GGC International Limited v. Ver
Filing
45
OPINION AND ORDER re: 29 MOTION to Dismiss the Third-Party Complaint. filed by Michael Moro, 36 MOTION to Dismiss the Third-Party Complaint. filed by Barry Silbert, Digital Currency Group, Inc..For these reasons, Moro 039;s and the DCG Defendants motions are granted. Vers Third-Party Complaint is dismissed without prejudice. Because the Third-Party Complaints relation to ongoing bankruptcy proceedings provided the basis for this actions removal from state court, s ee Dkt. 1 10-16, Ver and GGCI are directed to file simultaneous letter briefs within one week of this Opinion and Order, advising the Court as to their views on whether this action should be remanded to state court. See Bailey v. AHB Mgmt. Corp., No . 22 Civ. 7316 (CBA), 2023 WL 4552462, at *3 (E.D.N.Y. 2023) (remanding to state court after the dismissal of a third-party complaint because the remaining parties "are non-diverse parties" and the remaining claims "are state-law claims" and thus [t]here is no independent basis for federal subject matter jurisdiction). The Clerk of Court is respectfully directed to close Docket Numbers 29 and 36.SO ORDERED. (Signed by Judge John P. Cronan on 1/29/2025) (jca)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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GGC INTERNATIONAL LIMITED,
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Plaintiff,
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-v:
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ROGER VER,
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Defendant.
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ROGER VER,
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Counterclaim-Plaintiff,
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-v:
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GGC INTERNATIONAL LIMITED,
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Counterclaim-Defendant. :
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ROGER VER,
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Third-Party Plaintiff,
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-v:
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BARRY SILBERT, et al.,
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Third-Party Defendants.
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24 Civ. 1533 (JPC)
OPINION AND ORDER
JOHN P. CRONAN, United States District Judge:
Third-Party Plaintiff Roger Ver (“Ver”) brings claims for fraud against Third-Party
Defendants Barry Silbert (“Silbert”), Digital Currency Group, Inc. (“DCG,” and together with
Silbert, the “DCG Defendants”), and Michael Moro (“Moro”). Ver alleges that Silbert, DCG, and
Moro intentionally misrepresented the financial condition of several interrelated cryptocurrency
trading companies, including Plaintiff and Counterclaim-Defendant GGC International Limited
(“GGCI”), leading Ver to remain invested in GGCI’s derivatives products. Moro and the DCG
Defendants both move to dismiss Ver’s Third-Party Complaint under Federal Rules of Civil
Procedure 8, 9(b), and 12(b)(6). For the following reasons, the motions are granted.
I. Background 1
A.
Facts
1. DCG and the Genesis Entities
DCG owns and operates various cryptocurrency businesses. TP Compl. ¶ 31. As alleged,
“[d]uring the Relevant Period,” 2 DCG “controlled the . . . key hiring decisions, business strategy,
and budget” of a group of affiliated businesses known as the “Genesis Entities.” Id. ¶ 33.
Although the Third-Party Complaint does not clearly allege which businesses are the “Genesis
Entities,” that term appears to refer to Genesis Global Holdco (“Genesis Holdco”), Genesis Global
Capital (“Genesis Global”), and GGCI. See id. ¶ 5. The Third-Party Complaint contains the
following organizational chart of the Genesis Entities, as well as other affiliated businesses, id. at
8:
1
The following facts, which are assumed true for purposes of this Opinion and Order, are
taken from the Third-Party Complaint, Dkt. 1-17 (“TP Compl.”). See Interpharm, Inc. v. Wells
Fargo Bank, Nat’l Ass’n, 655 F.3d 136, 141 (2d Cir. 2011) (explaining that on a motion to dismiss
pursuant to Rule 12(b)(6), the court must “assum[e] all facts alleged within the four corners of the
complaint to be true, and draw[] all reasonable inferences in plaintiff’s favor”).
2
The Third-Party Complaint does not define the term “Relevant Period,” but the Court
assumes that this term refers to June 2022 and July 2022, which is when the alleged
misrepresentations are said to have occurred. See TP Compl. ¶¶ 2, 6-7.
2
DCG marketed the Genesis Entities collectively as a premier institutional cryptocurrency
and financial services company. Id. ¶ 32. DCG also marketed Genesis Global, which is the “direct
parent of GGCI,” as its leading lending desk with billions of dollars in cryptocurrency loan
originations. Id. GGCI “was formed simply to conduct the same operations as Genesis Global,
focusing instead on international clients.” Id. ¶ 34.
The Genesis Entities “operated as a single entity during the Relevant Period,” sharing
officers, capital, offices, IT infrastructure, and back-office functions. Id. ¶ 23. DCG and the
Genesis Entities shared IT infrastructure and DCG had direct access to the Genesis Entities’ books
and records. Id. ¶ 33. Silbert was the CEO, founder, and beneficial owner of DCG during the
Relevant Period, id. ¶ 17, while Moro “served as the CEO or its functional equivalent of the
Genesis Entities, as well as their non-party affiliates, from at least February 2, 2021, through
August 17, 2022,” id. ¶ 18. In particular, Moro was the CEO of both GGCI and Genesis Global,
3
and was the signatory for GGCI on a number of documents. Id. ¶ 35. The Third-Party Complaint
alleges that although GGCI is a British Virgin Islands company, its principal place of business is
in New York City, it has “no real offshore presence,” and is operated from New York “with little
or no separation between itself, Genesis Global, Genesis Holdco, and DCG.” Id. ¶¶ 16, 37.
2. GGCI Begins Trading with Ver
On June 10, 2020, GGCI approached Ver, “a well-known Bitcoin Cash (‘BCH’) proponent,
to trade BCH-based over-the-counter derivatives.” Id. ¶ 38. While Ver was hesitant to entrust
GGCI with significant assets, GGCI proposed that Ver lend his BCH at interest while
simultaneously using the same assets as collateral for derivative contracts with GGCI. Id. ¶¶ 4041. This arrangement induced Ver to trade derivatives with GGCI. Id. ¶ 42.
On June 15, 2020, Ver and GGCI executed a Master Loan Agreement (“MLA”), with Moro
signing the agreement on behalf of GGCI. Id. ¶ 43. On June 22, 2020, Ver and GGCI executed a
Master Confirmation Agreement (“MCA”) to govern their derivative contracts, which agreement
Moro also signed on behalf of GGCI. Id. ¶ 44. The MCA was later amended on July 13, 2020.
Id.
The MCA referenced form agreements from the International Swaps and Derivatives
Association (“ISDA”), which aimed to protect parties in over-the-counter derivatives transactions
against potential issues, like insolvency or misrepresentation. Id. ¶¶ 45-48.
To mitigate counterparty risk in derivatives transactions, one of the ISDA agreements
required the parties to maintain solvency at all times. Id. ¶ 54. This solvency requirement ensured
that Ver could collect from GGCI if his derivative positions were successful, while GGCI could
collect from Ver and foreclose on collateral if needed. Id. ¶ 55. Although the MCA contained
strict collateral requirements for Ver, GGCI did not enforce them and instead allowed Ver and
other customers to maintain undercollateralized positions. Id. ¶¶ 50-52, 59-68. This exposed
4
GGCI to additional risk of becoming insolvent during periods of market illiquidity and stress. Id.
¶ 71.
3. 2022 Market Instability
GGCI would routinely loan out its digital assets to other Genesis entities, including an
affiliated company named Genesis Asia Pacific Limited Pte (“GAP”). Id. ¶¶ 24, 72. GAP, in turn,
loaned those digital assets out, including to Three Arrows Capital Limited (“3AC”), a Singaporebased investment firm that specialized in trading and investing in cryptocurrencies and other digital
assets. Id. ¶¶ 26, 72. In May 2022, digital markets suffered “a steep decline due to the collapse of
digital assets LUNA and TerraUSD, causing significant losses, liquidations, and a snowball effect
of defaults and insolvencies.” Id. ¶ 102. “3AC was central to the crash,” id. ¶ 103, and in June
2022 defaulted on more than $2.3 billion to GAP, id. ¶¶ 2, 73, 103. This “caus[ed] losses to GGCI
as related party loans became impaired.” Id. ¶¶ 73, 109. As alleged, if GGCI was not already
insolvent, 3 it now “was insolvent as a result of 3AC’s inability to repay GAP before the end of
May 2022.” Id. ¶ 110.
In early June 2022, GGCI “devised a plan to strengthen its balance sheet.” Id. ¶ 121. This
plan was to “persuade its biggest clients, including Ver, to roll currently profitable options expiring
that June to later dates, thereby allowing GGCI to avoid making payments,” while simultaneously
“allow[ing] Ver’s currently unprofitable June options to expire, thereby bringing funds into
3
The Third-Party Complaint contains additional allegations that GGCI became insolvent
in 2021 as a result of overexposure to illiquid digital assets called FTT tokens, the value of which
was overinflated by FTX International Limited (“FTX”) and Alameda Research LLC
(“Alameda”). See TP Compl. ¶¶ 27-28, 87-101. Because the alleged misrepresentations made by
Moro and the DCG Defendants relate only to the 2022 market instability and Ver’s derivative
claims are based on those same 2022 events, the Court will not further discuss these additional
allegations from 2021.
5
GGCI.” Id. ¶ 121. On June 7 and June 11, GGCI asked Ver “to roll his deep in-the-money
Ethereum options to a later date,” and Ver ultimately agreed. Id. ¶¶ 123, 126.
Around this time, unnamed Genesis executives had GAP issue a margin call to 3AC,
demanding additional collateral payments, aware that 3AC would not be able to meet the
requirement. Id. ¶¶ 111, 113, 126. GAP then served a notice of default on 3AC on June 13,
enabling GAP to liquidate the limited collateral it held and pursue emergency relief through
arbitration to “seize further 3AC assets ahead of other creditors.” Id. ¶ 114.
As digital asset prices continued to fall, GGCI requested Ver post additional collateral on
June 13 and June 14. Id. ¶ 128. Ver bought $22.5 million in Bitcoin call options to reduce his
exposure to GGCI. Id. On June 14, “Silbert, on behalf of DCG’s board, instructed Moro and
Genesis ‘to continue aggressively shrinking the loan book and, until such time as we have the right
controls, risk monitoring, etc. in place—and we’re through the winter—. . . to limit the extension
of any new loans to counterparties.’” Id. ¶ 129. Silbert also reported to DCG’s board on the 3AC
default, suggesting that DCG not supply Genesis Global with additional capital to strengthen its
balance sheet. Id. ¶ 130.
On June 15, 2022, the Genesis Entities sent the following tweet (the “Genesis June 15
Tweet”) from their shared Twitter account, which Silbert and DCG both re-tweeted, id. ¶¶ 131-32:
6
Two days later, on June 17, 2022, Moro tweeted the following two tweets (the “Moro June
Tweets”), id. ¶ 134:
Ver alleges that “DCG’s COO reviewed and edited these tweets before Moro posted them,” and
“strategiz[ed] the release of the tweets.” Id. ¶ 135.
From June 16 to June 24, GGCI “continued discussions with Ver about the additional types
of collateral he could offer,” and indicated it would accept Ver’s preferred approach of posting a
combination of digital asset and certain shares in private companies. Id. ¶ 137. But “upon the
expiration of Ver’s out-of-the-money options on June 24,” Genesis executives demanded Ver
immediately provide 100% of the collateral in either US dollars or “Reference Currency,” meaning
the underlying digital asset being traded in the derivative contract, valued based on its mark-tomarket value, or else Ver would face a notice of default. Id. ¶¶ 49-50, 139. Ver alleges that GGCI
“knew Ver was not expecting to be required to pay the full sum of collateral in US dollars or
Reference Currency on that day,” as “GGCI had never required him to do [so] during their two
year relationship.” Id. ¶ 140. Ultimately, GGCI “offered to accept Ver’s digital assets and shares
7
as collateral, but only if he over-collateralized his position” by 300% if Ver paid in digital assets
or 600% if Ver paid in private shares. Id. ¶ 141.
Due to this request, “Ver began to suspect GGCI’s insolvency,” and subsequently
requested on a June 25 call that GGCI show proof of solvency. Id. ¶¶ 142-144. Also on June 25,
Silbert messaged DCG personnel, “[w]e just can’t allow people inside or outside [to] question
Genesis’ solvency,” in direct response to Ver having just done so. Id. ¶ 145. Ver alleges that
“GGCI was insolvent on June 25 and was therefore unable to provide Ver with proof of its
solvency.” Id. ¶ 147; see id. ¶ 148 (“GAP had just lost its bid to freeze 3AC assets in the emergency
arbitration hearing on June 21. At the very latest, GAP should have written down their impaired
3AC loans by such date, which would have resulted in GGCI also writing down any related party
loans with GAP.”).
On June 27 and June 28, Moro emailed DCG and Genesis Global executives, including
Silbert, discussing balance sheet and liquidity management. Id. ¶¶ 149-150. On June 28, “after
Ver had informed GGCI that he was not comfortable sending any further collateral without proof
of GGCI’s solvency,” GGCI provided the following “unaudited point in time financial statement”
known as a “statement of financial condition” as of June 20 (the “June 20 SOFC”), id. ¶ 152:
8
After Ver’s representatives sent GGCI and Genesis Global employees questions regarding
the firms’ finances, an unnamed employee of both GGCI and Genesis Global responded on June
30. Id. ¶¶ 154-155. The Third-Party Complaint alleges that, “[a]t the direction of Moro, Silbert
and the Genesis Entities,” this employee “made a number of representations[],” including that
GGCI had hedged its exposure to digital assets and that it “was business as usual,” despite the
market instability. Id. ¶ 155.
“Faced with an apparently solvent GGCI . . . Ver saw no choice but to keep his remaining
positions open at GGCI and cooperate with it . . . until his remaining options expired, unless and
until he was presented with evidence of its insolvency.” Id. ¶ 156. But according to Ver, “the
June 20 SOFC was an accounting farce,” as GGCI’s digital assets were “worth far less” than the
statement represented. Id. ¶ 157. To address this reality, “GGCI entered into discussions with its
parent companies for an injection of capital to return it to solvency in time for its quarterly
reporting obligations at the end of June.” Id. ¶ 160.
9
4. The DCG Promissory Note
On June 30, 2022, DCG executed an unsecured promissory note (the “DCG Promissory
Note”) payable to Genesis Global in the amount of $1.1 billion. Id. ¶ 164. Silbert signed the
Promissory Note on behalf of DCG, and Moro signed it on behalf of Genesis Global. Id. ¶¶ 165166. The terms of the note include a ten-year duration and a 1% interest rate. Id. ¶ 167. Genesis
Global added the DCG Promissory Note to its balance sheet as an asset worth $1.1 billion, and
injected $151 million into GGCI. Id. ¶¶ 168-169. In an unaudited Statement of Financial
Condition as of June 30 (the “June 30 SOFC”), GGCI recorded this $151 million injection in an
entry listed as “Other assets,” id. ¶ 169:
10
Ver alleges that “the fair market value of the DCG Promissory Note was just a small fraction of
the $1.1 billion face amount,” and therefore “Genesis Global remained insolvent even upon receipt
of the DCG Promissory Note.” Id. ¶ 171. Moreover, as alleged, the fair market value of the $151
million injection was “worth just a fraction of its reported face value” because “its value was
derived from the DCG Promissory Note,” and thus the injection was insufficient to resolve GGCI’s
solvency issue. Id. ¶ 172.
11
On July 6, 2022, Moro released a public statement on Twitter (the “Moro July 6 Tweet”;
together with the Moro June Tweets, the “Moro Tweets”), which confirmed that 3AC had caused
losses to Genesis in June. Id. ¶ 174. But Moro said that “[s]ince then, we worked with [DCG] to
find the optimal strategy to further isolate the risk. DCG has assumed certain liabilities of Genesis
related to this counterparty to ensure we have the capital to operate and scale our business for the
long term.” Id. (emphasis omitted). Ver alleges that “DCG’s COO and Head of Communications
edited and helped draft these tweets. Silbert reviewed these tweets before Moro posted them.” Id.
¶ 175. Ver alleges that this statement was “misleading” because DCG had not “assumed” the 3AC
losses, but had “replaced that liability with an illiquid ten-year Promissory Note.” Id. ¶¶ 176-177.
According to Ver, Genesis Global personnel “grew concerned that Genesis Global had
provided false information to counterparties,” including Ver. Id. ¶ 186. Ver alleges that he “was
misled into believing that GGCI was solvent by the June 20 SOFC and Genesis CEO Moro’s public
statements,” and that he “was thus unable to timely exercise his contractual right to terminate the
ISDA due to GGCI’s violation of the Solvency Requirement.” Id. ¶ 187. Ver also says that
“[f]rom June 21, 2022 up until he discovered GGCI’s insolvency in December 2022, Ver made
payments to GGCI in excess of $60 million and GGCI liquidated a further $50,000,000 in
collateral.” Id. ¶ 188.
5. Ver’s Concerns with GGCI’s Solvency
Ver alleges that the collapse of FTX and Alameda in November 2022 ultimately led him
to question whether GGCI’s representations of solvency were accurate. On December 23, 2022,
“just weeks after Ver made $37 million in collateral payments to GGCI, and just one week before
his options would expire,” Ver reviewed a New York Times interview with Samuel BankmanFried, FTX’s former CEO, who “stated that Alameda had repaid a $2.5 billion loan to ‘Genesis’
that August . . . because Genesis had called in specific loans made to Alameda.” Id. ¶¶ 194-195.
12
Ver “became concerned that GGCI might have been the entity that lent money to Alameda,
potentially affecting GGCI’s present solvency and their solvency in June 2022.” Id. ¶ 196.
As Ver at the time “was considering rolling his expiring December 30 options with GGCI
to a later date, he wanted to be sure GGCI remained solvent before doing so, and wanted to further
confirm they had in fact been solvent that past June when he initially inquired.” Id. ¶ 200. Ver
inquired with GGCI about its solvency in the wake of the FTX and Alameda bankruptcies, and
GGCI responded that it remained solvent and the funds in question had been repaid to another
Genesis entity. Id. ¶¶ 201-203. Ver then “demanded proof of GGCI’s present solvency, and
demanded GGCI provide proof as to how they valued the assets on its June SOFC,” reminding
GGCI that “he had faithfully paid in excess of $60 million in additional collateral since June,
believing it his legal obligation to do so since GGCI remained solvent, including $37 million
dollars in payments just weeks prior.” Id. ¶¶ 204-205. In response, GGCI “produced to Ver its
2021 audited financials, as well as an unaudited SOFC dated June 30, 2022.” Id. ¶ 207. Ver
alleges that both documents contain financial discrepancies. Id. ¶¶ 209-222.
Ver alleges that “[u]ltimately, discussions with GGCI made clear that GGCI hadn’t applied
any discount to the digital assets on its SOFC,” and that “[a]t one point, GGCI personnel even
admitted that they ‘may have been underwater for a few days.’” Id. ¶¶ 229-230. Ver maintains
that “[h]ad GGCI applied appropriate discounts to its digital assets . . . its SOFC would have
revealed its insolvency,” and that “[a]s a result, Ver would have closed his positions to avoid
trading with an insolvent counterparty and saved tens of millions of dollars.” Id. ¶¶ 231-232.
B.
Procedural History
Ver filed his Third-Party Complaint against Silbert, DCG, and Moro in the New York
Supreme Court, New York County, on December 27, 2023. Dkt. 1-17. The Third-Party Complaint
13
contains three counts. Count One asserts a claim for fraud, alleging that “Silbert, Moro, and DCG
crafted and issued a number of misrepresentations through a series of tweets,” identifying four
alleged misrepresentations. TP Compl. ¶ 234. Ver asserts that he “relied, in part, on the public
statements of Moro and Silbert when deciding to continue to maintain his option positions at
GGCI.” Id. ¶ 236. Ver avers that “[h]ad Silbert and Moro accurately represented the financial
condition of the Genesis Entities in their various statements, Ver never would have continued to
make payments to maintain his option positions and would have avoided the loss of additional
collateral by closing out his positions.” Id. ¶ 238.
Count Two asserts a claim for civil conspiracy to commit fraud, stating that “GGCI and
the Genesis Entities made a series of misrepresentations both directly to Ver and in the public with
the intent to lull Ver and others into a false sense of security and remain invested in his open option
positions, despite the fact that they were aware that GGCI and the Genesis Entities were insolvent.”
Id. ¶ 241. Ver alleges that “[t]he Third-Party Defendants and Counter-Defendants 4 combined and
agreed with each other and/or others to defraud Ver by intentionally misrepresenting the solvency
of the Genesis Entities,” and that “[p]ursuant to their agreements, explicit or otherwise, ThirdParty Defendant and Counter-Defendants acted in concert to support their common purpose of
defrauding Ver so that he would maintain his positions with GGCI, despite their insolvency at the
time.” Id. ¶¶ 242-243.
Count Three asserts a claim for aiding and abetting fraud, contending that “CounterDefendants have committed fraud by making intentional misrepresentations with knowledge of
their falsity in an effort to induce Ver to maintain his option positions with GGCI, which he did to
4
The Third-Party Complaint does not define the term “Counter-Defendants,” but the Court
assumes that this refers to Counterclaim-Defendant GGCI.
14
his detriment,” and that the “Third-Party Defendants coordinated with and were aware of the
intentional misrepresentations made to Ver.” Id. ¶¶ 249-250. Ver alleges that “Third-Party
Defendants provided substantial assistance and encouragement, materially contributed to, and
otherwise aided and abetted this fraud by making intentionally misleading and inaccurate
representations to Ver, and the public, regarding the solvency of the Genesis Entities.” Id. ¶ 251.
The Third-Party Defendants were served on January 29, 2024, Dkt. 1 ¶ 9, and on February
28, 2024, Silbert and DCG removed this case to federal court, Dkt. 1. On April 18, 2024, Moro
moved to dismiss the Third-Party Complaint. Dkts. 29, 30 (“Moro MTD”). On May 2, 2024, the
DCG Defendants also moved to dismiss the Third-Party Complaint. Dkts. 36, 37 (“DCG MTD”).
Ver filed his opposition to Moro’s motion on May 16, 2024, Dkt. 38 (“Opp. to Moro MTD”), and
his opposition to the DCG Defendants’ motion on May 30, 2024, Dkt. 39 (“Opp. to DCG MTD”).
Moro filed his reply on June 6, 2024, Dkt. 40 (“Moro Reply”), and the DCG Defendants filed their
reply on June 20, 2024, Dkt. 41 (“DCG Reply”).
II. Legal Standard
Federal Rule of Civil Procedure 8(a)(2) requires a pleading to contain a “short and plain
statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). Rule
8 does not demand “detailed factual allegations,” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555
(2007), but to survive a motion to dismiss pursuant to Rule 12(b)(6), “a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). A claim is
plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. A complaint’s “[f]actual
allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550
15
U.S. at 555. In making that determination, the Court must “accept[] as true the factual allegations
in the complaint and draw[] all inferences in the plaintiff’s favor,” Biro v. Condé Nast, 807 F.3d
541, 544 (2d Cir. 2015), but need not accept “legal conclusions” as true, Iqbal, 556 U.S. at 678.
When a claim sounds in fraud, a complaint must meet the heightened pleading standard of
Federal Rule of Civil Procedure 9(b). Rule 9(b) requires that “a party must state with particularity
the circumstances constituting fraud or mistake,” although “[m]alice, intent, knowledge, and other
conditions of a person’s mind may be alleged generally.” Fed. R. Civ. P. 9(b). In other words,
Rule 9(b) requires pleading the circumstances of the fraud and the defendant’s mental state.
Loreley Fin. (Jersey) No. 3 Ltd. v. Wells Fargo Sec., LLC, 797 F.3d 160, 171 (2d Cir. 2015). To
satisfy this heightened burden, the complaint must “(1) detail the statements (or omissions) that
the plaintiff contends are fraudulent, (2) identify the speaker, (3) state where and when the
statements (or omissions) were made, and (4) explain why the statements (or omissions) are
fraudulent.” Id. (quoting Eternity Glob. Master Fund Ltd. v. Morgan Guar. Tr. Co. of N.Y., 375
F.3d 168, 187 (2d Cir. 2004)). In terms of a defendant’s mental state, the complaint must allege
facts “that give rise to a strong inference of fraudulent intent.” Id. (quoting Lerner v. Fleet Bank,
N.A., 459 F.3d 273, 290-91 (2d Cir. 2006)). Courts view the alleged facts “in their totality, not in
isolation.” Id. (citation omitted).
III. Discussion
A.
Fraud Claim
To state a claim of common law fraud under New York law, a plaintiff must allege “(1) a
material misstatement, (2) known by the perpetrator to be false, (3) made with an intent to deceive,
(4) upon which the plaintiff reasonably relies, and (5) damages.” Quiroz v. Beaverton Foods, Inc.,
No. 17 Civ. 7348 (NGG), 2019 WL 1473088, at *10 (E.D.N.Y. Mar. 31, 2019) (internal quotation
16
marks omitted) (quoting Rotterdam Ventures v. Ernst & Young LLP, 752 N.Y.S.2d 746, 747-48
(3d Dep’t 2002)). For purposes of this Opinion and Order, the Court focuses on the fourth of these
elements, reasonable reliance. 5 “[A] fraud claim requires the plaintiff to have relied upon a
misrepresentation by a defendant to his or her detriment.” Pasternack v. Lab. Corp. of Am.
Holdings, 59 N.E.3d 485, 493 (N.Y. 2016). “[R]eliance does not simply involve a state of mind;
it involves specific action or inaction, and therefore must be pleaded with particularity.” In re
Bear Stearns Cos. Sec., Derivative, & ERISA Litig. (“In re Bear Stearns”), 995 F. Supp. 2d 291,
313 (S.D.N.Y. 2014). 6
Count One advances a fraud claim predicated on “Silbert, Moro, and DCG craft[ing] and
issu[ing] a number of misrepresentations through a series of tweets.” TP Compl. ¶ 234. The ThirdParty Complaint does not specify which tweets the fraud claim is predicated on, but it presumably
is referring to the Genesis June 15 Tweet, which Silbert and DCG both re-tweeted, id. ¶¶ 131-132,
and the Moro Tweets, id. ¶¶ 134-135, 174. While the Third-Party Complaint alleges that the
statements in those tweets were inaccurate in a number of ways, id. ¶ 234 (identifying inaccuracies
in the Genesis June 15 Tweet and Moro Tweets), only two allegations support reliance. First, “Ver
relied, in part, on the public statements of Moro and Silbert when deciding to continue to maintain
5
Although Moro and the DCG Defendants also argue alternate grounds for dismissing
Ver’s fraud claim, see Moro MTD at 9-18; DCG MTD at 9-18, the Court will not pass on those
grounds herein given its conclusion that any allegations of reliance are plainly lacking. Likewise,
the Court does not reach Moro’s alternative argument that Ver disclaimed reliance on
extracontractual representations in the MCA. Moro MTD at 17.
6
The parties assume that Rule 9(b) applies to all elements of the fraud claim. “The Second
Circuit has not yet determined whether Rule 9(b)’s heightened pleading requirement applies to
allegations of reliance in connection with a common law fraud claim.” DoubleLine Cap. LP v.
Odebrech Fin., Ltd., 323 F. Supp. 3d 393, 463 n.16 (S.D.N.Y. 2018). But “[s]everal district courts
in this district and at least one circuit, the Fourth Circuit, have held that a complaint must allege
with particularity that [the plaintiff] actually relied upon the defendant’s supposed misstatements.”
In re Fyre Festival Litig., 399 F. Supp. 3d 203, 216 (S.D.N.Y. 2019) (internal quotation marks
omitted) (collecting cases). The Court agrees with that approach.
17
his option positions at GGCI.” Id. ¶ 236. Second, “[h]ad Silbert and Moro accurately represented
the financial condition of the Genesis Entities in their various statements, Ver never would have
continued to make payments to maintain his option positions and would have avoided the loss of
additional collateral by closing out his positions.” Id. ¶ 238; see Opp. to Moro MTD at 16-17
(citing these two allegations to support reliance).
These allegations are insufficient to plead reliance on the allegedly misleading statements.
Most significantly, Ver’s allegations are “conclusory and generalized to all alleged misstatements”
made by the Third-Party Defendants. In re Fyre Festival Litig., 399 F. Supp. 3d at 216; see Int’l
Fund Mgmt. S.A. v. Citigroup, Inc., 822 F. Supp. 2d 368, 386-87 (S.D.N.Y. 2011) (holding that
“conclusory” allegations are insufficient to support a claim for fraud under New York common
law and misstatements under Section 18 of the Securities Exchange Act). The Third-Party
Complaint is conspicuously lacking in details of “when and how [Ver] relied upon the [challenged]
statement.” In re Fyre Festival Litig., 399 F. Supp. 3d at 217. In fact, as the DCG Defendants
correctly point out, the Third-Party Complaint does not even allege that Ver read or reviewed the
Genesis June 15 Tweet and the Moro Tweets. DCG MTD at 9-10. While it may be a reasonable
inference that Ver read these tweets if he allegedly relied upon them, his failure to advance
particular allegations concerning that review is problematic for pleading reliance, for a number of
reasons.
Assuming Ver read the tweets, the date when he did so is essential to assessing the role that
the content of the tweets, as opposed to other representations made to Ver by GGCI about its
solvency, played in Ver’s ultimate decision to maintain his option positions. See In re Fyre
Festival Litig., 399 F. Supp. 3d at 217 (“Because plaintiffs have not alleged that they knew of [the
allegedly misleading] Tweet, the Court cannot infer that any of their actions, including further
18
expenditure of funds, were made in reliance on [that] Tweet, as opposed to earlier statements that
have been determined to be non-actionable or were made by others.”). This absence of any
allegation concerning Ver’s actual review of the tweets is fatal to his pleading of reliance. See id.
at 216-17 (collecting cases) (“Because there is no assertion that any plaintiff saw, read, or
otherwise noticed [the tweet in question], there is no allegation that there was actual reliance at
all.” (internal quotation marks omitted)); see also id. at 217 (“Broad assertions of reliance on
multiple misstatements covering at least a four-month period of time are insufficient.”).
Ver’s reliance-related allegations also “lack supporting factual matter indicating how [he]
relied on the alleged misrepresentations.” Int’l Fund Mgmt., 822 F. Supp. 2d at 386 (emphasis
added). The Third-Party Complaint challenges the conduct of multiple parties with few specific
factual allegations about any particular party’s misrepresentation and how it impacted Ver’s
decision to maintain his option positions. Underscoring this issue, Ver never ties the allegedly
misleading tweets to any particular decision to post additional collateral or roll his options. See
SRM Glob. Master Fund Ltd. P’ship v. Bear Stearns Cos., 829 F.3d 173, 177-78 (2d Cir. 2016)
(explaining that factual allegations that the plaintiff “relied on the misrepresentations . . . in its
analysis of [the defendant] and in deciding whether it should purchase [the defendant’s] securities”
were not properly pleaded because the plaintiff failed to allege that he “actually purchased or sold
stock, or actually entered into or unwound a swap agreement, in reliance on the defendants’
misrepresentations”); In re Bear Stearns, 995 F. Supp. 2d at 309 (dismissing claims brought under
Section 18 of the Securities Exchange Act where the plaintiff “does not link [his] review of any
particular statements . . . to any actual [transaction] and does not identify a particular transaction
that [he] allegedly made in reliance on the” statement in question). While Ver suggests that all his
trading with GGCI from mid-June 2022 to late December 2022 relied in part on the tweets in
19
question, TP Compl. ¶ 236, he fails to explain why that is the case, especially considering the
highly volatile market conditions at the time. Moreover, by not advancing specific allegations
about how the tweets affected his actions or inactions, Ver has “fail[ed] to provide [the Third-Party
Defendants] notice of when and how [he] relied upon the statement[s].” In re Fyre Festival Litig.,
399 F. Supp. 3d at 217. In short, Ver’s generic assertion that he would have changed his behavior
if events had been different is not sufficient to satisfy the pleading requirements of Rule 9(b).
In his briefs, Ver urges the Court to view these conclusory statements “in light of” Ver’s
“repeated requests for assurances as to GGCI’s solvency and refusal to pay on his contract until
such assurances were provided.” Opp. to DCG MTD at 15-16; see Opp. to Moro MTD at 17
(same). But the Third-Party Complaint contains no allegation linking Ver’s communications with
GGCI to his reliance on Moro’s and the DCG Defendants’ tweets. And to the extent that Ver is
asking the Court to connect these disparate portions of the pleading to draw an inference of reliance
(a request Ver does not explicitly make), these particularized allegations would seem to support
the inference that Ver did not rely on the tweets re-tweeted or sent by Silbert, DCG, and Moro
when deciding to continue trading with GGCI.
Importantly, the Genesis June 15 Tweet and the Moro June Tweets were made on June 15
and June 17. TP Compl. ¶¶ 131, 134. But Ver alleges that he only “began to suspect GGCI’s
insolvency” after GGCI “changed their policy” regarding the collateralization of his options on
June 24. Id. ¶¶ 139-142. The Third-Party Complaint further alleges that Ver’s concerns about
GGCI’s solvency was not assuaged until after GGCI had provided the June 20 SOFC on June 28,
and that a GGCI employee “made a number of representations” about GGCI’s solvency on June
30. Id. ¶¶ 152-156. As alleged, Ver’s decision to keep his remaining positions open with GGCI
and post additional collateral was made at that point, id. ¶ 156—several days before the Moro July
20
6 Tweet concerning the DCG Promissory Note, see id. ¶ 174. Thus, these allegations would all
lead the Court to draw a critically different inference than what Ver desires: it was GGCI’s alleged
misrepresentations, not anything in the Genesis June 15 Tweet or the Moro Tweets, which led Ver
to maintain his positions and post additional collateral. See Terra Sec. Asa Konkursbo v. Citigroup,
Inc., 740 F. Supp. 2d 441, 448 (S.D.N.Y. 2010) (explaining that “[t]o determine, on a motion to
dismiss, whether a plaintiff has alleged reasonable reliance, a court may ‘consider the entire
context of the transaction’” (quoting Emergent Cap. Inv. Mgmt., LLC v. Stonepath Grp., Inc., 343
F.3d 189, 195 (2d Cir. 2003))).
“Simply put, what the [Third-Party] Complaint lacks are factual allegations that indicate
how [Ver] changed
h[is] behavior in response to believing Defendants’ alleged
misrepresentations.” Bocci v. Nationstar Mortg. LLC, No. 23 Civ. 1780 (JPC) (KHP), 2024 WL
4326932, at *13 (S.D.N.Y. Sept. 27, 2024). Thus, dismissal of Count One is appropriate. See,
e.g., SRM Glob. Master Fund Ltd., 829 F.3d at 178 (affirming the dismissal of a fraud claim where
the plaintiff failed to identify “any part of its complaint that adequately alleges reliance on any
misrepresentations”).
B.
Derivative Claims
Count Two alleges that Moro and the DCG Defendants engaged in a civil conspiracy to
commit fraud, while Count Three alleges that these Defendants aided and abetted fraud. See TP
Compl. ¶¶ 240-254. Both claims pertain to Moro and the DCG Defendants allegedly assisting or
conspiring in the intentional misrepresentation of the solvency of the Genesis Entities, including
GGCI. See id. ¶ 242 (“The Third-Party Defendants and Counter-Defendants combined and agreed
with each other and/or others to defraud Ver by intentionally misrepresenting the solvency of the
Genesis Entities.”); id. ¶ 251 (“During all relevant times to this matter, Third-Party Defendants
21
provided substantial assistance and encouragement, materially contributed to, and otherwise aided
and abetted [the Counter-Defendants’] fraud by making intentionally misleading and inaccurate
representations to Ver, and the public, regarding the solvency of the Genesis Entities.”).
As is evident from these allegations, the aiding and abetting claim overlaps with the
conspiracy claim. “In cases in which Plaintiffs’ aiding and abetting claims overlap with their
conspiracy claims, New York courts have allowed the aiding and abetting claims to proceed, but
have dismissed as duplicative the conspiracy claims.” Loreley Fin. (Jersey) No. 3 Ltd. v. Wells
Fargo Sec., LLC (“Lorely”), No. 12 Civ. 3723 (RJS), 2016 WL 5719749, at *8 (S.D.N.Y. Sept.
29, 2016). The Court agrees with the DCG Defendants that the claim for conspiracy is duplicative
of the aiding and abetting claim. DCG MTD at 24. Both claims stem from the same set of facts:
that Moro and the DCG Defendants assisted GGCI in GGCI’s fraud against Ver by concealing its
insolvency, which is the subject of Ver’s counterclaims against GGCI in this case.
In opposing dismissal, Ver argues that “the means by which each was achieved differs
significantly,” because “[t]he aiding and abetting claim is based on the DCG Defendants’ provision
of a sham promissory note, while the conspiracy claim is based on the DCG Defendants’
orchestration of a misinformation campaign designed to mislead customers and conceal GGCI’s
insolvency.” Opp. to DCG MTD at 25. But Ver’s argument does not address how the Third-Party
Complaint pleads these two Counts. Both Counts, as pleaded, concern the same intentional
misrepresentation, see TP Compl. ¶¶ 242, 251, and Ver cannot amend his pleading of those Counts
through unsworn representations of his counsel in opposing the motion to dismiss, see, e.g.,
Peacock v. Suffolk Bus Corp., 100 F. Supp. 3d 225, 231 (E.D.N.Y. 2015). The Court also agrees
with the DCG Defendants, see DCG Reply at 9-10, that, even were these Counts strategically
pleaded so as to cite only to different allegations, the Third-Party Complaint makes clear that the
22
“conspiracy claim[] add[s] no new allegations distinct from those underlying [Ver’s] fraud and
aiding and abetting fraud claim[],” and therefore dismissal of the civil conspiracy claim is
warranted as duplicative of the aiding and abetting claim. Pentacon BV v. Vanderhaegen, 725 F.
Supp. 3d 350, 388-89 (S.D.N.Y. 2024) (internal quotation marks omitted).
Moro’s contention that the aiding and abetting claim also should be dismissed as
duplicative of the fraud claim in Count One fails, however. See Moro MTD at 18-19. Ver’s fraud
claim pertains to the alleged direct misrepresentations made in the challenged tweets, see Opp. to
Moro MTD at 18, while the aiding and abetting claim is premised both on those
misrepresentations, TP Compl. ¶ 251, and the Third-Party Defendants’ coordination of GGCI’s
misrepresentations to Ver concerning GGCI’s solvency, id. ¶¶ 249-250.
Moreover, “as many
federal and state cases have recognized, Plaintiffs may plead aiding and abetting fraud in the
alternative to their underlying fraud claim,” and “New York courts have been particularly reluctant
to dismiss aiding and abetting claims at the pleading stage, so long as plaintiffs do not merely
allege that defendants aided and abetted their own fraud, but rather, premise the aiding and abetting
claims on different conduct.” Loreley, 2016 WL 5719749, at *6 (alterations adopted and internal
quotation marks and citations omitted). Since Ver’s aiding and abetting claim “also allege[s] acts
of substantial assistance that are distinct from the alleged misrepresentations and omissions that
are actionable under [Ver’s] claim for fraud,” it is not impermissibly duplicative with the primary
fraud claim. Id.
This leaves the issue of whether the aiding and abetting claim in Count Three is properly
pleaded. It is not. The elements of an aiding and abetting fraud claim under New York law are
“(1) the existence of a fraud; (2) [Defendants’] knowledge of the fraud; and (3) that [Defendants]
provided substantial assistance to advance the fraud’s commission.” Krys v. Pigott, 749 F.3d 117,
23
127 (2d Cir. 2014) (internal quotation marks omitted). Ver’s pleading of this claim must satisfy
Rule 9(b)’s particularity requirements. See Lerner v. Fleet Bank, N.A., 459 F.3d 273, 292-93 (2d
Cir. 2006).
Assuming arguendo that Ver has a viable fraud claim against GGCI predicated on its
representations to Ver regarding GGCI’s solvency (an issue which is still being litigated), the Court
agrees with Moro and the DCG Defendants that Ver has still failed to plead with particularity an
aiding and abetting claim. The issues here are twofold and mutually reinforcing.
First, the majority of Ver’s allegations regarding Moro’s and the DCG Defendants’
participation in GGCI’s alleged wrongdoing rely on improper group pleading. See In re PlatinumBeechwood Litig., 427 F. Supp. 3d 395, 449 (S.D.N.Y. 2019) (“Generally, to meet the Rule
9(b) . . . pleading standards, more specificity is required than the broad and group-pled allegations
quoted above.”); Moro MTD at 20; DCG MTD at 21. Indeed, as the Court’s factual recitation
supra reflects, the Third-Party Complaint is imprecisely drafted and forces the Court to speculate
about what Ver means by a number of terms, underscoring the group pleading issue. See In re
Platinum-Beechwood Litig., 427 F. Supp. 3d at 449 n.9 (“The fact that the Court has to speculate
on what ‘them’ refers to underscore[s] a problem with this type of broad and grouppled allegations.”). Count Three itself advances no specific allegations concerning any of the
Third-Party Defendants, simply stating that “[d]uring all relevant times to this matter, Third-Party
Defendants coordinated with and were aware of the intentional misrepresentations made to Ver,”
and “Third-Party Defendants provided substantial assistance and encouragement, materially
contributed to, and otherwise aided and abetted this fraud by making intentionally misleading and
inaccurate representations to Ver, and the public, regarding the solvency of the Genesis Entities.”
24
TP Compl. ¶¶ 250-251. “These allegations rely on impermissible group pleading that does not
satisfy Rule 9(b).” In re Platinum-Beechwood Litig., 427 F. Supp. 3d at 453.
Nor are the supporting allegations in the body of Ver’s Third-Party Complaint more
specific. While the Third-Party Complaint contains particular allegations regarding the ThirdParty Defendants’ participation in alleged wrongdoing concerning the equity issues in the Genesis
Entities broadly, once the allegations move to their knowledge of and participation in GGCI’s
alleged fraudulent misrepresentations to Ver—the non-duplicative alleged fraud that the aiding
and abetting claim is pleaded to be derivative of—the allegations Ver advances are non-specific
and generalized. See, e.g., TP Compl. ¶ 122 (“On information and belief, Genesis knew GGCI
was insolvent by [early June 2022].”); id. ¶ 155 (“At the direction of Moro, Silbert and the Genesis
Entities, an employee of both GGCI and Genesis Global, and, upon information and belief, other
Genesis Entities, made a number of representations[].”). By containing only unspecified and
general allegations concerning Moro’s and the DCG Defendants’ involvement in the particular
acts that give rise to Ver’s primary fraud claim against GGCI, the Third-Party Complaint fails to
satisfy Rule 9(b) as to Count Three. See In re Aegean Marine Petroleum Network, Inc. Sec. Litig.,
529 F. Supp. 3d 111, 147 (S.D.N.Y. 2021) (“[W]hen fraud is alleged against multiple defendants,
a plaintiff must set forth separately the acts complained of by each defendant. A complaint may
not simply clump defendants together in vague allegations to meet the pleading requirements of
Rule 9(b).” (internal quotation marks omitted)). “The failure to isolate the key allegations against
each defendant supports dismissal” under Rules 9(b) and 12(b)(6). Id. (internal quotation marks
omitted).
This naturally leads to the second issue: the absence of such particularized allegations
reflects insufficient pleading of Moro’s and the DCG Defendants’ “substantial assistance to
25
advance the fraud’s commission.” Krys, 749 F.3d at 127 (internal quotation marks omitted).
Focusing on this element, Ver primarily points to the particularized allegations regarding the $1.1
billion “illusory promissory note” that DCG issued. Opp. to Moro MTD at 19; Opp. to DCG MTD
at 20. But the Third-Party Complaint and Ver’s opposition briefs never adequately tie the
allegations surrounding the DCG Promissory Note to the specific alleged fraud perpetrated by
GGCI. While Ver argues that Moro signed and accepted the DCG Promissory Note and therefore
“provided substantial assistance to GGCI’s efforts to conceal their insolvency,” Opp. to Moro
MTD at 19, the Third-Party Complaint alleges that Moro “signed the Promissory Note as the CEO
of Genesis Global and Genesis Holdco, and as director of Genesis Asia Pacific,” not in any
capacity at GGCI, TP Compl. ¶ 166. Ver responds to the Third-Party Defendants’ arguments that
the DCG Promissory Note does not concern GGCI, by pointing to his allegation that “$151 million
of the DCG Promissory Note ended up on GGCI’s balance sheet.” Opp. to DCG MTD at 20. But
as the DCG Defendants note, the Third-Party Complaint advances no allegations regarding the
Third-Party Defendants’ participation in or knowledge of any transfer of that $151 million from
Genesis Global to GGCI. DCG MTD at 21.
Moreover, Ver’s allegation regarding the $151 million injection cannot support his aiding
and abetting claim, for a simple reason: 7 the injection is not alleged to be a proximate cause of any
7
Both Moro and the DCG Defendants argue that because the only allegation concerning
the DCG Promissory Note’s relation to the $151 million injection is pleaded “[o]n information and
belief,” TP Compl. ¶ 169, this allegation cannot meet Rule 9(b)’s particularity requirements. See
Moro Reply at 8; DCG MTD at 20-21. Rule 9(b), however, does not categorically prohibit
allegations pleaded “upon information and belief.” Amalgamated Nat’l Health Fund v. Hickey
Freeman Tailored Clothing, Inc., No. 23 Civ. 1428 (GHW), 2024 WL 1330049, at *2 (S.D.N.Y.
Mar. 28, 2024) (“As the Second Circuit [has] explained . . . ‘despite the generally rigid requirement
that fraud be pleaded with particularity, allegations may be based on information and belief when
facts are peculiarly within the opposing party’s knowledge.’” (quoting Wexner v. First Manhattan
Co., 902 F.2d 169, 172 (2d Cir. 1990))). While “[t]his exception to the general rule must not be
26
of Ver’s harm. “[E]mbedded into the substantial assistance element is a proximate cause analysis,
which requires a showing that a defendant’s participation was the proximate cause of plaintiff’s
injury.” Silvercreek Mgmt., Inc. v. Citigroup, Inc., 346 F. Supp. 3d 473, 487 (S.D.N.Y. 2018)
(internal quotation marks omitted and alterations adopted); see also Fraternity Fund Ltd. v. Beacon
Hill Asset Mgmt., LLC, 479 F. Supp. 2d 349, 370 (S.D.N.Y. 2007) (explaining that “substantial
assistance is intimately related to the concept of proximate cause” because the substantiality of
any assistance is measured “by whether the action of the aider and abettor proximately caused the
harm on which the primary liability is predicated”). Here, GGCI’s primary fraud liability is
predicated on GGCI’s intentional misrepresentations to Ver concerning its solvency. See TP
Compl. ¶ 249 (alleging that GGCI “committed fraud by making intentional misrepresentations
with knowledge of their falsity in an effort to induce Ver to maintain his option positions with
GGCI, which he did to his detriment”).
Yet, these misrepresentations allegedly occurred prior to or contemporaneous with (but
without any mention of) the injection. See TP Compl. ¶¶ 152-156 (identifying misrepresentations
which allegedly occurred on June 28 and June 30); id. ¶ 164 (alleging that the DCG Promissory
Note was executed on June 30). As alleged, Ver did not even receive the June 30 SOFC, which
indicated that the $151 million transfer was made, until late December 2022 after the FTX and
Alameda bankruptcies led Ver to have additional concerns about GGCI’s solvency. See id. ¶¶ 201214. The Third-Party Complaint contains no allegations that Ver rolled any options over or posted
mistaken for license to base claims of fraud on speculation and conclusory allegations,” a
complaint may nonetheless satisfy Rule 9(b) if it “adduce[s] specific facts supporting a strong
inference of fraud” and pleads other facts upon information and belief. Wexner, 902 F.2d at 172.
Ver does not explain why this allegation meets this standard, but given the context of the ThirdParty Complaint’s specific allegations surrounding the transfer and the disparity between the June
20 SOFC and the June 30 SOFC, see TP Compl. ¶¶ 168-172, the Court will assume that this
allegation is properly pleaded.
27
any additional collateral after he was provided the allegedly fraudulent notification of the $151
million injection, nor does the Third-Party Complaint indicate that GGCI’s alleged
misrepresentations to Ver concerning its solvency were impacted by the capital injection. Indeed,
while Ver insists on “[t]he foreseeability of Ver’s reliance,” Opp. to DCG MTD at 21, that
argument is severely undermined by the failure of Ver to allege how the $151 million injection
impacted his reliance at all. Thus, the Third-Party Complaint lacks any indication that Ver’s harm
was proximately caused by the Third-Party Defendant’s action, and therefore has failed to
particularly allege substantial assistance. See Fraternity Fund, 479 F. Supp. 2d at 370. 8
Because of these pleading deficiencies, dismissal of the aiding and abetting claim is
appropriate. 9
IV. Conclusion
For these reasons, Moro’s and the DCG Defendants’ motions are granted. Ver’s ThirdParty Complaint is dismissed without prejudice. Because the Third-Party Complaint’s relation to
8
To the extent that Ver is contending that the harm was caused by the Moro July 6 Tweet
about DCG “assum[ing] certain liabilities of Genesis,” TP Compl. ¶ 174 (emphasis omitted), such
an aiding and abetting claim would be improperly duplicative of the Ver’s primary fraud claim
against Moro because the derivative claim would “merely allege that [Moro] aided and abetted
[his] own fraud,” rather than “premis[ing] the aiding and abetting claims on different conduct.”
Loreley, 2016 WL 5719749, at *6 (internal quotation marks omitted and alteration adopted).
9
Ver has not requested leave to amend his Third-Party Complaint in the event the Court
grants the motions to dismiss. “[E]ven when a party does not ask for leave to amend, the Court
may grant leave to amend sua sponte.” In re Garrett Motion Inc. Sec. Litig., No. 20 Civ. 7992
(JPC), 2022 WL 976269, at *18 (S.D.N.Y. Mar. 31, 2022) (internal quotation marks omitted)
(collecting cases). But a district court does not abuse its discretion in failing to sua sponte grant a
party leave to amend. See Bruno v. Metro. Transp. Auth., 344 F. App’x 634, 636 (2d Cir. 2009)
(summary order) (collecting cases). Because the Third-Party Complaint was the basis for this
case’s removal to federal court, providing leave to file an Amended Third-Party Complaint would
necessarily have an impact on whether this case should be remanded upon dismissal. As a result,
the Court concludes the most prudent course is not to grant leave to amend sua sponte, so as to
afford Ver the opportunity to determine whether he would prefer to seek leave to amend or to ask
this Court to remand the case to state court.
28
ongoing bankruptcy proceedings provided the basis for this action’s removal from state court, see
Dkt. 1 ¶¶ 10-16, Ver and GGCI are directed to file simultaneous letter briefs within one week of
this Opinion and Order, advising the Court as to their views on whether this action should be
remanded to state court. See Bailey v. AHB Mgmt. Corp., No. 22 Civ. 7316 (CBA), 2023 WL
4552462, at *3 (E.D.N.Y. 2023) (remanding to state court after the dismissal of a third-party
complaint because the remaining parties “are non-diverse parties” and the remaining claims “are
state-law claims” and thus “[t]here is no independent basis for federal subject matter jurisdiction”).
The Clerk of Court is respectfully directed to close Docket Numbers 29 and 36.
SO ORDERED.
Dated: January 29, 2025
New York, New York
__________________________________
JOHN P. CRONAN
United States District Judge
29
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