Bloomfield Investment Resources Corp v. Daniloff

Filing 108

DECISION AND ORDER For the reasons stated above, it is hereby ORDERED that judgment shall be entered in favor of plaintiff Bloomfield Investment Resources Corporation ("Bloomfield") against defendant Elliot Daniloff ("Daniloff" ;) on Bloomfield's fraudulent inducement and both breach of contract claims in the amount of $18.5 million for compensatory damages plus prejudgment interest calculated at a rate of nine percent per annum on $25 million from Decembe r 16, 2014 until May 15, 2015; nine percent per annum on $23 million from May 16, 2015 until December 2, 2016; and nine percent per annum on $18.5 million from December 3, 2016 to the date of this Decision and Order; $1 million in p unitive damages; and post-judgment interest on the full judgment amount at the rate prescribed by 28 U.S.C. Section 1961(a) from the date of this Decision and Order, as calculated by the Clerk of Court; and it is further ORDERED that within seven ( 7) days of the date of this Decision and Order, Bloomfield shall submit a proposed order of judgment that includes a calculation of its damages, prejudgment interest, and a provision for the imposition of post-judgment interest as detailed above; and it is further ORDERED that Bloomfield may submit an application for reasonable attorneys' fees and costs pursuant to Rule 54(d) of the Federal Rules of Civil Procedure no later than June 6, 2023. Daniloff may respond to the application no later than June 13, 2023. And Bloomfield may file a reply no later than June 20, 2023. SO ORDERED. (Motions due by 6/6/2023., Replies due by 6/20/2023., Responses due by 6/13/2023) (Signed by Judge Victor Marrero on 5/23/2023) (jca)

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 1 of 81

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

5/23/2023

BLOOMFIELD INVESTMENT RESOURCES CORP.,

17 Civ. 4181 (VM)

Plaintiff,

DECISION AND ORDER

- against ELLIOT DANILOFF,
Defendant.
VICTOR MARRERO, United States District Judge.

Plaintiff Bloomfield Investment Resources Corporation
(“Bloomfield”) brought the instant action against defendant
Elliot Daniloff (“Daniloff”) for fraud, breach of contract,
promissory

estoppel,

and

unjust

enrichment.

(See

“First

Amended Complaint,” Dkt. No. 51.) Bloomfield asserts that it
loaned $25 million to a company owned by two investment funds
managed by ED Capital, LLC and ED Capital Management, LLC
(collectively, “ED Capital”), entities entirely owned and
controlled by Daniloff, and that it loaned this money in
reliance on Daniloff’s fraudulent promises and has not been
repaid. Daniloff counters that Bloomfield’s transfer of $25
million to Daniloff’s company constituted an investment into
the investment funds with no guarantee of repayment.
The Court conducted a four-day bench trial from October
24, 2022 to October 27, 2022. The Court now sets forth its
findings of fact and conclusions of law pursuant to Rule 52(a)

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 2 of 81

of the Federal Rules of Civil Procedure. The Court concludes
that Bloomfield has produced evidence sufficient to support
its claims for fraudulent inducement and breach of an oral
loan agreement that was subsequently modified. Accordingly,
Daniloff

is

liable

to

Bloomfield,

which

is

entitled

to

compensatory and punitive damages on those claims.
I.

FINDINGS OF FACT 1

Daniloff is a New York resident. Through ED Capital,
Daniloff serves as the investment advisor and investment
manager of two investment funds: Synergy Hybrid Fund Ltd.
(the “Synergy Hybrid Fund”) and Synergy Hybrid Feeder Fund
Ltd. (the “Synergy Hybrid Feeder Fund” and with Synergy Hybrid
Fund, the “Synergy Funds”). The Synergy Funds are Cayman
Island investment funds that invest in Russian public and
privately held equity and debt securities. The Synergy Funds
hold 100 percent of the shares of United Meat Group (“UMG”),
a

Russian

agricultural

corporation

involved

in

poultry

production. Daniloff created UMG in 2009 and became its
controlling owner. UMG is the Synergy Funds’ primary asset.

While the Court has reviewed and considered all of the live testimony,
affidavits, and accompanying exhibits admitted in evidence in connection
with the trial in this matter, the Court addresses only those portions of
the evidence relevant to the Court’s legal conclusions.
1

2

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Bloomfield is an entity created by and under the control
of David and Simon Reuben (the “Reuben Brothers”), who are
very wealthy investors based in London.
A.

NEGOTIATIONS AND THE ORIGINAL AGREEMENT
The

dispute

in

this

case

began

when

David

Reuben

(“Reuben”) was first introduced to Daniloff through Arkadiy
Orkin (“Orkin”). Orkin has had a business relationship with
Reuben and the Reuben Brothers since the 1990s. Orkin’s sonin-law, Alex Bendersky (“Bendersky”), was a close friend of
Daniloff’s since childhood, and Orkin viewed Daniloff as a
member

of

his

own

family.

In

2010,

Orkin

learned

about

Daniloff’s plans to venture into the Russian agricultural
sector through UMG. To fund his project and obtain loans from
Russian banks, Daniloff needed to show additional equity
capital on the books of UMG. Orkin sought to help Daniloff in
this regard.
In November 2010, Orkin contacted Reuben to brief him
about Daniloff’s project and to gauge whether Reuben would be
interested in providing financial support for the project.
Reuben informed Orkin via email that he was “presently not
making investments in funds.” (Pl. Ex. 1; Trial Transcript

3

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 4 of 81

(“Tr.”) at 11:10.) 2 Reuben was reluctant to get involved in
Daniloff’s

venture,

but

Orkin

assured

Reuben

that

“this

business has no connection with the fund. It is owned by [a]
private

company

OJSC

United

Meat

company

100

percent

controlled by Elliot [Daniloff].” (Pl. Ex. 1; Tr. at 11:1821.)
Upon Orkin’s recommendation and persuasion, Reuben met
with Daniloff in 2011 in London, and several times thereafter,
to

learn

more

about

Daniloff’s

project.

Daniloff

needed

roughly $20 to $30 million in funding to purchase equipment
and obtain additional loans from banks. Reuben explained to
Daniloff his concerns about the project because Reuben did
not want to make any investments and no longer invested in
Russia. Given Reuben’s hesitation, Daniloff proposed that
Reuben could instead provide him with a short-term loan of
$25 million, which would be held in escrow in a bank. Daniloff
could show the $25 million on the books, thereby allowing
Daniloff to raise money from Russian banks. The loan would be
paid back in several years. As collateral toward the loan,

Prior to trial, the parties stipulated that they do not object to the
admissibility of the exhibits introduced as part of the record. Therefore,
all exhibits were admitted into evidence without objection. (See Joint
Pretrial Order at 5; Tr. at 9:12-16.)
2

4

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Reuben would obtain 50 percent of UMG’s shares, which would
be reduced to 25 percent after he was paid back in full.
In July 2011, Reuben emailed one of his employees,
Alexander Bushaev (“Bushaev”), outlining his understanding of
the proposition. Bushaev was the Chief Financial Officer
(“CFO”)

of

the

Reuben

Brothers’

offices

in

Geneva,

Switzerland and looked after their loan portfolio. In the
email, Reuben explained that the $25 million to Daniloff would
be “show[n] as equity altho[ugh] given as [a] loan and any
d[i]sbursements to be monitored by [Reuben].” (Pl. Ex. 6.)
Reuben and Bushaev also discussed the arrangement by phone.
Reuben indicated to Bushaev that Reuben’s entire discussion
with Daniloff about the transaction reflected that the $25
million transfer would be in the form of a loan that would
only be shown as equity because Daniloff would “not be able
to borrow against the loan; he can only borrow against what
will be shown as an equity.” (Tr. at 22:22-24.)
Daniloff

did

not

want

to

put

this

agreement

(the

“Original Agreement”) in writing. If Reuben’s name appeared
on the loan, Reuben’s high-profile status would make him a
target of guarantees and banks in Russia, posing an obstacle
to Daniloff borrowing money. Daniloff proposed that, instead,
the loan appear as an investment which would hide Reuben’s
5

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 6 of 81

name

from

the

transaction

and

allow

Daniloff

to

obtain

additional loans from banks. However, the $25 million would
remain a loan and be held in escrow.
Reuben was comfortable making this arrangement orally,
instead of in writing. According to Reuben, a contract was
never signed in the majority of the business deals he had
entered into in Russia. Instead, business agreements were
entered

into

and

honored

on

the

strength

of

trust

and

confidence grounded on the bonds of family and friendship.
Despite relying primarily on oral contracts, Reuben had never
failed to recoup his money. Thus, Reuben felt that he had no
reason to believe that Daniloff would fail to repay him,
including because Orkin vouched for Daniloff as part of the
family and assured Reuben that he would work on this venture
together with Daniloff.
After rounds of discussions, Daniloff and Reuben agreed
to

the

terms

of

the

Original

Agreement

roughly

around

September 2011. According to Reuben, the two “shook hands . . .
[and] did the deal.” (Id. at 17:19-20.) Accordingly, the
Original

Agreement

provided

that

Reuben

would

loan

$25

million to Daniloff on the condition that (1) the funds would
be fully repaid in roughly two years; (2) the funds would
remain in a segregated bank account, any disbursement of which
6

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 7 of 81

would

require

Reuben’s

authorization;

(3)

Reuben

would

receive a 50 percent stake in UMG as security for the loan;
and (4) Reuben’s shares in UMG would be reduced to 25 percent
upon full repayment.
B.

THE SYNERGY HYBRID FUND
Roughly around September 2011, Daniloff informed Reuben

that he would need documentation signed so that the loan could
appear as an investment in his investment fund, the Synergy
Hybrid

Fund.

To

accommodate

Daniloff,

Reuben

designated

Patrick O’Driscoll (“O’Driscoll”), the CFO of one of the
Reuben Brothers’ offices, as point person to help Daniloff
effectuate the transfer of the $25 million into the Synergy
Hybrid Fund, which would serve as a conduit for the loan
proceeds. At no point, to Reuben’s understanding, was this
channeling of the loan proceeds through the Synergy Hybrid
Fund actually meant to be a true investment into the fund. At
that

time,

Daniloff

likewise

made

no

representations

to

Reuben that he believed that the money he received was a true
investment and not a loan. 3
The Court recognizes that in various emails, the parties, at times,
refer to the $25 million amount as an “investment.” However, in other
communications and discussions also evidenced in the record, the parties
refer to the transaction as underpinning a loan. Despite the
characterization of the funds as an “investment” in those emails, the
terminology does not reflect whether the parties believed the funds were
a true “investment” into the Synergy Hybrid Fund that would require any
repayment to be made via the redemption process based on a valuation of
3

7

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 8 of 81

Reuben’s representatives exchanged multiple emails with
Daniloff confirming that the Synergy Hybrid Fund acted only
as

a

conduit

for

the

loan

proceeds

to

be

shown

as

an

investment and that the funds would continue to be held in
escrow with Bloomfield having signatory control, consistent
with the Original Agreement. For example, on September 6,
2011, O’Driscoll emailed Daniloff for confirmation that the
fund was for “visibility purposes” and “in reality, the
investment is not sitting in the fund.” (Def. Ex. E; Pl. Ex.
12.) Though at trial, Daniloff testified that he did not
remember the email sent by O’Driscoll (see Tr. at 183:21-22),
at the time that O’Driscoll sent the email, Daniloff did not
dispute O’Driscoll’s characterization of the Synergy Hybrid
Fund’s limited purpose or how the proceeds would be used. On
September

14,

2011,

Ben

Webb

(“Webb”),

an

employee

of

O’Driscoll’s who assisted with the administration of the loan
proceeds,

emailed

Gennady

Zalko

(“Zalko”),

the

Chief

Executive Officer of UMG, that: “In order for us to invest,
we

will

accounts

require
so

that

that

we

become

expenditure

signatories
is

on

controlled

the

bank

with

our

shares. Thus, the imprecise vocabulary used by the parties out of
convenience does not preclude the finding that the transfer of proceeds
constituted a loan, especially viewed in light of the parties’ overall
conduct, testimony, and the totality of the evidence in the record.

8

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 9 of 81

authorisation.” (Pl. Ex. 15 at 6896; Tr. at 192:2-6.) Despite
Daniloff insisting at trial that Zalko did not represent
Daniloff, Daniloff had explicitly instructed Webb to contact
Zalko directly regarding opening an account at ING Bank where
the loan proceeds would be held in escrow.
After this email correspondence, Zalko set up an account
with ING Bank where the loan proceeds were to be deposited
and remain untouched absent Reuben’s express authorization,
and over which Webb would have signatory authority on behalf
of Reuben. In October 2011, Bushaev set up Bloomfield, the
special purpose vehicle (“SPV”) through which Reuben would
transfer $25 million to the Synergy Hybrid Fund. To effectuate
the transfer, Daniloff needed Reuben or his representative to
sign a subscription agreement (the “Subscription Agreement”)
for the Synergy Hybrid Fund. On November 3, 2011, per Reuben’s
direction, Bushaev executed the Subscription Agreement. Webb
emailed

Daniloff

administrator

of

and
the

a

representative

Synergy

Hybrid

of

Fund,

Apex,
the

the

signed

Subscription Agreement and asked Daniloff directly to confirm
that he received the document and for “next steps, including
transfer to the ING account.” (Id. at 199:7-8; Def. Ex. J-1.)

9

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 10 of 81

C.

THE TRANSFER OF THE $25 MILLION
Shortly after the Subscription Agreement was executed on

November 3, 2011, Bloomfield wired the $25 million to Daniloff,
and the funds became cleared for use on December 22, 2011.
(See Pl. Ex. 23.) Despite Bloomfield initiating the transfer
of the funds, Daniloff did not respond to Webb’s November 3,
2011 email asking for next steps. Webb emailed Daniloff once
more on January 24, 2012, again seeking confirmation that
“the funds will be transferred to the ING Bank account opened
for this business.” (Def. Ex. P at 2520.) Webb further noted
that “[n]o amount should be committed unless David agrees [to]
the spend in advance.” (Id.) Daniloff replied to the email,
stating: “I confirm the funds will be transferred to the ING
Bank account.” (Id.) At trial, Daniloff indicated he did not
remember this email, but that he was “sure the money was
transferred” to that account. (Tr. at 200:7, 200:13-17.) In
fact, it was not.
In April 2012, Webb emailed Daniloff for an update on
the status of the loan that was supposed to be held in the
ING Bank account as he had not received any notice from the
bank that the proceeds had been transferred. Daniloff emailed
Webb that “[t]he funds sit on deposit in SberBank.” (Tr.
202:9-10;

Def.

Ex.

P.)

SberBank
10

is

a

Russian

bank,

and

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 11 of 81

Bloomfield did not have signatory control over any bank
account at SberBank.
While Daniloff claimed in April 2012 that the Bloomfield
funds

were

deposited

in

a

SberBank

account,

Bloomfield

established at trial that in fact, immediately after the funds
became

available

to

Daniloff

on

December

22,

2011,

he

dispensed with a large portion of the funds without Reuben’s
authorization or knowledge. After first receiving unblocked
access to the $25 million in December 2011, Daniloff directed
an ED Capital employee to (1) wire $10 million to a UMG bank
account at SberBank; (2) pay Apex’s third quarter fees for
2011; (3) reimburse ED Capital’s setup fees; (4) pay fourth
quarter management fees to ED Capital; and (5) transfer the
remaining funds to an account with HSBC Bank, another account
over which Bloomfield was not a signatory. (See Pl. Ex. 23.)
Further, on January 1, 2012, Daniloff reorganized the
Synergy Hybrid Fund, transferring Bloomfield’s funds from the
Synergy Hybrid Fund into a new Synergy Hybrid Feeder Fund.
Despite

this

change,

Daniloff

did

not

seek

Bloomfield’s

approval for the reorganization until March 5, 2012, three
months after it had already occurred. While Bloomfield had
signed the Subscription Agreement for the Synergy Hybrid Fund,

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Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 12 of 81

Bloomfield never executed a subscription agreement for the
Synergy Hybrid Feeder Fund.
Though Daniloff contends that the Subscription Agreement
controlled

the

parties’

consistently

with

the

Subscription

Agreement.

relationship,
Original
For

the

Agreement

example,

in

parties
and

not

January

acted
the
2012,

Daniloff emailed a “Dear Colleagues” letter to Orkin, Reuben,
and other representatives of the Reuben Brothers, outlining
proposed uses of the funding. (See Pl. Ex. 42 at 3519.) Upon
receipt of the email, Reuben promptly responded to Daniloff
that he did “not want the funds used th[at] way” and directed
him not to commit to using the funds for anything. (Id.)
Reuben further explained that the money could be used only if
Reuben received a form of security, such as if there was
equity or other loans provided by banks, and that the money
needed to be “quickly [paid] back as agreed.” (Id.; see also
Tr. at 36:4-15.) Daniloff responded to Reuben’s email, “ok
will do.” (Pl. Ex. 42 at 3518.)
In a July 2012 email to Orkin, Reuben recounted a meeting
with Daniloff, in which Daniloff indicated that the money
“needs now to be used.” (Pl. Ex. 32.) Reuben noted that he
told Daniloff that if he planned to use the money, Reuben
would rather leave the project and take his money out. (See
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id.) The following month, Reuben met with Daniloff in Cannes,
France. There, Daniloff made another proposal -- converting
the loan into equity for his venture so that he could use the
money. (See also Pl. Ex. 35 at 3054.) Reuben testified that
his position was that he would “rather take [his] money back
if [Daniloff] want[ed] to convert [the money] to equity” and
that he “want[ed] the loan to remain as a loan. That is how
we agreed.” (Tr. at 40:6-9.)
Following

that

discussion,

Daniloff

emailed

Reuben,

noting, among other things, that the initial funding of the
partners, i.e., Reuben, “must be returned first” within two
to three years. (Pl. Ex. 35 at 3054.) The parties discussed
by phone and Daniloff followed up with Reuben via email to
confirm that Reuben agreed to allow Daniloff to use up to $5
million for a chicken farm project in Russia. At trial, Reuben
disputed that he agreed to the arrangement. But the email
from Daniloff nonetheless demonstrates that Daniloff sought
authorization

from

Reuben

to

use

the

loan

proceeds,

consistent with the terms of the Original Agreement.
D.

REPAYMENT OF THE LOAN
Daniloff was expected to repay the loan in full by

December 4, 2013. (See Tr. at 56:5-17; Pl. Ex. 54 at 2301.)
Reuben’s son, Jamie Reuben (“Jamie”), became involved in
13

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Bloomfield’s $25 million transaction in the middle of 2013,
several months before Daniloff was to repay Reuben. By email,
on

July

2,

2013,

Jamie

wrote

Daniloff,

memorializing

a

conversation they had together, breaking down how Daniloff
allocated the proceeds from Bloomfield. Reuben responded to
the email, copying Daniloff, indicating that he “did not
authorize this as detailed.” (Pl. Ex. 40 at 4060.) Reuben
further wrote: “The deal was as follows. For us putting 25
m[illion] dollars in escrow to be shown as equity but cannot
be used[,] we got 25 percent of the company.” (Id.) Reuben
explained that he made a loan and not an investment because
“[o]therwise for putting up nearly all the capital I would
have demanded the majority of the shares. But because I was
not knowledgeable of the business I did not want to go further
than the escrow of the 25 m[illion] dollars so we would be
paid out by now.” (Id.) Reuben reiterated the arrangement
between him and Daniloff, and at no point in the email
correspondence did Daniloff dispute Reuben’s recitation of
their agreement.
In August 2013, an email between Jamie and Daniloff
showed that Daniloff planned to return at least $16.5 million
of the $25 million to Reuben by the year’s end. (See Pl. Ex.
48.) Daniloff stated: “I confirm that the plan to return 16.5
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Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 15 of 81

million is correct, and as of now, there are no deviations to
the plan.” (Id.) From November 2013 to January 2014, Daniloff
discussed with Reuben’s team a means of securing repayment
after he raised more funds. Daniloff was unable to repay
Bloomfield the $16.5 million by the end of 2013, but his
repayment plan now involved “rais[ing] euro bonds up to $100
million, and [taking] up $30 million at the interest rate of
8 percent.” (Pl. Ex. 274; Tr. at 57:5-7.) Reuben restated in
an email that his priority was to “get back to our original
agreement. That is, that our investment and accrued interest
be returned as soon as possible.” (Pl. Ex. 274; Tr. at 58:48.) When Reuben stated the terms of the Original Agreement,
Daniloff neither rejected nor disputed the existence or terms
of that agreement.
In June 2014, Reuben learned from Orkin that the roughly
$30 million that Daniloff raised that was supposed to be paid
to Bloomfield was being transferred to other companies or
placed at Razvitie Bank, a Russian bank facing bankruptcy. He
also learned that the funds would be allocated for other
projects including a “pig farming operation.” (Pl. Ex. 40 at
4061.) Reuben again repeated to Daniloff by email that the
$25 million he contributed was supposed to be held only in
escrow and not used. Reuben wrote that he “would not ha[ve]
15

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 16 of 81

invested this kind of money without considerable diligence”
and that he provided the money as a loan because it was
guaranteed to be safely and promptly returned. (Pl. Ex. 64 at
2845.) He also expressed concern over the money placed at the
Russian

Razvitie

Bank

because

it

was

likely

to

become

insolvent which would lead to a “loss of cash.” (Id. at
2844.) 4
Concerned with Daniloff’s inability to repay the loan,
Reuben

directed

his

team

to

help

Daniloff

fulfill

his

obligations. Reuben engaged Mehmet Saydam (“Saydam”) to take
lead

on

ensuring

repayment

and

finding

ways

to

support

Daniloff’s venture. Saydam first joined Reuben’s team in 2012.
In or around November 2013, Reuben designated Saydam as point
person on his arrangement with Daniloff in order to help
Daniloff raise new capital so that he could repay Reuben.
Saydam’s

understanding

of

the

initial

arrangement

between Daniloff and Bloomfield was the same as Reuben’s -that Reuben loaned Daniloff $25 million, which would remain
in escrow in a separate bank account controlled by Reuben,
that Reuben would obtain 50 percent of UMG as collateral, and
upon full repayment, Reuben’s shares would be reduced to 25
4 Bloomfield established at trial that Razvitie Bank where Daniloff had
held some of UMG’s money ultimately had its license revoked and went
bankrupt, as Reuben forewarned.

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Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 17 of 81

percent.

Saydam

worked

closely

with

Daniloff

to

develop

structures to repay the $25 million loan until Bloomfield
took legal action in 2015. According to Saydam, during their
many

interactions,

Daniloff

never

disputed

that

the

$25

million was a loan that was expected to be repaid in full.
Throughout their discussions on repayment, Daniloff would
often

propose

suggestion.

a

The

structure
parties’

and

then

updated

later

rescind

expectation

that

was

that

Daniloff would repay the loan by October 9, 2014 (see Pl. Ex.
81 at 3085), but Daniloff again failed to meet the deadline.
The discussions about raising additional funding with the
promise to repay Reuben eventually culminated in an in-person
meeting in Moscow in November 2014.
Daniloff, Saydam, Zalko, Orkin, Bendersky, and Dan Gould
(“Gould”) attended a meeting in Moscow, Russia on November
26, 2014. On that occasion, the participants discussed the
means by which Daniloff would repay the $25 million loan. The
meeting

was

memorialized

Modification”),
attendance,

and

including

was

in

writing

signed

Daniloff.

by
The

(the
all

the

“November

26

parties

in

participants

at

that

meeting decided to put the agreement for repayment in writing
so as “not to have things up in the air.” (Tr. at 536:24.)

17

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 18 of 81

The

November

26

Modification

included

seven

clauses

marked from “0” to “6,” laying out how Daniloff would repay
Bloomfield the $25 million. The terms included, among other
things, that Reuben would be repaid in full by December 15,
2014; that a back-to-back loan would be used to repay Reuben;
and that Reuben would ultimately end up with 25 percent of
UMG. The structure of the repayment plan was proposed by
Daniloff, and the parties never expressed any doubt that the
November 26 Modification would be binding. That same day,
Saydam

emailed

the

Bloomfield

representatives,

including

Reuben, a summary of the items that were agreed upon at the
in-person Moscow meeting.
At

trial,

Daniloff

characterized

the

November

26

Modification as a way to appease a “disappointed investor”
(Id. at 438:21) and testified that he was merely trying to
find a way to provide Reuben a return on investment. Daniloff
further testified that the agreement was only a term sheet or
a set of discussion points, not an “agreement about anything”
because of the uncertainty regarding the seventh term, marked
Clause 6. (Id. at 437:23-438:9.) Clause 6 concerned the role
that Gould would have with UMG after repayment and was notated
with “TERMS 2B proposed and agreed.” (Pl. Ex. 103.)

18

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Yet,

the

demonstrate

trial

that

testimony

Daniloff

acted

and

evidence

consistently

presented
with

the

November 26 Modification being binding upon him. For example,
Saydam contacted Daniloff in December 2014 confirming that
Daniloff would get his passport certified by the U.S. embassy
as part of the KYC, or “Know Your Customer,” procedure at the
Demir-Halk Bank (“DHB Bank”) in the Netherlands, which is
where the parties now planned to hold Reuben’s funds in escrow.
(Pl.

Ex.

108

at

3178.)

Daniloff

emailed

Saydam

that

he

scheduled an appointment with the embassy, demonstrating his
attempt to comply with the procedure. (See id.)
Nevertheless, the loan was not repaid by December 15,
2014 as required by the November 26 Modification. On December
23, 2014, Daniloff emailed Orkin, proposing partial repayment
of $15 million instead of the full $25 million, and noting
that the $15 million would be held at DHB Bank in the
Netherlands.

Orkin

responded

to

Daniloff

that

they

had

“planned and agreed to pay David 25 million, not 15 million.”
(Pl. Ex. 112 at 145.) Daniloff did not disagree with Orkin
and replied, “I’m hoping that you will support me; David will
agree to 15 million.” (Id.)
Roughly around December 2014, Daniloff also proposed a
$2 million repayment, which he referred to as a “redemption.”
19

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 20 of 81

(See Pl. Ex. 117.) Unlike a typical redemption, however,
Daniloff’s “redemption” was not dependent on the value of any
shares but instead based on the amount of cash Daniloff had
available. (See Tr. at 549:8-23.) According to Saydam, such
a “redemption” would not dilute Bloomfield’s shares until
full repayment is achieved after which Bloomfield’s shares
would be reduced to 25 percent as the parties agreed. (See
id. at 550:5-10.) However, in a December 2014 email between
the parties, when Daniloff suggested that the parties obtain
the

money

through

through

Saydam,

the

redemption

rejected

the

mechanism,

option,

to

Bloomfield,

which

Daniloff

responded “OK.” (Pl. Ex. 117; see Tr. at 590:5-591:9.)
Having failed to repay Reuben by December 15, 2014,
Daniloff promised Bloomfield via email that the funds would
be repaid by December 29, 2014, and then by January 9, 2015.
Reuben was not repaid by January 9, 2015.
In January 2015, Jamie along with Reuben’s brother,
Simon Reuben (“Simon”), became more involved in the matter
after Daniloff’s repeated failures to fulfill his obligations.
(See

id.

at

Bloomfield’s

559:22-560:14.)
representatives

In
that

an

email

included

chain
the

with
Reuben

Brothers, Jamie, Saydam, Bushaev, and O’Driscoll, the terms
of the Original Agreement were recounted.
20

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 21 of 81

Saydam testified that because Daniloff seemed unlikely
to honor the Original Agreement, Reuben’s team brainstormed
possible solutions in the event that the parties needed to
pursue legal recourse. Because of the technicality of the
loan proceeds being taken into an investment fund and based
on the written documents available, Saydam considered that
the redemption procedure might be the only available option
to achieve some of the repayment. (See Pl. Ex. 130; Tr. at
563:1-10.)
E.

THE NETHERLANDS LITIGATION
On January 20, 2015, Daniloff emailed Reuben, Jamie,

Saydam, and Orkin stating that while he looked for “a workable
solution,” he would give Bloomfield a second signature on the
UMG account at ING Bank, the same arrangement as indicated in
the Original Agreement. (Pl. Ex. 135 at 8798; Tr. at 265:2023.) Eventually, however, upon Saydam’s suggestion, the funds
were to be transferred to the DHB Bank in the Netherlands.
(See Pl. Ex. 138.)
In April 2015, Daniloff proposed a two-part repayment
structure -- one for $15 million and another for $2 million
-- which Saydam memorialized in an email to Daniloff, Orkin,
Reuben, and Jamie. (See Pl. Ex. 147.) Daniloff transferred
$15 million to the DHB Bank over which each Bloomfield and
21

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 22 of 81

Daniloff

were

signatories.

On

May

18,

2015,

Bloomfield

received $2 million from Ovester, on behalf of Daniloff. 5
From June 10 to 11, 2015, Reuben and Daniloff exchanged
emails regarding the return of the loan. Daniloff expressed
his inability to return the money immediately because he
needed to “get [the] project going and can’t stop,” which
Reuben indicated was “unacceptable.” (Pl. Ex. 154 at 24322.)
In his emails to Daniloff, Reuben again recited the terms of
the Original Agreement and that he wanted his money released
immediately. (See id. at 24321-22.) Daniloff did not refute
that representation and in fact acknowledged that he would
“return [Reuben’s] money” and that he “need[ed Reuben’s]
permission and blessing to move forward” with his projects.
(Id. at 24321.)
At trial, Bloomfield established that on or about June
15, 2015, Saydam received a call from DHB Bank alerting him
that UMG was attempting to remove Bloomfield’s signatory

With respect to the $2 million, Daniloff proposed that Ovester, an
investor in the Synergy Funds, redeem a certain number of units amounting
to $2 million. Bloomfield would then sell the equivalent of half the
number of shares Ovester redeemed for $2 million, which would reestablish
Bloomfield retaining 50 percent of the shares of UMG until the loan would
be fully repaid. (See Pl. Ex. 147.) Daniloff caused the repayment of the
$2 million on May 15, 2015, and it was received on May 18, 2015. (See Pl.
Ex. 272.) The $15 million that Daniloff proposed would be given to Reuben
as a pledge, and held at the DHB Bank in the Netherlands, until the
remainder of the now $23 million would be repaid. (See Pl. Ex. 147; Tr.
at 578:6-12.)
5

22

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 23 of 81

power over the DHB account that held the $15 million funds.
Though the account had two signatories -- one of which was
O’Driscoll’s on behalf of Bloomfield -- Zalko, on behalf of
UMG, attempted to cancel O’Driscoll’s signatory power on the
DHB account in order to withdraw money from the bank without
Bloomfield’s

permission.

As

a

result

of

the

attempted

cancellation, on or about June 16, 2015, Bloomfield initiated
an action to enjoin Daniloff’s transfer of the UMG money in
the Netherlands.
On or about June 19, 2015, Reuben wrote to Daniloff,
recounting the terms of the Original Agreement, Daniloff’s
repeated breaches of the agreement, Daniloff’s promises to
Reuben, and the events that led to Bloomfield filing and being
granted an injunction restraining Daniloff from transferring
the Bloomfield money in DHB Bank. (See Pl. Ex. 156 at 544749.) Several days later, on or about June 22, 2015, Daniloff
replied to Reuben’s email representing for the first time:
that the operative agreement controlling the transfer of the
$25 million was the Subscription Agreement and its related
documents (such as the Private Placement Memorandum or “PPM”);
that the $25 million was not a loan but an investment; that
recovery

of

any

amount

from

the

Synergy

Funds

could

be

achieved only through the redemption procedure; and that
23

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 24 of 81

Daniloff had retained legal counsel. (See id. at 5447.) This
email constituted the first time Daniloff represented that
the $25 million was an actual investment in the Synergy Funds,
and not a loan, and that the Subscription Agreement actually
governed the parties’ relationship with respect to how the
$25 million would be used.
Subsequent to and despite Daniloff’s June 2015 email,
the parties still engaged in discussions and negotiations
regarding

full

repayment

of

the

$25

million.

Though

Bloomfield sought full repayment and had taken legal action,
it was still committed to ensuring UMG’s survival because
pursuant

to

the

Original

Agreement,

Bloomfield

would

ultimately retain 25 percent of UMG once Daniloff had paid
back the loan. The parties discussed a restructuring of UMG
that would provide a certain sum of money to Bloomfield, but
the restructuring ultimately did not occur.
In addition to the $2 million repayment that Daniloff
made on May 15, 2015, Bloomfield received $4.5 million from
Daniloff on December 2, 2016. This $4.5 million came from an
escrow account following a settlement of the Netherlands
litigation. Though the payment was described as a “redemption”
by Daniloff and in the financial statements of the Synergy
Funds (see Tr. at 445:24-25, 446:4; Pl. Ex. 165 at 7461,
24

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 25 of 81

7480), the $4.5 million in form and substance was not a
“redemption” but a repayment and did not originate from the
Synergy Hybrid Feeder Fund directly (see Tr. at 586:2-11).
F.

DANILOFF’S CREDIBILITY
The Court found throughout the trial that Daniloff was

not a credible witness. His testimony was often inconsistent
or

contradictory

and

his

explanations

unpersuasive.

He

maintained that the $25 million was never a loan even when
confronted with emails in which he confirmed an obligation to
repay Bloomfield, and either affirmed or failed to deny the
terms of the Original Agreement. He frequently claimed he was
not able to remember salient events that occurred throughout
this saga, and that were vital to the parties’ agreement. For
example, he claimed he did not remember that the $25 million
was to be kept in a restricted bank account over which
Bloomfield would have signatory control -- details of which
were manifestly critical to the underlying transaction and
had been memorialized in multiple email correspondences over
the course of several years between the parties. (See, e.g.,
id. at 184:5-13.)
Further, at trial, Daniloff was confronted with clear
evidence

demonstrating

disagreement,

he

failed

that
to

despite

dispute
25

any

his
of

purported
Bloomfield’s

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 26 of 81

recitation of the Original Agreement in the emails introduced
into the record. Daniloff incredibly rationalized his failure
to correct the parties’ supposedly erroneous understanding by
asserting that he “ha[d] no obligation to respond . . .
because

everything

that

was

sent

in

[the

emails]

was

absolutely incorrect.” (Id. at 441:11-15.) Though Daniloff
testified that the Subscription Agreement -- not the Original
Agreement -- controlled the parties’ relationship, and that
the $25 million was never considered a loan and always an
investment, the Court did not find that the testimony or
evidence

Daniloff

presented

was

credible,

or

that

it

plausibly supported a finding embodying Daniloff’s version of
the material facts in dispute.
Bloomfield

also

established

at

trial

that

after

obtaining control over the $25 million via the Synergy Funds,
Daniloff regularly over-valued his funds in amounts exceeding
$49 million between 2012 to 2016. This increase in the net
asset

value

caused

an

increase

in

performance

fees

and

management fees, resulting in roughly one million dollars in
such fees being paid out to Daniloff through ED Capital each
year. 6 Through those fees, in 2014, for example, $205,000 was

Bloomfield also established at trial that Daniloff and ED Capital were
investigated by the Securities and Exchange Commission (the “SEC”) in
2019 and were subject to a cease-and-desist order pursuant to Sections
6

26

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 27 of 81

used to pay for travel; $248,000 was used to pay for travel
and conferences; and $191,000 was personal to Daniloff. (Id.
at

351:10-352:11;

increased

annual

Pl.
fees

Ex.
--

96

at

fees

21566.)

used

to

Despite

cover

these

Daniloff’s

expenses, business-related or otherwise -- Daniloff reported
$0 in wages or negative income on his tax returns. (See, e.g.,
Pl.

Exs.

209-226.)

Notably,

had

the

$25

million

from

Bloomfield gone directly to the ING Bank account where it
would have been held in escrow for UMG, as agreed, instead of
through the Synergy Hybrid Fund in the first instance, the
fees paid to Daniloff and ED Capital would have likely been
significantly less because of a lower net asset valuation.
II.
A.

CONCLUSIONS OF LAW

FRAUDULENT INDUCEMENT
Bloomfield claims that Daniloff is liable for fraudulent

inducement. Specifically, Bloomfield alleges that Daniloff
made a material misrepresentation to intentionally deceive
Bloomfield into providing Daniloff with $25 million as a loan
pursuant to the Original Agreement by using the Synergy Hybrid
203(e) and 203(k) of the Investment Advisers Act of 1940. According to
the evidence presented at trial, ED Capital was found to have failed to
distribute the annual audited financial statements of its investment funds
in accordance with the generally accepted accounting principles to
investors. Daniloff was found responsible for ED Capital’s violations as
the sole owner and managing member of ED Capital. The SEC censured ED
Capital, which was required to pay a civil monetary penalty in the amount
of $75,000.

27

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 28 of 81

Fund as a conduit for the proceeds. In New York, 7 to prevail
on a claim of fraudulent inducement, the plaintiff must prove
by

clear

and

convincing

evidence

“(i)

a

material

misrepresentation of a presently existing or past fact; (ii)
an

intent

to

deceive;

misrepresentation

by

(iii)

[the

reasonable

complaining

reliance
party];

on

and

the
(iv)

resulting damages.” Ipcon Collections LLC v. Costco Wholesale
Corp., 698 F.3d 58, 62 (2d Cir. 2012) (internal quotation
marks omitted) (quoting Johnson v. Nextel Commc’ns, Inc., 660
F.3d 131, 143 (2d Cir. 2011)). The Court finds that Bloomfield
produced clear and convincing evidence sufficiently proving
that Daniloff fraudulently induced Bloomfield to enter into
the Original Agreement by using the Synergy Hybrid Fund as a
conduit for the loan proceeds to improperly obtain control
over the $25 million that Bloomfield provided to Daniloff.
1. Material Misrepresentation
First, Bloomfield proved at trial that Daniloff made a
material misrepresentation of a presently existing or past
fact. Specifically, Daniloff represented that the $25 million
loan provided by Reuben needed to be channeled through the
Synergy Hybrid Fund in order to show equity for UMG to acquire

7 The Court notes that the parties do not dispute that New York law applies
to the claims asserted in this matter.

28

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 29 of 81

additional loans, but that the funds would remain a loan and
be transferred to the ING Bank account over which Bloomfield
would have signatory authority.
Ordinarily, in New York, a fraud claim is duplicative of
a breach of contract claim, and therefore must be dismissed,
where

the

claims

“arise

out

of

the

same

core

events,

relationship or transaction.” Lam v. Am. Exp. Co., 265 F.
Supp. 2d 225, 230 (S.D.N.Y. 2003). However, a fraud claim
based on inducement to enter a contract can proceed if a
plaintiff: “(i) demonstrate[s] a legal duty separate from the
duty to perform under the contract; or (ii) demonstrate[s] a
fraudulent misrepresentation collateral or extraneous to the
contract; or (iii) seek[s] special damages that are caused by
the misrepresentation and unrecoverable as contract damages.”
Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc.,
98 F.3d 13, 20 (2d Cir. 1996) (internal citations omitted);
see also WIT Holding Corp. v. Klein, 724 N.Y.S.2d 66, 68 (N.Y.
App. Div. 2001) (“[A] misrepresentation of material fact,
which

is

collateral

to

the

contract

and

serves

as

an

inducement for the contract, is sufficient to sustain a cause
of action alleging fraud.”).
Here, the Court finds that Bloomfield may recover under
a

fraudulent

inducement

claim
29

because

Daniloff’s

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 30 of 81

misrepresentations regarding the Synergy Hybrid Fund and the
enforceability of the Subscription Agreement were collateral
present

statements

of

fact,

extraneous

to

the

Original

Agreement, and used to induce Bloomfield to transfer $25
million to Daniloff via the Synergy Hybrid Fund. This transfer
into the Synergy Hybrid Fund caused Daniloff to have exclusive
control over the funds and use the money without Bloomfield’s
oversight in contravention of the Original Agreement.
Daniloff’s

theory

of

the

case

is

that

he

never

misrepresented that Bloomfield made an investment in the
Synergy Hybrid Fund as an investor and that the $25 million
did not represent a loan. However, the testimony presented at
trial and the email evidence indicate otherwise. At trial,
Reuben

testified

for

Bloomfield

that

Daniloff

expressly

indicated to him that the $25 million needed to be shown as
equity via the Synergy Hybrid Fund in order to borrow against
it, even though the money was to be given as a loan. Reuben
testified, “If I put the money in as a loan, . . . [Daniloff]
could not raise money because there would be no money in the
company for which to raise the loan. So, therefore, he wanted
me to put it as a form of investment or equity so that he
could go to a bank to get a loan[.]” (Tr. at 114:22-115:2.)
Reuben further testified that Daniloff was concerned that
30

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 31 of 81

revealing

Reuben’s

Daniloff’s

ability

name
to

in

this

obtain

venture

additional

would

loans.

impede
Daniloff

confirmed that, by investing in the fund, Reuben would be
able “to protect his identity.” (Id. at 182:16-20.)
Bloomfield also presented an email from O’Driscoll to
Daniloff, confirming his understanding that the investment in
the Synergy Hybrid Fund was “for visibility purposes” but
that “in reality, the investment is not sitting in the fund.”
(Pl.

Ex.

12.)

Daniloff

did

not

dispute

O’Driscoll’s

characterization of the arrangement. Relying on Daniloff’s
representations
Subscription

and

omissions,

Agreement

for

Bloomfield

the

Synergy

executed

Hybrid

Fund

the
on

November 3, 2011 in order to effectuate the transfer of the
$25

million

into

the

fund.

Though

Bushaev

signed

the

Subscription Agreement on behalf of Bloomfield, Bloomfield
did not believe that the document would be legally binding
nor did Daniloff present it as so. However, by putting the
$25 million in the Synergy Hybrid Fund in the first instance,
Daniloff was able to have unfettered access to and control
over

the

money

without

Bloomfield’s

authorization

and

oversight.
Daniloff

argues

that

he

did

not

make

any

misrepresentation because he always maintained that the $25
31

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 32 of 81

million was an investment and not a loan, which would thus
allow him to unilaterally use the funds. Daniloff presented
an executed memorandum of understanding (the “MOU”) between
the parties that was drafted some time before September 15,
2011. (See Def. Ex. C.) The document refers to a “potential
Reuben investment in Synergy Hybrid Fund” with no mention of
a loan. (Id.) However, while this document labels the $25
million as an “investment,” the MOU along with an earlier
draft of the MOU contemplates that “Reuben will recover its
$25 million over time via trading, and the shareholding in
[the Synergy Hybrid Fund] will be diluted to 25 percent
accordingly.” (Def. Ex. C; Pl. Ex. 256.) The document also
noted that “Reuben BVI will be controlling the cash management
of [UMG] until the $25 million investment is recovered.” (Def.
Ex. C; Pl. Ex. 256.) The Court finds that despite referring
to the $25 million as an “investment” into the Synergy Hybrid
Fund, the proceeds actually functioned as a loan. With an
investment, there is no guarantee that an investor will
“recover” the same amount it invested over time nor does an
investor have control over his invested funds. Moreover, the
terms

are

consistent

with

the

Original

Agreement,

which

provided that Bloomfield’s shares in UMG would be reduced to
25 percent upon full repayment of the purported loan.
32

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 33 of 81

Also,

as

the

Court

discusses

below,

email

correspondences between the parties starting in 2011 through
2015 reveal that the parties, including Daniloff, always
operated

with

the

understanding

that

the

$25

million

constituted a loan, subject to full repayment and consistent
with the Original Agreement, and not an investment. At no
point until he retained counsel in 2015 did Daniloff assert
that the funds could be recouped only through the redemption
procedure prescribed by the Subscription Agreement.
Further, Daniloff’s misrepresentation to Bloomfield is
made clear by the fact that, contrary to his representation,
Daniloff immediately began using the funds once the transfer
from Bloomfield was completed, the funds were used without
Bloomfield’s

authorization,

and

the

$25

million

was

not

actually transferred to a segregated bank account at ING Bank,
over which Bloomfield was to have signatory authority.
2. Intent to Deceive
Second, Bloomfield proved that Daniloff had an intent to
deceive.

This

intent

is

evinced

from

the

events

that

transpired upon Bloomfield’s transfer of the $25 million to
Daniloff via the Synergy Hybrid Fund. Bloomfield established
at trial that despite the parties’ Original Agreement which
provided that the $25 million would be transferred to a
33

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 34 of 81

separate account at ING Bank and that the funds would remain
untouched

unless

Bloomfield

expressly

authorized

the

transaction, once the funds were cleared for use on December
22, 2011, Daniloff immediately began dispensing with the
money without Bloomfield’s knowledge.
At trial, Bloomfield presented evidence that once the
Synergy

Hybrid

Fund

received

the

$25

million

unblocked,

Daniloff immediately directed his team to wire roughly $10
million to a UMG bank account at SberBank, pay fees owed to
Apex, the Synergy Hybrid Fund’s administrator, and to ED
Capital, of which Daniloff is the sole owner and manager, and
hold the remaining funds in the Synergy Hybrid Fund’s account
at HSBC Bank. At no point were the funds transferred to the
ING Bank account that the parties had set up to hold the money
in escrow. And at no point did Daniloff apprise Bloomfield
that the funds were being used in this manner.
That Daniloff intended to deceive is also apparent when
considering the emails between Webb, on behalf of Bloomfield,
and

Daniloff

in

which

Daniloff

continued

to

withhold

information from Bloomfield, namely that he had already begun
using the funds. The emails showed that Webb believed the
funds were transferred or would be transferred to the ING
Bank

account

as

agreed,

and
34

Daniloff

affirmed

that

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 35 of 81

understanding.

Additionally,

though

several

years

later,

Daniloff attempted to eliminate Bloomfield as a signatory to
the DHB Bank account, which would permit Daniloff to use the
money

without

Daniloff’s

authorization.

attempt

to

remove

Bloomfield
its

only

signatory

learned

control

of

when

contacted by a representative of DHB Bank, and not from
Daniloff

himself,

further

evincing

an

ongoing

intent

to

deceive Bloomfield.
The Court does not find Daniloff’s argument that he had
no intent to deceive persuasive. At trial, Daniloff attempted
to explain that he lacked an intent to deceive because his
use of the proceeds was pursuant to and consistent with the
Subscription Agreement. However, shortly after Bloomfield
transferred the proceeds to the Synergy Hybrid Fund, Daniloff
reorganized the fund into the Synergy Hybrid Feeder Fund (for
which no subscription agreement signed by Bloomfield exists).
Daniloff regularly over-valued his investment fund, which
allowed him, through ED Capital, to acquire higher management
and performance fees annually. Daniloff also allegedly made
extravagant purchases of luxury vehicles for himself and
family members. Even if, as Daniloff contends, Bloomfield’s
understanding of their arrangement as a loan agreement was
mistaken,

Daniloff

consistently
35

failed

to

correct

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 36 of 81

Bloomfield’s supposedly mistaken belief about the nature of
the funds and how they would be used, despite being regularly
made aware of their beliefs over the course of nearly four
years. Further, as explained below (see infra Section II.B),
even if Daniloff’s use of the $25 million was aligned with
the Subscription Agreement, the Subscription Agreement was
not

the

operative

agreement

that

governed

the

parties’

relationship.
Thus,

Daniloff

expectations

about

was

how

fully

the

aware

proceeds

of

would

Bloomfield’s
be

used,

yet

immediately began spending the money to pay for various
expenses unrelated to UMG, without Bloomfield’s knowledge and
consent, and in contravention of the Original Agreement.
Daniloff

also

regularly

withheld

information

about

or

misrepresented entirely the whereabouts of the proceeds and
how they would be handled. Accordingly, the Court finds that
Daniloff had a present intent to deceive Bloomfield into
transferring $25 million through the Synergy Hybrid Fund in
order to allow Daniloff to dispense of the funds in a manner
contrary to the Original Agreement.
3. Reasonable Reliance
Third, Bloomfield has demonstrated that its reliance on
Daniloff’s

misrepresentations
36

was

reasonable.

Determining

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 37 of 81

reasonable reliance is a “fact-intensive” inquiry. Schlaifer
Nance & Co. v. Est. of Warhol, 119 F.3d 91, 98 (2d Cir. 1997).
“Courts in this [D]istrict ‘consider the entire context of
the transaction, including factors such as its complexity and
magnitude, the sophistication of the parties, and the content
of any agreements between them.’” Sothebys, Inc. v. Thut, No.
21 Civ. 6574, 2022 WL 3351534, at *11 (S.D.N.Y. July 28,
2022), report and recommendation adopted, No. 21 Civ. 6574,
2022 WL 3354674 (S.D.N.Y. Aug. 12, 2022) (quoting Emergent
Cap. Inv. Mgmt., LLC v. Stonepath Grp., Inc., 343 F.3d 189,
195 (2d Cir. 2003)); see also JP Morgan Chase Bank v. Winnick,
350 F. Supp. 2d 393, 406 (S.D.N.Y. 2004) (“New York takes a
contextual view, focusing on the level of sophistication of
the

parties,

information

the

relationship

available

at

the

between
time

of

them,
the

and

the

operative

decision.”). However, “[a] plaintiff cannot close his eyes to
an obvious fraud, and cannot demonstrate reasonable reliance
without making inquiry and investigation if he has the ability,
through ordinary intelligence, to ferret out the reliability
or

truth

about”

the

defendant’s

conduct.

Crigger

v.

Fahnestock & Co., Inc., 443 F.3d 230, 234 (2d Cir. 2006).
Bloomfield

argues

that

its

reliance

was

reasonable

because Daniloff’s rationale for using the Synergy Hybrid
37

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 38 of 81

Fund as a “conduit” made sense to Reuben, who had routinely
entered into large-scale deals in Russia on “oral agreements
alone.” (Pl. Pre-Trial MOL at 6.) Also, at trial, Reuben
testified

that

he

relied

on

Orkin’s

recommendation

that

Daniloff was a trustworthy person and Orkin’s guarantee that
he would monitor the transaction. Daniloff contends that
Bloomfield’s reliance on Daniloff’s representations was not
justifiable because Reuben is a sophisticated businessman,
and

“where

sophisticated

businessmen

engaged

in

major

transactions enjoy access to critical information but fail to
take

advantage

of

that

access,

New

York

courts

are

particularly disinclined to entertain claims of justifiable
reliance.” (Def. Pre-Trial MOL at 6-7 (quoting Grumman Allied
Indus., Inc. v. Rohr Indus., Inc., 748 F.2d 729, 737 (2d Cir.
1984)).)

Daniloff

further

argues

that

the

Subscription

Agreement and PPM expressly contemplate that the funds would
be used as an investment by disclosing the responsibility and
assumption

of

risk

investors

had

with

respect

to

their

investments.
The

Court

concludes

that

Bloomfield’s

reliance

on

Daniloff’s representations was justifiable when viewed in the
context of the entire transaction. Daniloff made a convincing
proposal to Reuben that transferring the funds through the
38

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 39 of 81

Synergy Hybrid Fund would show equity on the books of UMG,
allowing Daniloff to acquire additional loans and protect
Reuben’s identity in Russia so that he would not be targeted
by other Russian banks to be a guarantee. Further, Daniloff
did not dispute Bloomfield’s understanding that the transfer
of

the

money

through

the

Synergy

Hybrid

Fund

was

“for

visibility purposes” -- for optics -- and the proceeds would
not sit in the fund. (Pl. Ex. 12.) And, though the agreement
was an oral one, it was consistent with the types of oral
transactions and handshake agreements Reuben had entered into
before in Russia, a circumstance confirmed by Saydam at
trial. 8
Additionally, the Court considers the close personal and
familial relationship between the parties involved as another
factor demonstrating that Reuben’s reliance was justifiable
in that they were not merely working together at an arm’s
length.

That

a

plaintiff

has

a

“‘long-standing

close,

personal relationship’ with the individual who allegedly made
fraudulent

statements,

as

opposed

to

an

‘arms

length

relationship between client and service provider . . . may
well bolster the [plaintiff’s] . . . argument that [his] . . .
8 Saydam provided credible testimony that Reuben regularly entered into
oral loans, amounting to roughly 20 loan agreements to date, with an
estimated $3.5 billion loan portfolio. (See Tr. at 599:13-600:9.)

39

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 40 of 81

reliance was reasonable.’” Abbey v. 3F Therapeutics, Inc.,
No. 06 Civ. 409, 2011 WL 651416, at *7 (S.D.N.Y. Feb. 22,
2011), aff’d sub nom. Abbey v. Skokos, 509 F. App’x 92 (2d
Cir.

2013)

(alterations

in

original)

(quoting

Parsons

&

Whittemore Enter. Corp. v. Schwartz, 387 F. Supp. 2d 368, 374
(S.D.N.Y. 2005)).
The Court finds here that Bloomfield, via Reuben and
Orkin,

and

Daniloff

had

a

uniquely

close

and

personal

relationship. Reuben was introduced to Daniloff through Orkin,
who shared cultural ties with Daniloff and treated Daniloff
like family because Daniloff was childhood best friends with
Orkin’s son-in-law, Bendersky. Though Reuben did not have a
previous

relationship

with

Daniloff,

Reuben

had

a

long-

standing and ongoing business relationship with Orkin that
dated back to the 1990s. Orkin worked for various Reubenaffiliated companies, and Reuben had previously entrusted
Orkin with a “difficult job” in Taiwan which he performed
“very well,” by executing all of their commitments, and in
turn establishing a deeper trust. (Tr. at 8:16-25.) Reuben
thus placed great trust and confidence in Orkin when he
considered
further

getting

vouched

involved

for

in

Daniloff

Daniloff’s
as

“a

project.

family

Orkin

member,”

and

promised that they would work on this project together. (Id.
40

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 41 of 81

at

18:20-21.)

Reuben

also

testified

that

upon

meeting

Daniloff in person in 2011, he found Daniloff to be capable
and trustworthy, and considered inviting Daniloff to work on
Reuben’s own projects. 9 Since Daniloff first pitched his UMG
project to Reuben in 2011, Daniloff, Reuben, Orkin, and other
representatives of both parties communicated frequently and
consistently over the course of years, and met regularly in
different parts of the world to discuss the UMG project and
the

loan.

10

The

Court

thus

finds

that

the

family-like

relationship and cultural ties among the various parties made
Reuben’s

dealing

with

Daniloff

at

an

arm’s

length

more

challenging, and gave Reuben reason to trust and rely on
Daniloff’s oral promises.
Further, the Court finds that Bloomfield’s reliance on
Daniloff’s misrepresentations was reasonable because Daniloff
behaved

as

arrangement

though
was

the

aligned.

parties’
Since

understanding

the

beginning

of
of

the
their

relationship until the Netherlands litigation began in 2015,

Saydam testified that Reuben “really trusted Elliot [Daniloff], really,
really, really trusted, until extremely, extremely late” and that Reuben
viewed Daniloff as “a younger version of himself.” (Tr. at 511:16-17,
511:20-21.)
9

Shortly before the Netherlands injunction, in June 2015, Reuben emailed
Daniloff demanding that his money be returned. Appealing to his and
Reuben’s close relationship, Daniloff replied, “You told me that I should
call you or come to you like a father for [] help if I needed” (Pl. Ex.
154 at 24321), further evincing the familial nature of their relationship.
10

41

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 42 of 81

the parties exchanged numerous emails and held multiple inperson

and

phone

conversations

about

the

original

loan

arrangement. Notably, Daniloff characterized his discussions
with

Bloomfield

as

“unsuccessful

attempts

to

correct

[]

Reuben’s unfounded belief that he or Bloomfield made a loan
to [] Daniloff.” (Def. Pre-Trial MOL at 9.) However, neither
the testimony nor the evidence presented at trial supports
Daniloff’s contentions. For example, after the money was
transferred, when Bloomfield, through its representatives,
emailed Daniloff about his repayment obligation or opening a
bank account with Bloomfield as a signatory, Daniloff at no
point represented that their understanding was incorrect, and
instead

affirmed

their

understanding

or

took

actions

consistent with the Original Agreement, such as connecting
Bloomfield with Zalko to set up a bank account with ING Bank.
Despite

Daniloff’s

argument

that

any

reliance

was

unreasonable because Reuben is a “sophisticated businessm[a]n”
(Def. Pre-Trial MOL at 6), the other documents support the
notion that the parties were outwardly aligned with respect
to the arrangement. Though Daniloff offered the MOU signed in
September 2011 to show that no misrepresentation was made
because the money was an “investment,” the Court finds that
the document supports that the money actually operated as a
42

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 43 of 81

loan.

Despite

the

MOU

referring

to

the

money

as

an

“investment,” as the Court discussed earlier, the document
contemplated that Reuben would recover his $25 million over
time and that his shares would be reduced to 25 percent, as
agreed. The document further contemplated that Reuben would
control the money at UMG until his money was fully recovered.
(See Def. Ex. C.) Moreover, that the money was characterized
as

an

“investment”

is

consistent

with

Daniloff’s

representations to Reuben that the funds needed to be shown
as equity on the books of UMG for the purposes of appearances
with banks or regulators.
The Court thus finds that Bloomfield proved reasonable
reliance at trial. This is true in light of Reuben’s prior
practices of foregoing business formalities such as putting
a loan agreement in writing, the more intimate nature of the
parties’ relationship, Bloomfield’s request for assurances,
and Daniloff’s subsequent representations to Bloomfield and
concrete

steps

taken

indicating

that

both

parties

were

operating pursuant to the terms of the Original Agreement.
4. Damages
Lastly,
Daniloff’s

Bloomfield

suffered

misrepresentations

and

damages
deceptions.

because

of

Bloomfield

argues that it can recover for fraudulent inducement because
43

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 44 of 81

Daniloff’s misrepresentations constitute “collateral present
statements

of

fact”

that

would

entitle

it

to

damages

notwithstanding its breach of contract claims. (Pl. Pre-Trial
MOL at 7 (quoting Deerfield Commc’ns. Corp. v. ChesebroughPonds, Inc., 502 N.E.2d 1003, 1004 (N.Y. 1986)).) Daniloff
counters that Bloomfield suffered no damages because Daniloff
did not make any misrepresentations upon which Bloomfield
detrimentally relied.
The Court disagrees and finds that Bloomfield did suffer
damages because of Daniloff’s fraudulent inducement. Relying
on Daniloff’s misrepresentations regarding the use of the
Synergy

Hybrid

Fund

and

the

enforceability

of

the

Subscription Agreement, Bloomfield transferred $25 million to
the Synergy Hybrid Fund under the impression that the money
constituted a loan that would be subject to Bloomfield’s
control and repaid within two years. Instead, by reason of
Daniloff’s

intentional

deceptive

maneuvers,

Bloomfield

unknowingly lost any control over the money because it was
out of its reach in the Synergy Hybrid Fund, and Daniloff,
contrary to the terms of the Original Agreement, spent a
substantial

portion

of

the

authorization.

44

funds

without

Bloomfield’s

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 45 of 81

Despite Bloomfield accommodating Daniloff by considering
alternative repayment plans and extending deadlines, the loan
has not been fully repaid. In all, Bloomfield was repaid only
$2 million in May 2015 and $4.5 million in December 2016,
leaving an outstanding amount of $18.5 million. Bloomfield
has established that it suffered damages in the amount of
$18.5 million and related interest on account of Daniloff’s
fraudulent inducement.
Bloomfield seeks both compensatory and punitive damages
in this matter, and the Court finds that both are appropriate.
With respect to compensatory damages, however, as Bloomfield
will be adequately compensated for the loss it suffered
through its breach of contract claims (see infra Section II.B),
the Court will not award duplicative compensatory damages
stemming from the same transaction.
Bloomfield argues that it is also entitled to punitive
damages for Daniloff’s fraud in the inducement claim. For
this purpose, Bloomfield seeks an amount equivalent to its
compensatory damages because Daniloff’s conduct was “gross,
wanton,

or

willful.”

(Pl.

Pre-Trial

MOL

at

15

(quoting

Langenberg v. Sofair, No. 03 Civ. 8339, 2006 WL 3518197, at
*5 (S.D.N.Y. Dec. 7, 2006)).) In New York, punitive damages
are generally not available for ordinary breach of contract
45

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 46 of 81

cases. See Rocanova v. Equitable Life Assur. Soc. of U.S.,
634 N.E.2d 940, 943 (N.Y. 1994). However, such damages are
recoverable “where the breach of contract also involves a
fraud

evincing

a

‘high

degree

of

moral

turpitude’

and

demonstrating ‘such wanton dishonesty as to imply a criminal
indifference to civil obligations,’” and “the conduct was
‘aimed at the public generally.’” Id. (quoting Walker v.
Sheldon, 178 N.E.2d 497, 499 (N.Y. 1961)); see also id. at
498-99 (noting that punitive damages may be recovered where
the fraud is “aimed at the public generally, is gross and
involves high moral culpability”).
Though New York courts have articulated a public aim
requirement, Bloomfield argues that it need not prove that
Daniloff’s conduct harmed the general public to be awarded
punitive damages and that it need only prove that Daniloff’s
conduct was gross, wanton, or willful because the contractual
relationship between the parties began at the same time as
the fraudulent inducement. See Langenberg, 2006 WL 3518197,
at *5.
Courts in this District have considered circumstances in
which a public aim showing is not required to support an award
of punitive damages. In Langenberg, which Bloomfield relies
upon, the plaintiff alleged that the defendant breached a
46

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 47 of 81

contract

and

defrauded

the

plaintiff

by

making

material

misrepresentations about “his personal, professional, and
educational background, as well as the reasons that he wished
to control [the plaintiff’s] investment portfolio.” Id. at
*3. As a result of the defendant’s misrepresentations, the
plaintiff relied on the statements and allowed the defendant
to control her assets, causing her to lose a substantial
amount of money. See id. The court determined that punitive
damages was appropriate without requiring public harm because
the New York Court of Appeals in Rocanova contemplated the
public harm requirement only in cases where the tort arises
directly from an existing contractual relationship. See id.
at *4. In Langenberg, the parties did not have a prior
contractual relationship until the plaintiff was fraudulently
induced to enter into one. See id.
The Langenberg court also cited several cases by courts
in this District analyzing the public aim requirement. For
example, in Jones v. Dana, the court did not require a public
harm when awarding punitive damages to a plaintiff where the
defendant lied about her status as a financial advisor and
history

of

success

in

order

to

obtain

control

over

the

plaintiff’s inheritance. See No. 06 Civ 159, 2006 WL 1153358,
at *26 (S.D.N.Y. May 2, 2006). The court found that even
47

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 48 of 81

without showing a public harm, a “very high threshold of moral
culpability

[was]

satisfied”

because

the

defendant

“took

advantage of the plaintiff” who was recently widowed and acted
“under the guise of being [the p]laintiff’s friend and trusted
advisor[,] and then repeatedly covered up her actions so that
they would not be discovered by [p]laintiff,” warranting an
award of punitive damages. Id.
The Langenberg Court also distinguished Topps v. Cadbury
Stani S.A.I.C., 380 F. Supp. 2d 250, 266 (S.D.N.Y. 2005),
another case in this District that assessed the public aim
requirement for punitive damages. See 2006 WL 3518197, at *4.
In Topps, the court required proof of a public wrong in a
fraudulent inducement claim because the plaintiff’s claim
that it was fraudulently induced to amend an agreement, thus
engendering the tort claim, arose “directly from a twentyeight year contractual relationship.” 380 F. Supp. 2d at 266.
These
punitive

cases
damages

are

instructive

here.

As

in

to

the

Langenberg,

imposition

of

Daniloff

and

Bloomfield did not have a prior long-standing contractual
relationship

at

the

time

Daniloff

fraudulently

induced

Bloomfield to making the $25 million loan through the Synergy
Hybrid Fund. Instead, Orkin, who considered Daniloff family,
introduced Reuben to Daniloff. Orkin and Reuben likewise had
48

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 49 of 81

a close relationship, which thus blurred the lines resulting
in the parties dealing in closer proximity than at an arm’s
length. Taking advantage of this new relationship, Daniloff
fraudulently induced Bloomfield to transfer the loan proceeds
through the Synergy Hybrid Fund for optics, and to sign the
Subscription Agreement in order to effectuate that transfer
pursuant to the parties’ oral loan agreement. By transferring
the $25 million into the Synergy Hybrid Fund, Bloomfield lost
any control it had over the funds, while Daniloff in turn had
unfettered access to the money. Daniloff’s immediate use of
a substantial portion of the $25 million, which he had agreed
with Bloomfield would remain untouched unless Reuben provided
his

express

intended

to

authorization,
fulfill

his

indicates

obligations

that
and

Daniloff
sought

to

never
take

Bloomfield’s money without consent.
Having

considered

the

nature

of

the

parties’

relationship, the considerable amount of money at issue, and
Daniloff’s repeated deception and failures to return the
funds

over

the

course

of

years

despite

his

constant

representations to do so, the Court finds that Daniloff’s
conduct was indeed gross, wanton, and willful. Moreover, the
Court

considered

that

Daniloff

used

the

funds

for

unauthorized purposes immediately upon their transfer to him
49

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 50 of 81

without the consent or knowledge of Bloomfield. With this
money in his investment fund, Daniloff also repeatedly overvalued his fund, which resulted in higher administrative and
management fees paid out to his company and himself. As the
fraudulent inducement did not arise out of a long-standing
relationship, and, indeed, Daniloff sought to leverage the
newness and misplaced trust of his relationship with Reuben,
the Court agrees with Bloomfield that a public harm showing
is not required. Accordingly, the Court finds that an award
of punitive damages in this action is warranted.
Though Bloomfield is entitled to punitive damages, the
Court finds that punitive damages in an amount equivalent to
the compensatory damages, as requested by Bloomfield, is
excessive. Compensatory damages “are intended to redress the
concrete loss that the plaintiff has suffered by reason of
the defendant’s wrongful conduct.” State Farm Mut. Auto. Ins.
Co. v. Campbell, 538 U.S. 408, 415 (2003). Punitive damages,
on the other hand, “serve a broader function.” Id. Such
damages primarily aim “to punish the defendant and to deter
him and others from similar conduct in the future.” Vasbinder
v. Scott, 976 F.2d 118, 121 (2d Cir. 1992). While the amount
of a punitive damages award should be adequate to achieve
those objectives, it “should not be so high as to result in
50

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 51 of 81

the

financial

ruin

of

the

defendant.”

Id.

And

though

compensatory and punitive damages strive to serve different
purposes, in reality, significant overlap exists. 11 As the
Supreme Court noted in State Farm, “compensatory damages[ ]
already contain [a] punitive element.” 538 U.S. 408, 426
(2003); see also Roginsky v. Richardson-Merrell, Inc., 378
F.2d 832, 841 (2d Cir. 1967) (“Many awards of compensatory
damages doubtless contain something of a punitive element,
and more would do so if a separate award for exemplary damages
were eliminated.”). This is especially so in cases where the
compensatory damages award takes into consideration “damages
for severe injuries that cause the victim acute distress, and
arouse public anger and indignation.” TVT Records v. Island
Def Jam Music Grp., 279 F. Supp. 2d 413, 424 (S.D.N.Y. 2003).
Thus, compensatory damages awards “may reflect some element
of

relief

that

duplicates

harm

redressed

by

punitive

remedies, in particular when a compensatory verdict fully
redresses an injury.” Id. at 450.

See generally Andrew W. Marrero, Punitive Damages: Why the Monster
Thrives, 105 GEO. L.J. 767, 789 (2017) (“In practice, compensatory damages
embody elements and purposes that considerably overlap with the functions
and effects of punitive damages. In some circumstances, substantial
compensatory damages, as perceived either from the motive of the plaintiff
in commencing the litigation, or the impact a verdict of liability has on
the defendant, inherently contain a retributive component that operates
to inflict punishment and serve as deterrence in a manner not materially
different from the effects of punitive damages.”).
11

51

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Bloomfield relies on Koch v. Rodenstock, No. 06 Civ.
6586, 2012 WL 5844187 (S.D.N.Y. May 9, 2012), to argue for
punitive damages in an amount equivalent to the compensatory
damages. Koch, however, involved compensatory damages of only
$311,486. The court in Koch further cited multiple cases where
the punitive damages were a fraction of the compensatory
damages

and

remarked

that

“[w]here

higher

compensatory

damages have been awarded, the courts have more typically set
punitive damages awards at lesser amounts.” Id. at *12.
The Court agrees that where compensatory damages are
particularly substantial, in order to avoid double punishment
of

the

wrongdoer,

a

lower

punitive

damages

award

is

appropriate. Here, the compensatory damages amount to $18.5
million plus prejudgment interest (see infra Section II.B),
which is greater than the figures at issue in the cited cases
by

orders

of

representations

magnitude.
to

12

While

Bloomfield

were

Daniloff’s
indeed

fraudulent

reckless

and

willful, and though his conduct resulted in a breach of trust
and waste of time and resources, the injury to Bloomfield was

In Langenberg, cited by Bloomfield, the court awarded punitive damages
that was roughly 40 percent of the compensatory damages. See Langenberg,
2006 WL 1153358, at *1 (awarding $1 million in punitive damages where the
compensatory damages amounted to $2,373,066). Similarly, in Jones, the
court awarded punitive damages in the amount of $1 million where the
actual damages amounted to $2,170,973. See Jones, 2006 WL 1153358, at
*26.
12

52

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 53 of 81

chiefly economic. The compensatory damages award would thus
provide full restitution to Bloomfield, and the aspects of an
injury justifying a higher punitive damages award, such as
those intangible, unquantifiable, and exceptional losses not
fully

covered

by

a

compensatory

damages

award,

are

not

entirely present here. Punitive damages that are equal to the
compensatory damages would consequently be disproportionate
to the harm imposed, and the imposition of such a penalty
would seem to be driven by a desire to impoverish or paralyze,
rather than deter, the offender. See TVT Records, 279 F. Supp.
2d

at

452.

Accordingly,

the

Court

finds

that

given

the

substantial award of compensatory damages at $18.5 million,
a punitive damages award of $1 million would adequately serve
the

purposes

subjecting

of

Daniloff

retribution
to

and

duplicative

deterrence,
punishment.

without

Thus,

the

Court finds that Bloomfield is entitled to punitive damages
of $1 million for its fraudulent inducement claim.
B.

BREACH OF THE
MODIFICATION
Bloomfield

ORIGINAL

argues

that

AGREEMENT
Daniloff

AND

NOVEMBER

breached

both

26
the

Original Agreement and the November 26 Modification, which
constitute existing and enforceable contracts. To establish
breach of contract under New York law, “a plaintiff must prove,
by a preponderance of the evidence, (1) the existence of a
53

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 54 of 81

contract between itself and [the] defendant; (2) performance
of the plaintiff’s obligations under the contract; (3) breach
of the contract by [the] defendant; and (4) damages to the
plaintiff caused by [the] defendant’s breach.” Oquendo v. CCC
Terek, 111 F. Supp. 3d 389, 411 (S.D.N.Y. 2015) (internal
quotation marks omitted) (quoting Diesel Props S.r.l. v.
Greystone Bus. Credit II LLC, 631 F.3d 42, 52 (2d Cir. 2011)).
Based on the evidence presented at trial, the Court finds
that

Bloomfield

established

that

Daniloff

breached

the

Original Agreement, which is a valid enforceable contract,
and

the

November

26

Modification,

which

constitutes

a

modification of the Original Agreement, and that Bloomfield
is therefore entitled to damages.
1. Existence of a Contract
a. The Original Agreement
First, the Court finds that Bloomfield established that
the Original Agreement constituted a valid oral contract
between Bloomfield and Daniloff. In New York, contracts may
be entered into orally. See Winston v. Mediafare Ent. Corp.,
777 F.2d 78, 80 (2d Cir. 1985) (applying New York law).
However, an oral agreement may not be enforced “unless there
is a manifestation of mutual assent sufficiently definite to
assure that the parties are truly in agreement with respect
54

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 55 of 81

to all material terms.” Anderson v. Greene, 774 F. App’x 694,
697

(2d

Cir.

2019)

(internal

quotation

marks

omitted)

(quoting Kelly v. Bensen, 58 N.Y.S.3d 169, 172 (N.Y. App. Div.
2017)); see also Compania Sud-Americana de Vapores, S.A. v.
IBJ Schroder Bank & Tr. Co., 785 F. Supp. 411, 428 (S.D.N.Y.
1992)

(noting

that

courts

consider

“the

objective

manifestations of the intent of the parties as gathered by
their expressed words and deeds” to determine existence of an
oral contract). To determine whether the parties intended to
be bound by an oral agreement, the Second Circuit considers:
“(1) whether a party expressly required the agreement be in
writing to be enforceable; (2) partial performance of the
contract; (3) whether the parties agreed to all of the alleged
contract terms; and (4) whether the agreement at issue is the
type

of

contract

that

is

usually

written.” Optionality

Consulting Pte. Ltd. v. Nekos, No. 18 Civ. 5393, 2019 WL
4523469, at *4 (S.D.N.Y. Sept. 18, 2019) (citing Ciaramella
v. Reader’s Digest Ass’n, Inc., 131 F.3d 320, 323 (2d Cir.
1997)).
At trial, Bloomfield demonstrated that neither party
required

the

enforceable
agreement

Original
and

written

Agreement

deliberately
down.

be

decided

Reuben
55

to

in
not

testified

writing
to

to

have

credibly

be
the

that

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 56 of 81

Daniloff did not want the agreement in writing out of concern
that Reuben’s name on the loan would attract the attention of
guarantors and regulators, making it difficult for UMG to
obtain additional loans from banks. This concern was one of
the reasons Bloomfield ultimately agreed to channel the loan
proceeds through the Synergy Hybrid Fund so that, for public
perception purposes, the money would appear instead as an
investment.
Bloomfield

also

proved

through

testimony

and

email

evidence that the parties partially performed the contract.
For example, Reuben, via Bloomfield, transferred the $25
million to Daniloff, which was completed on December 22, 2011.
Representatives of Bloomfield, such as O’Driscoll, Webb, and
Saydam, coordinated with representatives of Daniloff and UMG
to set up a segregated bank account first at ING Bank and
then at DHB Bank where the $25 million (and later $15 million)
would be held in escrow, subject to Bloomfield’s signatory
control.

Further,

the

terms

of

the

Original

Agreement

required Reuben’s authorization before the funds could be
used, and Daniloff sought permission from Reuben regarding
proposed uses of the funding on multiple occasions. Some of
those

instances

included

the

Dear

Colleagues

email

to

Bloomfield, the reorganization of the Synergy Hybrid Fund on
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March 5, 2012, the request made in July 2012 to convert the
loan into equity, and the proposed use of up to $5 million
for a poultry farm project. Daniloff also discussed and
proposed

various

entirety

of

the

structures
loan,

for

consistent

repaying
with

the

Bloomfield
terms

of

the
the

Original Agreement. As the Court notes below, the existence
of the November 26 Modification, which altered some of the
repayment terms, likewise evinces that some of the provisions
of the agreement had already been performed.
Daniloff also effected partial repayment to Bloomfield.
Although

Daniloff

contends

that

each

repayment

was

a

“redemption,” consistent with the Subscription Agreement and
PPM, the Court finds that Daniloff’s theory lacks credibility.
The amount of $2 million returned to Bloomfield in May 2015
was not based on a valuation of UMG shares, which would be
required for a return on investment pursuant to a redemption.
Nor was Bloomfield required to dilute its interest in UMG to
receive the $2 million repayment. Instead, Daniloff used
Ovester, another investor in the fund, to redeem units of the
fund that would generate proceeds of $2 million. By Bloomfield
selling back to Ovester roughly half of the number of UMG
shares that Ovester had redeemed, Bloomfield was able to
secure

repayment

of

$2

million
57

without

reducing

its

Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 58 of 81

proportion of UMG shares. Thus, despite referring to the
transaction

as

a

“redemption,”

the

$2

million

paid

to

Bloomfield was simply a partial repayment of Bloomfield’s
loan, as it was made by Ovester, not the Synergy Hybrid Feeder
Fund, and was based on the cash amount Daniloff had available,
not on the value of UMG shares. 13
Likewise,

the

$4.5

million

that

Daniloff

repaid

to

Bloomfield on December 2, 2016 was not a “redemption” despite
Daniloff’s attempt to treat it as such. (See Tr. at 445:21446:19.) The $4.5 million amount repaid to Bloomfield was
made pursuant to an escrow agreement as a result of settling
the

Netherlands

litigation.

In

short,

according

to

this

agreement, UMG would pay Bloomfield $3 million and undergo a
restructuring. If these conditions were not met by the agreedupon date, $4.5 million would be released to Bloomfield.
Because Bloomfield was not paid by the deadline and the
extended deadline, Daniloff paid Bloomfield in the amount of
$4.5

million.

Though

this

payment

was

represented

as

a

“redemption” in the financial statements for the Synergy

Though Ernest Israilov, a relative of Daniloff’s, was the director of
Ovester, Bloomfield established at trial that Daniloff had effective
control over Ovester, allowing Daniloff to propose this mechanism to repay
Bloomfield.

13

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Funds, the evidence presented at trial does not support that
characterization.
The Court also finds that the parties agreed to all of
the terms of the contract, establishing a meeting of the minds.
Reuben, Saydam, and Orkin credibly and consistently testified
at trial that the terms of the Original Agreement included
that Reuben would provide $25 million as a loan to Daniloff
that would be repaid in approximately two years, that Reuben
would receive 50 percent of UMG shares as security for the
loan, which would be reduced to 25 percent upon full repayment,
that the loan would be held at a segregated bank account over
which Bloomfield would have signatory authority, and that any
use

of

the

loan

proceeds

would

require

Bloomfield’s

authorization. These terms were also memorialized in multiple
emails beginning in 2011 when Bloomfield and Daniloff first
entered into the agreement and well into 2015, when litigation
began. Though the precise details regarding the mechanics of
the repayment varied throughout the years, the essential
terms remained constant. Bloomfield also presented emails at
trial in which Daniloff attempted to amend the terms of the
Original Agreement, attempts that were immediately rejected
by Bloomfield. Daniloff’s efforts to change the terms of the

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agreement demonstrate that he was aware of and had agreed to
the original terms.
Further, even if there was any ambiguity regarding the
terms of the Original Agreement, which the Court does not
find there to be, certain terms were again memorialized in
the modification signed on November 26, 2014 in Moscow. The
November

26

Daniloff’s

Modification,

obligation

to

discussed
repay

a

below,

$25

million

reiterated
loan

to

Bloomfield.
Finally, the Court finds that the type of contract here
is not always written down, especially when involving bonds
of

personal

relationships

of

family,

close

friends,

and

business associates. Not infrequently, such oral agreements
are closed by handshakes rather than by written and dated
signatures.

Reuben

testified

credibly

that

in

his

many

dealings in Russia, he operated strictly on oral agreements,
and that despite relying on oral agreements, his loans were
invariably repaid.
The Court does not find credible Daniloff’s argument
that the Subscription Agreement and the corresponding PPM
were

the

operative

agreements

governing

the

parties’

relationship and that an oral loan agreement did not exist.
At trial, Daniloff failed to present credible or compelling
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evidence indicating the operative feature of the Subscription
Agreement that served to govern the parties’ relationship and
the specific financial transaction they entered into. While
the

Court

recognizes

that

the

parties

executed

the

Subscription Agreement, the agreement was both collateral to
and not integrated into the original arrangement, and was
never intended to take effect.
In New York, “[a]lthough parol evidence may not be
admitted to contradict, vary, add to, or subtract from the
terms of a written agreement, such evidence is admissible to
show that ‘a writing, although purporting to be a contract,
is, in fact, no contract at all.’” Salzstein v. Salzstein,
894 N.Y.S.2d 510, 512-13 (N.Y. App. Div. 2010) (quoting Dayan
v. Yurkowski, 656 N.Y.S.2d 689, 690 (N.Y. App. Div. 1997));
see also Paolangeli v. Cowles, 617 N.Y.S.2d 936, 938 (N.Y.
App. Div. 1994) (“[T]he parol evidence rule does not bar the
admission of parol evidence to show that what appears to be
a contractual obligation is, in fact, no obligation at all.”)
(internal quotation marks and citation omitted).
Further, where a contract lacks a merger or integration
clause, a court may examine “extrinsic evidence to prove the
nature of their mutual promises.” Starter Corp. v. Converse,
Inc., 170 F.3d 286, 295 (2d Cir. 1999). In such instances, in
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New York, “the court must determine whether the agreement is
integrated ‘by reading the writing in [] light of surrounding
circumstances,

and

by

determining

whether

or

not

the

agreement was one which the parties would ordinarily be
expected to embody in the writing.’” Bourne v. Walt Disney
Co., 68 F.3d 621, 627 (2d Cir. 1995) (quoting Braten v.
Bankers Trust Co., 456 N.E.2d 802, 804 (N.Y. 1983)). The Court
must thus consider “‘the type of transaction involved, the
scope of the written contract’ and the content of any other
agreements

asserted.”

Bourne,

68

F.3d

at

627

(quoting

Fogelson v. Rackfay Constr. Co., Inc., 90 N.E.2d 881, 883
(N.Y. 1950)).
Here, the Court does not find that the Subscription
Agreement

and

the

PPM

were

“intended

to

take

effect.”

Salzstein, 894 N.Y.S.2d at 513 (citing Dayan, 656 N.Y.S.2d at
690). While the Subscription Agreement was executed to allow
the $25 million to be put in the Synergy Hybrid Fund, that
fund was to act only as a conduit so the Bloomfield money
could then be transferred to a siloed bank account over which
Bloomfield would have signatory authority.
The circumstances surrounding the writing, the email
evidence,

and

the

witnesses’

testimony

confirm

that

the

parties entered into the Subscription Agreement to effectuate
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Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 63 of 81

the

terms

supersede

of

the

the

Original

Original

Agreement,

Agreement.

and

was

Rather,

not

the

meant

evidence

persuasively demonstrated that the Subscription Agreement was
meant as a means of securing the “visibility” or optics of
the

transaction

that

was

actually

embodied

in

the

oral

Original Agreement. (See Tr. at 145:4-15.)
As discussed above, both parties acted consistently
with

the

terms

of

the

Original

Agreement

and

partially

performed the contract, and often that conduct was in direct
contravention of the principles of equity financing. For
example, Daniloff conceded at trial that an investor normally
does not manage or control his investment in a fund, and
instead assumes the risk inherent in investment decisions.
(See Tr. at 485:16-24.) Here, however, Daniloff regularly
sought

permission

and

authorization

from

Reuben

directly

regarding how the money would be used, giving Reuben the power
to

reject

proposed

fundamentally

uses

inconsistent

of

the

with

funds.
financial

Such

conduct

principles

is
and

practices associated with capital investments. Moreover, the
MOU that was signed by the parties in or before September
2011, also provided that Reuben would control the money he
was supposed to provide to UMG, despite the MOU referring to

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the money as an “investment.” (Def. Ex. C; see Tr. at 487:617.)
Additionally, the actual repayments made to Bloomfield
were

not

true

“redemptions”

in

accordance

with

equity

financing principles. At trial, Saydam recounted only one
instance

in

Bloomfield
process,

December
could

which

testified

that

be

2014,

when

partially

Bloomfield
after

Daniloff

repaid

promptly

the

via

suggested
the

rejected.

Netherlands

that

redemption
Saydam

litigation

also

began,

Daniloff’s June 22, 2015 email to Bloomfield was the first
time he asserted that the Subscription Agreement controlled
the parties’ relationship. However, even after Daniloff sent
that

email

to

Bloomfield,

he

behaved

as

though

he

were

obligated to repay Bloomfield the $25 million in full. Though
Daniloff

contends

that

the

$2

million

and

$4.5

million

payments that Bloomfield ultimately received constituted a
return on investment pursuant to the redemption process,
those amounts were not true redemptions as they were not based
on a valuation of UMG shares and Bloomfield’s proportion of
shares remained unchanged.
Also, Daniloff reorganized the Synergy Hybrid Fund into
the Synergy Hybrid Feeder Fund in January 2012, causing
Bloomfield’s shares to be held in the new fund. However,
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Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 65 of 81

Daniloff

failed

to

present

evidence

demonstrating

that

Bloomfield executed a subscription agreement for the Synergy
Hybrid Feeder Fund, creating doubt as to what effect, if at
all, the Subscription Agreement for the Synergy Hybrid Fund
had on the $25 million, besides allowing the initial transfer
into that investment fund.
Accordingly,

the

Court

finds

that

the

Subscription

Agreement and its corresponding PPM are not freestanding
binding contracts governing the parties’ relationship and
underlying $25 million transaction. Thus, the Court concludes
that

the

Original

Agreement,

Agreement,

constitutes

a

and

not

valid,

the

Subscription

enforceable

contract

applicable in this action.
b. The November 26 Modification
Bloomfield alleges that Daniloff breached the November
26 Modification, which it argues is a separate, enforceable
contract.

Daniloff

counters

that,

on

the

contrary,

the

November 26 Modification is not a contract that is binding on
the parties because there was no meeting of the minds, and
the document was merely a term sheet that contemplated further
negotiation.

The

Court

Modification

did

not

finds

that

constitute

a

the

November

separate

26

contract

independent of the Original Agreement but was instead a
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Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 66 of 81

modification

of

the

Original

Agreement,

which

Daniloff

subsequently breached.
In New York, “parties may modify a contract ‘by another
agreement, by course of performance, or by conduct amounting
to a waiver or estoppel.’” Dallas Aerospace, Inc. v. CIS Air
Corp., 352 F.3d 775, 783 (2d Cir. 2003) (quoting CT Chems.
(U.S.A.) Inc. v. Vinmar Impex, Inc., 613 N.E.2d 159, 162 (N.Y.
1993)). Generally, a valid contractual modification “must
satisfy

each

element

of

a

contract,

including

offer,

acceptance, and consideration.” O’Grady v. BlueCrest Cap.
Mgmt. LLP, 111 F. Supp. 3d 494, 502 (S.D.N.Y. 2015), aff’d,
646 F. App’x 2 (2d Cir. 2016) (citing Beacon Terminal Corp.
v. Chemprene, Inc., 429 N.Y.S.2d 715, 718 (N.Y. App. Div.
1980)). Additionally, “[t]he course of conduct must evince a
meeting of the minds in order to modify the [a]greement.”
O’Grady, 111 F. Supp. 3d at 502.
Moreover, a modification or amendment to a contract
“establishes

a

new

agreement

between

the

parties

which

supplants the affected provisions of the underlying agreement
while

leaving

the

balance

of

its

provisions

unchanged.”

Baraliu v. Vinya Cap., L.P., No. 07 Civ. 4626, 2009 WL 959578,
at *4 (S.D.N.Y. Mar. 31, 2009) (internal quotation marks

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Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 67 of 81

omitted) (quoting Benipal v. Herath, 674 N.Y.S.2d 815, 816
(N.Y. App. Div. 1998)). 14
Here, the Court finds that the November 26 Modification
constituted, at minimum, a valid modification of the oral
Original Agreement. The November 26 Modification is a signed,
handwritten document consisting of seven distinct clauses,
numbered from “0” to “6” that provides a concrete repayment
plan, connected to, but with some terms absent from, the
Original Agreement. (See Pl. Ex. 103.) Daniloff and Zalko, on
behalf of Daniloff, and Orkin, Bendersky, Saydam, and Gould,
on behalf of Bloomfield, were present in Moscow to discuss
the terms of this agreement, draft it, and sign it. The
November 26 Modification, which was signed by all parties in
attendance, outlined how Daniloff would repay the $25 million
loan -- the underlying assumption upon which the parties were
operating. Specifically, the document indicated that Daniloff
would take the $25 million amount from a UMG bond drawdown,
allowing Bloomfield to be repaid roughly by December 15, 2014.
This repayment would be achieved through a “back-to-back”

In New York, “subsequent contracts ‘regarding the same subject matter
supersede[] the prior contract,’ even if there is no express termination,
and even if the subsequent contract lacks an integration or merger clause.”
Alessi Equip., Inc. v. Am. Piledriving Equip., Inc., 578 F. Supp. 3d 467,
502 (S.D.N.Y. 2022) (alterations in original) (quoting Indep. Energy Corp.
v. Trigen Energy Corp., 944 F. Supp. 1184, 1195 (S.D.N.Y. 1996)).
14

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loan, and Daniloff would deposit the payment from UMG in a
bank account at DHB Bank in the Netherlands, over which
Bloomfield would have signatory control. (See id.) Saydam
testified at trial that Daniloff determined and suggested the
general structure of this repayment plan so that he could
“fulfill his obligations towards” Reuben. (Tr. at 544:1-9.)
The exact mechanics of repayment were not included in the
Original Agreement, so the Court is persuaded that the parties
sought

to

provide

those

details

through

modification

to

reflect the changed circumstances since the parties shook
hands on Original Agreement.
Based on the evidence presented at trial, both the
Original Agreement and the November 26 Modification involved
the same transaction of $25 million loan transferred from
Bloomfield to Daniloff, and the November 26 Modification
provided a new date of December 15, 2014 for the repayment
deadline, waiving its previous deadline of December 2013, 15
The Court finds that the November 26 Modification effectively waived
the deadline for repayment imposed by the Original Agreement by
establishing a new repayment date of December 15, 2014. In New York, “[a]
party may, by words or conduct, waive a provision in a contract or
eliminate a condition which was inserted for [its] benefit.” Am. Railcar
Indus., Inc. v. GyanSys, Inc., No. 14 Civ. 8533, 2017 WL 11501888, at *5
(S.D.N.Y. Nov. 14, 2017), aff’d, 764 F. App’x 57 (2d Cir. 2019)
(alterations in original and internal quotation marks omitted) (quoting
Oleg Cassini, Inc. v. Couture Coordinates, Inc., 297 F. Supp. 821, 830
(S.D.N.Y. 1969)). Further, New York courts have “held that a party, by
acquiescence or failure to pursue rights diligently under a time of the
essence provision, eliminates or waives the provision as a term or implied
term of the contract.” Am. Railcar Indus., 2017 WL 11501888, at *5
15

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and outlined steps for effectuating repayment of the loan
provided.
Further, as the November 26 Modification was written and
signed by the party to be bound, it did not require new
consideration to constitute a valid modification. See Stralia
Mar. S.A. v. Praxis Energy Agents DMCC, 431 F. Supp. 3d 366,
371 (S.D.N.Y. 2019) (noting that a modification to a valid
contract does not require “additional consideration if the
modification is ‘in writing and signed by the party against
whom it is sought to enforce the change [or] modification’”)
(quoting N.Y. Gen. Oblig. Law § 5–1103).
However, the parties dispute whether they intended to be
bound

by

this

document.

To

determine

whether

a

binding

contract or modification exists, a court must look to the
intention of the parties, specifically “the parties’ intent
to be bound.” Kreiss v. McCown DeLeeuw & Co., 37 F. Supp. 2d
294, 299 (S.D.N.Y. 1999) (citing R.G. Grp., Inc. v. Horn &
Hardart Co., 751 F.2d 69, 74 (2d Cir. 1984)). The contracting
parties are “free[] to determine the exact point at which an

(internal quotation marks omitted) (quoting Gould v. Bantam Books, Inc.,
No. 83 Civ. 5121, 1984 WL 684, at *4 (S.D.N.Y. 1984)). The Court finds
that Bloomfield did not pursue its legal rights between the end of
December 2013 and the execution of the November 26 Modification, and
instead it imposed a new deadline for repayment pursuant to the November
26 Modification. Thus, the operative deadline for Daniloff’s repayment of
the loan became December 15, 2014.

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agreement becomes binding.” Kreiss, 37 F. Supp. 2d at 299.
And “it is the intent of the parties that will determine the
time of contract formation.” Winston, 777 F.2d at 80; see
also Pues Fam. Tr. Ira v. Parnas Holdings Inc., 677 F. App’x
4, 5 (2d Cir. 2017) (finding that under New York law, “[t]he
nature of [a loan] obligation depends upon the parties’
intention”)

(alterations

in

original)

(quoting

Brewster

Transit Mix Corp. v. McLean, 565 N.Y.S.2d 316, 316 (N.Y. App.
Div. 1991)). However, “if either party communicates an intent
not to be bound until he achieves a fully executed document,
no amount of negotiation or oral agreement to specific terms
will result in the formation of a binding contract.” Winston,
777 F.2d at 80 (citing R.G. Grp., 751 F.2d at 74).
At trial, Daniloff testified on cross examination that
the November 26 Modification was “a list of discussion points”
and not a binding agreement to repay Reuben. (Tr. at 438:517.) He contended that this agreement was not binding on the
parties because of the presence of the open term in Clause 6,
“Dan[’s] Role sale/equity financial control” annotated with
“Terms 2B proposed and agreed,” which the Court recognizes is
unequivocally an open term. (Pl. Ex. 103.)
Though a document may contain an open term, “the mere
fact of open terms will not permit [the parties] to disavow
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it.” Tchrs. Ins. & Annuity Ass’n of Am. v. Tribune Co., 670
F. Supp. 491, 502 (S.D.N.Y. 1987). “The fact that countless
pages of relatively conventional minor clauses remained to be
negotiated does not render the agreement unenforceable.” Id.
at 501; see also Shann v. Dunk, 84 F.3d 73, 79 (2d Cir. 1996)
(“[A] court should consider the broad framework of a contract
in determining whether missing terms are actually essential
-- that is, necessary to make the agreement legally binding.”).
Further, such disputed terms “are not to be considered in
isolation, but in the context of the overall agreement.”
Tribune

Co.,

670

F.

Supp.

at

500.

To

determine

the

enforceability of an open term, courts consider “expression[s]
of intent,” id. at 499, “the context of the negotiations,”
id. at 500, the nature of the open terms, see id. at 501-02,
and “partial performance,” id. at 502.
Here, despite the presence of the open term, the Court
finds that the November 26 Modification is binding because
the parties intended it to be so. At trial, Saydam testified
that the purpose of the meeting in Moscow on November 26,
2014, was to “[i]ron out all the details on how [Reuben would]
get repaid” (Tr. at 536:2) after months of unproductive
discussions with Daniloff to develop repayment structures.
Saydam testified that the terms were written down in order
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“[t]o

have

a

clear,

clear,

undeniable

written

agreement

set . . . that will tell [them] how [they] are going to
proceed.” (Id. at 536:24-537:1.)
Clauses 0 through 5 clearly establish the terms of the
agreement expressing repayment of the loan, how Bloomfield
would be repaid, and by when. The open term in Clause 6
specifically concerned the role of Dan Gould, a banker who
had been hired by Daniloff at Bloomfield’s request. Orkin and
Bendersky, who were present at the meeting, declared in their
affidavits that they intended the document to be binding on
the parties, and that the role of Gould was minor compared to
the main purpose of the agreement, which was to establish how
Daniloff would repay Bloomfield. (See Bendersky Decl. ¶¶ 2224; Orkin Decl. ¶¶ 28-29.)
At

trial,

Saydam

affirmed

that

the

primary

dispute

regarding Gould’s role was largely immaterial to the crux of
the modification which was repayment of the $25 million loan.
Gould was included in the November 26 Modification because he
would act as the financial controller of the transaction after
repayment had been achieved to ensure the success and survival
of UMG given that Bloomfield was expected to still retain 25
percent

control

of

the

company.

According

to

Saydam,

Daniloff’s main issue with Gould’s role concerned the amount
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of compensation he would receive, which resulted in the
parties writing “Terms 2B proposed and agreed.” (Pl. Ex. 103.)
As Bloomfield established at trial, the open term did
not undermine the remaining provisions listed in the November
26 Modification. (See Tr. at 540:20-22.) Gould’s role was not
material or critical to enforcing the other terms because the
parties expected repayment in “less than a month” following
the November meeting in Moscow. Because Gould’s role would
become relevant “mostly subsequent to repayment” (Id. at
539:3-7), it did not comprise the “guts of the deal,” Shann,
84 F.3d at 78, and concretizing this term would not be
necessary to make the document legally binding.
After

the

modification

had

been

signed

by

all

in

attendance in the meeting, Daniloff made no representations
to Saydam or others in Reuben’s party that the November 26
Modification was not binding. (See Tr. at 546:20-22.) Further,
the

parties

took

steps

consistent

with

the

November

26

Modification following that meeting. For example, in order to
effectuate the terms of the agreement, the parties needed to
follow the “Know Your Customer,” or KYC procedure at DHB Bank,
which required that Daniloff’s passport be certified by the
U.S. embassy. Daniloff emailed Saydam that he scheduled an
appointment with the embassy, which indicated that he was
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following DHB Bank’s protocol in order to effectuate the
deposit of the repayment amount into DHB Bank, consistent
with the back-to-back loan noted in Clause 1 of the November
26 Modification. (See id. at 547:3-24; Pl. Ex. 108 at 3178.)
Additionally,

on

December

11,

2014,

Reuben

emailed

Daniloff to confirm that Daniloff “agreed and will transfer
25 m[illion] dollars that was taken by [him] from the escrow
account,” reaffirming that Reuben is not an “investor in the
fund” and that he was supposed to “get paid back within two
years.” (Pl. Ex. 107.) Daniloff responded, “I understand your
position very well and support it” and that he would return
the $25 million to Bloomfield. (Id.) Daniloff also sent an
email

on

January

1,

2015,

referencing

the

November

26

Modification as “the transaction as agreed in Moscow” and
that “all parts of the agreement in Moscow must be completed.”
(Pl. Exs. 104, 122.) Further, Daniloff acknowledged the terms
of the November 26 Modification (and the Original Agreement)
when he proposed to Orkin that he return $15 million instead
of the $25 million, a suggestion that Reuben promptly rejected.
Daniloff’s conduct following the Moscow meeting, and
the parties’ partial performance of the contract modification
indicate that the November 26 Modification was not merely a
list of discussion points but a binding modification of the
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oral Original Agreement that governed the parties’ conduct
and the underlying $25 million transaction. Thus, the Court
concludes that Bloomfield established that the November 26
Modification constitutes a binding, enforceable modification
to the Original Agreement.
2. Bloomfield’s Performance and Daniloff’s Breach
The Court finds that Bloomfield has proved the remaining
elements for breach of the oral Original Agreement and the
subsequent

modification

in

the

form

of

the

November

26

Modification. Having proven the existence of a contract in
the form of the Original Agreement and a valid modification,
Bloomfield has established that Bloomfield fully performed
pursuant to the contract because it transferred the $25
million

loan

specified

in

to

the

entity

accordance

and

with

by
the

the

process

parties’

Daniloff

agreement.

Bloomfield also took steps to set up a bank account first at
ING Bank and then at DHB Bank over which it would have
signatory authority.
Bloomfield likewise established that Daniloff breached
the contract by failing to repay the $25 million loan first
by the end of 2013 and then by the new repayment date of
December 15, 2014 pursuant to the November 26 Modification,
and by failing to obtain Reuben’s authorization when he used
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Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 76 of 81

this money. Despite Bloomfield’s extensions on repayment,
Daniloff has failed to repay the $25 million loan in full.
3. Damages
The Court finds that Bloomfield has established damages
because as of the date of this Decision and Order, Daniloff
has not fully repaid the loan, causing damage to Bloomfield.
In New York, “damages for breach of contract should put the
plaintiff in the same economic position he would have occupied
had the breaching party performed the contract.” Oscar Gruss
& Son, Inc. v. Hollander, 337 F.3d 186, 196 (2d Cir. 2003).
As Bloomfield has established breach of contract, it “is
entitled to recover compensatory damages, i.e., an amount
which will restore the plaintiff to the same economic position
she would have held but for the breach.” Langenberg, 2006 WL
3518197, at *3 (citing Topps, 380 F. Supp. 2d at 261).
Bloomfield provided $25 million to Daniloff as a loan
and expected the full amount to be repaid. On May 15, 2015,
Daniloff

caused

a

partial

repayment

of

$2

million

to

Bloomfield. Then, on December 2, 2016, Daniloff partially
repaid Bloomfield $4.5 million. Having repaid a total of $6.5
million to Bloomfield, Daniloff now owes $18.5 million to
make Bloomfield whole.

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Under New York law, “a plaintiff who prevails on a claim
for breach of contract is entitled to prejudgment interest as
a matter of right” pursuant to N.Y. C.P.L.R. Sections 5001
and 5002. U.S. Naval Inst. v. Charter Commc’ns, Inc., 936
F.2d

692,

698

(2d

Cir.

1991).

“An

award

of

prejudgment

interest is principally intended to compensate an aggrieved
party for the wrongful deprivation of the use of its money.”
Quintel Corp., N.V. v. Citibank, N.A., 606 F. Supp. 898, 914
(S.D.N.Y. 1985) (citing Rolf v. Blyth, Eastman Dillon & Co.,
Inc., 637 F.2d 77, 87 (2d Cir. 1980)). The interest is
calculated “from the earliest ascertainable date the cause of
action
“[w]here

existed.”
.

.

.

N.Y.

damages

C.P.L.R.
were

§ 5001(b).

incurred

at

Further,

various

times,

interest shall be computed upon each item from the date it
was

incurred

or

upon

all

of

the

damages

from

a

single

reasonable intermediate date.” Id. Such interest is awarded
at a rate of nine percent per annum pursuant to N.Y. C.P.L.R.
Section 5004. See Turner Const. Co. v. American Mfrs. Mut.
Ins. Co., 485 F. Supp. 2d 480, 490 (S.D.N.Y. 2007).
Bloomfield argues that the earliest ascertainable date
is January 1, 2014 because the loan was scheduled to be repaid

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Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 78 of 81

by the end of 2013. 16 The Court does not agree with Bloomfield
that the interest should accrue from January 1, 2014. The
parties

executed

the

November

26

Modification,

which

effectively modified the terms of the Original Agreement,
waiving the requirement that Daniloff repay the loan by the
end of 2013 and resetting the deadline to December 15, 2014.
Therefore, the breach of contract claim became actionable on
December 16, 2014, when Daniloff failed to repay the loan by
December 15, 2014. (See Pl. Ex. 103.)
Accordingly, the statutory prejudgment interest should
be calculated from December 16, 2014 to the date of this
Decision and Order, adjusted to the amounts remaining due on
the loan. Specifically, the prejudgment interest shall be
calculated as a statutory nine percent per annum interest on
$25 million from December 16, 2014 until May 15, 2015; a nine
percent per annum interest on $23 million from May 16, 2015
until December 2, 2016; and a nine percent per annum interest
on $18.5 million from December 3, 2016 to the date of this
Decision and Order.

In New York, the statute of limitations for a breach of contract claim
is six years. See N.Y. C.P.L.R. § 213(2). The limitations period begins
to run when the cause of action accrues, which is at the time of breach.
See N.Y. C.P.L.R. § 203(a); El-Cruikshank Co., Inc. v. Bank of Montreal,
615 N.E.2d 985, 986 (N.Y. 1993).
16

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Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 79 of 81

Further,

Bloomfield

seeks

and

is

entitled

to

post-

judgment interest on the full judgment amount 17 at the rate
prescribed by 28 U.S.C. Section 1961(a) from the date of this
Decision and Order, as calculated by the Clerk of Court. See
28 U.S.C. § 1961(a) (“Interest shall be allowed on any money
judgment in a civil case recovered in a district court.”);
Cappiello v. ICD Publications, Inc., 720 F.3d 109, 112 (2d
Cir. 2013) (holding that “under § 1961, federal district
courts must apply the federal rate of post-judgment interest
to judgments rendered in diversity actions”).
Accordingly,

Bloomfield

has

proven

its

breach

of

contract claims and is thus entitled to compensatory damages
in the amount of $18.5 million plus prejudgment interest
according to the calculation set forth above, and postjudgment interest on the full judgment amount pursuant to 28
U.S.C. Section 1961(a).
C.

PROMISSORY ESTOPPEL AND UNJUST ENRICHMENT
Bloomfield argues, in the alternative, that even if the

Original Agreement and the November 26 Modification are not
enforceable

contracts,

Bloomfield

can

recover

under

the

The Court notes that the full judgment amount to which post-judgment
interest applies includes punitive damages. See Koch v. Greenberg, 14 F.
Supp. 3d 247, 287 (S.D.N.Y. 2014), aff’d, 626 F. App’x 335 (2d Cir. 2015)
(“The postjudgment amount upon which the interest accrues includes
compensatory damages, punitive damages, and fee awards.”).
17

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Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 80 of 81

doctrines

of

promissory

estoppel

and

unjust

enrichment.

Promissory estoppel and unjust enrichment are both quasicontract claims that arise “in the absence of any agreement.”
Goldman v. Metro. Life Ins. Co., 841 N.E.2d 742, 746 (N.Y.
2005). In New York, a party may not recover under quasicontract claims “if the parties have a valid, enforceable
contract that governs the same subject matter” as the quasicontract claims. Mid-Hudson Catskill Rural Migrant Ministry,
Inc. v. Fine Host Corp., 418 F.3d 168, 175 (2d Cir. 2005).
As the Court has determined that the Original Agreement
is

a

valid

enforceable

contract

and

the

November

26

Modification is a valid modification, both of which were
breached, the Court need not reach these claims.
III.

ORDER

For the reasons stated above, it is hereby
ORDERED that judgment shall be entered in favor of
plaintiff

Bloomfield

Investment

Resources

Corporation

(“Bloomfield”) against defendant Elliot Daniloff (“Daniloff”)
on Bloomfield’s fraudulent inducement and both breach of
contract

claims

in

the

amount

of

$18.5

million

for

compensatory damages plus prejudgment interest calculated at
a rate of nine percent per annum on $25 million from December
16, 2014 until May 15, 2015; nine percent per annum on $23
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Case 1:17-cv-04181-VM-SLC Document 108 Filed 05/23/23 Page 81 of 81

million from May 16, 2015 until December 2, 2016; and nine
percent per annum on $18.5 million from December 3, 2016 to
the date of this Decision and Order; $1 million in punitive
damages; and post-judgment interest on the full judgment
amount at the rate prescribed by 28 U.S.C. Section 1961(a)
from the date of this Decision and Order, as calculated by
the Clerk of Court; and it is further
ORDERED that within seven (7) days of the date of this
Decision and Order, Bloomfield shall submit a proposed order
of judgment that includes a calculation of its damages,
prejudgment interest, and a provision for the imposition of
post-judgment interest as detailed above; and it is further
ORDERED that Bloomfield may submit an application for
reasonable attorneys’ fees and costs pursuant to Rule 54(d)
of the Federal Rules of Civil Procedure no later than June 6,
2023. Daniloff may respond to the application no later than
June 13, 2023. And Bloomfield may file a reply no later than
June 20, 2023.

SO ORDERED.
Dated:

23 May 2023
New York, New York

81

_________________________
Victor Marrero
U.S.D.J.