In Commodity Futures Trading Commission v. Walsh (CFTC), 17 N.Y.3d 162 (2011),1 the Court of Appeals answered two certified questions by the U.S. Court of Appeals for the Second Circuit, 618 F3d 218 (2d Cir. 2010). The questions arose from lawsuits brought by the CFTC and the Securities and Exchange Commission against, inter alia, Stephen Walsh and his former spouse, Janet Schaberg. The actions were grounded in violations of the anti-fraud provisions of the Commodity Exchange Act and the Securities Exchange Act, i.e., that Walsh and his partner misappropriated as much as $554 million from investors’ funds from 1996 to 2009.
Although the agencies alleged no wrongdoing by Schaberg, they proceeded against her as a “relief defendant” seeking disgorgement of whatever proceeds had come into her possession from Walsh’s criminal enterprise by way of their marital settlement agreement. Under the agreement, Schaberg conveyed her ownership interest in jointly held real property to Walsh, only to receive ownership of other real property, valued at nearly $5 million, and $12.5 million payable over 10 years. She waived maintenance. The two certified questions were:
