                               In the

     United States Court of Appeals
                 For the Seventh Circuit
                     ____________________
No. 15-1442
SECURITIES AND EXCHANGE COMMISSION,
                                                   Plaintiff-Appellee,

                                  v.

FRANK J. CUSTABLE, JR., et al.,
                                                          Defendants.

APPEAL OF BRAD HARE.
                     ____________________

         Appeal from the United States District Court for the
           Northern District of Illinois, Eastern Division.
         No. 03 C 2182 — Sharon Johnson Coleman, Judge.
                     ____________________

        ARGUED JULY 8, 2015 — DECIDED JULY 28, 2015
                 ____________________

   Before POSNER, SYKES, and HAMILTON, Circuit Judges.
   POSNER, Circuit Judge. In 2003 the SEC filed a civil suit
against Frank Custable, the principal defendant in this ap-
peal and the only one we need discuss, charging him with
fraud involving “penny stocks.” The term refers to very
cheap stocks (no more than $5 per share). The typical penny-
stock fraud involves the purchase of quantities of penny
2                                                   No. 15-1442


stocks and their resale to gullible investors at inflated prices.
See generally “Penny Stock,” Wikipedia, https://en.wiki
pedia.org/wiki/Penny_stock#Regulation (visited July 24,
2015). Custable’s fraud was alleged to have yielded him at
least $4 million.
    The civil suit was interrupted by criminal proceedings
that resulted in a long prison sentence for Custable. But
eventually the civil suit resumed and in 2010 he consented to
the entry of a judgment against him that ordered him to pay
a $120,000 penalty plus $6.4 million in disgorgement of prof-
its. See 15 U.S.C. § 78u(d)(5); SEC v. Lipson, 278 F.3d 656,
662–63 (7th Cir. 2002). The penalty, imposed pursuant to 15
U.S.C. § 78u(d)(3), was to be paid to the U.S. Treasury “ex-
cept as otherwise provided in [15 U.S.C. §] 7246” and anoth-
er section not relevant here: § 78u(d)(3)(C)(i). Section 7246(a)
provides that “the amount of such civil penalty shall, on the
motion or at the direction of the [Securities and Exchange]
Commission, be added to and become part of a disgorge-
ment fund or other fund established for the benefit of the
victims of such violation.” See Official Committee of Unsecured
Creditors of WorldCom, Inc. v. SEC, 467 F.3d 73, 76 (2d Cir.
2006). The SEC is thus authorized either to remit the penalty
money (the $120,000) to the Treasury or to place it in the
same fund as the disgorged profits. It decided on the former.
   The civil judgment permitted the Commission to submit
to the district court for approval a disbursement plan for
those profits—more precisely for so much of the profits as
could be found and seized. Deciding that locating the de-
frauded victims wouldn’t be feasible, the Commission asked
the district court to allow it to pay to the Treasury all the
disgorged profits that it had recovered (slightly more than
No. 15-1442                                                    3


$500,000—a small fraction of the total profits of $6.4 million
that the SEC would have liked to recover). The Commission
explained that distributing the funds to the victims was in-
feasible because there were so many of them, there was so
little money in the fund, and the fraud was so old—it had
begun in 2001.
    Enter the appellant, Brad Hare. Though not a party in the
district court—he did not move to intervene—he claimed to
have an interest in the fund and asked the district court to
allow him to respond to any motion to disburse money from
it. The judge quite properly refused to permit Hare, a non-
party, to participate in the litigation. But at the same time the
judge considered and rejected Hare’s argument that he was
entitled to money in the fund, and granted the SEC’s motion
to disburse the entire fund to the Treasury.
    Whether or not the SEC should have been allowed to de-
ny the victims of the fraud compensation from the fund is
actually a side issue, because Hare was not a victim. True, he
claimed to have been defrauded by Custable before 2001, but
that fraud had had nothing to do with penny stocks. Hare’s
contention was that he had gone into business with Custable
and that the latter had fraudulently diverted assets of the
business to himself. Hare had brought a separate suit against
Custable, based on the earlier fraud, which they settled in
2014 with Custable agreeing to pay Hare almost $4.5 mil-
lion—which Custable, sentenced to prison for more than 20
years, didn’t have.
    Hare appeals from the district court’s order allowing the
SEC to give the Treasury the money in the fund intended for
victims of the penny-stock fraud. As a victim of a Custable
fraud, holding a large uncollectible judgment against him,
4                                                   No. 15-1442


Hare contends that he’s a worthier recipient of assets of the
fund than the Treasury.
    There is a serious—in fact dispositive—question whether
we can hear this appeal. Hare was not a party in the district
court, and ordinarily only a party can appeal, Devlin v.
Scardelletti, 536 U.S. 1, 7 (2002); In re Bergeron, 636 F.3d 882,
883 (7th Cir. 2011); Bloom v. FDIC, 738 F.3d 58, 62 (2d Cir.
2013), though there are exceptions—for example, a member
of a class in a class action suit can appeal even if he is not
one of the named plaintiffs. Devlin v. Scardelletti, supra, 536
U.S. at 14. Hare might be thought to qualify for a different, a
novel, exception. He could have become a party in the dis-
trict court only if he’d moved to intervene in that court and
the court had granted the motion, which was highly unlike-
ly, because Hare was not a victim of the penny-stock fraud.
Still, had he moved to intervene he could have appealed
from the denial of that motion—and if instead the district
judge had granted the motion but then denied Hare relief on
the merits, that ruling too would have set the stage for an
appeal. So it’s not true that his only route to possible relief
was to appeal the order handing over the fund to the Treas-
ury, albeit the order extinguished any possibility of his col-
lecting his judgment against Custable from money in the
fund. Given what Hare wants—a shot at the disgorged-
profits fund—his failure to have sought intervention is in-
comprehensible.
    He makes two arguments for our allowing him to appeal
nevertheless. They’re unattractive arguments, both in their
own right as we’re about to see and because moving to in-
tervene would have been the proper way to get the case to
us. Hare claims to be an indirect victim of the penny-stock
No. 15-1442                                                     5


fraud, because, he contends, the commission of the fraud
was financed in part by the money that Custable had ob-
tained by his fraud against Hare. Hare’s other argument is
that while the claims of the penny-stock victims may be too
numerous and stale to be worth trying to sort out and com-
pensate from the fund, as the SEC contended successfully in
the district court, his claim is large and its amount liquidat-
ed: it is the amount stated in his settlement agreement with
Custable. Of course Custable, being penniless (pun intend-
ed) now and in the foreseeable future, couldn’t have cared
very much what he was agreeing to pay Hare. But since the
district court (another district judge, in Hare’s suit against
Custable) approved the agreement, we’ll assume that the
amount of the settlement is reasonable, though as it far ex-
ceeds the disgorged-profits fund there is no way for Hare to
obtain from the fund more than a pittance of what Custable
has agreed to pay him. Hare’s second argument is factually
strong, but legally weak because if he isn’t a victim of the
penny-stock fraud it doesn’t matter how large and certain
his claim for damages caused by a different fraud is.
    As for the first, the indirect-victim claim, only if it were a
certainty that the district judge would not have granted
Hare’s motion to intervene and that we would not have re-
versed her order denying his motion would an appeal from
the district court’s order turning over the entire fund to the
Treasury be the only avenue of relief open to him. In such
circumstances of futility of trying to intervene, an appeal by
a nonparty may be permissible. E.g., In re Bergeron, supra, 636
F.3d at 883; SEC v. Enterprise Trust Co., 559 F.3d 649, 651–52
(7th Cir. 2009). But the posited “circumstances” are specula-
tive in the extreme. And anyway Hare’s indirect-victim ar-
gument makes no sense. It implies that Hare helped finance,
6                                                  No. 15-1442


albeit unintentionally, Custable’s fraud against the purchas-
ers of penny stocks—the money that Custable stole from
Hare was used to finance the penny-stock fraud! Far from
being a victim of the penny-stock fraud, Hare was an unwit-
ting tool of the perpetrator. It would be absurd to think that
he could claim money as a victim of a scheme which, how-
ever unwittingly, he had assisted in creating—especially
since he was not a victim of that scheme.
    We can imagine, if barely, Hare’s making a cy pres ar-
gument for obtaining money from the fund in order to re-
coup part of his loss from the fraud that Custable committed
against him. The money paid into the court account was
money that should in principle have gone to the victims of
the penny-stock fraud; and when for some reason it’s infea-
sible to distribute the entire amount of a defendant’s wrong-
ful gains to the victims of the defendant’s wrongdoing
(maybe because the victims can’t be located, a feature of this
case), the cy pres doctrine allows the court to award the left-
over money to some person or institution that has a claim or
need similar to that of the uncompensatable victims. And
one might think of Hare in that light—a victim of the same
criminal, yet a victim who unlike the other victims (i.e., the
victims of the penny-stock fraud) can feasibly be compen-
sated from the fund that holds the criminal’s ill-gotten gains.
    But Hare doesn't invoke cy pres, which probably is any-
way unavailable given the district court’s authority to by-
pass victims of a fraud and send the disgorged profits and
the penalty to the U.S. Treasury. See FTC v. Febre, 128 F.3d
530, 537 (7th Cir. 1997); SEC v. Cavanagh, 445 F.3d 105, 116–
17 (2d Cir. 2006); SEC v. Blavin, 760 F.2d 706, 712–13 (6th Cir.
1985). The implication is that Congress made payment to the
No. 15-1442                                                     7


Treasury the cy pres alternative (“cy pres” means literally
“nearly like” or “as near as”) to payment to victims of fraud
when payment to the victims is infeasible.
    That isn’t the only reason a cy pres argument would have
failed in this case. The usual recipient of cy pres money is a
charity, Hughes v. Kore of Indiana Enterprise, Inc., 731 F.3d 672,
675–76 (7th Cir. 2013), and the money is supposed to be
used, to the extent feasible, for the benefit of victims of the
defendant’s wrongdoing. Holtzman v. Turza, 728 F.3d 682,
689 (7th Cir. 2013). Hare is not a victim of the relevant
wrongdoing, is not a charity, and has never intimated that
he would use even one penny of any money that he obtained
from the victims’ fund to help the defrauded penny-stock
investors.
   Hare has failed to establish that he is within an exception
to the rule that forbids a nonparty to appeal. And the
grounds that he advances for relief are in any event frivo-
lous. His appeal is therefore dismissed. Gautreaux v. Chicago
Housing Authority, 475 F.3d 845, 850–51, 853 (7th Cir. 2007).
