Judge Smith -- welcome to the Ninth Circuit, by the way -- writes a very nice opinion in this case. That also seems entirely right.
I'd have articulated the relevant rule somewhat differently, but I totally agree with him on the substance. When a defendant criminally pumps and dumps, and the underlying stock's not a total sham, the value of the loss (for purposes of the guidelines) is the difference between the true and the artificial market capitalization. And, again, if the stock's not a complete sham, the former isn't zero. Hence the entirely appropriate reversal here, as the district court's loss calculation was based on the erroneous assumption that the underlying stock had no value absent the pump when almost certainly it did.
On an personal level, I also had a hearty laugh when I read the following two sentences near the end of Judge Smith's opinion: "The government argues that the stock nevertheless remained 'worthless' because 'the trading volume is close to zero.' But close to zero is not zero, and the government therefore implicitly -- if unintentionally -- acknowledges that New Energy stock continued to have some value after the fraud came to light." Sure, that analysis is entirely correct, and basically encapsulates the district court's error. But Judge Smith's comment that "close to zero is not zero" reminded me of the analogous line "Like unbeatable is not unbeatable." To which Judge Klausner, on remand, might well offer his best impersonation of Nicolas Cage and respond: "I know that now!"
