Full opinion text
OPINION AND ORDER DONALD M. MIDDLEBROOKS, District Judge. THIS CAUSE comes before the Court for final disposition of the issues presented during a bench trial held from February 26, 2014 through February 28, 2014 and March 3, 2014. Plaintiff United States Commodity Futures Trading Commission (“CFTC”) alleges that Defendants violated several sections of the Commodity Exchange Act (the “Act”), 7 U.S.C. § 1 et seq., as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) and CFTC Regulations. The trial in this matter focused primarily on Hunter Wise, Mr. Jager, and Mr. Martin, whom the CFTC asserts led a commodities scheme that involved misrepresenting the nature of precious metals transactions with retail customers and that resulted in losses totaling millions of dollars. This Opinion constitutes the Court’s findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a). All proposed findings of fact and conclusions of law inconsistent with those set forth herein are rejected. I. FACTUAL BACKGROUND Hunter Wise “investors are not players in the casino, instead they own the casino.... Put another way, our investors are not betting on the horses; we own the race track [sic]. The point is that we control the process, and stand to make money no matter where the markets shift.” E-mail from Jager to Pandora Pang (June 1, 2008) (CFTC Ex. 180 at 1). This statement embodies Mr. Jager and Mr. Martin’s intentions, their understanding of what Hunter Wise stood for, and how they, and Hunter Wise investors, profited on the backs of approximately 3,200 retail customers who lost over $52 million from July 16, 2011 through February 25, 2013. In their minds, they unreasonably believed that the house always wins. A. The Casino — Its Owners and Its Dealers Mr. Jager and Mr. Martin’s “casino” was a well-planned and executed scheme dealing with financed, off-exchange commodities transactions that they orchestrated using retail customers, the Dealer Defendants, non-party dealers, and metals Suppliers. Hunter Wise’s business model revolved around the supposed buying and selling of precious metals, including gold, silver, platinum, palladium, and copper. Hunter Wise claimed to purchase and sell these precious metals from several Suppliers. Hunter Wise was originally a California limited liability company started in July 2007, but it has been a registered Nevada limited liability company since October 2010. It maintains business addresses in Las Vegas, Nevada and Irvine, California. Mr. Martin is the registered agent. He and Mr. Jager are managers and members of Hunter Wise Commodities. Hunter Wise Commodities is the sole member of both Hunter Wise Credit, LLC and Hunter Wise Trading, LLC. Hunter Wise Commodities, Hunter Wise Credit, and Hunter Wise Trading all share the same business address in Las Vegas and the same mailing address in Irvine. Hunter Wise Services also shares the Irvine mailing address. Mr. Martin and Mr. Jager are the sole members and managers of Hunter Wise Services, LLC and are the Chief Operating Officer and Chief Executive Officer of Hunter Wise Services, respectively. Both Mr. Martin and Mr. Jager testified at trial. Mr. Martin has thirty-five years of experience in the precious metals industry. His precious metals experience includes working at Monex Precious Metals, formerly Pacific Coast Coin Exchange, Uni-met Credit Corporation, where he was in charge of business development for the buying, selling, and financing of precious metals. Mr. Martin founded and was president of Capital Asset, which was in the business of buying, selling, and financing commodities transactions through a network of dealers. .The dealers would find customers and send them to Capital Asset. An outside investor eventually terminated him from that company. Capital Asset was his last venture in commodities until 2006, when he and Mr. Jager decided to develop the business plan for Hunter Wise. Mr. Jager has experience in the securities market as well. Prior to working for Hunter Wise Commodities, Mr. Jager ran, and continues to run, Hunter Wise Securities, a securities firm that is registered by the Financial Industry Regulatory Authority. Mr. Jager put in the seed capital for Hunter Wise and he was responsible for raising the equity capital for Hunter Wise. Although he had no prior experience in the precious metals industry, Mr. Jager was crucial to Hunter Wise’s success because he provided important contacts and determined the strategic direction of the corporation, all in partnership with Mr. Martin. In addition, two other key employees testified during the trial: Sylvia Williams and Steve Fitch. Ms. Williams was Hunter Wise’s Director of Operations. She reported directly to Mr. Martin. Mr. Fitch was responsible for interfacing with the dealers. He offered dealer training and knew what services Hunter Wise offered to the dealers. According to Hunter Wise’s records, Hunter Wise received retail customers from over 110 dealers. Summary Exhibih-Hunter Wise Dealer Loss Reports (with Customer Names) by Dealer (July 2011-present), CFTC Ex. 67. Both employees testified to Hunter Wise’s operations in the commodities industry. On December 5, 2012, the CFTC filed the Complaint (DE 1) in the instant action, alleging thirteen Counts against Defendants for Dodd-Frank violations. The CFTC seeks injunctive and equitable relief and penalties under the Act. On December 6, 2012, the CFTC filed a Motion for Preliminary Injunction (DE 4) seeking to enjoin the Defendants from offering and executing illegal retail commodity transactions. On February 22, 2013, after the Court held a hearing on the Motion for Preliminary Injunction, the Court issued an Order Temporarily Appointing Special Corporate Monitor. (DE 77). The Court issued an Order on Plaintiffs Motion for Preliminary Injunction (DE 78) on February 26, 2013, finding that the CFTC has jurisdiction over the commodities transactions at issue in the instant matter and was entitled to a preliminary injunction and other equitable relief. The Court also reaffirmed the Special Monitor’s authority as it relates to the corporate Defendants. (See DE 78. at 33-37). The Court entered an Order on the Parties’ Motions for Summary Judgment on February 19, 2014. (DE 281). In the February 19, 2014 Order, the Court granted summary judgment in favor of the CFTC and against the Hunter Wise Defendants as to Count One of the Complaint, violations of Section 4(a) of the Act: illegal, off-exchange transactions; and Count Twelve of the Complaint, violations of Section 4d of the Act for failure to register. Therefore, the Court need only address Count Two, violations of Section of the Act by cheating, defrauding, or attempting to cheat or defraud retail customers in connection with retail commodities transactions; Count Three, violations of Section 6(c)(1) of the Act and Regulation 180.1 by employing a scheme or artifice to defraud in connection with contracts of sale of commodities; and Count Thirteen, aiding and abetting under Section 13(a) of the Act, 7 U.S.C. § 13c(a). The CFTC alleges that Mr. Martin and Mr. Jager developed a scheme using Hunter Wise’s corporate web to defraud over 3,200 retail customers and resulted in the retail customers losing over $52 million from July 16, 2011 through February 25, 2013. B. The Casino’s Operations Hunter Wise’s scheme was a multi-level model. First, the Dealer Defendants would contact and solicit novice and amateur investors to enter into financed commodities transactions using Hunter Wise’s documents and training material to guide them. Next, the dealers would send the retail customers’ funds to Hunter Wise, who would in turn distribute the dealers’ applicable share of the fees and interest. Lastly, Hunter Wise would use the remaining funds to enter into margin trading transactions with the metals Suppliers. Hunter Wise steered and controlled every aspect of this process. (1) The Retail Customers’ Interactions with the Dealer Defendants and Hunter Wise Because of the Dealer Defendants’ misrepresentations, these investors, i.e., the retail customers, thought they were purchasing precious metals from the Dealer Defendants on a financed basis. For example, the Dealer Defendants’ websites, claimed that retail customers would be buying metals, but that the metals would be stored in a depository, which would require a storage fee. See, e.g., Blackstone Website, CFTC Ex. 52 at 4. The Dealer Defendants claimed that once the retail customers submitted a down payment, the retail customers would receive a loan to cover the rest of the cost of buying the metals. The retail customers were charged exorbitant interest on these purposed loans. Retail customers expected to reap the benefits of their investment in these metals commodity transactions. Hunter Wise’s own training materials, which it offered to Dealer Defendants to use on retail customers, claimed that trading in precious metals was a “medium risk investment” and that retail customers saw “over 300% return.” CFTC Ex. 112 at 7, 12. Further, the Hunter Wise-created training materials promised “physical ownership” of the metals that were liquid and would “always have value.” Id. at 31. The retail customers entered into several agreements with the Dealer Defendants-agreements that were prepared by Hunter Wise. A Customer Loan, Security & Storage Agreement provided that its purpose was to: set forth the terms under which [the dealer] will lend to Borrower, from time to time, physical commodities (the “Commodity Loans”), and sums of money to purchase physical commodities (the “Cash Advances”), including, but not limited to, delivery to a depository, costs, fees, storage, collateral, security interest, certain risks and costs associated with each loan transaction. Customer Account Agreement Template, CFTC Ex. 150 at 4 (hereinafter, “Loan Agreement”). From this Loan Agreement, the retail customers were led to believe that the interest they were paying was for the loans their dealers financed for these transactions and that metals stored on behalf of the retail customers actually existed. As part of the scheme, Hunter Wise created templates and issued documents on the Dealer Defendants’ behalf through its online database called the “portal.” Hunter Wise maintained and controlled this “portal,” which allowed dealers and retail customers to access their account and transaction information and allowed the Dealer Defendants to prepare reports on their retail customers. Hunter Wise generated the account documents that were given to retail consumers, even though they were on the Dealer Defendants’ letterhead and appeared to be from the Dealer Defendants. The documents included Trade Confirmation notices, tax forms, Notices of Transfers, and account statements. Further, Hunter Wise provided training materials and other services that the Dealer Defendants used to solicit retail customers and maintain their accounts in order to continue the scheme. See Fitch Testimony, Feb. 27-28, 2014, Mar. 3, 2014. All of these documents contained misleading statements or deceptive omissions regarding whether the retail customers actually owned precious metals. Through the portal or discussion with their dealers, the retail customers thought they were able to buy and sell metals. If their trading equity fell below a certain percentage, they would get a margin call and they would have to deposit more money into their account. If their position fell to an even lower equity percentage, part of the retail customers’ account would be liquidated until there were enough funds in the account so that the equity percentage would be over the margin call amount. Hunter Wise had the ability to impose margin calls and liquidate retail customers’ positions. (2) Hunter Wise’s Management of the Dealer Defendants It is apparent that the whole scheme would fall apart without Hunter Wise’s ever-present oversight. For example, Frank Gaudino, the owner of Lloyds Commodities, testified regarding how much he and the Dealer Defendants depended on Hunter Wise to operate the scheme. Lloyds was responsible for recruiting the dealers who solicited the retail customers for Hunter Wise. All of Lloyds’ dealers used Hunter Wise’s services. See Gaudino Testimony, Mar. 3, 2014. Lloyds served as an intermediary between Hunter Wise and the Dealer Defendants; it provided no other services to the dealers. Id. Although Lloyds would find dealers to do business with Hunter Wise, it was Hunter Wise that ran the background checks on those dealers to ensure their credibility. It was Hunter Wise that would develop the ticket number with a price for all transactions for Lloyds to relay to the dealers, and the dealers to the retail customers. It was Hunter Wise that provided the services Lloyds claimed it provided in its promotional brochures, which were identical to those claimed in Hunter Wises’ own promotional brochures. Compare Lloyds Promotional Brochure, CFTC Ex. 105 with Hunter Wise Promotional Brochure, CFTC Ex. 151. In addition, it was Hunter Wise that Lloyds depended on to purchase the metals and to provide confirmation to retail customers that the metals existed. Similar to the identical promotional brochures, Lloyds simply rebranded the contents of a Hunter Wise Newsletter that confirmed the metals inventory and sent it to its customers under Lloyds’ logo. Compare Transfer Notices, Hunter Wise Newsletter, July 20, 2011, CFTC Ex. 118 with E-mail with Lloyds Newsletter (Aug. 23, 2011) (CFTC Ex. 119). Sylvia Williams, a former employee and owner of Lloyds Asset Management and a former broker-dealer for Hunter Wise through Universal Clearing Firm S.A. and Barclay Metals, Inc., also testified about how much control Hunter Wise had over its dealers. See Williams Testimony, Feb. 27, 2014. Retail customers’ account statements were sent directly from Hunter Wise to the customers. Her Florida-based corporation, Barclay Metals, did not execute the loans it purported to offer its clients; she admitted, “We didn’t have that kind of money.” Id at 18:6-12. Instead, Barclays looked to Hunter Wise to control the lending and deal with the metals. Hunter Wise representatives, Jay Bruce Grossman, its legal counsel, and Joe De Dios, its Director of U.S. Development, confirmed that Hunter Wise “absolutely” had the metals. Id. at 13:12-14:2. Ms. Williams recalled Mr. Grossman insisting that she provide his phone number to her brokers and then to the retail customers so that he could confirm Hunter Wise’s ownership of the metals to them. Id. The Dealer Defendants sent the deposits and other funds provided by the retail customers, as well as their account information, directly to Hunter Wise or to Lloyds, who would then send it to Hunter Wise. No matter the intermediary, however, the retail customers’ funds would end up in Hunter Wise’s accounts. (3) Hunter Wise’s Transactions with the Metals Suppliers While Hunter Wise was directing its brokers and dealers to cheat the retail customers, it was also using the retail customers’ funds to execute another level of its scheme. Instead of buying precious metals on a financed basis in the retail customers’ name, as they were told and as they agreed to, Hunter Wise took the customers’ money, provided the Dealer Defendants with their share, and bought their own precious metals on a financed basis from the Suppliers. These margined trading transactions allowed Hunter Wise to offset its risk and use its downstream clients’ money to do so. The agreements Hunter Wise entered into with the Suppliers and their representatives made it clear that Hunter Wise did not in fact own the metals in these margin trading accounts. Delivery of the metals on the retail customers’ behalf, whether deferred or not, did not occur. See Fitch Testimony, Feb. 28, 2014. Hunter Wise claims that it owned the metals in the Suppliers’ possession, but, in actuality, the evidence shows that Hunter Wise owned an interest in metals and was subject to a margin call, just like its retail customers. Mr. Martin and Mr. Jager tried to compare its margin trading activity to a mortgage. However, with a mortgage an individual receives ownership and actual delivery occurs. A bank may foreclose on a home only if the individual stops paying. Here, transfer of ownership and actual delivery of the metals never occurred. If Hunter Wise’s accounts fell below a certain equity level, Hunter Wise would have to invest more money or risk losing it all. There was no transfer of ownership to the downstream clients. Paper confirmations without true ownership, and the risk of losing their investments if margin calls occurred, made the transactions Hunter Wise offered entirely different from mortgages. C. The Deceived Patrons-The Retail Customers It seems that patrons of Las Vegas casinos would fare better than the retail customers who were caught up in Hunter Wise’s scheme. While Hunter Wise was celebrating its gains, over 90% of the retail customers in the scheme lost money between July 16, 2011 and February 25, 2013. Hunter Wise, Lloyds, and the Dealer Defendants neither purchased precious metals on the retail customers’ behalf, disbursed loan funds to finance the portion of the purchase price remaining, nor delivered metals to the retail customers. Yet, the retail customers paid fees and interest on the mistaken belief that the Defendants had done all these things for the retail customers’ benefit. Victims of the scheme, Hunter Wise’s downstream clients, testified to losing thousands of dollars of their life savings. For example, Dagmar McElroy testified during her deposition that her USCT dealer, “Mr. Lepore,” informed her that she would not be charged any fees, aside from an initial 10% charge, and that the silver she was purchasing would be stored in a facility in her name. McElroy Depo. at 9:10-10:1. Ms. McElroy invested $28,000.00 in silver, gold, and palladium. Although she had access to her online account, Ms. McElroy explained that the statements were confusing and that it was easier to speak with her broker about the status of her metals. Never did her broker inform her about her losses. Ms. McElroy checked her account in February 2012, and she testified to being “absolutely floored” that she was charged over $15,000.00 in commission fees and over $900 in interest. Id. at 27:22-25. After demanding that her account be closed, Ms. McElroy received a check for only $3,457.87, which amounted to $24,542.13 in losses. Another victim, John Wimberly, stated his dismay at the magnitude of his losses and his frustration with Newbridge. In a certified letter addressed to the “New-bridge Alliance Bookkeeping Dept.” and dated February 23, 2012, Mr. Wimberly wrote: Apparently, the principals [sic] of leverage were never made clear to me. I invested twenty[-]eight thousand dollars. At the end, I should have been in control of eleven hundred fifty ounces of silver valued at $33.40 per ounce. That equals thirty[-]eight thousand four hundred ten dollars. Now when I close out my account, you are sending me a hand written [sic] check for eight thousand four hundred eleven dollars and sixty[-]five cents. I am returning this check. I have no intention of cashing this (or any other check) without a written, detailed explanation of where nineteen thousand five hundred eighty[-]eight dollars and thirty[-]five cents of my money went. Letter from Wimberly to Newbridge (Feb. 23, 2Q12) (CFTC Ex. 36). Mr. Wimberly, an unsophisticated investor who receives Social Security checks and a VA pension, .depended on Newbridge dealer Clifford Cheek to direct him toward successful investments. See Wimberly Testimony, Feb. 26, 2014. While there were risks in investing in silver, Mr. Cheek convinced him that silver was undervalued and would only go up. Mr. Wimberly believed he would be making money by buying metals through Newbridge, as Mr. Cheek promised. Unfortunately, that was not the case. Mr. Fitch testified that it would be “odd” for a dealer to disappear, see Fitch Testimony, Feb. 28, 2014, yet that is exactly what happened when some of the victims sought explanations about their losses and the return of their money from dealers. William Metzger, a retiree of the real estate business, testified to receiving a “Position Reconciliation” statement from the Delaware Depository Service Company (“DDSC”) dated September 14, 2011 that stated, “Hunter Wise Services, LLC’S [sic] records reflect that as of 9/14/2011 your current position(s) with C.D. Hopkins Metals Division are” a purchase of thirty ounces of gold. CFTC Ex. 44. Based on information Hunter Wise provided, Mr. Metzger was the “beneficial owner of gold.” Id. Yet Mr. Metzger never received the gold or silver he supposedly owned. In December of 2012, when Mr. Metzger asked Blackstone dealer Mukarram Mawjood to deliver his metals, Mr. Mawjood talked him out of that request, even though Mr. Metzger had already lost approximately $7,000 of the $20,000 he had invested. Mr. Metzger was convinced by Mr. Mawjood that there was money to be made in these transactions, and gave Mr. Mawjood sixty more days to turn the investment around. At the end of the sixty days, Mr. Maw-jood was nowhere to be found. Mr. Metz-ger called and left him messages, but he did not return Mr. Metzger’s calls. After a few weeks, Mr. Metzger learned Mr. Mawjood’s voice mailbox was full and he never spoke to Mr. Mawjood again. With no metals in his name, the last statement he received listed his balance at $7,975.66, considerably less than the $20,000 he had invested. Metzger Blackstone Account Statement (Jan. 2013) (CFTC Ex. 41 at 9). Hunter Wise provided the tools for the Dealer Defendants to misrepresent the type of transaction into which the retail customers were entering. From training manuals, scripts, and videos to documents confirming the existence of metals on their behalf, Hunter Wise controlled every aspect of the downstream client-deception, yet it did not disclose its involvement to the customers. Furthermore, it used the retail customers’ funds to purchase margin trading accounts that did not guarantee the existence of the commodities. Hunter Wise knew there were no metals in its possession, knew no loans existed though it charged interest, and knew there was no actual delivery of the metals within the twenty-eight day period. In order to make a bigger profit, Hunter Wise willingly defrauded its customers. D. Dodd-Frank Warnings from Hunter Wise’s Counsel As Dodd-Frank neared implementation, Hunter Wise sought ways of continuing to defraud retail customers even though Hunter Wise’s illegal operations would soon be under the CFTC’s jurisdiction. Hunter Wise hired several attorneys to advise it on its scheme and on the implications of Dodd-Frank. During the relevant period, ’Hunter Wise’s former counsel included John Giovannone (“Giovannone”) formerly of Greenberg Traurig; Timothy Carey (“Carey”) of Winston and Strawn, and formerly of Dewey & LeBoeuf;. and . Jay Bruce Grossman (“Grossman”) of J.B. Grossman PA' or the former firm Gross-man Greenberg. Prior to and after Dodd-Frank became effective, Hunter Wise’s counsel explained to Mr. Jager and Mr. Martin the serious legal issues associated with Hunter Wise’s operations. While Mr. Giovannone was more adamant about Hunter Wise, Mr. Jager, and Mr. Martin’s civil and criminal liability, Mr. Carey, and even Mr. Grossman, indicated that Hunter Wise documents and actions would violate Dodd-Frank. (1) Mr. Giovannone’s Doddr-Frank Warnings As the July 16, 2011 date for Dodd-Frank to become effective approached, Mr. Martin and Mr. Jager received strong warnings from Mr. Giovannone regarding Dodd-Frank’s impact on Hunter Wise. For example, on June 24, 2011, Mr. John Giovannone sent an e-mail to Mr. Martin and Mr. Jager with clear and concise recommendations regarding their scheme: 1. Hunter Wise should stop accepting new purchase orders on or before close of business on [Friday,] July 15, 2011. I think the odds are against Hunter Wise being able to successfully defend a CFTC enforcement action attacking its current method of doing business under Sections 4(a) and 4(b) of the CE Act. 2. You should consider stopping acceptance of new purchase orders now and giving your customers notice that they will have to to [sic] liquidate their existing positions before July 15 or you will liquidate their positions on that date. This is the safe and most conservative approach. 3. In the alternative, you may wish to permit your customers to maintain their current positions until they choose to liquidate them. However, I cannot at this time predict whether the CFTC will consider that a breach of the CE Act or not. 4. If Ed was in fact successful in getting Standard Bank to agree to provide you with the financing you require to effect substituted delivery within 28 days of sale, we should rush to get that put into place before July 18. Even then, there is still the question of whether the CFTC would permit you to maintain your current customer positions after July 15 because they will not have featured delivery within the required 28 days. E-mail from Giovannone to .Jager and Martin (June 24, 2011) (CFTC Ex. 187 at 3). Mr. Giovannone’s analysis included his belief that: [T]he CFTC plans to bring a series of enforcement actions as early as [Monday,] July 18 against every company in the precious metals industry which continues to offer precious metals for sale on a margined or financed basis on that date unless delivery is made, at least on a substituted basis to a depository which issues the equivalent of an non-negotiable warehouse receipt to the ultimate customer, within 28 days of the sale. Id. at 2. Thus, Mr. Giovannone raised the red flag regarding the impact Dodd-Frank would have on Hunter Wise. Under the Dodd-Frank amendments to the Act, Hunter Wise would be brought under the CFTC’s jurisdiction and would risk a suit brought by the CFTC. Hunter Wise was not actually delivering metals to retail customers and it was not providing non-negotiable warehouse receipts to retail customers within twenty-eight days, as Dodd-Frank required. Mr. Giovannone’s recommendations were unequivocal: Hunter Wise had to shut down or change its operations by July 15, 2011, if not before, in order to avoid liability. Although Mr. Giovannone’s recommendations were unambiguous, Mr. Martin sent an e-mail that same day asking, “Am I correct that John is essentially suggesting that we close the company?” Id. at 1. Mr. Jager’s response confirmed he and Mr. Martin understood Hunter Wise counsel’s legal advice by stating, “That, in my opinion, as the purveyor of the worst case scenario, was essentially his opinion.” Id. Mr. Martin and Mr. Jager understood Mr. Giovannone’s statements that "the Dodd-Frank enforcement authority jeopardized Hunter Wise’s business activities. In fact, they recognized they could no longer continue their scheme. Yet, when Mr. Giovannone sent an email to Mr. Martin and Mr. Jager about three weeks later seeking to determine whether they had implemented any of his recommendations, he learned that very little had changed. See E-mail from Giovan-none to Martin (July 12, 2011) (CFTC Ex. 169 at 5). On July 12, 2011, as opposed to heeding Mr. Giovannone’s warnings, Mr. Martin stated that he and Mr. Jager would refuse to close- down the company if they were unable to reach a deal with a United States depository to receive actual delivery of metals within the twenty-eight day period pursuant to Dodd-Frank. In response to Mr. Martin’s statement that they were willing to violate the law instead of shutting Hunter Wise down, Mr. Giovannone was even more adamant about his analysis: “If you cannot be sure that you can get delivery in place within the 28 day period, i.e., by August 15, you should shut down until you are. You could personally be guilty of a felony!” Id. That same day, after reviewing Mr. Giovannone’s warnings about the potential for criminal charges being brought against them for their actions, Mr. Jager sent an e-mail to Mr. Martin stating that on Friday, July, 15, 2011, “we decide if we shut down the entire company, or as John [Giovannone] says[,] ‘we risk it[.]”’ Email from Jager to Martin (July 12, 2011) (CFTC Ex. 189 at 1). Mr. Jager was keenly aware of the choices available to them and the consequences of continuing to operate. Perhaps even more aware of the consequences was Mr. Martin, who wrote in an e-mail to Mr. Jager, “With any luck we will have adjoining cells.” Id. (2) Mr. Carey and Mr. Grossman’s Advice Mr. Giovannone was not alone in advising Mr. Jager and Mr. Martin about Hunt-. er Wise’s legal issues. Mr. Carey and Mr. Grossman’s discussions with Mr. Jager and Mr. Martin also provided ample reasons why Hunter Wise’s operations and business plan would be illegal once Dodd-Frank came into effect. For example, Mr. Carey testified that towards the beginning of his representation, which began in May 2011, he informed Mr. Martin and Mr. Jager that Hunter Wise’s agreements with the dealers were troublesome and inconsistent with Hunter Wise’s actual practices. See Carey Depo. at 170: 14-17. The agreements, which included the trading agreements, the loan agreements, and administrative service agreements, did not describe accurately the way Hunter Wise transacted its business, but Hunter Wise nevertheless continued to use them and share them with the dealers, who, in turn, provided them to the retail customers. Id. at 18-24. Mr. Carey advised Mr. Martin that he did not understand why Mr. Martin believed Hunter Wise had stored metals with each of the Suppliers “given what seemed to be the book entry obligations as opposed to something [he] could hold in [his] hand.” Id. at 142:11-17. In an e-mail to Mr. Jager, on August 3, 2011, Mr. Carey advised him about a discussion Mr. Carey had had with Mr. Martin and noted that “getting the notes from the [Suppliers] from whom [Mr. Jager] purchase[d] that there [was] metal behind their sales” would confirm that they actually had metal stored for Hunter Wise’s retail customers. Instead of obtaining “notes” as Mr. Carey advised, Mr. Martin and Mr. Jager had DDSC issue Position Reconciliation forms to retail customers that only “confirm[ed] ... that the products exist[ed] and that on the books of your Collateral Manager, Hunter Wise Services, LLC, your client, [sic] is identified as the beneficial owner of that collateral.” Transfer Notices, Hunter Wise Newsletter, July 20, 2011, CFTC Ex. 118. The DDSC’s Position Reconciliation forms troubled Mr. Carey. He advised, “it would be a good idea that if you’re going to confirm that some amount of physical metal occurs that someone is doing more than writing that on a piece of paper and has some basis on which to make the statement.” Carey Depo. at 152:12-21. Mr. Carey questioned the Position Reconciliation notice’s language and Mr. Jager and Mr. Martin’s decision to have DDSC issue them in light of the fact that neither DDSC, nor anyone else for that matter, had verified the existence of the metals. Hunter Wise’s other counsel, Mr. Gross-man, understood that Hunter Wise’s scheme did not result in Hunter Wise actually having physical inventory and he advised Mr. Martin and Mr. Jager as such; it was his belief that there was “no metal at the end of the rainbow.” Taped call between Grossman and Gaudino (July 21, 2011 at 3:24 p.m.) (CFTC Ex. 225). In July 2011, Mr. Grossman stated that he had explained to Mr. Martin that the metals did not exist; Hunter Wise merely had offset hedging. Id. In regards to the Transfer of Commodity form Hunter Wise sent out to the retail customers, Mr. Grossman explained that the form “lays out exactly what is being held, how and for whom. It nowhere says that HW and any of HW’s customer dealers is (though they may , be) holding any physical product that is required to meet obligations to HW’s dealer customers or ultimately the retail customer.” E-mail from Grossman to Martin (July 24, 2011) (CFTC Ex. 238). Mr. Grossman goes on to advise his clients, [Tjhere is a marked difference between explaining how Hunter Wise trades the derivative and physical markets to provide an assured ability to meet any and all customer trade claims no matter where a particular precious and industrial market may trend and, on the other hand providing assurances to your customer dealer’s retail clients that you are holding ‘physical inventory’ which may be taken to mean specific inventory. Id. at 2. Months later, Mr. Grossman acknowledged that stating Hunter Wise had metals stored on its behalf would “almost [be] an untruth,” even though Mr. Martin sought to make such a declaration. Taped Call Between Grossman and Gaudino (Nov. 21, 2011 at 11:45 a.m.) (CFTC Ex. 227). Ultimately, Mr. Martin and Mr. Jager chose to ignore Mr. Giovannone’s warnings, as well as Mr. Carey and Mr. Gross-mans’ advice regarding Dodd-Frank’s requirements and Hunter Wise’s misleading statements and deceptive omissions. Hunter Wise continued operating after July 16, 2011. E. Prior Knowledge of the Scheme’s Regulatory Implications (1) Not His First Rodeo-Mr. Martin’s Consent Order As Mr. Giovannone was providing legal advice to Mr. Martin and Mr. Jager regarding the Dodd-Frank issues that existed at Hunter Wise, Mr. Martin seemed to believe that his thirty-five year history in the precious metals industry made him better suited to analyze Dodd-Frank’s implications. In response to Mr. Giovan-none’s e-mail asking Mr. Jager and Mr. Martin whether they had implemented the recommendations he had made regarding Hunter Wise’s operations, Mr. Martin stated, “Been doing this since 1977. This is not my first rodeo.” E-mail from Martin to Giovannone (July 13, 2011) (CFTC Ex. 169 at 1). Indeed, it was not. Mr. Martin was an executive at Unimet when, due to the actions of Mr. Martin and other representatives, the Federal Trade Commission (“FTC”) commenced an action in the United States District Court, Central District of California, against Unimet Credit Corporation, Unimet Trading Corporation, and four individual defendants, including Mr. Martin. See Compl., CFTC Ex. 158, FTC v. Unimet Credit Corp., No. 92-5759 (C.D.Cal., Sept. 23, 1992). In Unimet, Mr. Martin and two other defendants stipulated to the entry of a Consent Order. See Consent Order as to Defendants E. Keith Owens, Ed Martin, and Ed Myers, CFTC Ex. 159, Unimet, No. 92-5759 (C.D.Cal., Dec. 20, 1994). The Consent Order enjoined Mr. Martin from “providing substantial assistance to any commodities retailer whom [he knows] is failing to disclose any material fact, including[,] but not limited to[,] the true amount of commissions and fees.” Id. at 6. The Consent Order permanently restrained Mr. Martin from misrepresenting the “degree of risk associated with an investment in commodities; the likelihood that a consumer would earn a profit on an investment”; and the amount of fees or any other material fact objectively material to a consumer’s decision to invest in a commodity or other investment offering. Id. at 5. Mr. Martin received and agreed to abide by the Consent Order, which detailed what would constitute fraud and explained what he was permanently enjoined from doing. Here, Mr. Martin and Mr. Jager developed the Hunter Wise scheme to insulate them from retail customers’ claims. Mr. Martin and Mr. Jager seemed to believe that if they were not directly soliciting clients, even as they were committing fraud, they could not be liable for their losses. They intended to hide behind a cloak of anonymity as they were pulling the strings. (2) Regulatory Problems that Implicated Hunter Wise Aside from Mr. Martin’s personal experience with regulatory agencies regarding fraud in precious metals transactions, Mr. Martin and Mr. Jager were made aware of the issues with the Hunter Wise scheme through lawsuits that directly, or by implication, related to Hunter Wise’s actions in dealer fraud. (a) Article Regarding Commodities Fraud Cases in Florida Mr. Martin and Mr. Jager were made aware of the CFTC’s expanded jurisdiction as early as March 2011. On March 23, 2011, Chris Jain, an attorney, forwarded to Mr. Martin and Mr. Jager an article that discussed the many victims who were taken advantage of by unscrupulous brokers and dealers. Jon Burstein, Little Regulation, Lots of Risk Can Leave Gold Investors on Shaky Ground, Sun Sentinel, March 19, 2011, CFTC Ex. 168 (hereinafter, “Little Regulation”). Although much of the article focused on the fact that precious metal businesses and transactions conducted in Florida have gone unregulated, the author advised readers of the pending féderal regulatory changes associated with Dodd-Frank. Immediately following the discussion of the criminal history of two individuals who solicited retail customers in Hunter Wise’s scheme, see Martin Depo. Feb. 26, 2014, the article explained: More federal oversight of the gold firms appears to be on the horizon when a new law takes effect in July. Companies that sell precious metals in leveraged deals will have to deliver the gold within 28 days to the customer or a location where the metals are easily accessible so the buyer can verify that they actually exist. If the gold isn’t physically delivered, the transaction will fall under CFTC jurisdiction, and companies and their brokers will need to be federally licensed to work in commodities. Little Regulation, at 5. Mr. Martin and Mr. Jager received this explanation of Dodd-Frank’s implications more than four months before its implementation. (b) Federal Trade Commission’s Action Against 20/20 In April 2011, the CFTC filed an action against 20/20 Trading Company, Inc., 20/20 Precious Metals, Inc., and its officers (collectively, “20/20”) in the United States District Court for the Central District of Cali- , fornia. See 20/20 Compl. CFTC Ex. 182, CFTC v. 20/20, No. 11-000643 (CD Cal. Apr. 26, 2011). The Complaint alleged that from January 2006 through the filing of the action, in April of 2011, 20/20 “had cheated and defrauded customers and prospective customers by lying about the likelihood of profiting, and concealing the near certainty of substantial losses, when investing with” 20/20. Id. at 2 ¶ 1. The 20/20 Complaint sought to hold 20/20 liable for defrauding retail customers out of at least $4 million in losses. Mr. Giovannone mentioned the 20/20 Complaint in an e-mail to Mr. Martin and Mr. Jager on May 3, 2011, claiming that it was “imperative” that they speak with him. See E-mail from Giovannone to Martin and Jager (May 3, 2011) (CFTC 182 at 1). On May 13, 2011, he forwarded the 20/20 Complaint to Mr. Martin and Mr. Jager and directed that they read paragraphs 56 and 60 of the Complaint in particular. Paragraph 56 reads, in pertinent part, “When a customer sends 20/20 Metals funds to purchase physical metals, 20/20 Metals wires those funds to a third party, [Hunter Wise,] and uses them to enter into leveraged transactions in the name of 20/20 Metals.” 20/20 Compl., CFTC Ex. 182 at 21 ¶ 56. Paragraph 60 states, Additionally, 20/20 Metals misrepresents how customer funds are being used. Specifically, 20/20 Metals misrepresents that it purchases physical metals, that title has passed to the customer, and that the metal is stored in a secure depository. Since 20/20 Metals only has an account with [Hunter Wise] in which it enters into leveraged transactions in its own name, not the name of the customer, the customer has no right to any metals and title to any metals that might be purchased does not pass to the customer.” Id. at 22 ¶ 60. Mr. Carey testified that Hunter Wise initially retained him and his former law firm, Dewey & LeBoeuf, in May of 2011 because of the 20/20 action. See Carey Depo., at 19:7-12. Hunter Wise’s concerns regarding the implications of the 20/20 action seemed to increase even further after the court-appointed Receiver in the 20/20 matter filed a Report with the trial court. The Report stated that after investigating and interviewing relevant individuals, he was not “able to obtain and examine the evidence to verify the existence, ownership^] and safekeeping of the precious metals purchased and held in the customer’s accounts.” Id. at 27:18-22; see also E-mail from Martin to Carey (May 23, 2011) (CFTC Ex. 183 at 1) (“[T]he Receiver, after three weeks of trying, has been unable to find evidence that product exists.”). Upon learning of the Receiver’s findings, Mr. Jager sent an e-mail to Mr. Martin, Mr. Carey, and Mr. Grossman relaying his concern for Hunter Wise’s future. Mr. Jager wrote, “This is really crushing news[,] which is angering on many levels. That would seem to indicate that the next shoe to drop is with [Hunter Wise, if] they indeed do believe there is no product.” Id. (c) Florida Office of Financial Regulation’s Action against Midas A month after the FTC filed the 20/20 Complaint, in late June 2011, the Florida Office of Financial Regulation (“FOFR”) requested documents from Hunter Wise in relation to its criminal investigation of Midas Asset Management, another Hunter Wise dealer. Mr. Grossman explained that a FOFR representative, “Ms. Grom-nicki,” asked, ‘Where is the depository facility where the precious metal is stored.” E-mail from Grossman to Martin (July 5, 2011) (CFTC Ex. 234 at 1). According to Mr. Grossman, Ms. Gromnicki had posed that important question to him on numerous occasions. Mr. Martin responded to Mr. Grossman’s e-mail that same day, writing, “I believe our response to the question of where the metal is stored needs to be carefully thought out.” Id. F. Betting the House Mr. Martin and Mr. Jager bragged about owning the casino, controlling the process, and the ability to “make money no matter where the markets shift.” E-mail from Jager to Pandora Pang (June 1, 2008) (CFTC Ex. 180 at 1). They received legal advice and warnings regarding Hunter Wise’s Dodd-Frank violations and fraudulent conduct. Yet, they purposefully decided to risk criminal and civil liability by continuing Hunter Wise’s fraudulent and illegal operations. Approximately 3,200 retail customers lost over $52 million because of Hunter Wise’s scheme. The house cannot win when, in violation of the law, the game is rigged. II. STATUTORY BACKGROUND Section 742 of the Dodd-Frank Act expanded the scope of the CFTC’s jurisdiction to include financed commodity transactions with consumers, thereby granting the CFTC the power and authority to ensure that transactions involving commodities were to be executed on an exchange and subjecting such transactions to the anti-fraud provisions of the Act and Commission Regulations. Count Two of the Complaint alleges that Hunter Wise, Mr. Martin, and Mr. Jager committed fraud in violation of Section 4b of the Commodity Exchange Act. Section 4b(a)(2) of the Act states, in relevant part: (a) Unlawful actions It shall be unlawful- (2) for any person, in or in connection with any order to make, or the making of, any contract of sale of any commodity for future delivery, or swap, that is made, or to be made, for or on behalf of, or with, any other person, other than on or subject to the rules of a designated contract market (A) to cheat or defraud or attempt to cheat or defraud the other person; (B) willfully to make or cause to be made to the other person any false report or statement or willfully to enter or cause to be entered for the other person any false record; [or] (C) willfully to deceive or attempt to deceive the other person by any means whatsoever in regard to any order or contract or the disposition or execution of any order or contract, or in regard to any act of agency performed, with respect to any order or contract for or, in the case of paragraph (2), with the other person[.] 7 U.S.C. § 6b(a)(2). Count Three alleges that Hunter Wise, Mr. Martin, and Mr. Jager committed fraud under Section 6(c)(1) of the Act and Commission Regulation 180.1. Section 6(c)(1) and Commission Regulation 180.1 were meant to “augment the [CFTC’s] existing authority to prohibit fraud and manipulation.” Prohibition on the Employment, or Attempted Employment, of Manipulative and Deceptive Devices and Prohibition on Price Manipulation, 76 Fed.Reg. 41398, 41401 (July 14, 2011). Section 6(c) of the Act is codified in 7 U.S.C. § 9(1), and provides, in relevant part: It shall be unlawful for any person, directly or indirectly, to use or employ, or attempt to use or employ, in connection with ... a contract of sale of any commodity in interstate commerce ... any manipulative or deceptive device or contrivance, in contravention of such rules and regulations as the Commission shall promulgate. 7 U.S.C. § 9(1). Commission Regulation 180.1, states, in pertinent part: (a) It shall be unlawful for any person, directly or indirectly, in connection with any ... contract of sale of any commodity in interstate commerce ... to intentionally or recklessly: (1) Use or employ, or attempt to use or employ, any manipulative device, scheme, or artifice to defraud; (2) Make, or attempt to make, any untrue or misleading statement of a material fact or to omit to state a material fact necessary in order to make the statements made not untrue or misleading; [or] (3)Engage, or attempt to engage, in any act, practice, or course of business, which operates or would operate as a fraud or deceit upon any person. 17 C.F.R. § 180.1. Count Thirteen of the Complaint claims that Hunter Wise, Mr. Martin, and Mr. Jager aided and abetted the violations of the Act that were committed by other defendants in the instant matter. Section 13(a) of the Act states, in pertinent part: Any person who commits, or who willfully aids, abets, counsels, commands, induces, or procures the commission of, a violation of any of the provisions of this chapter, or any of the rules, regulations, or orders issued pursuant to this chapter, or who acts in combination or concert with any other person in any such violation, or who willfully causes an act to be done or omitted which if directly performed or omitted by him or another would be a violation of the provisions of this chapter or any of such rules, regulations, or orders may be held responsible for such violation as a principal. 7 U.S.C. § 13c(a). III. LEGAL ANALYSIS “The [Act] is a remedial statute that serves the crucial purpose of protecting the innocent individual investor — who may know little about the intricacies and complexities of the commodities markeUr-from being misled or deceived.” CFTC v. RJ Fitzgerald & Co., 310 F.3d 1321, 1329 (11th Cir.2002), cert. denied, 543 U.S. 1034, 125 S.Ct. 808, 160 L.Ed.2d 597 (2004). A. Section 4b of the Act-Fraud Count Two of the Complaint alleges that Hunter Wise, Mr. Martin, and Mr. Jager committed fraud in violation of Section 4b of the Commodity Exchange Act. A defendant is liable under Section 4b(a) of the Act if the CFTC demonstrates: (1) that a misrepresentation, misleading statement, or omission was made; (2) with scienter; and (3) that the misrepresentation, statement, or omission was material. Id. at 1328. Failure to establish any one of these elements is dispositive and would preclude the CFTC’s fraud claims. Id. (1) Misrepresentations, Misleading Statements, or Omissions In the face of strong evidence showing otherwise, Mr. Martin and Mr. Jager argue that Hunter Wise did not make misrepresentations or deceptive omissions. “Whether a misrepresentation has been made depends on the overall message and the common understanding of the information conveyed.” Id. (internal quotations omitted). Courts may find that when an individual drafts and distributes promotional and training material that is relayed to retail customers that claims little to no risk in commodities transactions, the individual has acted fraudulently. See Clayton Brokerage Co. v. CFTC, 794 F.2d 573, 580-81 (11th Cir.1986). In addition, claiming that a retail customer will profit from certain market trends, without advising the customer of the likelihood of that not occurring is material and deceptive. In re JCC, [1992-1994 Transfer Binder] (CCH) Comm. Fut. L. Rep. ¶ 26,080 at 41, 576 (CFTC 1984), aff'd sub nom. JCC Inc. v. CFTC, 63 F.3d 1557 (11th Cir.1995). Here, Hunter Wise misrepresented facts about the precious metals transactions it oversaw. In particular, it directly and indirectly led the retail customers to believe metals were stored on their behalf. Hunter Wise prepared and distributed documents, including account statements, Transfer of Commodities forms, and trade confirmation notices, to the retail customers confirming the existence of the metals, the loans, and the purchases. Hunter Wise failed to inform the parties that the metals it purchased were on a financed basis, it did not own the metals, and the metals, if there were any at all, were not in the retail customers’ names. Evidence demonstrating Hunter Wise’s conduct comes specifically from the Position Reconciliation statement William Metzger received from DDSC, which stated, “Hunter Wise Services, LLC’S [sic] records reflect that as of 9/14/2011 your current position(s) with C.D. Hopkins Metals Division are” a purchase of thirty ounces of gold. DDSC Position Reconciliation Statements, CFTC Ex. 44. Accordingly, as confirmed by information Hunter Wise provided, Mr. Metzger was the owner of the gold. In fact, Mr. Metzger did not own any gold since the gold did not exist; neither Hunter Wise nor his dealer bought gold in his name. Yet, Hunter Wise provided information to DDSC that misled Mr. Metzger, and others, to think they had. As to the issue of omissions, the Eleventh Circuit, in R.J. Fitzgerald, found that claiming the certainty of receiving huge profits in the precious metals industry without informing the prospective retail customers that “95 per cent of the firm’s clientele lost money in the types of investments being advertised” was an omission that was fraudulent as a matter of law. 310 F.3d at 1332. In the instant matter, Hunter Wise tracked everything that went on with the retail customers’ transactions. As Mr. Mawjood confirmed, nothing about a trade or account was official until it got to Hunter Wise. Mawjood Dep., (DE 191-1 at 56:12-20). Hunter Wise kept and managed meticulous records of all its downstream clients through the portal. Even with its knowledge of the clients’ losses, Hunter Wise never updated the training materials or promotional brochures to indicate how poorly its downstream customers were doing in these commodities transactions. It did not modify those documents even as it continued to offer the documents to the dealers for their use to solicit prospective retail customers. Hunter Wise investors, Mr. Jager, and Mr. Martin pocketed the interest Hunter Wise charged customers for loans it agreed to, but never did, provide, as well as the fees it charged for the storage of metals that did not exist. Hunter Wise did not inform its clients how it was using the funds it received. Instead of applying the funds to pay off interest on real loans or buying and storing metals, Hunter Wise used the funds to offset its obligations. The fees retail customers paid reduced their account funds greatly. Hunter Wise continued to charge interest and storage fees, even though the charges were for nonexistent services. Mr. Martin and Mr. Jager, through Hunter Wise, willfully misrepresented or made omissions about the precious metal transactions at issue in this case. In addition, based on its misleading statements and willful omissions, I find that Hunter Wise provided an “overall message” that was in violation of Sections 4b. The evidence shows that Hunter Wise misled and deceived the retail customers into entering into its precious metals scheme. (2) Scienter — “With any luck we will have adjoining cells.” To prove scienter, the CFTC must show that the “[defendant intended to defraud, manipulate, or deceive, or [that the defendant's conduct represents an extreme departure from the standards of ordinary care.” R.J. Fitzgerald, 310 F.3d at 1328. Conduct involving “highly unreasonable omissions or misrepresentations ,.. that present a danger of misleading [retail customers] which is either known to the Defendant or so obvious that [the] Defendant must have been aware of it” have been found to meet the scienter requirement. Id. (internal quotation omitted). Mr. Martin had day-to-day oversight over Hunter Wise’s operations. Mr. Jager had the authority to sign contracts for Hunter Wise, helped with the strategic planning, and provided the contacts and capital necessary to keep the business running. To argue that they believed in good faith that Hunter Wise was making loans to the dealers or retail customers, that they owned any metals, and that their documents were not fraudulent is implausible. They were too knowledgeable and too involved in the process to plead ignorance. Hunter Wise acted recklessly and intentionally to deceive and defraud the retail customers. Hunter Wise was the mastermind behind the multi-level scheme. Mr. Jager and Mr. Martin could have corrected the misrepresentations and deceptive omissions in the agreements they entered into with the dealers, the training materials it provided the dealers, and the many documents Hunter Wise sent to the retail customers, including the Position Reconciliation notices, the Transfer of Commodity forms, trade confirmations, and account statements. Hunter Wise allowed its dealers to defraud the retail customers and prospective customers they solicited for Hunter Wise’s benefit. Since Hunter Wise oversaw all transactions, Mr. Jager and Mr. Martin had the ability to inform retail customers of the misrepresentations and deceptive statements, but failed to do so. Instead, Hunter Wise continued the fraud on the customers while it reaped the benefits of their losses. (a) Hunter Wise’s Reliance Claims Mr. Jager and Mr. Martin seek to absolve themselves by claiming they reasonably relied on sources that allegedly affirmed Hunter Wise’s scheme did not fall under the CFTC’s jurisdiction because the transactions did not involve leveraged contracts or because the actual delivery exception and the line of business exception of the Act applied. They claim that they relied on: (1) Hunter Wise’s counsel; (2) the CFTC’s 1985 Interpretative Letter, Bank Activities Involving the Sale of Precious Metals, Comm. Fut. L. Rep. (CCH) ¶ 22,673 (CFTC Aug. 6, 1985) (hereinafter “1985 Interpretative Letter”); and (3) the London Bullion Market Association and the Foreign Exchange Committee’s 1994 International Bullion Master Agreement (hereinafter, “Master Agreement”). (i) The Plain Meaning of the Act is Unambiguous Before delving into their reliance claims, I first note that none of Mr. Jager and Mr. Martin’s claims can be found reasonable because the plain meaning of the statutory language is unambiguous, as the Eleventh Circuit found in Hunter Wise, 749 F.3d 967 (11th Cir.2014). In Hunter Wise, the Eleventh Circuit analyzed the Act’s wording, as well as Mr. Jager and Mr. Martin’s arguments, to reach its findings. As to the “leveraged or margined basis” or financed transaction on a similar basis language of Dodd-Frank, see 7 U.S.C. § 2(c)(2)(D)(i)(II), the Eleventh Circuit found that “leveraging refers generally to the ability to control high-value amounts of a commodity or a security with a comparatively small value of capital, known as the margin.” Hunter Wise, at 976 (noting Glossary, Commodity Future Trading Commission, http://www.cftc.gov/ ConsumerProtection/EducationCenter/ CFTCGlossary/index.htm (last visited Feb. 11, 2014)). The Eleventh Circuit stated that “Hunter Wise defined leverage similarly in a memorandum to its holding company’s potential investors; it explained its operations by describing leverage as ‘the use of a smaller amount of capital to do the work of a much larger amount.’ ” Id. (quoting Business Overview of Hunter Wise Commodities, LLC (DE 4-4 at 21)). In addition, the Eleventh Circuit found that Mr. Martin and Mr. Jager’s attempt to read a specific durational requirement and to expand the definition of a “leverage contract” under 7 U.S.C. § 23 to the Dodd-Frank amendment in § 2(c)(2)(D), “tenuous, at best.” Id. If Mr. Martin and Mr. Jager’s suggested analysis applied, then § 23 would render § 2(c)(2)(D) meaningless; Section 2(c)(2)(D) would “only give[ ] the Commission authority over what § 23 already prohibits.” Id. Lastly, even though it found the statutory text unambiguous and reviewing agency interpretation and legislative history was unnecessary, the Eleventh Circuit noted that both sources “harmonize[d]” with and “complement[ed],” respectively, its findings. As to the “actual delivery” exception, 7 U.S.C. § 2(c)(2)(D)(ii)(III)(aa), the Eleventh Circuit again applied the ordinary meaning of the term to hold that “delivery must be actual.’” Hunter Wise, at 979 (emphasis in original). The Eleventh Circuit explained, “The sequence of events contemplated by Martin and Jager — in which the electronic transfer of documents indicating control or possession effectuates delivery without physical transfer of the commodity — is by any definition constructive, rather than actual.” Id. (citing Black’s Law Dictionary 494 (9th ed.2009) (defining “constructive delivery” as “[a]n act that amounts to a transfer of title by operation of law when actual transfer is impractical or impossible”)). The Eleventh Circuit also found that other sources of analysis, including the CFTC’s own interpretation, were unnecessary “because ‘actual delivery' unambiguously excludes the constructive delivery Martin and Jager argue occurred.” Id. at 980. For the same reasons, I find that Mr. Martin and Mr. Jager’s claimed reliance on other sources to determine whether Hunter Wise’s scheme, which involved misrepresentations and deceptive omissions, violated the Act is unreasonable. The plain reading of the statute demonstrates that the CFTC has jurisdiction over Hunter Wise and that Hunter Wise committed fraud that triggered CFTC enforcement proceedings. (ii) Hunter Wise’s Counsel Mr. Martin and Mr. Jager claim that Hunter Wise’s legal counsel advised them that Hunter Wise owned and possessed metals and that the transactions it engaged in did not violate the Act. In light of all the evidence to the contrary, their purported reliance on counsel is disingenuous. In the weeks leading up to July 16, 2011, the date the Dodd-Frank amendments to the Act became enforceable, Mr. Jager and Mr. Martin received clear warnings from Hunter Wise counsel Mr. Giovannone that Hunter Wise’s operations were illegal under Dodd-Frank. Mr. Giovannone, in no uncertain terms, told Mr. Jager and Mr. Martin to shut down Hunter Wise until it complied with the Act. See E-mail from Giovannone to Jager and Martin (June 24, 2011) (CFTC Ex. 187 at 3). After learning that Mr. Martin and Mr. Jager had not acted upon the plans he had recommended to keep Hunter Wise from violating the law, he warned them that they could face criminal liability if they continued Hunter Wise’s operations. See E-mail from Martin to Giovannone (July 12/2011) (CFTC Ex. 169 at 4). Mr. Martin and Mr. Jager intentionally ignored Mr. Giovannone’s advice, and they acted recklessly in continuing to defraud the retail customers after Dodd-Frank became effective. Hunter Wise’s other counsel warned Mr. Jager and Mr. Martin that Hunter Wise’s documents regarding Hunter Wise owning and storing metals were false. See Taped Call Between Grossman and Gaudino (Nov. 21, 2011 at 11:45 a.m.) (CFTC Ex. 227). Mr. Grossman explained to Hunter Wise the difference between the arrangement it had with the metal Suppliers (i.e., margin trading accounts meant to offset Hunter Wise’s obligations to the retail