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Second Circuit Finds That Criminal Victims Cannot Recover Attorneys' Fees for Parallel SEC Investigations
Thursday, May 5, 2022

On February 25, 2022, the U.S. Court of Appeals for the Second Circuit held that federal restitution law does not apply to criminal victims seeking to recoup attorney fees incurred in connection with parallel Securities and Exchange Commission (SEC) investigations.(1)

The case stemmed from the 2017 conviction of former MSD Capital LP analyst, John Afriyie, for securities and wire fraud after he was found to have traded on inside information he misappropriated from his employer about Apollo Global Management LLC’s planned $15 billion buyout of ADT Corp.

At Afriyie’s sentencing, MSD submitted a restitution request for attorneys’ fees to cover the Department of Justice and SEC investigations, the criminal proceedings and MSD’s own investigation of Afriyie. The fees—which MSD paid in full—totaled $691,046.42. Afriyie was sentenced to 45 months in prison, and the district court ordered him to reimburse MSD for the full amount of its attorneys’ fees.(2) Afriyie appealed the district court’s decision.

Under the Mandatory Victims Restitution Act (MVRA), defendants convicted of certain crimes must reimburse their victims for “lost income and necessary childcare, transportation, and other expenses incurred during participation in the investigation or prosecution of the offense or attendance at proceedings related to the offense.”(3)

In United States v. Amato, a 2008 decision, the Second Circuit held that “other expenses” recoverable under the statute could include attorneys’ fees incurred by victims while helping the government investigate and prosecute a defendant.(4) The court in Amato also found that victims could recover costs incurred while privately investigating the defendant.(5) A decade later, in Lagos v. United States, the Supreme Court of the United States adopted a narrower interpretation of the MVRA.(6) Specifically, the Court held that “the words ‘investigation’ and ‘proceeding’ are limited to government investigations and criminal proceedings”(7) and do not include costs associated with an internal investigation relating to an alleged crime.

The Second Circuit opinion in Afriyie contains two primary legal holdings. First, the Second Circuit found that Amato’s primary holding that attorneys’ fees can sometimes be “other expenses” does in fact survive the Supreme Court’s ruling in Lagos. Second, the Second Circuit held that a victim cannot recover expenses incurred while participating in a civil SEC investigation of the defendant.

In a unanimous decision, Judge Rosemary Pooler wrote, “It remains the law of this Circuit that other expenses may include attorneys’ fees, provided the statute’s other strictures are met. Lagos, however, instructs us to read narrowly the MVRA’s requirement that expenses arise from a victim’s participation in the investigation or prosecution of the offense. Turning fresh eyes to this phrase, we hold that restitution is appropriate only for expenses associated with criminal matters. Civil matters—including SEC investigations, even if closely related to a criminal case—do not qualify.” (Internal quotations omitted.)

The Second Circuit remanded the case back to the district court to find a “reasonable solution” to differentiate between the legal work on the criminal and civil cases when recalculating MSD’s recovery.

This Second Circuit decision marks a departure from the long-held Amato decision. As a result, criminal victims should be mindful that the MVRA may no longer be available as a potential means to recoup attorneys’ fees stemming from parallel SEC investigations in that jurisdiction.


  1. U.S. v. Afriyie, No. 20-2269-cr (2d Cir. Feb. 25, 2022).

  2. The district court ultimately lowered the restitution amount to $511,369.92 after removing the internal investigation costs.

  3. 8 U.S.C. § 3663A(b)(4).

  4. 540 F.3d 153, 159-60 (2d Cir. 2008).

  5. Id.

  6. 138 S. Ct. 1684, 1690 (2018).

  7. Id. at 1687.

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