[PUBLISH] IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 16-16544 ________________________

D.C. Docket No. 1:14-cv-22739-JLK U.S. COMMODITY FUTURES TRADING COMMISSION, llllllllllllllllllllllllllllllllllllllllPlaintiff - Appellee, versus SOUTHERN TRUST METALS, Inc., LORELEY OVERSEAS CORPORATION, ROBERT ESCOBIO, llllllllllllllllllllllllllllllllllllllllDefendants - Appellants. ________________________

Appeal from the United States District Court for the Southern District of Florida ________________________

(July 12, 2018)

Before JORDAN, HULL, and GILMAN, ∗ Circuit Judges.

∗ Honorable Ronald Lee Gilman, United States Circuit Judge for the Sixth Circuit, sitting by designation. Case: 16-16544 Date Filed: 07/12/2018 Page: 2 of 40

GILMAN, Circuit Judge:

After reviewing the Defendants’ Petition to Rehear, and having considered supplemental briefing by the parties, we vacate the original opinion in this case, U.S. Commodity Futures Trading Comm’n v. Southern Trust Metals, Inc., 880 F.3d 1252 (11th Cir. 2018), and issue the following opinion in its place. The Petition to Rehear is otherwise denied.

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This is a commodities-fraud case. The U.S. Commodity Futures Trading Commission (CFTC) began investigating Southern Trust Metals, Inc., Loreley Overseas Corporation, and Robert Escobio (collectively, the Defendants) in response to a customer’s complaint. That complaint also prompted the National Futures Association (NFA)—a private, self-regulatory organization for the futures industry—to open an investigation, which proceeded in tandem with the CFTC’s.

The NFA’s investigation ended in a settlement. Afterwards, the CFTC filed this lawsuit, alleging that the Defendants violated the Commodities Exchange Act (CEA) when they failed to register as futures commission merchants, transacted the purchase and sale of contracts for the future delivery of a commodity (futures) outside of a registered exchange, and promised to invest customers’ money in precious metals (metals) but instead invested the funds in so-called “off-exchange

2 Case: 16-16544 Date Filed: 07/12/2018 Page: 3 of 40

margined metals derivatives” (metals derivatives). The district court, after a bench trial, entered judgment for the CFTC on all claims.

For the reasons set forth below, we AFFIRM the judgment of the district court except as to the restitution award for the group of investors whose losses were associated solely with the registration violations. As to that portion of the restitution award, we VACATE the judgment and REMAND with instructions to consider other equitable remedies.

I. BACKGROUND A. Factual background

Escobio is the Chief Executive Officer (CEO) and largest shareholder of the Southern Trust Securities Holding Corporation (Holding Corporation). The Holding Corporation owns Loreley, a British Virgin Islands corporation, which in turn owns Southern Trust, a Florida corporation. Escobio formed Southern Trust to provide commodities investment services, and he serves as its director and CEO.

Southern Trust represented that it was able to facilitate customers’ investment in precious metals. Its website and brochure stated that customers “can take physical possession of [their] metals in New York or London.” The company’s brokers told customers much the same sto