In 2009, the Securities and Exchange Commission (SEC) commenced a criminal enforcement action against Anthony Vassallo, Kenneth Kenitzer and their purported hedge fund, Equity Investment Management and Trading, Inc. (EIMT), claiming that the defendants had been running a $40 million Ponzi scheme. A receiver was appointed to marshal EIMT’s assets. In one branch of the receivership proceedings, the receiver sought disgorgement of a $2 million transfer from Veritas Investments, LLC (Veritas), a sub-fund of EIMT, to “parties in interest” Michael Callahan (Callahan) and Matthew Tucker (Tucker). Callahan and Tucker had received, respectively, $125,000 and $1.875 million from Veritas in connection with a proposed collateralized mortgage obligation (CMO) deal. Tucker and Callahan purportedly offered to arrange for Veritas to purchase Greenwich Capital CMOs for $2 million and re-sell those CMOs on the same day for $7 million. Although Veritas wired the $2 million to Tucker and Callahan, and Tucker did acquire Greenwich Capital CMOs, the trade was never completed and Tucker eventually sold the CMOs at a huge loss. The receiver sought an order forcing Tucker and Callahan to disgorge the $2 million received from Veritas. Tucker did not oppose the motion, but Callahan did, claiming that he should only be responsible for the $125,000 he actually received. The Magistrate Judge determined that Callahan knew or should have known that the CMO deal was a fraud and, consequently, was jointly and severally liable with Tucker to disgorge the full $2 million. We outline the background facts and the court’s reasoning.