663, 670-71, 82 S.Ct. 1089, 8 L.Ed.2d 180 (1962) (court below could not properly have decided issue of fraud on summary judgment in the absence of any “direct allegation of fraud in the counterclaim”). Accordingly, if the Commission were seeking to bring a claim against Owen and the Relief Defendants, such as an unjust enrichment claim, they would be entitled to have that claim separately delineated in the Commission’s Amended Complaint. See Fed.R.Civ.P. 8(a)(2) (pleading shall contain “a short and plain statement of the claim showing that the pleader is entitled to relief’); see also Robbins v. Banner Inds., 285 F.Supp. 758, 760 (S.D.N.Y.1966) (notice pleading requires “averment of a single set of facts” accompanied by “separate counts” setting forth the pleader’s legal theories for recovery). Here, however, the Relief Defendants are joined solely because they were limited partners in Aragon, which distributed the proceeds of Amir’s illegal trading to them in approximately May 2005. (Compl. ¶¶ 20-21; see id. at 51 (prayer for relief)). There is no claim that the Commission could assert against Oren and the Relief Defendants with respect to the Aragon second-quarter Taro trades. Rather, the Commission simply contends that other defendants are liable under the securities laws for executing those trades on the basis of material nonpublic information. Moreover, although the Amended Complaint accuses Oren of specific acts of wrongdoing, for purposes of the Commission’s motion for partial summary judgment, Oren is not alleged to have engaged in any impropriety, and therefore stands in the shoes of the Relief Defendants. There consequently is no need for the SEC to bring a “claim” in order for the Court to reach the assets of Oren and the Relief Defendants. Rather, as the case law with respect to “nominal” or “relief’ defendants makes clear, a third party who has no legitimate claim to the proceeds of a securities law violation can be required to disgorge those ill-gotten gains to the Commission. See, e.g., Cavanagh, 155 F.3d at 136. 5. Alleged Factual Issues The last argument advanced by Oren and the Relief Defendants is that the SEC has failed to show through uncontradicted evidence that they (a) “received ill-gotten funds” from Aragon in May 2006, and (b) do not have “a legitimate claim to those funds.” (R. Defs.’ Mem. at 16-20). As noted earlier, the trading records produced by the SEC confirm that the trades that Amir executed in the Aragon account on the basis of Zvi’s improper tip regarding Taro’s second-quarter 2004 earnings performance yielded profits of $962,906. (PL’s 56.1 Stmt. ¶48; Defs.’ 56.1 Stmt. ¶ 48; D’Avino Decl. ¶ 2 & Ex. 2). Accordingly, unless Oren and the Relief Defendants are able to demonstrate some basis to claim legitimate ownership of these funds, the Commission is entitled to their disgorgement as a matter of law. The parties’ papers do not disclose the state in which the Aragon limited partnership was formed. Nevertheless, regardless of which state’s law may apply, it seems clear that Amir’s decision to execute his insider trades through such a vehicle was intended to ensure that the limited partners would not be vicariously liable for Aragon’s debts. (See Amir Dep. at 220) (“[Pjrobably the most important reason was liability. When you have a limited partnership, the limited partners can only lose what they put in.”). Indeed, that is one of the key advantages of operating as a limited liability partnership. See generally, 6 Del. C. § 15—306(c); N.J. Stat. Ann. § 42:1A-I8(c); N.Y. Partnership Law § 26(2)(b); Alan R. Bromberg & Larry E. Ribstein, Limited Liability Partnerships, the Revised Uniform Partnership Act, and the Uniform Limited Partnership Act § 3.04, at 123 (2005 ed.). By choosing to operate Aragon as a limited partnership, Amir created a situation in which any funds paid into the partnership by the limited partners would ordinarily be constituted equity contributions, not loans. See, e.g., The Commons at Lebanon v. Oakview Sec. Corp., No 91 Civ. 4189, 1993 WL 515838, at *11-12 (D.N.J. Dec. 8, 1993) (quoting Reed Rowley & David Sive, Rowley on Partnership § 53.2, at 558 (2d ed. I960)) (“To be ‘contributed’ to the limited partnership, the beneficial interest in the cash or other property must be conveyed, transferred or assigned unconditionally.”) (emphasis omitted); Kittredge v. Langley, 252 N.Y. 405, 419, 169 N.E. 626 (1930) (Contribution of a special partner, “like the capital of a corporation, and to a similar extent, is to be treated as a trust fund for the discharge of liabilities” to creditors.). In their papers opposing summary judgment, Oren and the Relief Defendants have failed to show that the money they paid to Aragon consisted of anything other than equity contributions. It follows that they are not entitled to any offset against the SEC’s claim for disgorgement of the profits that Amir illegally earned in the Aragon account which were later distributed to them. There also is no basis for the suggestion of Oren and the Relief Defendants that the SEC must trace the proceeds of Amir’s illegal trading to their individual accounts. Rather, where tainted funds have been commingled with potentially legitimate funds, the SEC is entitled to obtain disgorgement from the entire pool of funds. Furthermore, to the extent that the proceeds of Amir’s insider trading are no longer in the Aragon account, the SEC is entitled to pursue the return of an amount equal to the amount that Amir and Aragon illegally obtained. SEC v. Banner Fund Int’l, 211 F.3d 602, 617 (D.C.Cir.2000) (citing SEC v. Shapiro, 494 F.2d 1301 (2d Cir.1974)). As the District of Columbia Circuit noted in the Banner Fund case, to hold otherwise would lead to “absurd results” because a securities law violator could “spend all the proceeds of his fraudulent scheme while husbanding his other assets,” thereby insulating himself from liability. Id. Indeed, in Shapiro, a defendant who traded unlawfully on the basis of insider information was required to disgorge all of his profits even though some of them had subsequently been lost through additional trades. See 494 F.2d at 1309. The decision in Better Life, which Oren and the Relief Defendants seek to distinguish, is not to the contrary. That case arose out of a “Ponzi” or “pyramid” scheme which generated profits “through the sale of memberships and the attraction of new investors to the scheme.” 995 F.Supp. at 171. Each membership in the club cost $39 per year. Members, in turn, were eligible to participate in “wealth building projects,” the largest of which was an “advertising pool,” in which investors were falsely promised that they would double their investment in three months or less. Id. Although the sale of the memberships arguably was lawful, the advertising pool notes constituted investment contracts which were securities and therefore subject to registration under federal law. Id. at 173-74. By the time that the company ceased operations, it had collected $45 million in investments through the sale of its unregistered securities and had paid out $41 million to investors, but had only $2.7 million in its accounts, and faced more than $51.6 million in upcoming obligations to investors. Id. at 171-72. A special administrator also concluded that the company had received, at most, $117,894 from membership dues and other “legitimate” sources. Id. at 172 n. 5, 179 n. 20. After the SEC requested disgorgement, the court undertook an analysis of the extent to which certain relief defendants had contributed to the acquisition of specific assets, observing that disgorgement would be required, except to the extent that the assets had been purchased using untainted funds. The only such untainted funds, however, were the membership fees. Id. at 180-84. The court also noted that there was “no question” that any tainted funds received by a gratuitous transferee would have to be disgorged. Id. at 181-82. In addition, the court held that “when legitimate assets are commingled with illegitimate ones, such that the assets cannot be separated out, a constructive trust may extend over the entire asset pool.” Id. at 181. Oren and the Relief Defendants suggest that Better Life supports their claim that factual issues exist here because the court in that case took care to “deduct” the amount of legitimate contributions from the amounts the relief defendants were required to disgorge, despite the commingling of legitimate and illegitimate contributions in a single account. (R. Defs.’ Mem. at 20 n. 19 (citing Better Life, 995 F.Supp. at 179 n. 20)). Better Life is distinguishable, however, from the facts of this case. At the outset, the membership fees that the court deemed legitimate in Better Life did not constitute an investment. Rather, they reflected payment for other products and services, such as a “subscription to the ‘Better Life News,’ [and] a one-third discount on seminars, guidebooks, and tapes.” Better Life, 995 F.Supp. at 171. Here, by comparison, there is no question that Owen and the Relief Defendants—in particular Rivka—are gratuitous transferees who had no legal claim against the pooled funds held by Aragon prior to Amir’s decision to make disbursements to them. There consequently is no sum that they are entitled to “deduct” from any proceeds that they received from an account holding untainted funds. Additionally, the corporate defendant in Better Life maintained “at least 27 bank accounts.” Id. at 173 n. 6. It therefore was possible that the funds that the relief defendants had received might not have come from tainted or commingled sources. Here, on the other hand, the funds to which Oren and the Relief Defendants claim title unquestionably were commingled with the proceeds of illegality in a single account. Accordingly, Oren and the Relief Defendants will each be required to disgorge $192,258 to the SEC, reflecting their proportional share of the proc