Zhao v. Eqonex Limited — Entry #52: MEMORANDUM OPINION & ORDER re: 46 MOTION to Dismiss
Case: Zhao v. Eqonex Limited nysd · 1:23-cv-03346
filed April 20, 2023
What this document is
Docket entry #52 · filed September 18, 2024
MEMORANDUM OPINION & ORDER re: 46 MOTION to Dismiss . filed by Daniel Ling, Zhao Changpeng, Binance Group, Yu Helen Hai, Almira Cemmell, Bifinity UAB, Jonathan Farnell. For the foregoing reasons, Defendants' motion to dismiss is GRANTED. Plaintiffs have failed to plead a primary violation of Section 10(b) of the Exchange Act by Defendants Farnell and Hai or by Eqonex. Plaintiffs have separately failed to plead Section 20(a) control-person claims against all Defendants. Because the Court cannot conclude that further amendment of the complaint would be futile, the Court grants Plaintiffs leave to file a second amended complaint solely to cure the deficiencies identified in this opinion no later than 30 days from the date of this order. See Lorelry Fin. (!ersry) No. 3 Ltd v. We/Lr Fargo Sec., LLC, 797 F.3d 160, 191 (2d Cir. 2015). The Clerk of Court is directed to terminate the motion pending at ECF No. 46. SO ORDERED. (Signed by Judge Gregory H. Woods on 9/18/2024) (vfr) (Entered: 09/19/2024)
Who is involved
- Almira Cemmell
- Bifinity UAB
- Bin Li
- Binance Group
- Daniel Ling
- Eqonex Limited
- Jaime Chaves
- Jonathan Farnell
- Kreig Kinnaman
- Louis Zhao
- Yu Helen Hai
- Zhao Changpeng
Why we have it
We follow this case because it names a company we track, although that company is not a party:
- CleanSpark: its name “CleanSpark, Inc.” appears in a filing in this case.
…........................... 7 Bishins v. CleanSpark, Inc., 2023 WL 112558 (S.D.N.Y. Jan. 5, 2023)…
A free copy from the RECAP archive of federal court filings (mirrored at the Internet Archive), retrieved October 26, 2026. Federal court filings are public records.
Document text
40 page(s), 147,960 characters, converted from the PDF's text layer · plain text.
Full text
Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 1 of 40
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G R E G O R Y H. W O O D S, U nit e d St at es Distri ct J u d g e:
I. I N T R O D U C TI O N
I n M ar c h 2 0 22, E q o n e x Li mit e d ( “ E q o n e x ”) , a Si n ga p or e- d o mi cil e d di gital ass ets fi n a nci al
c o m p a n y, e nt er e d i nt o a strat e gi c p art n ers hi p wit h Bifi nit y U A B ( “ Bifi nit y ”), a p a y m e nts t e ch n ol o g y
c o m p a n y. T h e t er ms of t h e strat e gi c p art n ers hi p ga v e B ifi nit y si g nifi ca nt i nfl u e n c e o v er E q o n e x’s
o p er ati o ns. W h e n a n n o u n ci n g t h e strat e gi c p a rt n ershi p, E q o n e x als o a n n o u n c e d t h at t h e t w o
c o m p a ni es w o ul d c o nti n u e dis c ussi n g a p ot e nti a l m er g er. Fi v e m o nt hs aft er th e strat e gi c
p art n ers hi p b e g a n, E q o n e x d e ci d e d t o cl os e its virt u al c urr e n ci es e x c h a n g e — its pri m ar y s o ur c e of
r e v e n u e— a n d Bifi nit y t o o k f ull o w n ers hi p of E q o n e x’s di g it al ass et c ust o di a n b usi n ess . T hr e e
m o nt hs l at er, E q o n e x f o un d its elf u n a bl e t o r e pa y its l o an t o Bifi nit y a n d t ol d i n v est ors it h a d
d o u bts a b o ut t h e c o m p a n y’s a bilit y t o c o nti n u e as a g oi n g c o n c er n. E q o n e x’s st o c k pri c e c oll a ps e d
s h ortl y t h er e aft er.
Pl ai ntiffs br o u g ht t his s e c uriti es cl ass a cti o n o n b e h alf of t h e ms el v es a n d ot h er si mil arl y
sit u at e d i n v est ors wh o a c q uir e d E q o n e x c o m m o n st o c k. Pl ai ntiffs cl ai m t h at Bifi nit y e nt er e d i nt o
t h e str at e gi c part n ershi p m er el y t o ta k e a d v a nt a g e of E q o n e x ’s fi n a nci al har ds hi p a n d a c q uir e
Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 2 of 40
E q o n e x’s U. K. -a p pr o v e d di git al ass et c ust o dia n. As a r es ult, Pl ai ntiffs cl ai m t h at D ef e n d a nts, i n
c o n n e cti o n wit h t his s c h e m e, m a d e f als e a n d misl ea di n g st at e m e nts a b o ut t h eir i nt e nti o ns t o
str e n gt h e n E q o n e x a n d f a cilit at e a m er g er , i n vi ol ati o n of S e cti o n 1 0( b) a n d S e cti o n 2 0( a) of t h e
S e c uriti es E x c ha n g e A ct of 1 9 3 4 (t h e “ E x c ha n g e A ct ”) a n d R ul e 1 0 b -5. D ef e n d a nts r es p o n d t h at
Pl ai ntiffs h a v e f ail e d t o all e g e wit h parti c ul arit y f a cts s u p p orti n g t h e e xist e n c e of s u c h a s c h e m e or
s u p p orti n g D ef e n d a nts’ s ci e nt er .
D ef e n d a nts m o v e t o dis miss all clai ms p urs ua nt t o F e d. R. Ci v. P. 1 2( b)( 6) a n d 1 2( b)( 2).
B e c a us e Plai ntiff s h a v e n ot a d e q u at el y pl e a d e d t h at a n y D ef e n d a nt pla n n e d f or E q o n e x t o fail at t h e
ti m e t h at t h e strat e gi c p art n ers hi p wit h Bifi nit y w as a n n o u n c e d, Pl ai ntiffs ha v e n ot a d e q u at el y
pl e a d e d t h at a n y of t h e all e g e dl y misl ea di n g stat e m e nts w er e m a d e wit h s ci e nt er. F or t h at r e as o n,
a n d f or t h e ot h er r e as o ns d es cri b e d b el o w, D ef e n da nts’ m oti o n t o dis mis s is G R A N T E D.
II. BACK GR O U N D
A. F a ct s 1
1. T h e P arti e s
E q o n e x is a Si n ga p or e -d o mi cil e d di gital ass ets fi n a n ci al c o m p a n y .2 D kt . N o. 3 9, A m.
C o m pl. ¶ 4. E q o n e x off er e d di git al ass et c ust o di a n s er vi c es, ass et m a na g e m e nt s er vi c es, a n d
br o k er a g e s er vi c es . I d. “ E q o n e x’s [ c]ust o d y b usi n ess was c o m p os e d of Di gi va ult, ” a s e c ur e di git al
1 At t h e m oti o n t o dis miss st a g e, t h e C o urt a c c e pts t h e f oll o wi n g f a cts s et f ort h i n t h e A m e n d e d Cl ass A cti o n C o m pl ai nt
( “ A m e n d e d C o m pl ai nt ”), D kt. N o. 3 9. C ert ai n f a cts ar e als o dr a w n fr o m t h e F or m 6 -K d o c u m e nts fil e d wit h t h e S E C
t hat c o nt ai n t h e st at e m e nts Pl ai ntiffs all e g e t o b e f als e or misl e a di n g a n d t hat f or m t h e b asis f or t his a cti o n. D kt. N os.
4 8 -6, 4 8 -7. B e c a us e Pl ai ntiffs r ef er e n c e t h es e d o c u m e nt s i n t h e A m e n d e d C o m pl ai nt a n d r el y o n t h es e d o c u m e nts f or
t h eir cl ai ms, t h e C o urt m a y c o nsi d er t h e f a cts c o nt ai n e d t h er ei n f or d e ci di n g a m oti o n t o dis miss. See A T SI Co m mc ’ns,
I nc. v. S h a ar F u n d, Ltd., 4 9 3 F. 3 d 8 7, 9 8 ( 2 d Cir. 2 0 0 7) (“[ T h e c o urt] m a y c o n si d er a n y writt e n i nstr u m e nt atta c h e d t o t h e
c o m pl ai nt, st at e m e nts or d o c u m e nts i n c or p or at e d i nt o t h e c o m pl ai nt b y r ef er e n c e, l e g all y r e q uir e d p u bli c dis cl os ur e
d o c u m e nts fil e d wit h t h e S E C, a n d d o c u m e nts p oss ess e d b y or k n o w n t o t h e pl ai ntiff a n d u p o n w hi c h it r eli e d i n
bri n gi n g t h e s uit. ”); Rot h m a n v. Gregor , 2 2 0 F. 3 d 8 1, 8 8 ( 2 d Cir. 2 0 0 0) (“ F or p ur p os es of a m oti o n t o dis miss, w e h a v e
d e e m e d a c o m pl ai nt t o i n cl u d e a n y writt e n i nstr u m e nt . . . a n d d o c u m e nts t h at t h e pl ai ntiffs eit h er p oss ess e d or k n e w
a b o ut a n d u p o n w hi c h t h e y r eli e d i n bri n gi n g t h e s uit . ”).
2 E q o n e x w as i niti all y n a m e d as a d ef e n d a nt i n t his c as e, b ut Pl ai ntiffs wit h dr e w its cl ai ms a g ai nst E q o n e x i n t h eir
A m e n d e d C o m pl ai nt . See D kt. N o. 3 9. T h er ef or e, t h e C o urt will c o nsi d er all cl ai ms a g ai nst E q o n e x t o h a v e b e e n
dis miss e d. H o w e v er, Pl ai ntiffs still all e g e t hat E q o n e x w as a “ pri m ar y vi ol at or ” of S e cti o n 1 0( b) f or p ur p os es of
Pl ai ntiffs’ S e cti o n 2 0( a) cl ai ms a g ai nst t h e r e m ai ni n g d ef e n d a nts. A m. C o m pl. ¶ 8 2.
2
Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 3 of 40
ass et c ust o dia n. I d. ¶ 3 8. E q o n e x als o o p er at e d a n e x c h a n g e f or tra di n g virt u al c urr e n ci es a n d t h eir
d eri v ati v es (t h e “ E x c h a n g e ”) . I d. ¶ 5. I n c o m e fr o m th e E x c h a n g e m a d e u p 7 9. 9 p er c e nt of
E q o n e x’s r e v e n u es i n t h e fis c al y e ar e n di n g i n M ar c h 2 0 2 2. I d. ¶ 6 1. E q o n e x w as p u bli cl y list e d o n
t h e N A S D A Q i n O ct o b er 2 0 2 0. I d. ¶ 3 6.
Bi n a n c e is a l ar g e bl o c k c hai n e c os yst e m a n d cr y pt o c urr e n c y i nfrastr u ct ur e pr o vi d er. I d. ¶ 2 6.
Bi n a n c e o p er at es t h e l ar g est bit c oi n e x c h a n g e i n t h e w orl d b y v ol u m e. I d. ¶ 4 2. Bifi nit y is a
p a y m e nts t e c h n ol o g y c o m p a n y i n c or p or at e d i n t h e R e p u bli c of Lit h u a nia. I d. ¶ 2 7. Bifi nit y is “ a
p art of Bi n a n c e as its offi ci al fi at -t o-cr y pt o p a y m e nts pr o vi d er. ” I d. Bi n a n c e “la u n c h e d Bifi nit y o n
M ar c h 7, 2 0 2 2, t h e s a m e da y t h at E q o n e x a n n o u n c e d t h e st r at e gi c part n ers hi p wit h Bifi nit y. ” I d.
Z h a o C h a n g p e n g is t h e s ol e s h ar e h ol d er of Bifi nit y a n d is t h e c o-f o u n d er a n d C hi ef
E x e c uti v e Offi c er ( “ C E O ”) of Bi n a n c e. I d. ¶ 3 2.
J o n at h a n F ar n ell is t h e h ea d of Bi n a n c e f or t h e U. K. a n d is t h e C E O of Bifi nit y. I d. ¶ 2 8.
F ar n ell b e c a m e E q o n e x’s C E O a n d a m e m b er of E q o n e x’s b o ar d of dir e ct ors o n M ar c h 1 7, 2 0 2 2.
I d.
Y u H el e n H ai “is t h e pr esi d e nt of Bifi nit y as w ell as t h e h e a d of t h e N F T a n d f a n t o k e n
pl atf or ms of Bi n a n c e a n d t h e Bi n a n c e C harit y F o u n d ati o n. ” I d. ¶ 3 1. Hai was a p p oi nt e d t o s er v e as
a m e m b er of E q o n e x’s b oar d of dir e ct ors o n M ar c h 1 7, 2 0 2 2. I d. S h e r esi g n e d fr o m E q o n e x’s
b o ar d o n A pril 2 8, 2 0 2 2. I d.
D a ni el Li n g “s er v es as Bifi nit y’s Dir e ct or of Str at e g y. ” I d. ¶ 2 9. Li n g b e c a m e E q o n e x’s
C hi ef Fi n a n cial Offi c er ( “ C F O ”) a n d r e pl a c e d H ai o n E q o n e x’s b oar d of dir e ct ors o n A pril 2 8,
2 0 2 2. I d.
Al mir a C e m m ell b e ca m e E q o n e x’s C hi ef C or p orat e Affairs Offi c er ( “ C C A O ”) o n M ar c h 3 1,
2 0 2 2. I d. ¶ 3 0. “ Pri or t o t h at r ol e, C e m m ell w as s p e ci al pr oj e cts l e a d f or Bifi nit y. ” I d.
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2. R e g ul at i o ns C o n str ai n Bi n a n c e’ s O p er ati o n s i n t h e U nit e d Ki n g d o m
I n M a y 2 0 2 1, E q o n e x’s Di gi v a ult r e c ei v e d a p pr o val fr o m t h e U nit e d Ki n g d o m’s Fi n a n cial
C o n d u ct A ut h orit y ( “ F C A ”) t o r e gist er as a n a p pr o v e d c ust o dial w all et pr o vi d er i n t h e U. K. I d.
¶ 3 8.
Ar o u n d t h e s a m e ti m e Di gi v a ult g ot off t h e gr o u n d i n t h e U. K., r e g ul at ors li mit e d Bi n a n c e’s
a c c ess t o t h e mar k et. O n J u n e 2 6, 2 0 2 1, t h e F C A or d er e d Bi n a n c e t o st o p all r e g ul at e d a cti vit y i n
t h e U. K., citi n g c o n c er ns a b o ut c o ns u m er pr ot e cti o n, fra u d, a n d m o n e y l a u n d eri n g. I d. ¶ 4 5. As a
r es ult, “[s] o m e of t h e U. K.’s l ar g est b a n ks, i n cl u di n g S a nt a n d er a n d B ar cl a ys . . . b arr [ e d] c ust o m ers
fr o m s e n di n g m o n e y t o t h e Bi n a n c e e x c h a n g e.” I d. I n r es p o ns e, Bi n a n c e p urs u e d a c c ess t o t h e
U. K. m ar k et t hr o u g h a p art n ers hi p wit h a n F C A -a p pr o v e d p a y m e nts pr o vi d er, P a ys af e, i n F e br u ar y
2 0 2 2. I d. ¶ 6 6. T h e F C A r eit er at e d its c o n c er ns a b o ut Bi n a n c e b ut ha d li mit e d p o w ers t o o bj e ct t o
t h e P a ys af e arra n g e m e nt. I d.
“I n A u g ust 2 0 2 2, t h e F C A a n n o u n c e d t h at as of A u g ust 1 1, [ 2 0 2 2],” it w o ul d “ e x p a n d [] its
c h a n g e i n c o ntr ol r e gi m e t o i n cl u d e F C A -r e gist er e d cr y pt o ass et b usi n ess es.” Id. ¶ 5 7. Aft er A u g ust
1 1, 2 0 2 2, “a p ers o n or e ntit y wis hi n g t o a c q uir e ‘c o ntr ol ’ of a F C A -r e gist er e d cr y pt o ass et b usi n ess,
dir e ctl y or i n dir e ctl y, w o ul d h a v e t o r e c ei v e pri or F C A a p pr o v al. ” I d. “ A ‘ c o ntr oll er’ w o ul d m e a n a
p ers o n or e ntit y w h o o w ns m or e t h a n 2 5 % of t h e s h ar es or v oti n g ri g hts i n t h e cr y pt o b usi n ess. ” I d.
T his c ha n g e ha d b e e n a nti ci p at e d i n t h e i n d ustr y si n c e b ef or e J u n e of t h at y e ar. I d. ¶ 5 8.
3. T h e Str at e gi c P art n er s hi p
O n M ar c h 7, 2 0 2 2, E q o n e x a n n o u n c e d t h at it e nt er e d i nt o a strat e gi c p art n ers hi p wit h
Bifi nit y (t h e “ Str at e gi c P art n ers hi p ”). I d. ¶ 6. P urs ua nt t o t h e t er ms of t h e Str at e gi c P art n ers hi p,
Bifi nit y off er e d E q o n e x a $ 3 6 milli o n c o n v erti bl e l oa n f a cilit y (t h e “ L oa n A gr e e m e nt ”) . I d. ¶ 7. I n
r et ur n, Bifi nit y r e c ei v e d t h e ri g ht t o a p p oi nt t h e C E O, C F O, a n d C hi ef L e gal Offi c er ( “ C L O ”) of
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E q o n e x as w ell as t h e ri g ht t o n o mi n at e t w o m e m b ers t o E q o n e x’s b oar d of dir e ct ors. I d. Bifi nit y
als o r e c ei v e d “ o v er 2 4. 9 % of t h e s h ar e s of Di gi va ult. ” I d. ¶ 8.
O n M ar c h 1 7, 2 0 2 2, Bifi nit y a p p oi nt e d F ar n ell t o s er v e as E q o n e x’s C E O a n d as a dir e ct or
o n E q o n e x ’s b oar d. I d. ¶ 2 8. T h at s a m e da y, Bifi nit y a p p oi nt e d H ai t o s er v e as a dir e ct or o n
E q o n e x ’s b oar d. I d. ¶ 3 1. Aft er s h e r esi g n e d fr o m E q o n e x’s b oar d o n A pril 2 8, 2 0 2 2, Bifi nit y
a p p oi nt e d Li n g t o s er v e b ot h as E q o n e x’s C F O a n d as a dir e ct or o n E q o n e x’s b o ar d . I d. ¶ ¶ 2 9, 3 1.
O n M ar c h 3 1, 2 0 2 2, Bifi nit y a p p oi nt e d C e m m ell t o b e E q o n e x’s C C A O . I d. ¶ 3 0.
4. T h e M ar c h Pr e s s R el e a s e s
O n M ar c h 7, 2 0 2 2, E q o n e x iss u e d a pr ess r el eas e a n n o u n ci n g t h e Str at e gi c P art n ers hi p (t h e
“ M ar c h 7 P r ess R el eas e ”). 3 I d. ¶ 4 7. T h e M ar c h 7 P r ess R el e as e “ t o ut e d t h at t h e c o m p a ni es w o ul d
3 T he M ar c h 7 Pr ess R el e as e r e a d i n f ull as f oll o ws:
SI N G A P O R E – M ar c h 7, 2 0 2 2 – E Q O N E X Li mit e d ( N A S D A Q: E Q O S) ( “ E Q O N E X ” or
t h e “ C o m p a n y ”), a di git al ass ets fi n a n ci al s er vi c es c o m p a n y, t o d a y a n n o u n c e d t hat it h as e nt er e d i nt o
a str at e gi c p art n ers hi p wit h Bifi nit y U A B ( “ Bifi nit y ”), a p a y m e nts t e c h n ol o g y c o m p a n y t h at is p art of
t h e wi d er Bi n a n c e Gr o u p a n d t h e offi ci al fi at-t o-cr y pt o p a y m e nts pr o vi d er f or Bi n a n c e, t h e w orl d’s
l e a di n g bl o c k c h ai n e c os yst e m a n d cr y pt o c urr e n c y i nfr astr u ct ur e pr o vi d er.
Bifi nit y w as est a blis h e d i n 2 0 2 1 b ut offi ci all y l a u n c h e d t o t h e m ar k et t o d a y a n d h as b e e n
p o w eri n g Bi n a n c e’s fi at -t o-cr y pt o o n a n d off r a m ps, pr o c essi n g milli o ns i n tr a ns a cti o ns gl o b all y f or
Bi na n c e. c o m us ers. Bifi nit y’s l e a di n g p a y m e nt i nfr astr u ct ur e c o n n e cts tr a diti o n al fi n a n c e t o w orl d-
l e a di n g a n d e m er gi n g bl o c k c h ai ns, tr a nsf or mi n g h o w b usi n ess es a n d p e o pl e s e n d a n d r e c ei v e m o n e y
ar o u n d t h e w orl d. Bifi nit y is r e gist er e d wit h t h e R e gistr y of L e g al E ntiti es of t h e R e p u bli c of Lit h u a ni a
as a cr y pt o w all et s er vi c e pr o vi d er.
B uilt wit h a f o c us o n r e g ul ati o n, s e c urit y a n d c o m pli a n c e b est -pr a cti c e, E Q O N E X w as t h e
first di git al ass et fir m wit h a n e x c h a n g e t o b e p u bli cl y list e d i n t h e U. S. E Q O N E X off ers r e g ul at or y -
f o c us e d tr a di n g s er vi c es c e nt er e d ar o u n d t h e E Q O N E X cr y pt o e x c h a n g e, i nst it uti o n al-gr a d e di gital
ass et i n v est m e nt s ol uti o ns i n cl u di n g a n ass et m a n a g er t o g et h er wit h t h e p e n di n g l a u n c h of e x c h a n g e
tr a d e d pr o d u cts a n d str u ct ur e d pr o d u cts, a n d Di gi v a ult, a n F C A-r e g ul at e d hi g h s e c urit y cr y pt o a n d
di gital ass et c ust o d y s ol uti o n.
U n d er t h e t er ms of t h e str at e gi c p art n ers hi p, Bifi nit y will a d v a n c e a U S $ 3 6 milli o n
c o n v erti bl e l o a n t o E Q O N E X a n d will w or k t o g et h er t o m a xi mi z e b usi n ess s y n er gi es cr e at e d b y t his
n e w str at e gi c r el ati o ns hi p a n d c a pit ali z e o n o p p ort u niti es t o c o o p er at e a n d f urt h er e x p a n d t h eir
b usi n ess es. I n a d diti o n, Bifi nit y will h a v e t h e ri g ht t o a p p oi nt, fr o m wit hi n Bifi nit y, t h e C hi ef
E x e c uti v e Offi c er, C hi ef Fi n a n ci al Offi c er, a n d C hi ef L e g al Offi c er of E Q O N E X as w ell as n o mi n at e
t w o s e ats o n E Q O N E X’s B o ar d of Dir e ct ors. B ot h c o m p a ni es will c o nti n u e t o e n g a g e i n n o n -
bi n di n g dis c ussi o ns t o e x pl or e p ot e nti al m er g er o p p ort u niti es, s u bj e ct t o r e g ul at or y a p pr o v al.
T h e str at e gi c p art n ers hi p will i niti all y f o c us o n l e v er a gi n g Di gi v a ult as a n F C A r e g ul at e d
c ust o di a n, str e n gt h e ni n g t h e t e c h n ol o g y s u p p orti n g E Q O N E X E x c h a n g e, a n d e x p a n di n g Bifi nit y’s
g e o gr a p hi c al f o ot pri nt t hr o u g h E Q O N E X’s li c e nsi n g fr a m e w or k. B ot h p arti es will als o e x pl or e
o p p ort u niti es t o gr o w E Q O N E X’s di gital ass et i n v est m e nt s ol uti o ns b usi n ess.
C hi -W o n Y o o n , C h air m a n of E Q O N E X s ai d t o d a y, “ W e ar e e xtr e m el y pl e as e d t o t e a m u p
wit h Bifi nit y i n a p art n ers hi p t h at is li k el y t o b e tr a nsf or m ati o n al f or b ot h c o m p a ni es a n d f or t h e
i n d ustr y at l ar g e. Bifi nit y s h ar es o ur str o n g b eli ef i n h el pi n g t o bri d g e t h e w orl d o f tr a diti o n al fi n a n c e
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‘w or k t o g et h er t o m a xi mi z e b usi n ess s y n er gi es cr e at e d b y t his n e w strat e gi c r el ati o ns hi p a n d
c a pit ali z e o n o p p ort u niti es t o c o o p er at e a n d f urt h er e x p a n d t h eir b usi n ess. ’” I d. S p e cifi call y, t h e
wit h cr y pt o c urr e n ci es, as w ell as o ur c o n vi cti o n t o o p er at e t o t h e hi g h est st a n d ar ds of i n v est or
pr ot e cti o n, r e g ul at or y o v ersi g ht, s e c urit y a n d g o v er n a n c e. ”
“ T his tr a ns a cti o n m ar ks t h e n e xt l o gi c al st e p i n o ur c o m p a n y’s e v ol uti o n, r e pr es e nti n g a n
i m p ort a nt o p p ort u nit y t o gr o w o ur f o ot pri nt a n d e x p a n d o ur r e g ul at e d off eri n gs f or t h e b e n efit of o ur
c ust o m ers a n d s h ar e h ol d ers. ”
“ Bifi nit y’s c utti n g -e d g e t e c h n ol o g y a n d e xt e nsi v e e x p eri e n c e i n b uil di n g, o p er ati n g, a n d
m ar k eti n g di git al pl a tf or ms a n d pr o d u cts will h el p dri v e t h e gr o wt h a n d s c al e of o ur e c os yst e m,
st arti n g wit h Di gi v a ult, o ur c ust o d y s ol uti o n, o ur ass et m a n a g e m e nt b usi n ess a n d i nstit uti o n all y -
f o c us e d pr o d u cts o n t h e e x c h a n g e. ”
“I l o o k f or w ar d t o w or ki n g cl os el y wit h t h e Bifi nit y t e a m t o s c al e u p o ur pl atf or m a n d dri v e
l o n g-t er m s ust ai n a bl e gr o wt h. ”
H el e n H ai, Pr esi d e nt of Bifi nit y, c o m m e nt e d, “It is wit h gr e at e x cit e m e nt a n d e nt h usi as m
t hat w e e nt er t his p art n ers hi p wit h E Q O N E X. E Q O N E X h as a u ni q u e v al u e pr o p ositi o n a n d
p os iti o ni n g t h at w e ar e d e e pl y ali g n e d wit h. E Q O N E X h as alr e a d y m a d e si g nifi c a nt pr o gr ess i n
b uil di n g o ut t h e f o u n d ati o n al r e g ul at e d i nfr astr u ct ur e f or its e c os yst e m. T h eir i nstit uti o n al a p pr o a c h
a n d a bilit y t o utili z e gl o b al r e g ul at or y fr a m e w or ks t o b uil d a c o m pli a nt b usi n ess dir e ctl y c o m pl e m e nts
o ur r et ail f o c us a n d will gr e atl y b e n efit Bifi nit y o v er t h e l o n g -t er m. ”
Tr a n s a cti o n D et ail s
U n d er t h e t er ms of t h e str at e gi c p art n ers hi p w hi c h h as b e e n a p pr o v e d b y t h e B oar ds of
E Q O N E X a n d Bifi nit y, Bifi nit y h as is s u e d E Q O N E X a U S $ 3 6 milli o n c o n v erti bl e l o a n f a cilit y wit h
a n 1 8 -m o nt h m at urit y fr o m e a c h dr a w d o w n d at e. T h e i niti al c o n v ersi o n pri c e is U S $ 1. 8 9 p er s h ar e,
s et wit h r ef er e n c e t o t h e 5 0 -d a y a v er a g e cl osi n g -pri c e of E Q O N E X s h ar es i m m e di at el y pri or t o t h e
d a t e of t h e L o a n A gr e e m e nt.
A b o ut E Q O N E X
E Q O N E X Li mit e d ( N A S D A Q: E Q O S) is a t e c h n ol o g y dri v e n di gital ass ets fi n a n ci al
s er vi c es gr o u p t hat pr o vi d es i nstit uti o n al gr a d e i nfr astr u ct ur e a n d a f ull s uit e of tr a di n g, c ust o d y a n d
ass et m a n a g e m e nt s ol uti o ns t o cl i e nts. T h e Gr o u p’s di gital ass ets e c os yst e m h as b e e n d esi g n e d t o
a c c o m m o d at e t h e n e e ds of i nstit uti o ns a n d i n di vi d u als wit h t h e s a m e d e gr e e of r e g ul at or y o v ersi g ht
a n d s e c urit y t h e y ar e a c c ust o m e d t o i n tr a diti o n al fi n a n ci al m ar k ets. E Q O N E X’s e c os yst e m p ri m aril y
e n c o m p ass es E Q O N E X E x c h a n g e, a di gital ass et e x c h a n g e; Di gi v a ult, a F C A a c cr e dit e d h ot a n d c ol d
di gital ass ets c ust o di a n a n d Bl et c hl e y P ar k Ass et M a n a g e m e nt, a f u n d of cr y pt o -h e d g e f u n ds.
F or m or e i nf or m ati o n visit: htt ps: / / gr o u p. e q o n e x. c o m /
F ol l o w E Q O N E X o n s o ci al m e di a o n T witt er @ e q o n e x, o n F a c e b o o k @ e q o n e x, a n d o n
Li n k e dI n.
A b o ut Bifi nit y
Bifi nit y, p o w er e d b y Bi n a n c e, is a p a y m e nts t e c h n ol o g y c o m p a n y t hat pr o vi d es a n e ntr y
p oi nt t o t h e n e w w orl d of di git al c urr e n c y f or b usi n ess es. It off ers o n-a n d -off -r a m p s ol uti o ns t o
e m p o w er b usi n ess es t o c o n v ert fi at -t o-cr y pt o tr a ns a cti o ns usi n g m aj or p a y m e nt m et h o ds dir e ctl y.
F or m or e i nf or m ati o n, visit: htt ps: / / w w w. bifi nit y. c o m /.
F or w ar d -L o o ki n g I nf or m ati o n
A n y f or w ar d -l o o ki n g stat e m e nts i n t his pr ess r el e as e ar e b as e d o n a v ail a bl e c urr e nt m ar k et
m at eri al a n d m a n a g e m e nt’s e x p e ct ati o ns, b eli efs a n d f or e c asts c o n c er ni n g f ut ur e e v e nts i m p a cti n g
E Q O N E X. Y o u ar e c a uti o n e d t hat a n y s u c h f or w ar d -l o o ki n g st at e m e nts ar e n ot g u ar a nt e es of f ut ur e
p erf or m a n c e a n d i n v ol v e ris ks a n d u n c ert ai nti es, as w ell as ass u m pti o ns, w hi c h, if t h e y w er e t o e v er
m at eri ali z e or pr o v e i n c orr e ct, c o ul d c a us e t h e r es ults of E Q O N E X t o diff er m at eri all y fr o m t h os e
e x pr ess e d or i m pli e d b y s u c h f or w ar d-l o o ki n g st at e m e nts. T h e f or w ar d -l o o ki n g stat e m e nts m a d e i n
t his pr ess r el e as e s p e a k o nl y as of t h e d at e h er e of a n d w e dis cl ai m a n y o bli g ati o n, e x c e pt as r e q uir e d
b y l a w, t o pr o vi d e u p d at es, r e visi o ns or a m e n d m e nts t o a n y f or w ar d -l o o ki n g stat e m e nts t o r efl e ct
c h a n g es i n o ur e x p e ct ati o ns or f ut ur e e v e nts.
D kt. N o. 4 8 -6.
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M ar c h 7 P r ess R el eas e st at e d t h at t h e Strat e gi c P art n ers hi p w o ul d “i nitiall y f o c us o n l e v er a gi n g
Di gi v a ult as a n F C A r e g ulat e d c ust o dia n, str e n gt h e ni n g t h e t e c h n ol o g y s u p p orti n g t h e E Q O N E X
E x c h a n g e, a n d e x p a n di n g Bifi nit y’s g e o gr a p hi c al f o ot pri nt t hr o u g h E Q O N E X’s li c e nsi n g
fra m e w or k. ” I d. ¶ 4 8. It als o t ol d i n v est ors t h at t h e t w o c o m p a ni es w o ul d “ c o nti n u e t o e n g a g e i n
n o n -bi n di n g dis c ussi o ns t o e x pl or e p ot e nti al m er g er o p p ort u niti es, s u bj e ct t o r e g ul at or y a p pr o v al. ”
I d.
D ef e n d a nt H ai — t h e n pr esi d e nt of Bifi nit y— w as q u ot e d i n t h e M ar c h 7 P r ess R el eas e as
s a yi n g t h at E q o n e x’s “i nstit uti o n al a p pr o a c h a n d a bilit y t o utili z e gl o bal r e g ul at or y fra m e w or ks t o
b uil d a c o m pli a nt b usi n ess dir e ctl y c o m pl e m e nts o ur r et ail f o c us a n d will gr e atl y b e n efit Bifi nit y o v er
t h e l o n g-t er m. ” I d. O n t his n e ws, E q o n e x’s s h ar e pri c e i n cr e as e d 2 2 p er c e nt b et w e e n M ar c h 4 a n d
M ar c h 9. I d. ¶ 5 1.
O n M ar c h 7, 2 0 2 2, t h e F C A “ iss u e d a stat e m e nt . . . e x pr essi n g c o n c er n ” a b o ut t h e
p art n ers hi p b et w e e n E q o n e x a n d Bifi nit y . I d. ¶ 5 2. B ut, as wit h t h e P a ys af e arra n g e m e nt t h at
pr e c e d e d it, t h e F C A’s ha n ds w er e ti e d. T h e F C A st at e d t h at it “di d n ot h a v e p o w ers t o ass ess t h e
fit n ess a n d pr o pri et y of t h e n e w b e n efi ci al o w n ers or t h e c h a n g e i n c o ntr ol.” I d. T h e F C A
n o n et h el ess r eit er at e d its c o n c er ns a b o ut t h e diffi c ult y of eff e cti v el y s u p er visi n g Bi n a n c e. I d.
O n M ar c h 1 7, 2 0 2 2, E q o n e x iss u e d a n ot h er pr ess r el e as e (t h e “ M ar c h 1 7 Pr ess R el eas e ”)
a n n o u n ci n g t h at it a n d Bifi nit y “t o o k t h e n e xt st e p i n s oli dif yi n g t h eir strat e gi c p art n ers hi p ” b y
a p p oi nti n g F ar n ell a n d H ai t o t h eir n e w p ositi o ns at E q o n e x. 4 I d. ¶ 5 3. T h e pr ess r el e as e st at e d, i n
r el e v a nt p art:
4 T he M ar c h 1 7 Pr ess R el e as e r ea d i n f ull as f oll o ws:
SI N G A P O R E – M ar c h 1 7, 2 0 2 2 – E Q O N E X Li mit e d ( N A S D A Q: E Q O S) ( “ E Q O N E X ”
or t h e “ C o m p a n y ”), a di git al ass ets fi n a n ci al s er vi c es c o m p a n y, a n d Bifi nit y U A B ( “ Bifi nit y ”), a
p a y m e nts t e c h n ol o g y c o m p a n y t hat is p art of Bi n a n c e, t o o k t h e n e xt st e p i n s oli dif yi n g t h e ir str at e gi c
p art n ers hi p wit h t h e a p p oi nt m e nt of E Q O N E X’s n e w C E O a n d t w o n e w m e m b ers t o t h e
E Q O N E X B o ar d of Dir e ct ors (t h e “ B o ar d ”).
J o n at h a n F ar n ell, w h o pr e vi o usl y s er v e d as H e a d of Bi na n c e U K a n d C E O of Bifi nit y, h as
b e e n a p p oi nt e d as C E O of E Q O N E X a n d a dir e ct or o n t h e B o ar d. H el e n H ai, Pr esi d e nt of Bifi nit y,
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h as als o b e e n a p p oi nt e d t o t h e B o ar d. B ot h a p p oi nt m e nts ar e eff e cti v e i m m e di at el y. T h e c urr e nt
i nt eri m C E O A n dr e w El d o n will r e v ert b a c k t o his pri m ar y r ol es of C hi ef O p er ati n g Offi c er a n d
i nteri m C hi ef M ar k eti n g Offi c er.
U n d er t h e t er ms of t h e str at e gi c p art n ers hi p a n n o u n c e d l ast w e e k, Bifi nit y h a d t h e ri g ht t o
n o mi n at e k e y a p p oi nt m e nts, i n cl u di n g t h e C E O a n d t w o n e w B oar d m e m b ers. Bifi nit y will als o
n o mi n at e t w o a d diti o n al s e ni or l e a d ers i n t h e c o mi n g w e e ks.
As C E O, J o n at h a n will pl a y a n i nstr u m e nt al r ol e i n f ast -tr a c ki n g t h e c oll a b or ati o n b et w e e n
b ot h b usi n ess es. T h e i niti al p h as e of t his gr o u n d br e a ki n g str at e gi c p art n ers hi p will p ut i n pl a c e a
fr a m e w or k f or Bifi nit y t o s af e g u ar d s o m e of its cli e nt ass ets wit h E Q O N E X’s F C A r e gist er e d
c ust o di a n, Di gi v a ult, i n c o m pli a n c e wit h all a p pli c a bl e r e g ul at or y r e q uir e m e nts. M o vi n g f or w ar d,
Bifi nit y will d e v el o p w a ys t o l e v er a g e t h e E Q O N E X E x c h a n g e as a n alt er n ati v e tr a di n g pl atf or m,
d e pl o y r es o ur c es t o str e n gt h e n t h e t e c h n ol o g y, a n d als o e x pl or e o p p ort u niti es t o s c al e t h e ass et
m a n a g e m e nt b usi n ess.
J o n at h a n is a r es p e ct e d fi n a n c e a n d cr y pt o i n d ustr y l e a d er a n d m ost r e c e ntl y h el d t h e r ol es of
H e a d of Bi n a n c e f or t h e U nit e d Ki n g d o m a n d C E O of Bifi nit y . Wit h a str o n g c o m pli a n c e p e di gr e e,
J o n at h a n w as i n v ol v e d i n d e v el o pi n g t h e c o m p a n y’s gl o b al r e g ul at or y li c e ns e a n d r e gistr ati o n
r o a d m a p, w hi c h w as cr u ci al f or t h e offi ci al l a u n c h of Bifi nit y i n e arl y M ar c h 2 0 2 2. Pri or t o t h at,
J o n at h a n w as Dir e ct or of C o m pli a n c e a n d B o ar d M e m b er of e T or o M o n e y, a n F C A -r e g ul at e d
p a y m e nts fir m. H e als o h e a d e d o p er ati o ns a n d s at o n t h e B oar d at e T or o X, t h e Gr o u p’s cr y pt o
e x c h a n g e a n d c ust o d y pl atf or m .
H el e n is Pr esi d e nt of Bifi nit y a n d h ol ds v ari o us s e ni or p ositi o ns wit hi n t h e Bi n a n c e
or g a ni z ati o n i n cl u di n g h e a di n g t h e N F T a n d f a n t o k e n pl atf or ms a n d t h e Bi n a n c e C h arit y
F o u n d ati o n. H el e n is a r es p e ct e d gl o b al l e a d er a n d a U nit e d N ati o ns I n d ustri al D e v el o p m e nt
Or g a ni z ati o n ( U NI D O) G o o d will A m b ass a d or. H el e n f o u n d e d t h e M a d e i n Afri c a I niti ati v e t hat
a d vis e d Afri c a n g o v er n m e nts o n i n d ustri ali z ati o n a n d i n v est m e nts. S h e w as als o t h e C o -F o u n d er of
C & H G ar m e nts, w hi c h w as a pi o n e er P a n -Afri c a e x p ort -ori e nt e d g ar m e nts m a n uf a ct ur er. S h e is als o
a tr ai n e d a ct u ar y wit h al m ost 2 0 y e ars of e x p eri e n c e w or ki n g wit h F T S E 1 0 0 c o m p a ni es.
C hi -W o n Y o o n, E Q O N E X C h air m a n s ai d, “ W e ar e d eli g ht e d t o w el c o m e J o n at h a n t o t h e
E Q O N E X m a n a g e m e nt t e a m a n d H el e n t o o ur B o ar d. T h eir a p p oi nt m e nts m ar k t h e n e xt criti c al
st e p i n d e v el o pi n g t h e Bifi nit y a n d E Q O N E X str at e gi c p art n ers hi p. I l o o k f or w ar d t o w or ki n g wit h
t h e m cl os el y t o o pti mi z e o ur b usi n ess es a n d f ulfil o ur j oi nt visi o n t o b e c o m e a bri d g e b et w e e n t h e ol d
w orl d of tr a diti o n al fi n a n c e a n d cr y pt o c urr e n ci es. ”
J o n at h a n F ar n ell, C E O of E Q O N E X s ai d, “ E Q O N E X w as o n e of t h e cr y pt o i n d ustr y’s
pi o n e eri n g fir ms, l e a di n g t h e s e ct or t o w ar ds gr e at er r e g ul at or y c o m pli a n c e a n d g o v er n a n c e as a list e d
c o m p a n y. N o w as w e e m b ar k o n t his gr o u n d br e a ki n g i n d ustr y p art n ers hi p, it’s p arti c ul arl y e x citi n g t o
j oi n E QO N E X as it a p pr o a c h es s u c h a n i m p ort a nt i nfl e cti o n p oi nt i n its hist or y. ”
“ W e c a n alr e a d y s e e t h e str e n gt hs a n d c a p a biliti es t h at w e c a n h ar n ess b et w e e n t h e t w o
c o m p a ni es. E Q O N E X h as a n o utst a n di n g r e g ul at or y a n d li c e nsi n g tr a c k r e c or d a n d m ar k et -l e a di n g
e x p ertis e at i d e ntif yi n g o p p ort u niti es f or i nstit uti o ns, w hi c h is m ost cl e arl y e vi d e nt w h e n l o o ki n g at
t h e Di gi v a ult b usi n ess t h at c o nti n u es t o attr a ct i nstit uti o ns a n d l a w e nf or c e m e nt a g e n ci es. C o u pl e d
wit h its ass et m a n a g e m e nt b usi n ess a n d e x c h a n g e, t h e o p p ort u nit y t o cr e at e a f ull e c os yst e m b y
h ar n essi n g Bifi nit y’s t e c h n ol o g y, m ar k eti n g cl o ut a n d cli e nt b as e h as t h e p ot e nti al t o b e tr a nsf or m ati v e
f or t h e i n d ustr y. ”
J o n at h a n a d d e d, “ E Q O N E X a n d Bifi nit y s h ar e t h e s a m e et h os a n d visi o n t o h el p cr e at e s af e
a n d c o m pli a nt cr y pt o c urr e n c y e c os yst e ms f or c o ns u m ers a n d i nstit uti o ns a cr oss t h e w orl d. I’ m
l o o ki n g f or w ar d t o f ost eri n g tr u e c oll a b or ati o n a n d pr o d u cti vit y a cr oss b ot h b usi n ess es a cr oss b ot h
t e a ms. ”
As p art of t h es e or g a ni z ati o n al c h a n g es, c urr e nt b o ar d m e m b ers A n dr e w El d o n, E Q O N E X
C hi ef O p er ati n g Offi c er a n d i nt eri m C hi ef M ar k eti n g Offi c er, a n d P a ul E wi n g, E Q O N E X C hi ef
Fi n a n ci al Offi c er will st e p d o w n fr o m t h e E Q O N E X B o ar d, eff e cti v e i m m e di at el y.
A b o ut E Q O N E X
E Q O N E X Li mit e d ( N A S D A Q: E Q O S) is a t e c h n ol o g y -dri v e n di gital ass ets fi n a n ci al
s er vi c es gr o u p t hat pr o vi d es i nstit uti o n al -gr a d e i nfr astr u ct ur e a n d a f ull s uit e of tr a di n g, c ust o d y a n d
ass et m a n a g e m e nt s ol uti o ns t o cli e nts. T h e Gr o u p’s di gital ass ets e c os yst e m h as b e e n d esi g n e d t o
a c c o m m o d at e t h e n e e ds of i nstit uti o ns a n d i n di vi d u als wit h t h e s a m e d e gr e e of r e g ul at or y o v ersi g ht
a n d s e c urit y t h e y ar e a c c ust o m e d t o i n tr a diti o n al fi n a n ci al m ar k ets. E Q O N E X’s e c os yst e m pri m aril y
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As C E O, J o n at h a n will pla y a n i nstr u m e nt al r ol e i n f ast -tra c ki n g t h e c oll a b or ati o n
b et w e e n b ot h b usi n ess es. . . . M o vi n g f or w ar d, Bifi nit y will d e v el o p w a ys t o l e v er a g e
t h e E Q O N E X E x c h a n g e as a n alt er n ati v e tr a di n g platf or m, d e pl o y r es o ur c es t o
str e n gt h e n t h e t e c h n ol o g y, a n d als o e x pl or e o p p ort u niti es t o s c al e t h e ass et
m a n a g e m e nt b usi n ess.
I d. T h e M ar c h 1 7 P r ess R el e as e als o q u ot e d F ar n el l as sa yi n g t hat E q o n e x, Di gi v a ult, a n d t h e
E x c h a n g e cr e at e d a n “ o p p ort u nit y t o cr e at e a f ull e c os yst e m b y h ar n essi n g Bifi nit y’s t e c h n ol o g y,
m ar k eti n g cl o ut[,] a n d cli e nt b as e, ” w hi c h w o ul d “[ ha v e] t h e p ot e nti al t o b e tr a nsf or m ati v e f or t h e
i n d ustr y. ” I d. H e w e nt o n t o s a y t h at h e w as “l o o ki n g f or w ar d t o f ost eri n g tr u e c oll a b or ati o n a n d
pr o d u cti vit y a cr oss b ot h b usi n ess es a cr oss b ot h t ea ms. ” I d. O n t his n e ws, E q o n e x’s s h ar e pri c e
i n cr e as e d o v er 3 2 p er c e nt b et w e e n M ar c h 1 7 a n d M ar c h 2 1. I d. ¶ 5 5.
Pl ai nt iffs all e g e t h at “ D ef e n d a nts k n e w . . . b ut o mitt e d t h at t h e ‘ c oll a b or ati o n’ b et w e e n
E q o n e x a n d Bifi nit y was si m pl y a n att e m pt e d e n d -r u n ar o u n d t h e F C A’s ba n o n Bi n a n c e
u n d ert a ki n g a n y r e g ul at e d a cti vit y i n t h e U. K. ” I d. ¶ 5 4.
5. E q o n e x’ s C oll a p s e
O n A u g ust 1 5, 2 0 2 2, E q o n e x iss u e d a pr ess r el e as e a n n o u n ci n g a si g nifi ca nt r etr e n c h m e nt i n
its b usi n ess, i n cl u di n g t h e cl os ur e of t h e E x c h a n g e, its m ai n s o ur c e of r e v e n u e:
[ E q o n e x] is t a ki n g d e cisi v e a cti o n t o str e a mli n e its o p er ati o ns a n d f o c us r es o ur c es
pri m aril y o n t h e b usi n ess es t h at off er t h e m ost p ot e nti al f or r e v e n u e gr o wt h a n d
l o n g-t er m fi n a n ci al s ust ai n a bilit y: Ass et M a n a g e m e nt a n d C ust o d y. T h e C o m p a n y
will pr o a cti v el y e xit t h e cr o w d e d cr y pt o e x c h a n g e s p a c e b y cl osi n g t h e E x c h a n g e.
E Q O N E X C h air m a n C hi -W o n Y o o n r e c e ntl y o utli n e d t h e C o m p a n y’s
str at e gi c pri oriti es a n d i nt e nti o n t o f o c us its r es o ur c es o n b usi n ess es w h er e it h as
si g nifi c a nt c o m p etiti v e str e n gt hs a n d c a n l e v er a g e its tra diti o n al fi n a n c e e x p ertis e a n d
e n c o m p ass es E Q O N E X E x c h a n g e, a di gital ass et e x c h a n g e; Di gi v a ult, a F C A a c cr e dit e d h ot a n d c ol d
di gital ass ets c ust o di a n a n d Bl et c hl e y P ar k Ass et M a n a g e m e nt, a f u n d of cr y pt o -h e d g e f u n ds.
F or m or e i nf or m ati o n visit: htt ps: / / gr o u p. e q o n e x. c o m /
F oll o w E Q O N E X o n s o ci al m e di a o n T witt er @ e q o n e x, o n F a c e b o o k @ e q o n e x, a n d o n
Li n k e dI n.
A b o ut Bifi nit y
Bifi nit y, p o w er e d b y Bi n a n c e , is a p a y m e nts t e c h n ol o g y c o m p a n y t hat pr o vi d es a n e ntr y
p oi nt t o t h e n e w w orl d of di git al c urr e n c y f or b usi n ess es. It off ers o n-a n d -off -r a m p s ol uti o ns t o
e m p o w er b usi n ess es t o c o n v ert fi at -t o-cr y pt o tr a ns a cti o ns usi n g m aj or p a y m e nt m et h o ds dir e ctl y.
F or m or e i nf or m ati o n, visit: htt ps: / / w w w. bifi nit y. c o m /.
D kt. N o. 4 8 -7.
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e x p eri e n c e. T h e d e cisi o n b y t h e E Q O N E X B o ar d of Dir e ct ors t o a c c el er at e its
str at e gi c pla n a n d cl os e t h e E x c ha n g e is i n ali g n m e nt wit h t his strat e gi c fr a m e w or k.
Cl osi n g t h e E x c ha n g e will i m pr o v e t h e C o m p a n y’s fi n a n ci al p ositi o n b y
m at eri all y r e d u ci n g t h e hi g h -c ost str u ct ur e ass o ciat e d wit h o p er ati n g t h e E x c ha n g e,
a n d fr e e u p r es o ur c es t o dri v e gr o wt h i n t h e s e g m e nts w h er e it h as si g nifi c a nt
c o m p etiti v e str e n gt hs.
E Q O N E X C E O J o n at h a n F ar n ell s ai d, “ W e ar e f o c us e d o n o p p ort u niti es
t h at will dri v e r e v e n u e gr o wt h a n d p ositi o n us f or l o n g-t er m s u c c ess. Cl osi n g t h e
E x c h a n g e will si g nifi ca ntl y si m plif y o ur b usi n ess, n arr o w o ur f o c us, fr e e u p
r es o ur c es, a n d all o w us t o o per at e as a m or e effi ci e nt or g a ni z ati o n wit h ca p a cit y t o
a g gr essi v el y g o aft er m ar k et s e g m e nts t h at off er t h e m ost p ot e nti al. . . . W e t a k e a
r e alisti c vi e w t h at o ur e x c h a n g e will n ot m o v e t h e n e e dl e f or us fi n a n ci all y o v er t h e
n e ar -t o- m e di u m t er m. W e d o n’t s e e v al u e i n c o nti n ui n g t o b e ar t h e c osts of
o p er ati n g a n e x c h a n g e d uri n g w h at m a y b e a pr ol o n g e d m ar k et d o w nt ur n. W e h a v e
c o n vi cti o n t h at pr o a cti v el y e xiti n g t h e cr o w d e d e x c h a n g e s pa c e is t h e ri g ht d e cisi o n
t o d eli v er s h ar e h ol d er v al u e. . . . O ur As s et M a n a g e m e nt a n d C ust o d y b usi n ess,
Di gi v a ult, h a v e alr ea d y m a d e s oli d pr o gr ess wit h t h e a d diti o n al r es o ur c es t h at w e
h a v e all o c at e d t o t h e m r e c e ntl y, a n d w e ar e b ullis h a b o ut t h eir pr os p e cts as w e
b e c o m e a n or g a ni z ati o n f o c us e d o n t h es e hi g h -p ot e nti al b u si n ess ar e as. ”
I d. ¶ 5 9. O n t his n e ws, E q o n e x’s s h ar e pri c e f ell o v er 1 8 p er c e nt o v er t h e n e xt t w o d a ys . I d. ¶ 6 0.
O n A u g ust 1 5, 2 0 2 2, “ i n c o n n e cti o n wit h t h e cl os ur e of t h e E x c h a n g e a n d i n a c c or d a n c e
wit h t h e L o a n A gr e e m e nt, Bifi nit y gr a nt e d E q o n e x a w ai v er f or t h e c essati o n of a m aj or b usi n ess
a n d E q o n e x a gr e e d t o i n cr e as e Bifi nit y’s s h ar e c h ar g e of Di gi v a ult u n d er t h e L o a n A gr e e m e nt fr o m
2 4. 9 % t o 1 0 0 %. ” I d. ¶ 1 2.
O n N o v e m b er 2 1, 2 0 2 2, E q o n e x “ dis cl os e d t h at [it w as] i n br ea c h of c ert ai n pr o visi o ns of
t h e L o a n A gr e e m e nt a n d c o ns e q u e ntl y s e e ki n g a wa vi er fr o m Bifi nit y o n s u c h br e a c h es. ” I d. ¶ 6 2
(i nt er n al q u ot ati o n m ar ks o mitt e d). E q o n e x stat e d t h at its fi n a n cial r es o ur c es “ m a y n ot b e s uffi ci e nt
t o s atisf y t h e w or ki ng c a pit al r e q uir e m e nts of t h e [ c o m p a n y] f or a p eri o d of t w el v e m o nt hs . . . ,
w hi c h m a y c ast si g nifi c a nt d o u bt o n [ E q o n e x’s] a bilit y t o c o nti n u e as a g oi n g c o n c er n. ” I d. O n t his
n e ws, E q o n e x’s s har e pri c e f ell o v er 4 8 p er c e nt o n N o v e m b er 2 2, 2 0 2 2. I d. ¶ 6 3. E q o n e x w as
d elist e d b y N A S D A Q o n N o v e m b er 3 0, 2 0 2 2 aft er its s h ar e pri c e f ell t o $ 0. 0 9 3. I d. ¶ ¶ 1 6 -1 7.
E q o n e x h as si n c e fil e d f or b a n kr u pt c y. I d. ¶ 2 5. Pl ai ntiffs all e g e t hat E q o n e x w as h e a d e d f or
i ns ol v e n c y at t h e ti m e it e nt er e d i nt o t h e Str at e gi c Part n ers hi p. I d. ¶ 3 ( “[ E q o n e x] als o li e d a b o ut t h e
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l o a n s uffi ci n g t o sta v e off E q o n e x’s i ns ol v e n c y. ”); see also i d. ¶ 5 0 ( “ E q o n e x h a d n o w a y t o r e p a y
Bifi nit y . . . . ”); id. ¶ 6 7 ( “ E q o n e x was n ot i n a p ositi o n t o r e p a y. ”) .
B. Pr o c e d ur al Hi st or y
Pl ai ntiffs c o m m e n c e d t his a cti o n o n A pril 2 0, 2 0 2 3. D kt. N o. 1. Pl ai ntiffs bri n g cl ai ms
a g ai nst F ar n ell a n d H ai u n d er S e cti o n 1 0( b) of t h e E x c h a n g e A ct a n d R ul e 1 0 b -5 f or m a ki n g
all e g e dl y m at eri al misr e pr es e nt ati o ns a n d o mitti n g m at eri al i nf or m ati o n a b o ut D ef e n d a nts’
i nt e nti o ns r e g ar di n g t h e Str at e gi c P art n ers hi p . A m. C o m pl. ¶ 8 2. Pl ai ntiffs als o bri n g cl ai ms a g ai nst
Bi n a n c e, Bifi nit y, Z h a o, Far n ell, Li n g, C e m m ell, a n d H ai u n d er S e cti o n 2 0(a) of t h e E x c h a n g e A ct
f or e x er cisi n g t h eir c o ntr ol o v er E q o n e x t o i n d u c e it t o m a k e t h e m at eri al misr e pr es e nt ati o ns a n d
o missi o ns all e g e dl y c o nt ai n e d i n t h e M ar c h Pr ess R el e as es . I d. ¶ 9 6. O n J a n u ar y 1 2, 2 0 2 4,
D ef e n d a nts m o v e d t o dis miss f or f ail ur e t o st at e a cl ai m a n d l a c k of p ers o n al j uris di cti o n. D kt. N os.
4 6, 4 7, 4 8. Pl ai ntiffs fil e d a n o p p ositi o n t o t h e m oti o n t o dis miss o n F e br u ar y 1 6, 2 0 2 4. D kt. N o.
4 9. D ef e n d a nts fil e d t h eir r e p l y o n M ar c h 4, 2 0 2 4. D kt. N os. 5 0, 5 1.
D ef e n d a nts i niti all y m o v e d t o dis miss all of Pl ai ntiffs ’ cl ai ms arisi n g fr o m all t h e st at e m e nts
r ef er e n c e d i n t h e A m e n d e d C o m pl ai nt.5 Pl ai ntiffs di d n ot o p p os e all as p e cts of D ef e n d a nts’ m oti o n.
I nst e a d, Pl ai ntiff s li mit e d t h e s c o p e of t h eir clai ms i n t h eir o p p ositi o n bri ef, ar g ui n g o nl y t h at
“ D ef e n d a nts m a d e t w o mat eri all y f als e cl ai ms: ” ( 1) “ t h at t h e Str at e gi c P art n ers hi p w o ul d s u p p ort
E q o n e x, ” a n d ( 2) “ t h at t h er e w as a p ossi bilit y of a m er g er b et w e e n E q o n e x a n d Bifi nit y. ” 6 D kt. N o.
4 9, Pl ai ntiffs’ M e m or a n d u m of L a w i n O p p ositi o n t o D ef e n d a nts’ M oti o n t o Dis miss ( “ Pl ai ntiffs’
O p p. ”) at 9. Pl ai ntiffs t h us c o n c e d e t h at t h e C o urt s h o ul d dis miss a n y cl ai ms arisi n g fr o m
5 D ef e n d a nts c at e g ori z e d t h e st at e
m e nts i nt o t hr e e gr o u ps: st at e m e nts a b o ut t h e l o a n, st at e m e nts a b o ut t h e n o n -bi n di n g
m er g er dis c ussi o ns, a n d st at e m e nts a b o ut t h e str at e gi c p art n ers hi p. D kt. N o. 4 7, D ef e n d a nts’ M e m or a n d u m of L a w i n
S u p p ort of T h eir M oti o n t o Dis miss ( “ D ef e n d a nt’s S u p p ort ”) at 4 – 5.
6 Pl ai ntiffs’ cl ai ms aris e e x cl usi v el y o ut of t h e M ar c h 7 a n d M ar c h 1 7 Pr ess R el e as es iss u e d b y E q o n e x. A m. C o m pl. ¶ ¶
4 7 – 5 0, 5 3 – 5 4.
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st at e m e nts t h at d o n ot r el at e t o w h et h er t h e Str at e gi c P art n ers hi p w o ul d b e n efit E q o n e x or t o t h e
p ot e nti al m er g er .
T h e m ai n iss u e f or t h e C o urt t o a d dr ess is t h us w h et h er Pl ai ntiffs h a v e pl ea d e d f a cts
s uffi ci e nt t o all e g e t h at D ef e n d a nts m a de or i n d u c e d t h e M ar c h 7 a n d 1 7 Pr ess R el eas es wit h t h e
k n o wl e d g e t hat t h e y di d n ot i nt e n d t o s u p p ort E q o n e x or t o c o ns u m m at e a m er g er. T h e C o urt will
a d dr ess ( 1) w h et h er Pl ai ntiffs a d e q u at el y pl ea d t h at F ar n ell a n d H ai “ ma d e ” t h e c h all e n g e d
st at e m e nts f or p ur p os es of S e cti o n 1 0( b) li a bilit y; ( 2) w h et h er Pl ai ntiffs a d e q uat el y pl ea d t h e f alsit y
of t h e c h all e n g e d st at e m e nts; (3 ) w h et h er Plai ntiffs a d e q u at el y pl ea d t h at D ef e n d a nts or E q o n e x
k n e w t h at t h e y di d n ot i nt e n d t o s u p p ort E q o n e x or c o ns u m m at e a m er g er w h e n t h e st at e m e nts
w er e m a d e ; (4 ) w h et h er Plai ntiffs a d e q u at el y pl e a d t h at, if a vi ol ati o n of S e cti o n 1 0( b) w er e f o u n d,
D ef e n d a nts “ c o ntr oll e d ” t h e m a k ers of t h e m at eri al misr e pr es e ntati o ns, s u bj e cti n g t h e m t o S e cti o n
2 0( a) li a bilit y ; a n d (5 ) w h et h er Pl ai ntiffs’ pl e a di n gs est a blis h t hat t h e C o urt h as p ers o n al j uris di cti o n
o v er D ef e n d a nts . B e c a us e t h e C o urt fi n ds t h at Pl ai ntiffs ’ pl e a di n gs f ail t o st at e a clai m o n t h es e
iss u es, t h e C o urt r efrai ns fr o m a d dr essi n g l oss c a us ati o n.
III. L E G A L S T A N D A R DS
A. R ul e 1 2( b)( 6)
T o s ur vi v e a m oti o n t o dis miss u n d er F e d. R. Ci v. P. 1 2( b)( 6), “ a c o m pl ai nt m ust all e g e
s uffi ci e nt f a cts, t a k e n as tr u e, t o st at e a pl a usi bl e cl ai m f or r eli ef. ” Jo h nso n v. Priceli ne.co m, I nc., 7 1 1
F. 3 d 2 7 1, 2 7 5 ( 2 d Cir. 2 0 1 3) ( citi n g Bell Atl. Cor p. v. T wo m bly , 5 5 0 U. S. 5 4 4, 5 5 5– 5 6 ( 2 0 0 7)). T o
d et er mi n e p l a usi bilit y, c o urts f oll o w a “t w o-pr o n g e d a p pr o a c h. ” As hcroft v. I q bal , 5 5 6 U. S. 6 6 2, 6 7 9
( 2 0 0 9). “ First, alt h o u g h a c o urt m ust a c c e pt as tr u e all of t h e all e g ati o ns c o nt ai n e d i n a c o m pl ai nt,
t h at t e n et is i n a p pli c a bl e t o l e g al c o n cl usi o ns, a n d t hr e a d b are r e cit als of t h e el e m e nts of a c a us e of
a cti o n, s u p p ort e d b y m er e c o n cl us or y st at e m e nts, d o n ot s uffi c e. ” H arris v. Mills , 5 7 2 F. 3 d 6 6, 7 2
( 2 d Cir. 2 0 0 9) ( alt er ati o ns a n d i nt er n al q u ot ati o n m ar ks o mitt e d) ( q u oti n g I q b al, 5 5 6 U. S. at 6 7 8).
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S e c o n d, a c o ur t d et er mi n es “ w h et h er t h e ‘ w ell-pl e a d e d f a ct u al all e gati o ns,’ ass u m e d t o b e tr u e,
‘ pl a usi bl y gi v e ris e t o a n e ntitl e m e nt t o r eli ef.’ ” H ayde n v. P aterso n , 5 9 4 F. 3 d 1 5 0, 1 6 1 ( 2 d Cir. 2 0 1 0)
( q u oti n g I q b al, 5 5 6 U. S. at 6 7 9). D et er mi ni n g w h et h er a c o m pl ai nt s tat es a pla usi bl e cl ai m is a
“ c o nt e xt -s p e cifi c t as k t h at r e q uir es t h e r e vi e wi n g c o urt t o dr a w o n its j u di ci al e x p eri e n c e a n d
c o m m o n s e ns e. ” I q bal, 5 5 6 U. S. at 6 7 9.
B e c a us e cl ai ms u n d er S e cti o n 1 0( b) of t h e E x c h a n g e A ct a n d R ul e 1 0 b -5 t h er e u n d er s o u n d
i n fr a u d, t h e y ar e s u bj e ct t o t h e h ei g ht e n e d pl e a di n g r e q uir e m e nts of F e d. R. Ci v. P. 9( b) a n d t h e
Pri v at e S e c uriti es Liti g ati o n R ef or m A ct ( t h e “P S L R A ” ). Nov a k v. K as a ks , 2 1 6 F. 3 d 3 0 0, 3 0 6– 0 7 ( 2 d
Cir. 2 0 0 0). R ul e 9( b) r e q uir es t h at t h e c o m pl ai nt “stat e wit h p arti c ularit y t h e cir c u mst a n c es
c o nstit uti n g fra u d. ” F e d. R. Ci v. P. 9( b). T o satisf y t h at r e q uir e m e nt, t h e c o m pl ai nt m ust “( 1)
s p e cif y t h e st at e m e nts t h at t h e pl ai ntiff c o nt e n ds w er e fra u d ul e nt, ( 2) i d e ntif y t h e s p ea k er, ( 3) st at e
w h er e a n d w h e n t h e st at e m e nts w er e ma d e, a n d ( 4) e x pl ai n w h y t h e stat e m e nts w er e fr a u d ul e nt. ”
A T SI Co m mc ’ns, I nc. v. S h a ar F u n d, Ltd. , 4 9 3 F. 3 d 8 7, 9 9 ( 2 d Cir. 2 0 0 7) ( citi n g Nov a k , 2 1 6 F. 3 d at
3 0 6). T h e P S L R A i m p os es si milar r e q uir e m e nts o n cl ai ms br o u g ht u n d er t h e E x c h a n g e A ct: “t h e
c o m pl ai nt s h all s p e cif y ea c h st at e m e nt all e g e d t o h a v e b e e n misl e a di n g, t h e r eas o n or r e as o ns w h y
t h e st at e m e nt is misl e a di n g, a n d, if a n all e g ati o n r e gar di n g t h e st at e me nt or o missi o n is m a d e o n
i nf or m ati o n a n d b eli ef, t h e c o m pl ai nt s hall stat e wit h p arti c ul arit y all f a cts o n w hi c h t h at b eli ef is
f or m e d. ” 1 5 U. S. C. § 7 8 u -4( b)( 1). T h e P S L R A f urt h er r e q uir es t h at t h e c o m pl ai nt “st at e wit h
p arti c ul arit y f a cts gi vi n g ris e t o a str o n g i nf er e n c e t hat t h e d ef e n d a nt a ct e d wit h t h e r e q uir e d st at e of
mi n d ” wit h r es p e ct t o e a c h all e g e d misstat e m e nt or o missi o n. 1 5 U. S. C. § 7 8 u -4( b)( 2)( A). A
c o m pl ai nt will s ur vi v e u n d er t h at h ei g ht e n e d st a n d ar d “ o nl y if a r e as o na bl e p ers o n w o ul d d e e m t h e
i nf er e n c e of s ci e nt er c o g e nt a n d at l e ast as c o m p elli n g as a n y o p p osi n g i nf er e n c e o n e c o ul d dr a w
fr o m t h e f a cts all e g e d. ” Tell a bs, I nc. v. M a kor Iss ues & Rig hts, Ltd. , 5 5 1 U. S. 3 0 8, 3 2 4 ( 2 0 0 7).
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I n r es ol vi n g a m oti o n t o dis miss u n d er R ul e 1 2( b)( 6), c o urts g e n er all y m a y n ot c o nsi d er
m at eri als e xtri nsi c t o t h e c o m pl ai nt. See F e d. R. Ci v. P. 1 2( d). H o w e v er, t h at r ul e is n ot a bs ol ut e. I n
a d diti o n t o t h e f a cts all e g e d i n t h e c o m pl ai nt, c o urts “ m a y c o nsi d er a n y writt e n i nstr u m e nt att a c h e d
t o t h e c o m plai nt, st at e m e nts or d o c u m e nts i n c or p or at e d i nt o t h e c o m pl ai nt b y r ef er e n c e, l e g all y
r e q uir e d p u bli c dis cl os ur e d o c u m e nts fil e d wit h t h e S E C, a n d d o c u m e nts p oss ess e d b y or k n o w n t o
t h e pl ai ntiff a n d u p o n w hi c h it r eli e d i n bri n gi n g t h e s uit. ” A T SI , 4 9 3 F. 3d at 9 8. C o urts m a y als o
c o nsi d er “ m att ers of w hi c h j u di ci al n oti c e m a y b e t a k e n .” Goel v. B u nge, Lt d. , 8 2 0 F. 3 d 5 5 4, 5 5 9 ( 2 d
Cir. 2 0 1 6) ( cit ati o n o mitt e d). F urt h er m or e, o n a m oti o n t o dis miss , t h e C o urt c a n c o nsi d er
st at e m e nts m a d e i n a c o m p a n y’s p u blic fili n gs wit h t h e S E C. See Kr a mer v. Ti me W ar ner, I nc. , 9 3 7 F. 2 d
7 6 7, 7 7 4 ( 2 d Cir. 1 9 9 1). H o w e v er, t h e C o urt ca n c o nsi d er t h e m “‘ o nl y t o d et er mi n e w h at t h e
d o c u m e nts stat e d,’ a n d ‘ not to prove t he tr ut h of t heir co nte nts .’ ” Rot h v. Je n ni ngs , 4 8 9 F. 3 d 4 9 9, 5 0 9 ( 2 d
Cir. 2 0 0 7) ( alt er ati o n i n ori gi n al) ( q u oti n g Kr a mer v. Ti me W ar ner I nc. , 9 3 7 F. 2 d 7 6 7, 7 7 4 ( 2 d Cir.
1 9 9 1)).
I V. DI S C U S SI O N
A. S e cti o n 1 0( b) a n d R ul e 1 0 b -5 Li a bilit y
U n d er S e cti o n 1 0( b) a n d R ul e 1 0 b -5, it is u nl a wf ul t o “ m a k e a n y u ntr u e st at e m e nt of a
m at eri al f a ct or t o o mit t o st at e a mat eri al f a ct n e c ess ar y i n or d er t o m a k e t h e st at e m e nts m a d e, i n
t h e li g ht of t h e cir c u mst a n c es u n d er w hi c h t h e y w er e m a d e, n ot misl e a di n g . . . i n c o n n e cti o n wit h
t h e p ur c h as e or sal e of a n y s e c urit y.” 1 7 C. F. R. § 2 4 0. 1 0 b -5( b); see also 1 5 U. S. C. § 7 8j( b). T o st at e a
cl ai m u n d er S e cti o n 1 0( b) a n d R ul e 1 0 b -5 f or fra u d ul e nt misr e pr es e nt ati o ns, a pl ai ntiff m ust all e g e
“( 1) a m at eri al misr e pr es e nt ati o n or o missi o n b y t h e d ef e n d a nt; ( 2) s ci e nt er; ( 3) a c o n n e cti o n
b et w e e n t h e misr e pr es e nt ati o n or o missi o n a n d t h e p ur c h as e or sal e of a s e c urit y; ( 4) r eli a n c e u p o n
t h e misr e pr es e nt ati o n or o missi o n; ( 5) e c o n o mi c l oss; a n d ( 6) l oss ca usati o n. ” G A M C O I nvs., I nc. v.
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Vive n di U nivers al, S. A. , 8 3 8 F. 3 d 2 1 4, 2 1 7 ( 2 d Cir. 2 0 1 6) ( q u oti n g H alli b urto n Co. v. Eric a P. Jo h n F u n d,
I nc., 5 7 3 U. S. 2 5 8, 2 6 7 ( 2 0 1 4)).
Pl ai ntiffs ass ert S e cti o n 1 0( b) cl ai ms a g ai nst Far n ell a n d H ai . E v e n t h o u g h E q o n e x is n o
l o n g er a d ef e n d a nt, Plai ntiffs als o ass ert t h at E q o n e x is li k e wis e a “ pri m ar y vi ol at or ” of S e cti o n
1 0( b) f or p ur p os es of Pl ai ntiffs’ S e cti o n 2 0( a) c o ntr ol -p ers o n li a bilit y cl ai ms .7 D ef e n d a nts m o v e t o
dis miss u n d er R ul e 1 2( b)( 6) o n t h e gr o u n ds t h at Pl ai ntiffs h a v e f ail e d t o a d e q u at el y pl ea d ( 1) t h at
F ar n ell a n d H ai m a d e a n y of t h e st at e m e nts Plai ntiffs c h all e n g e; ( 2) t h at t h e c hall e n g e d st at e m e nts
w er e f als e or misl ea di n g or c o nstit ut e d f als e or misl e a di n g o missi o ns; a n d ( 3) t h at D ef e n d a nts or
E q o n e x h a d t h e r e q uisit e s ci e nt er.
1. F ar n ell a n d H a i Ar e ‘ M a k er s’ of O nl y T h eir Q u ot e d St at e m e nt s
F ar n ell a n d H ai “ ma d e ” o nl y t h e st at e m e nts i n t h e M ar c h 7 a n d M ar c h 1 7 Pr ess R el e as es
t h at ar e attri b ut e d t o t h e m, n ot t h e r e m ai n d er of t h e st at e m e nts i n t h e Pr ess R el e as es b e c a us e
Pl ai ntiffs f ail t o all e g e t h at eit h er F ar n ell or H ai h a d ulti m at e a ut h orit y o v er t h e s e ot h er st at e m e nts .
In or d er t o b e li a bl e f or a vi ol ati o n of S e cti o n 1 0( b) , a d ef e n d a nt m ust ha v e “ m a d e ” t h e
all e g e dl y m at eri al misst at e m e nts. J a n us C a pit al Gr p., I nc. v. First Derivative Tr a ders, 5 6 4 U. S. 1 3 5, 1 4 1
( 2 0 1 1). “ M a k e ” m ea ns “t o st at e, ” n ot “t o cr eat e. ” I d. at 1 4 2, 1 4 4 – 4 5. “[ T] h e m a k er of a st at e m e nt
is t h e p ers o n or e ntit y wit h ulti m at e a ut h orit y o v er t h e st at e m e nt, i n cl u di n g its c o nt e nt a n d w h et h er
a n d h o w t o c o m m u n i c at e it. ” I d. at 1 4 2; see also i d. at 1 4 4 ( “ Wit h o ut [ ulti m at e] a ut h orit y, it is n ot
n e c ess ar y or i n e vit a bl e t h at a n y f als e h o o d will b e c o nt ai n e d i n t h e stat e m e nt ”). B y c o ntrast, “[ o] n e
w h o pr e p ar es or p u blis h es a st at e m e nt o n b e h alf of a n ot h er is n ot its m a k er.” I d. at 1 4 2.
7 See I n re S u pre m a S peci alties, I nc. Sec. Litig., 4 3 8 F. 3 d 2 5 6, 2 8 5 ( 3 d Cir. 2 0 0 6) ( “[ T] h er e is n o r e q uir e m e nt i n t h e l a n g u a g e of
[ S e cti o n 2 0( a)] t hat t h e c o ntr oll e d p ers o n b e n a m e d as a d ef e n d a nt as a pr e di c at e t o i m p osi n g li a bilit y u p o n t h e
c o ntr olli n g i n di vi d u al d ef e n d a nts. ”) ; Sg al a m bo v. Mc Ke n zie , 7 3 9 F. S u p p. 2 d 4 5 3, 4 8 6 n. 2 0 3 ( S. D. N. Y. 2 0 1 0) (“ S o l o n g as
t h e C o m pl ai nt a d e q u at el y all e g es t h e el e m e nts of a R ul e 1 0 b-5 cl ai m a g ai nst C a n a di a n S u p eri or as a c or p or ati o n, it is of
n o m o m e nt t hat C a n a di a n S u p eri or is n ot a n a m e d d ef e n d a nt d u e t o b a n kr u pt c y.”).
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“I n t h e p ost -J a n us w orl d, a n e x e c uti v e m a y b e h el d a c c o u nt a bl e w h er e t h e e x e c ut iv e h a d
ulti m at e a ut h orit y o v er t h e c o m p a n y’s stat e m e nt; si g n e d t h e c o m p a n y’s st at e m e nt; r atifi e d a n d
a p pr o v e d t h e c o m p a n y’s st at e m e nt; or w h er e t h e s t at e m e nt is attri b ut e d t o t h e e x e c uti v e. ” I n re
F a n nie M ae 2 0 0 8 Sec. Litig. , 8 9 1 F. S u p p. 2 d 4 5 8, 4 7 3 ( S. D. N. Y. 2 0 1 2), aff’ d , 5 2 5 F. A p p’ x 1 6 ( 2 d Cir.
2 0 1 3) ; see also I n re S mit h B ar ney Tr a nsfer Age nt Litig., 8 8 4 F. S u p p. 2 d 1 5 2, 1 6 5 ( S. D. N. Y. 2 0 1 2)
( h ol di n g t h at “ o nl y t h os e offi c ers w h os e si g nat ur es a p p e ar o n misl e a di n g st at e m e nts m a y b e li a bl e as
t h e ‘ m a k ers’ of t h os e st at e m e nts ”); I n re L ul ule mo n Sec. Litig., 1 4 F. S u p p. 3 d 5 5 3, 5 7 7 n. 1 4 ( S. D. N. Y.
2 0 1 4), aff’d , 6 0 4 F. A p p’ x 6 2 ( 2 d Cir. 2 0 1 5) ( “ T h e o nl y st at e m e nts f or w hi c h t h e [ c o m pl ai nt] all e g es
[t h e c o m p a n y’s f o u n d er a n d dir e ct or] w as t h e ‘ma k er ’ ar e t h os e c o ntai n e d i n t h e [fili n g] t h at [ h e]
si g n e d . . . . [ H e] t h us c a n n ot b e f o u n d li a bl e f or a n y ot h er st at e m e nts, b e ca us e t h er e ar e n o
p arti c ul ari z e d all e gati o ns t h at h e h a d a n y r ol e i n s ha pi n g t h eir c o nt e nt. ”). “[I] n t h e or di n ar y c as e,
attri b uti o n . . . is str o n g e vi d e n c e t h at a st at e m e nt w as m a d e b y— a n d o nl y b y — t h e p art y t o w h o m it
is attri b ut e d.” J a n us, 5 6 4 U. S. at 1 4 2 – 4 3 .
W hil e e x pli cit attri b uti o n c a n b e a str o n g i n di c ati o n of J a n us’s “ ulti m at e a ut h orit y, ” it als o c a n
b e f o u n d if “ i m pli cit fr o m s urr o u n di n g cir c u mst a n c es,” or, i n ot h er w or ds, e vi d e n c e d b y v ari o us
i n di ci a of c o ntr ol. See City of Roseville E m ployees ’ Ret. Sys. v. E nergy Sol utio ns, I nc. , 8 1 4 F. S u p p. 2 d 3 9 5,
4 1 8 ( S. D. N. Y. 2 0 1 1) ( q u oti n g J a n us, 5 6 4 U. S. at 1 4 2– 4 3 ); see also I n Re Weig ht W atc hers I nt’l I nc. Sec.
Litig. , 5 0 4 F. S u p p. 3 d 2 2 4, 2 6 1– 6 2 ( S. D. N. Y. 2 0 2 0) ( “ W h et h er t h e d ef e n da nt is t h e ‘ m a k er’ of t h e
misst at e m e nt m a y d e p e n d o n i nf er e nti al or cir c u msta nti al e vi d e n c e. ”); I O P C ast Iro n Hol di ngs, L L C v.
J. H. W hit ney C a pit al Part ners, L L C, 9 1 F. S u p p. 3 d 4 5 6, 4 7 3 – 7 4 ( S. D. N. Y. 2 0 1 5) (fi n di n g “ ulti m at e
a ut h orit y ” w h er e d ef e n da nts o w n e d o v er w h el mi n g m aj orit y of c o m p a n y s har es; d ef e n da nts’
e m pl o y e es f or m e d a m aj orit y of t h e c o m p a n y ’s b oar d; d ef e n d a nts d e ci d e d w h et h er t o s ell t h e
c o m p a n y; d ef e n da nts’ e m pl o y e es all e g e dl y n e g oti at e d t h e a gr e e m e nt at iss u e; a n d o n e of d ef e n d a nts’
e x e c uti v es si g n e d t h e a gr e e m e nt at iss u e); Li berty Me di a Cor p. v. Vive n di U nivers al, S. A. , 8 6 1 F. S u p p.
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2 d 2 6 2, 2 7 1 ( S. D. N. Y. 2 0 1 2) (fi n di n g “ ulti m at e a ut h orit y ” w h er e d ef e n da nt v ett e d a n d a p pro v e d
d o c u m e nts c o nt ai ni n g o missi o ns a n d misst at e m e nts a n d w h er e it fil e d t h os e d o c u m e nts wit h t h e
S E C).
Pl ai ntiffs a d e q u at el y pl ea d t h at F ar n ell a n d H ai w er e t h e ‘m a k ers ’ of t h e st at e m e nts i n t h e
M ar c h 7 a n d 1 7 Pr ess R el e as es t h at w er e attri b ut e d t o t h e m . T h e M ar c h 7 Pr ess R el e as e stat e d,
“ H el e n H ai, Pr esi d e nt of Bifi nit y, c o m m e nt e d . . . .” D kt. N o. 4 8 -6. T h e M ar c h 1 7 Pr ess R el eas e
r e a d, “J o nt h a n F ar n ell, C E O of E Q O N E X s ai d . . . ,” a n d “ J o n at h a n a d d e d . . . .” D kt. N o. 4 8 -7.
T h e stat e m e nts i m m e di at el y f oll o wi n g t h es e p hr as es ar e dir e ctl y attri b ut e d t o t h e d ef e n d a nts , w hi c h
is “str o n g e vi d e n c e ” t h at t h e y h a d ulti m at e a ut h orit y o v er a n d t h us “ m a d e ” t h e st at e m e nts . J a n us,
5 6 4 U. S. at 1 4 2 – 4 3 . T h er ef or e, Pl ai ntiffs a d e q u at el y pl e a d t h at F ar n ell a n d Hai ar e t h e ‘m a k ers ’ of
t h es e q u ot e d st at e m e nts f or p ur p os es of S e cti o n 1 0( b) li a bilit y.
H o w e v er, Pl ai ntiffs di d n ot a d e q u at el y pl e a d t hat eit h er F ar n ell or H ai m a d e t h e ot h er
st at e m e nts c o nt ai n e d i n t h e M ar c h 7 Pr ess R el e as e. F ar n ell a n d H ai w er e n ot a p p oi nt e d t o t h eir
p ositi o ns at E q o n e x u ntil M ar c h 1 7. A m. C o m pl. ¶ ¶ 2 8 , 3 1 . Pl ai ntiffs f ail t o all e g e fa cts i n di c ati n g
t h at t h e y h a d ulti m at e a ut h orit y o v er t h e st at e m e nts m a d e i n a pr ess r el eas e iss u e d b y E q o n e x t e n
d a ys b ef or e t h e y ass u m e d t h eir p ositi o ns at t h e c o m p a n y . I d. ¶ ¶ 4 7, 5 3. Pl ai ntiffs d o n ot all e g e t h at
eit h er F ar n ell or H ai “ si g n e d, r atifi e d, or a p pr o v e d t h e pr ess r el eas e ” or t h at t h e pr ess r el e as e as a
w h ol e w as attri b ut e d t o eit h er of t h e m. X u v. Gri ds u m Hol di ng I nc. , 6 2 4 F. S u p p. 3 d 3 5 2, 3 6 0
( S. D. N. Y. 2 0 2 2) ( W o o ds, J.). As a r es ult , F ar n ell a n d H ai c a n n ot b e d e e m e d ‘ m a k ers’ of t h e n o n-
attri b ut e d st at e m e nts i n E q o n e x’s M ar c h 7 P r ess R el e as e b as e d o n Pl ai ntiffs’ pl e a di n gs .
Pl ai ntiffs si mil arl y f ail t o pl e a d t h at eit h er F ar n ell or H ai m a d e t h e n o n-attri b ut e d st at e m e nts
i n t h e M ar c h 1 7 P r ess R el e as e . F ar n ell a n d Hai all e g e dl y ass u m e d t h eir p ositi o ns at E q o n e x t h at
v er y d a y. A m. C o m pl. ¶ ¶ 2 8 , 3 1 . H o w e v er, t h e pl ea di n gs still l a c k a n y all e gati o n t h at eit h er Far n ell
or H ai h a d a ut h orit y o v er t h e p r ess r el e as e. Pl ai ntiffs f ail t o all e g e f a cts s h o wi n g t h at H ai, as a n e w
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m e m b er of E q o n e x’s b oar d of dir e ct ors, “ h a d a n y r ol e i n s h a pi n g [ t h e pr ess r el e as e’s] c o nt e nt. ” I n re
L ul ule mo n Sec. Litig. , 1 4 F. S u p p. 3 d 5 5 3, 5 7 6 n. 1 4 ( S. D. N. Y. 2 0 1 4), aff’ d , 6 0 4 F. A p p’ x 6 2 ( 2 d Cir.
2 0 1 5) ( h ol di n g t h at t h e c o m p a n y’s f o u n d er a n d dir e ct or w as n ot a m a k er, a bs e nt “ p arti c ul ari z e d
all e gati o ns t h at h e ha d a n y r ol e i n s h a pi n g [t h e st at e m e nts’] c o nt e nt ”).
Li k e wis e, P l ai ntiffs f ail t o pl e a d f a cts s h o wi n g t h at F ar n ell, as E q o n e x’s n e wl y a p p oi nt e d
C E O, was i n v ol v e d i n p u blis hi n g , r atif yi n g, or a p pr o vi n g t h e M ar c h 1 7 Pr ess R el eas e. F urt h er,
F ar n ell di d n ot si g n t h e pr ess r el e as e; to t h e c o ntr ar y, t h e o nl y p ers o n t o si g n b ot h t h e M ar c h 7 a n d
M ar c h 1 7 Pr ess R el eas es w as C F O a n d o utgoi ng dir e ct or, P a ul E wi n g. D kt. N os. 4 8 -6, 4 8 -7. T h e f a ct
t h at F ar n ell w as q u ot e d i n t h e pr ess r el e as e d o es n ot its elf esta blis h his a ut h orit y o v er it wit h o ut
ot h er “i n di ci a of c o ntr ol .” X u , 6 2 4 F. S u p p. 3 d at 3 6 0 – 6 1 (fi n di n g “ ulti m at e a ut h orit y ” o v er a pr ess
r el e as e w h er e pl e a di n gs s h o w t h at t h e C E O w as als o a c o -f o u n d er; h a d si g nifi ca nt s h ar e-o w n ers hi p
a n d v oti n g p o w er; h a d br o a d d e cisi o n -m a ki n g a ut h orit y o v er t h e m att ers at iss u e ; a n d ma d e l e n gt h y
a n d d et ail e d st at e m e nts dis c ussi n g t h e matt ers at iss u e i n t h e pr ess r el e as e e vi d e n ci n g his c o ntr ol
o v er t h e r e m ai n d er of t h e r el e as e ’s st at e m e nts); see also I n re Aege a n M ari ne Petrole u m Net wor k, I nc. Sec.
Litig. , 5 2 9 F. S u p p. 3 d 1 1 1, 1 3 8– 3 9 ( S. D. N. Y. 2 0 2 1) ( h ol di n g t h at b ei n g q u ot e d i n a st at e m e nt “ d o es
n ot est a blis h [ o n e’s] i n v ol v e m e nt i n t h e cr e ati o n of t h e fili n g ”). C o ntrar y t o Pl ai ntiffs’ s u g g esti o n, it
is i ns uffi ci e nt si m pl y t o pl e a d t h at “ as a r es ult of [ his] p ositi o n[] as C E O, ” h e c o ntr oll e d t h e pr ess
r el e as e’s c o nt e nt. X u , 6 2 4 F. S u p p. 3 d at 3 6 0 , 3 6 2.
F or t h es e r e as o ns, Pl ai ntiffs f ai l t o all e g e t h at Far n ell a nd H ai w er e ‘ m a k ers’ of t h e n o n-
attri b ut e d st at e m e nts i n E q o n e x’s M ar c h 7 or 1 7 P r ess R el e as e s, b ut Pl ai ntiffs h a v e a d e q u at el y
all e g e d t hat Far n ell a n d Hai ‘ m a d e’ t h eir q u ot e d st at e m e nts i n t h e Pr ess Rel eas es.
2. Pl ai ntiff s F ail t o Pl e a d t h at H ai’ s St at e m e nt I s F al s e or Mi sl e a di n g
Pl ai ntiffs f ail t o all e g e a n y f a cts t h at w o ul d i n di c at e t h at H ai’s q u ot e d st at e m e nt i n t h e M ar c h
7 Pr ess R el eas e w as f als e or misl e a di n g. “ A stat e m e nt is misl e a di n g if a r e as o n a bl e i n v est or w o ul d
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h a v e r e c ei v e d a fals e i m pr essi o n fr o m t h e stat e m e nt. ” Fre u de n berg v. E * Tr a de Fi n. Cor p. , 7 1 2 F. S u p p.
2 d 1 7 1, 1 8 0 ( S. D. N. Y. 2 0 1 0) ( cit ati o n o mitt e d). W h e n a c o m p a n y d o es n ot h a v e a n o bli g ati o n t o
s p ea k b ut d o es s o a n y w a y, it ass u m es “a d ut y t o b e b ot h a c c ur at e a n d c o m pl et e. ” C aiola v. Citi b a n k,
N. A., N. Y. , 2 9 5 F. 3 d 3 1 2, 3 3 1 ( 2 d Cir. 2 0 0 2); see also I n re Morg a n St a nley I nfo. F u n d Sec. Litig., 5 9 2 F. 3 d
3 4 7, 3 6 6 ( 2 d Cir. 2 0 1 0) ( e x pl ai ni n g t h at o n c e a cor p or ati o n m a k es “a dis cl os ur e a b o ut a p arti c ul ar
t o pi c, w h et h er v ol u nt ar y or r e q uir e d, t h e r e pr es e ntati o n m ust b e c o m pl et e a n d a c c ur at e ” ( q u otati o n
o mitt e d)). A n d “lit er all y tr u e st at e m e nts ” ar e a cti o na bl e if t h e y “ cr e at e a m at eri all y misl e a di n g
i m pr essio n .” S E C v. G a belli , 6 5 3 F. 3 d 4 9, 5 7 ( 2 d Cir. 2 0 1 1), rev’d a n d re ma n ded o n ot her gro u n ds , 5 6 8 U. S.
4 4 2 ( 2 0 1 3).
H ai w as q u ot e d i n t h e M ar c h 7 P r ess R el eas e as s a yi n g t h at E q o n e x’s “i nstit uti o n al a p pr o a c h
a n d a bilit y t o utili z e gl o b al r e g ul at or y fr a m e w or ks t o b uil d a c o m pli a nt b usi n ess dir e ctl y
c o m pl e m e nts o ur r et ail f o c us a n d will gr e atl y b e n efit Bifi nit y o v er t h e l o n g -t er m. ” A m. C o m pl. ¶ 4 8.
Pl ai ntiffs f ail t o all e g e t h at t his st at e m e nt w as f als e or misl e a di n g. 8 T h e st at e m e nt r ef ers o nl y t o t h e
p ot e nti al b e n efits of t h e Strat e gi c P art n ers hi p f or Bifi nity . It d o es n ot s a y a n yt hi n g a b o ut w h et h er t h e
Str at e gi c P art n ers hi p w o ul d b e n efit E qo ne x or a b o ut a p ot e nti al m er g e r. T h us, n o r e as o n a bl e
i n v est or c o ul d h a v e r e c ei v e d t h e i m pr essi o n t h at t h e Str at e gi c P art n ers hi p w o ul d s u p p ort E q o n e x or
t h at t h e t w o c o m p a ni es w o ul d p urs u e a m er g er, w hi c h ar e t h e t w o all e g e dl y f als e clai ms o n w hi c h
Pl ai ntiffs b as e t h eir all e gati o ns of fr a u d. See Pl ai ntiffs’ O p p. at 9. H ai’s M ar c h 7 st at e m e nt is t h us
n ot m at eri all y f als e or misl e a di n g.
8 T o t h e c o ntr ar y, Pl ai ntiffs all e g e t hat t h e Str at e gi c P art n ers hi p w as i nt e n d e d pri m aril y t o b e n efit Bifi nit y, as Bifi nit y
w o ul d g ai n a c c ess t o t h e r e g ul at e d U. K. m ar k et, i n w hi c h E q o n e x w as a p pr o v e d t o d o b u si n ess. A m. C o m pl. ¶ ¶ 1 0, 5 0 .
T h us, t h e A m e n d e d C o m pl ai nt a ct u all y all e g es t hat H ai’s st at e m e nt is tr u e: D ef e n d a nts’ h o p e d t hat E q o n e x’s a bilit y t o
utili z e gl o b al r e g ul at or y fr a m e w or ks w o ul d b e n efit Bifi nit y o v er t h e l o n g t er m .
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3. Pl ai ntiff s F ail t o A d e q u at el y All e g e D ef e n d a nt s’ S ci e nt er
Pl ai ntiffs f ail t o a d e q u at el y all e g e t h at eit h er F ar n ell, H ai, or a n y ot h er E q o n e x offi c er h a d
a ct u al k n o wl e d g e t hat t h e Str at e gi c P art n ers h i p was n ot m e a nt t o s u p p ort E q o n e x or t h at t h er e w as
n o i nt e nt i o n f or Bifi nit y a n d E q o n e x t o m er g e.
a. L e g al St a n d ar d
U n d er t h e h ei g ht e n e d pl ea di n g st a n dar ds of F e d. R. Ci v. P. 9( b) a n d t h e P S L R A, a plai ntiff
all e gi n g s e c uriti es fra u d m ust all e g e “ wit h p arti c ul arit y f a cts gi vi n g ris e t o a str o n g i nf er e n c e t h at t h e
d ef e n d a nt a ct e d wit h t h e r e q uir e d st at e of mi n d. ” 1 5 U. S. C. § 7 8 u -4( b)( 2)( A) ; see also Tell a bs, I nc. v.
M a kor Iss ues & Rts., Lt d. , 5 5 1 U.S. 3 0 8, 3 1 3 ( 2 0 0 7). T h e q u esti o n “is w h et h er all of t h e f a cts all e g e d,
t a k e n c oll e cti v el y, gi v e ris e t o a str o n g i nf er e n c e of s ci e nt er, n ot w h et h er a n y i n di vi d u al all e g ati o n,
s cr uti ni z e d i n is ol ati o n, m e ets t h at st a n d ar d. ” Tell abs , 5 5 1 U. S. at 3 2 2 – 2 3.
A n “i nf er e n c e of s ci e nt er m ust b e m or e t h a n m er el y pl a usi bl e or r e as o n a bl e — it m ust b e
c o g e nt a n d at l e ast as c o m p elli n g as a n y o p p osi n g i nf er e n c e of n o nfr a u d ul e nt i nt e nt. ” Tell a bs , 5 5 1
U. S. at 3 1 4. If a n i nf er e n c e of fr a u d ul e nt i nt e nt is n ot “ at l e ast as c o m p elli n g ” as a c o ntr ar y
i nf er e n c e, it is i n a d e q uat e, e v e n i n a “ cl os e c as e. ” Slayto n v. A m. E x p. Co. , 6 0 4 F. 3 d 7 5 8, 7 77 ( 2 d Cir.
2 0 1 0) . A n i nf er e n c e of s ci e nt er n e e d n ot b e “irr ef uta bl e, i. e., of t h e ‘s m o ki n g -g u n’ g e nr e, or e v e n
t h e m ost pl a usi bl e of c o m p eti n g i nf er e n c es. ” Tell abs , 5 5 1 U. S. at 3 2 4 ( q u ot ati o n o mitt e d); see also City
of Po nti ac Ge n. E m ployees’ Ret. Sys. v. Loc k hee d M arti n Cor p. , 8 7 5 F. S u p p. 2 d 3 5 9, 3 7 2 ( S. D. N. Y. 2 0 1 2)
( “[ A]t t h e m oti o n t o dis miss st a g e, a ti e o n s ci e nt er g o es t o t h e plai ntiff. ”). “ B ut g e n eri c a n d
c o n cl us or y all e gati o ns b as e d u p o n r u m or or c o nj e ct ur e ar e u n dis p ut e dl y i ns uffi ci e nt t o s atisf y t h e
h ei g ht e n e d pl e a di n g st a n dar d. ” C a m po v. Se ars Hol di ngs Cor p. , 6 3 5 F. S u p p. 2 d 3 2 3, 3 3 6 ( S. D. N. Y.
2 0 0 9), aff’d , 3 7 1 F. A p p’ x 2 12 ( 2 d Cir. 2 0 1 0). “ T h us, a c o m pl ai nt ‘ w hi c h f ails t o a d d u c e a n y s p e cifi c
f a cts s u p p orti n g a n i nf er e n c e of k n o wl e d g e a bl e p arti ci p ati o n i n t h e all e g e d fra u d, will n ot s atisf y
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e v e n a r ela x e d st a n d ar d.’ ” F a ul k ner v. Veri zo n Co m mc ’ns, I nc. , 1 5 6 F. S u p p. 2 d 3 8 4, 3 9 3 ( S. D. N. Y.
2 0 0 1) ( q u oti n g Deva ney v. C hester , 8 1 3 F. 2 d 5 6 6, 5 6 9 ( 2 d Cir. 1 9 8 7) ).
“ W hil e ‘t h e a bs e n c e of a m oti v e all e gati o n is n ot fat al,’ m oti v e ca n b e a r el e va nt fa ct or, a n d
‘p ers o n al fi n a n ci al gai n ma y w ei g h h e a vil y i n f a v or of a s ci e nt er i nf er e n c e. ’” Sl ayto n , 6 0 4 F. 3 d at 7 7 6
( q u oti n g Tell a bs , 5 5 1 U. S. at 3 2 5). I n s u m, “[t] h e i n q uir y o n a m oti o n t o dis miss is as f oll o ws: ‘ W h e n
t h e all e gati o ns ar e a c c e pt e d as tr u e a n d t a k e n c oll e cti v el y, w o ul d a r e as o n a bl e p ers o n d e e m t h e
i nf er e n c e of s ci e nt er at l east as str o n g as a n y o p p osi n g i nf er e n c e?’ ” I n re Scot. Re Gr p. Sec. Litig. , 5 2 4
F. S u p p. 2 d 3 7 0, 3 8 3 ( S. D. N. Y. 2 0 0 7).
F urt h er, r ul e 9( b) r e q uir es t h at “[i] n a c as e i n v ol vi n g m ulti pl e d ef e n d a nts, pl ai ntiffs m ust
pl e a d cir c u mst a n c es pr o vi di n g a f a ct u al basis f or s ci e nt er f or e a c h d ef e n d a nt; g uilt b y ass o ciati o n is
i m p er missi bl e. ” I n re D D A V P Direct P urc h aser A ntitr ust Litig., 5 8 5 F. 3 d 6 7 7, 6 9 5 ( 2 d Cir. 2 0 0 9); see
also De A ngelis v. Cor zi ne , 1 7 F. S u p p. 3 d 2 7 0, 2 8 1– 8 2 ( S. D. N. Y. 2 0 1 4) ( “[ Pl ai ntiff] i m pr o p erl y
att e m p ts t o gr o u p-pl e a d t h e s ci e nt er r e q uir e m e nt. ”); Pe n n. Ave. F u n ds v. I ny x I nc. , N o. 0 8-c v -6 8 5 7,
2 0 1 0 W L 7 4 3 5 6 2, at * 1 2 ( S. D. N. Y. M ar. 1, 2 0 1 0) ( “‘[ G]r o u p pl e a di n g’ of s ci e nt er . . . r u ns af o ul of
t h e P S L R A’s r e q uir e m e nt t h at a pl ai ntiff ‘st at e wit h p arti c ul a rit y f a cts gi vi n g ris e t o a str o n g
i nf er e n c e t h at t h e d ef e n da nt a ct e d wit h t h e r e q uir e d st at e of mi n d.’ ” ( citati o n o mitt e d) ( q u oti n g 1 5
U. S. C. § 7 8 u -4( b)( 2)) ).
b. T h e C h all e n g e d St at e m e nt s ar e F or w ar d -L o o ki n g a n d P uff er y
T h e stat e m e nts attri b ut e d t o F ar n ell a n d t h e c h all e n g e d st at e m e nts i n t h e M ar c h 7 a n d
M ar c h 1 7 Pr ess R el eas es ar e f or w ar d-l o o ki n g or c o nstit ut e c or p orat e p uff er y, a n d c o ns e q u e ntl y,
Pl ai ntiffs m ust pr o v e a ct ual k n o wl e d g e of t h eir falsit y t o st at e a cl ai m u n d er S e cti o n 1 0( b).
T h e P S L R A d efi n es f or w ar d -l o o ki n g st at e m e nts as, a m o n g ot h ers, stat e m e nts of “t h e pl a ns
a n d o bj e cti v es of m a n a g e m e nt f or f ut ur e o p er ati o ns ” a n d st at e m e nts of “f ut ur e e c o n o mi c
p erf or m a n c e. ” 1 5 U. S. C. § 7 8 u -5(i)( 1)( B) – ( C). T o pl e a d s ci e n t er f or a f or w ar d-l o o ki n g st at e m e nt, a
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pl ai ntiff m ust all e g e t h at t h e st at e m e nt w as m a d e “ wit h a ct u al k n o wl e d g e ” of its f alsit y. 1 5 U. S. C.
§ 7 8 u -5( c)( 1)( B) ; see also Sl ayto n v. A m. E x p. Co. , 6 0 4 F. 3 d 7 5 8, 7 7 6 ( 2 d Cir. 2 0 1 0) ( “[ T] h e s ci e nt er
r e q uir e m e nt f or f or w ar d-l o o ki n g st at e m e nts is stri ct er t h a n f or st at e m e nts of c urr e nt fa ct. W h er e as
li a bilit y f or t h e l att er r e q uir es a s h o wi n g of eit h er k n o wi n g f alsit y or r e c kl ess n ess, lia bilit y f or t h e
f or m er att a c h es o nl y u p o n pr o of of k n o wi n g f alsit y. ”). If t h e all e g e d vi olat or is a b usi n ess e ntit y, a
pl ai ntiff m ust pr o v e t h at t h e f or w ar d -l o o ki n g st at e m e nt w as “ m a d e b y or wit h t h e a p pr o v al of a n
offi c er of t h at e ntit y . . . wit h a ct u al k n o wl e d g e b y t hat offi c er t h at t h e st at e m e nt w as f als e or
misl e a di n g. ” I d. § 7 8 u -5( c)( 1)( B)(ii).
Li k e wis e, st at e m e nts of o pti mis m a n d p uff er y c a n b e a cti o n a bl e o nl y w h er e t h e y “ c o ntra di ct
f a cts t h at ar e k no w n t o a d ef e n d a nt, ” I n re Virt us I nv. P art ners, I nc. Sec. Litig., 1 9 5 F. S u p p. 3 d 5 2 8, 5 3 7
( S. D. N. Y. 2 0 1 6) ( e m p h asis a d d e d), or w h er e t h e y a m o u nt t o “‘ misr e pr es e nt ati o ns of e xisti n g f a cts’
t h at w er e m a d e e v e n t h o u g h t h e s p ea k er ‘k ne w t h at t h e c o ntrar y w as tr u e,’ ” Galest a n v. O ne M ai n
Hol di ngs, I nc. , 3 4 8 F. S u p p. 3 d 2 8 2, 2 9 8 ( S. D. N. Y. 2 0 1 8) ( e m p h asis a d d e d) ( q u oti n g Nov a k v. K as a ks ,
2 1 6 F. 3 d 3 0 0, 3 1 5 ( 2 d Cir. 2 0 0 0)). “ P uff er y e n c o m pass es ‘st at e m e nts t h at ar e t o o g e n er al t o c a us e a
r e as o n a bl e i n v est or t o r el y u p o n t h e m.’ ” I n re Vive n di, S. A. Sec. Litig., 8 3 8 F. 3 d 2 2 3, 2 4 5 ( 2 d Cir.
2 0 1 6) ( q u oti n g E C A, Loc. 1 3 4 I B E W Joi nt Pe nsio n Tr. of C hic ago v. J P Morg a n C h ase Co., 5 5 3 F. 3 d 1 8 7,
2 0 6 ( 2 d Cir. 2 0 0 9) ). “ G e n er al st at e m e nts of o pti mis m a n d p uff er y ar e n o n -a cti o n a bl e u n d er f e d er al
s e c uriti es l a ws b e c a us e t h e y ar e n ot ‘s uffi ci e ntl y s p e cifi c t h at a r e as o n a bl e i n v est or c o ul d r el y o n
[t h e m] as a g uar a nt e e of s o m e c o n cr et e f a ct or o ut c o m e. ’” S as k atc he w a n He alt hc are E m p.’s Pe nsio n Pl a n
v. K E Hol di ngs I nc., 2 0 2 4 W L 7 7 5 1 9 5, at * 2 0 ( S. D. N. Y. F e b. 2 6, 2 0 2 4) ( W o o ds, J.) ( q u oti n g Lo pe z v.
Ct p art ners E xec. Se arc h I nc. , 1 7 3 F. S u p p. 3 d 1 2, 2 9 ( S. D. N. Y. 2 0 1 6)); see also I n re V ale S. A. Sec. Litig.,
2 0 1 7 W L 1 1 0 2 6 6 6, at * 2 2 ( S. D. N. Y. M ar. 2 3, 2 0 1 7) (st at e m e nts r e g ar di n g “ w hat [t h e d ef e n d a nt] is
‘s e e ki n g’ t o d o, w h at it is ‘ c o m mitt e d’ t o d oi n g, w h at it is ‘f o c us e d o n,’ w h at it is ‘ ai mi n g’ t o d o, a n d
w h at its ‘ pri oriti es’ ar e ” w er e n o n -a cti o n a bl e).
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I n t his c as e, all t h e st at e m e nts t h at Pl ai ntiffs all e g e misl e d i n v est ors t h at t h e Strat e gi c
P art n ers hi p w o ul d str e n gt h e n E q o n e x ar e f or war d -l o o ki n g st at e m e nts a n d st at e m e nts of c or p or at e
p uff er y. 9 T h e st at e m e nts ass erti n g t h at t hr o u g h t h e Str at e gi c P art n ers hi p, t h e c o m p a ni es “[ m] o vi n g
f or w ar d ” “ will w or k t o g et h er ” a n d “ c olla b or at[ e] ” t o “str e n gt h e n ” a n d “l e v er a g e ” E q o n e x a n d t h e
E x c h a n g e, A m. C o m pl. ¶ ¶ 4 7, 4 8, 5 3 , c o nstit ut e “t h e pl a ns a n d o bj e cti v es a b o ut t h e c o m p a ni es’
m a n a g e m e nt f or f ut ur e o p er ati o ns , ” 1 5 U. S. C. § 7 8 u -5(i)( 1)( B) – ( C). F urt h er m or e, t h es e st at e m e nts
“t o ut[i n g] ” t h at t h e b usi n ess es w o ul d “ c o o p er at e ” t o “ m a xi mi z e b usi n ess s y n er gi es ” i n a wa y t h at
w o ul d b e “tr a nsf or m ati v e f or t h e i n d ustr y, ” A m. C o m pl. ¶ ¶ 4 7 , 5 3, ar e s uffi ci e ntl y v a g u e s u c h t h at
n o r e as o n a bl e i n v est or c o ul d r el y o n t h e m as a g u ara nt e e t h at E q o n e x a n d Bifi nit y w o ul d t a k e s o m e
c o n cr et e a cti o n.
Li k e wis e, all t h e pl e a d e d st at e m e nts r e gar di n g t h e c o m p a ni es’ i nt e nti o ns t o p urs u e a
p ot e nti al m er g er ar e f or war d -l o o ki n g st at e m e nts.1 0 T h e st at e m e nt t h at E q o n e x a n d Bifi nit y “ w o ul d
c o nti n u e t o e n g a g e ” i n “ p ot e nti al ” m er g er dis c ussi o ns, id. ¶ 4 8 , c o nstit ut e t h e pl a ns a n d o bj e cti ves of
c or p or at e m a n a g e m e nt. See F a ul k ner v. Veri zo n Co m mc’ ns, I nc. , 1 5 6 F. S u p p. 2 d 3 8 4, 3 9 7– 9 8
( S. D. N. Y. 2 0 0 1) ( “ All of V eri z o n’s c h all e n g e d st at e m e nts . . . c o n c er ni n g t h e st at us of t h e m er g er[]
ar e m er el y e x pr essi o ns of o pti mis m c o n c er ni n g a n u n c ertai n f ut ur e e v e nt. ”).
9 T h es e st at e m e nts i n cl u d e: “[ T h e c o m p a ni es will] w or k t o g et h er t o m a xi mi z e b usi n ess s y n er gi es cr e at e d b y t his n e w
str at e gi c r el ati o ns hi p a n d c a pit ali z e o n o p p ort u niti es t o c o o p er at e a n d f urt h er e x p a n d t h eir b usi n ess. ” A m. C o m pl. ¶ 4 7.
“[ T h e Str at e gi c P art n ers hi p will] i niti ally f o c us o n l e v er a gi n g Di gi v a ult as a n F C A r e g ul at e d c ust o di a n, str e n gt h e ni n g t h e
t e c h n ol o g y s u p p orti n g t h e E Q O N E X E x c h a n g e, a n d e x p a n di n g Bifi nit y’s g e o gr a p hi c al f o ot pri nt t hr o u g h E Q O N E X’s
li c e nsi n g fr a m e w or k. ” I d. ¶ 4 8. “[ T h e c o m p a ni es] t o o k t h e n e xt st e p i n s oli dif yi n g t h eir str at e gi c p art n ers hi p wit h t h e
a p p oi nt m e nt of E Q O N E X’s n e w C E O a n d t w o n e w m e m b ers t o t h e E Q O N E X B oar d of Dir e ct ors (t h e “ B o ar d ”). ”
I d. ¶ 5 3. “ As C E O, J o n at ha n will pl a y a n i nstr u m e nt al r ol e i n f ast -tr a c ki n g t h e c oll a b or ati o n b et w e e n b ot h b usi n ess es. ”
I d. “ M o vi n g f or w ar d, Bifi nit y will d e v el o p w a ys t o l e v er a g e t h e E Q O N E X E x c h a n g e as a n alt er n ati v e tr a di n g pl atf or m,
d e pl o y r es o ur c es t o str e n gt h e n t h e t e c h n ol o g y, a n d als o e x pl or e o p p ort u niti es t o s c al e t h e ass et m a n a g e m e nt b usi n ess . ”
I d. “ C o u pl e d wit h its ass et m a n a g e m e nt b usi n ess a n d e x c h a n g e, t h e o p p ort u nit y t o cr e at e a f ull e c os yst e m b y h ar n essi n g
Bifi nit y’s t e c h n ol o g y, m ar k eti n g cl o ut a n d cli e nt b as e h as t h e p ot e nti al t o b e tr a nsf or m ati v e f or t h e i n d ustr y. ” D kt. N o.
4 8 -7; see also A m. C o m pl. ¶ 5 3. “[I’ m] l o o ki n g f or w ar d t o f ost eri n g tr u e c oll a b or ati o n a n d pr o d u cti vit y a cr oss b ot h
b usi n ess es a cr oss b ot h t e a ms. ” A m. C o m pl. ¶ 5 3.
1 0 T h es e st at e m e nts i n cl u d e: “[ T h e c o m p a ni es will] c o nti n u e t o e n g a g e i n n o n -bi n d i n g dis c ussi o ns t o e x pl or e p ot e nti al
m er g er o p p ort u niti es, s u bj e ct t o r e g ul at or y a p pr o v al. ” I d. ¶ 4 8.
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B e c a us e t h e c h all e n g e d stat e m e nts ar e all f or w ar d -l o o ki n g or c or p or at e p uff er y, Pl ai ntiffs
m ust a d e q u at el y pl ea d t h at D ef e n d a nts h a d “a ct u al k n o wl e d g e t hat [t h e st at e m e nts w er e] f als e or
misl e a di n g. ” I n re Vive n di, S. A. Sec. Litig., 8 3 8 F. 3 d at 2 4 5; see also I n re Virt us I nv. P art ners, I nc. Sec.
Litig. , 1 9 5 F. S u p p. 3 d at 5 3 7.
c. Pl ai ntiff s F ail t o A d e q u at el y Pl e a d S ci e nt er a s t o E a c h S e cti o n
1 0( b) D ef e n d a nt
Pl ai ntiffs’ S e cti o n 1 0( b) clai ms ar e dis miss e d b e c a us e Pl ai ntiffs e n g a g e i n gr o u p pl e a di n g a n d
b e c a us e Pl ai ntiffs f ail t o all e g e wit h parti c ul arit y f a cts gi vi n g ris e t o a str o n g i nf er e n c e t h at
D ef e n d a nts or a n y ot h er E q o n e x e m pl o y e e h a d a ct u al k n o wl e d g e t h at t h e Strat e gi c P art n ers hi p
w o ul d n ot s u p p ort E q o n e x or t h at Bifi nit y a n d E q o n e x w o ul d n e v er m er g e.
i. Pl ai ntiff s E n g a g e i n I m p er mi s si bl e Gr o u p Pl e a di n g
Pl ai ntiffs h a v e f ail e d t o a d e q u at el y all e g e s ci e nt er as t o e a c h i n di vi d ual d ef e n d a nt , as is
r e q uir e d u n d er t h e h ei g ht e n e d pl e a di n g st a n dar d of F e d. R. Ci v. P. 9( b) a n d t h e P S L R A. “I n a cas e
i n v ol vi n g m ulti pl e d ef e n da nts, pl ai ntiffs m ust pl e a d cir c u mst a n c es pr o vi di n g a f a ct u al b asis f or
s ci e nt er f or e a c h d ef e n d a nt; g uilt b y ass o ciati o n is i m p er missi bl e. ” I n re D D A V P Direct P urc h aser
A ntitr ust L itig., 5 8 5 F. 3 d 6 7 7, 6 9 5 ( 2 d Cir. 2 0 0 9). T h e A m e n d e d C o m pl ai nt fr e q u e ntl y all e g es t h at
“ D ef e n d a nts k n e w ” or t hat “ Pri m ar y Vi ol at ors k n e w. ” See A m. C o m pl. ¶ ¶ 3 4, 5 0, 5 4, 8 3, 8 5.
Pl ai ntiffs f ail t o e v e n pl ea d e a c h i n di vi d ual D ef e n da nt’s st at e of mi n d , l et al o n e pr o vi d e “ a f a ct u al
b asis ” f or t he all e gati o n s. I n re D D A V P Direct P urc h aser A ntitr ust Litig., 5 8 5 at 6 9 5. T h e A m e n d e d
C o m pl ai nt t h us s uff ers fr o m t e xt b o o k gr o u p pl e a di n g. See T he Pe n nsylv a ni a Ave. F u n ds v. I ny x I nc. ,
2 0 1 0 W L 7 4 3 5 6 2, at * 1 2 ( S. D. N . Y. M ar. 1, 2 0 1 0) ( “‘I n y x D ef e n d a nts’ is a d efi n e d t er m i n t h e
[ a]m e n d e d [ c]o m pl ai nt t h at r ef ers t o d ef e n d a nts K a c h k ar, H a n dl e y, G ol ds c h mi dt, Gr e e n a n d I n y x,
I n c., c oll e cti v el y. T his t y p e of ‘gr o u p pl e a di n g ’ of s ci e nt er . . . r u ns af o ul of t h e P S L R A. ”).
W h il e Pl ai ntiffs ar g u e t h at “ D ef e n d a nts’ j o b w as t o c arr y o ut Bi n a n c e’s i nt e nti o ns, ” w hi c h
“r ais es t h e i nf er e n c e t h at t h e y k n e w t h os e i nt e nti o ns, ” Pl ai ntiffs’ O p p. at 1 8, t his all e g ati o n is n ot i n
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t h e pl e a di n gs, n or d o es it d o a n yt hi n g m or e t h a n all e g e “ g uilt b y ass o ci ati o n. ” I n re D D A V P Direct
P urc h aser A ntitr ust Litig. , 5 8 5 F. 3 d 6 7 7, 6 9 5 ( 2 d Cir. 2 0 0 9).
F urt h er m or e, Pl ai ntiffs’ gr o u p pl e a di n g u n d er mi n es t h eir all e g ati o n t h at E q o n e x w as a
pri m ar y vi ol at or of S e cti o n 1 0( b) . T h e P L S R A r e q uir es t h at Pl ai ntiffs pl ea d t h at t h e f or w ar d -l o o ki n g
st at e m e nts w er e “ ma d e b y or wit h t h e a p pr o v al of a n offi c er of [ E q o n e x] . . . wit h a ct u al k n o wl e d g e
b y t h at offi c er t h at t h e st at e m e nt w as fals e or misl e a di n g. ” 1 5 U. S. C. § 7 8 u -5( c)( 1)( B)(ii). Pl ai ntiffs
m er el y pl e a d t hat “ D ef e n d a nts ” k n e w t h e M ar c h 7 a n d 1 7 Pr ess R el e as es p ut o ut b y E q o n e x w er e
f als e. Pl ai ntiffs f ail t o all e g e w hi c h E q o n e x offi c er h a d a ct u al k n o wl e d g e of t h eir f alsit y a n d w h et h er
t h at offi c er ma d e or a p pr o v e d t h e P r ess R el e as es. As dis c uss e d, Pl ai ntiffs d o n ot all e g e t h at F a r n ell
or H ai w er e i n v ol v e d i n ‘ m a ki n g’ t h e P r ess R el e as es, n or d o Pl ai ntiffs a d e q uat el y all e g e t h at F ar n ell
or H ai i n di vi d u all y ha d a ct u al k n o wl e d g e t h at t h e Pr ess R el e as es w er e f als e . Plai ntiffs’ c l ai m t h at
E q o n e x is a pri m ar y vi ol at or of S e cti o n 1 0( b) t h er ef or e d oes n ot m e et t h e e x c e pti o n t o t h e P S L R A’s
s af e-h ar b or pr o visi o n f or f or w ar d -l o o ki n g st at e m e nts.
ii. Pl ai ntiff s F ail t o Pl e a d F a ct s S u p p orti n g a Str o n g I nf er e n c e t h at
D ef e n d a nt s H a d A ct u al K n o wl e d g e
Pl ai ntiffs’ h a v e f ail e d t o pl e a d “ wit h parti c ul arit y f a cts gi vi n g ris e t o a str o n g i nf er e n c e ” t h at
at t h e ti m e of t h e M ar c h Pr ess R el e as es, D ef e n da nts k n e w ( 1) t h at t h e Str at e gi c P art n ers hi p w o ul d
n ot s u p p ort E q o n e x or ( 2) t h at E q o n e x a n d Bifi nit y w o ul d n ot m er g e . 1 5 U. S. C. § 7 8 u -4( b)( 2)( A).
T h e “t hr e e -p art pr es cri pti o n f or c arr yi n g o ut t his i n q uir y ” r e q uir es “a c c e pt[i n g ] all f a ct u al
all e gati o ns i n t h e [ A m e n d e d C o m pl ai nt] as tr u e, ” c o nsi d eri n g “ w h et h er all of t h e f a cts all e g e d, t a k e n
c oll e cti v el y, gi v e ris e t o a str o n g i nf er e n c e of s ci e nt er, ” t h e n “t a k[i n g] i nt o a c c o u nt pl a usi bl e
o p p osi n g i nf er e n c es. ” Slayto n v. A meric a n E x p. Co. , 6 0 4 F. 3 d 7 5 8, 7 7 4 ( 2 d Cir. 2 0 1 0).
Pl ai ntiffs’ all e gati o ns of s ci e nt er hi n g e o n t h e e xist e n c e of a si nist er s c h e m e b y Bi n a n c e,
Bifi nit y, a n d t h eir e x e c uti v es t o us e t h e Str at e gi c P art n ers hi p t o “l et[] E q o n e x c oll a ps e ” a n d t h er e b y
“ g ai n c o ntr ol of Di gi v a ult ” i n or d er “ t o r e-e nt er t h e U. K. m ar k et. ” Pl ai ntiffs’ O p p. at 1 – 2; see also
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A m. C o m pl. ¶ 1 0. Plai ntiffs pl e a d t h e f oll o wi n g f a cts i n s u p p ort of its all e g ati o n t h at Bi n a n c e h a d
m oti v e t o us e t h e Str at e gi c P art n ers hi p t o r eg ai n a c c ess t o t h e U. K. m ar k et . I n J u n e 2 0 2 1, Bi na n c e
w as ba n n e d fr o m c o n d u cti n g “ all r e g ulat e d a cti vit y i n t h e U. K.. ” A m. C o m pl. ¶ 4 5. Bi na n c e
s u bs e q u e ntl y “ p urs u e d a c c ess t o U. K. m ar k ets i n m or e t h a n o n e w a y, ” i n cl u di n g a p art n ers hi p wit h
a n F C A -a p pr o v e d p a y m e nts pr o vi d er. I d. ¶ 6 6. “ Bi n a n c e a n d its e x e c uti v es h a v e c o nsist e ntl y a ct e d
t o s u b v ert fi n a n ci al r e g ul at ors ” i n C hi n a a n d t h e U nit e d St at es i n t h e p ast. I d. ¶ ¶ 6 4 – 6 5. I n M ar c h
2 0 2 2, Bifi nit y e n t er e d i nt o t h e Str at e gi c P art n ers hi p wit h E q o n e x, w hi c h o w n e d a n F C A-a p pr o v e d
di git al ass et c ust o dia n. I d. ¶ 4 7.
Pl ai ntiffs pl e a d t h e f oll o wi n g f a cts i n s u p p ort of its all e g ati o n t h at D ef e n da nts e x p e ct e d
E q o n e x t o f ail s o t hat t h e y c o ul d g ai n c o ntr ol of D i gi v a ult. Bifi nit y a n d t h e D ef e n d a nts “ k n e w or
r e c kl essl y disr e gar d e d t h at E q o n e x was n ot i n a p ositi o n t o r e p a y ” t h e L o a n. Id. ¶ 6 7. Fi v e m o nt hs
aft er t h e Str at e gi c P art n ers hi p c o m m e n c e d, “ E q o n e x a n n o u n c e d t h at it pla n n e d t o e xit t h e cr y pt o
e x c h a n g e s p a c e [a n d] cl os e t h e [ E]x c ha n g e, ” e v e n t h o u g h “t h e E x c ha n g e a c c o u nt[ e d] f or 7 9. 9 % of
E q o n e x’s r e v e n u es ” t h e pri or y e ar. I d. ¶ 1 1. T h at sa m e d a y, “ Bifi nit y gr a nt e d E q o n e x a w ai v er f or
t h e c ess ati o n of a m aj or b usi n ess a n d E q o n e x a gr e e d t o i n cr e as e Bifi nit y’s s har e c h ar g e of Di gi v a ult
u n d er t h e l o a n a gr e e m e nt fr o m 2 4. 9 % t o 1 0 0 %. I n ot h er w or ds, Bifi nit y t o o k o v er Di gi v a ult e ntir el y
as E q o n e x l ost t h e s o ur c e of n e arl y 8 0 % of its r e v e n u e. ” I d. ¶ 1 2.
T h es e f a cts, t a k e n as tr u e, d o n ot gi v e ris e t o a str o n g i nf er e n c e of s ci e nt er u n d er t h e
h ei g ht e n e d F e d. R. Ci v. P. 9( b) a n d P S L R A st a n dar d s. O n e ca n r e as o na bl y i nf er a m oti v e f or
Bi n a n c e t o a c c ess t h e U. K. m ar k et fr o m Bi n a n c e’s pr e vi o us o p er ati o ns i n t h e U. K. a n d its att e m pts
t o f or m ot h er p art n ers hi ps aft er t h e b a n. H o w e v er, t his m oti v e t o a c c ess t h e U. K. m ar k et d o es n ot
e q u at e t o a m oti v e t o bri n g d o w n E q o n e x.
T h e r e m ai n d er of t h e all e g e d e v e nts f ail t o pr o vi d e s uffi ci e nt cir c u mst a nti al e vi d e n c e t h at
D ef e n d a nts h a d k n o wl e d g e of a s c h e m e t o c a us e E q o n e x t o c oll a ps e t o all o w Bi n a n c e t o t a k e o v er
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Di gi v a ult . Pl ai ntiffs m a k e n o all e g ati o ns t h at a n y D ef e n d a nt t o o k a n y a cti o n t o eff e ct u at e t h e
c oll a ps e of E q o n e x. See A T SI Co m m n’cs, I nc. v. S h aar F u n d, Ltd. , 4 9 3 F. 3 d 8 7, 1 0 6 ( 2 d Cir. 2 0 0 7)
( “ T h es e all e g ati o ns f ail R ul e 9( b)’s r e q uir e m e nt . . . . [ T h e c o m pl ai nt] fails t o all e g e wit h parti c ul arit y
w h at, if a n yt hi n g, t h e d ef e n d a nts di d t o c a us e t h e d e cli n e; it si m pl y off ers a g e n er ali z e d all e gati o n
t h at t h e d ef e n d a nts e n g a g e d i n d e at h s pir al fi n a n ci n g. ”). Pl ai ntiffs m a k e n o all e g ati o n t h at a n y
D ef e n d a nt or E q o n e x e x e c uti v e w as m a d e a war e of a pl a n b y Bi n a n c e or Bifi nit y r e g ar di n g t h e
E x c h a n g e or t h e p ot e nti al m er g er , a n d Pl ai ntiffs h a v e pr o vi d e d n o “f a ct u al basis t o s u p p ort ” t h e
all e gati o n t h at D ef e n d a nts n e v er i nt e n d e d t o eff e ct uat e a m er g er. F a ul k ner v. Veri zo n Co m mc’ ns, I nc. ,
1 5 6 F. S u p p. 2 d 3 8 4 , 3 9 6 ( S. D. N. Y. 2 0 0 1) ( “Pl ai ntiffs h a v e pr o vi d e d n o fa ct u al b asis t o s u p p ort t h e
cl ai m t h at pri or t o N o v e m b er 1 4, 2 0 0 0, V eri z o n h a d c h a n g e d its mi n d a n d d e ci d e d t o t er mi n at e t h e
m er g er. ”). All Pl ai ntiffs pr o vi d e ar e a s eri es of u nf ort u n at e e v e nts f or E q o n e x o v er a p eri o d of fi v e
m o nt hs , w hi c h Pl ai ntiffs fr a m e as t h e c o ns e q u e n c es of t h e all e g e d s c h e m e, a n d “ c o n cl us or y ”
all e gati o ns of s ci e nt er t h at b or d er o n i m p er missi bl e c o nj e ct ur e . A T SI , 4 9 3 F. 3 d at 9 9 ( “All e g ati o ns
t h at ar e c o n cl us or y or u ns u p p ort e d b y f a ct u al ass erti o ns ar e i ns uffi ci e nt.”) ; see also C a mpo v. Se ars
Hol di ngs Cor p. , 6 3 5 F. S u p p. 2 d 3 2 3, 3 3 6 ( S. D. N. Y. 2 0 0 9), aff’d , 3 7 1 F. A p p’ x 2 1 2 ( 2 d Cir. 2 0 1 0)
( “[ G]e n eri c a n d c o n cl us or y all e gati o ns bas e d u p o n r u m or or c o nj e ct ur e ar e u n dis p ut e dl y
i ns uffi ci e nt. ”).
T h e C o urt m ust als o c o nsi d er “ pl a usi bl e o p p osi n g i nf er e n c es ” i n or d er t o ass ess w h et h er
Pl ai ntiffs’ i nf er e n c es ar e “at l e ast as c o m p elli n g ” as t h e alt er n ati v es. Tell abs, I nc. v. M a kor Iss ues &
Rts., Lt d. , 5 5 1 U. S. 3 0 8, 3 2 3– 2 4 ( 2 0 0 7). A n o p p osi n g i nf er e n c e fr o m t h es e s et of fa cts w o ul d b e t h at
E q o n e x was a c o m p a n y f a ci n g fi n a n cial h ar ds hi p a n d ulti m at el y f ail e d d es pit e g o o d f ait h eff orts b y
Bifi nit y t o r e ali z e s y n er gi es b et w e e n t h eir pl atf or ms. T h e f a ct t h at Bi n a n c e p urs u e d ot h er
p art n ers hi ps i n t h e U. K. aft er its b a n o n o p er ati o ns, A m. C o m pl. ¶ 6 6, s u p p orts t h e i nf er e n c e t hat
Bi n a n c e w as p urs ui n g a n ot h er g o o d f ait h p art n ers hi p wit h E q o n e x i n or d er t o a c c ess t h e U. K.
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m ar k et. T h e f a ct t h at Bifi nit y a p p oi nt e d o nl y t w o dir e ct ors t o E q o n e x’s s e v e n-p e rs o n b o ar d, i d. ¶ 7,
s u p p orts t h e i nf er e n c e t hat Bifi nit y w as n ot i n “ c o ntr ol ” of E q o n e x as Plai ntiffs cl ai m, id. ¶ 3, b ut
r at h er t h at Bifi nit y u n d ert o o k a p art n ers hi p. See i d. ¶ 5 9 ( “ T h e d e cisi o n b y t h e E Q O N E X Bo ar d of
Directors t o a c c el er at e its str at e gi c pl a n a n d cl os e t h e E x c h a n g e is i n ali g n m e nt wit h t his strat e gi c
fra m e w or k. ” ( e m p h asis a d d e d)). F urt h er, Pl ai ntiffs’ all e gati o n t h at “t h e L o a n w as n ot s uffi ci e nt t o
st a v e off E q o n e x’s i ns ol v e n c y ” s u p p orts t h e i nf er e n c e t h at E q on e x w as h e a d e d f or r ui n r e g ar dl ess
of t h e Str at e gi c P art n ers hi p. I d. ¶ 1 0 ; see also i d. ¶ 5 0 ( “E q o n e x h a d n o w a y t o r e p a y Bifi nit y . . . .”);
i d. ¶ 5 9 ( q u oti n g E q o n e x r e g ar di n g t h e “ hi g h -c ost str u ct ur e ass o ci at e d wit h o p er ati n g t h e
[ E]x c h a n g e ”). L astl y, Pl ai ntiffs all e g e t hat b y t h e ti m e E q o n e x m a d e t h e d e cisi o n t o cl os e t h e
E x c h a n g e o n A u g ust 1 5, 2 0 2 2, t h e F C A h a d a n n o u n c e d a r ul e r e q uiri n g pri or F C A a p pr o v al
w h e n e v er a p ers o n or e ntit y att e m pts t o “ a c q uir e c o ntr ol of a F C A -r e gist er e d cr y pt o ass et b usi n ess,
dir e ctl y or i n dir e ctl y. ” Id. ¶ 5 7. “ A c o ntr oll er w o ul d m e a n a p ers o n or e ntit y w h o o w ns m or e t h a n
2 5 % of t h e s h ar es or v oti n g ri g hts i n t h e cr y pt o b usi n ess. ” I d. T h e A m e n d e d C o m pl ai nt all e g es t h at
Bifi nit y h a d o nl y a 2 4. 9 p er c e nt s h ar e c har g e of Di g i v a ult b ef or e A u g ust 1 5. I d. ¶ 1 2. Fr o m t h es e
f a cts, o n e c a n r e as o n a bl y i nf er t h at Bifi nit y w o ul d n e e d F C A a p pr o v al t o t a k e o v er Di gi v a ult
a n y w a y, w hi c h d o es n ot s u p p ort t h e i nf er e n c e t h at cl osi n g t h e E x c ha n g e was a n “ att e m pt e d e n d-r u n
ar o u n d t h e F C A’s ba n. ” Id. ¶ 5 4. 1 1
“ W hil e [t h e C o urt] fi n d[s] t h e i nf er e n c e of fr a u d ul e nt i nt e nt pl a usi bl e, a n d c o nsi d er[s] t his t o
b e a cl os e c as e , ” t h e cir c u mst a nti al e vi d e n c e all e g e d b y Pl ai ntiffs d oes n ot l e n d str o n g s u p p ort f or
1 1 O nl y i n t h eir o p p ositi o n bri ef d o Pl ai ntiffs pr o p os e t h at “D ef e n d a nts w er e m oti v at e d t o k e e p u p t h e ill usi o n t hat t h e y
w er e si m pl y i n a Str at e gi c P ar t n ers hi p wit h E q o n e x wit h t h e p ossi bilit y of a m er g er s o t hat t h e y c o ul d w or k o n
c o n vi n ci n g t h e F C A t o s a n cti o n a c h a n g e i n c o ntr ol of Di gi v a ult, w hi c h w o ul d t h e n all o w t h e m t o t a k e a 1 0 0 % s h ar e
c h ar g e i n Di gi v a ult a n d l et E q o n e x its elf c oll a ps e. ” Pl ai nti ffs’ O p p. at 1 6 – 1 7. T h es e all e g ati o ns ar e n ot m a d e i n t h e
A m e n d e d C o m pl ai nt , a n d “ a p art y is n ot e ntitl e d t o a m e n d its c o m pl ai nt t hr o u g h st at e m e nts m a d e i n m oti o n p a p ers. ”
Wrig ht v. Er nst & Yo u ng L L P , 1 5 2 F. 3 d 1 6 9, 1 7 8 ( 2 d Cir. 1 9 9 8) ( citi n g II T, a n I nt’l I nv. Tr. v. Cor nfel d, 6 1 9 F. 2 d 9 0 9, 9 1 4
n. 6 ( 2 d Cir. 1 9 8 0), a brog ate d o n ot her gro u n ds by Morriso n v. N at ’l A ustr ali a B a n k Lt d., 5 6 1 U. S. 2 4 7 ( 2 0 1 0)). N or d o t h es e
all e g ati o ns m a k e l o gi c al s e ns e. D ef e n d a nts w o ul d n ot n e e d a s c h e m e “t o cir c u m v e nt t h e F C A’s b a n ,” Pl ai ntiffs’ O p p. at
1 1, if t h e y ulti m at el y pl a n n e d si m pl y t o c o n vi n c e t h e F C A t o gr a nt t h e m a c c ess a g ai n. S ee D kt. N o. 5 0, D ef e n d a nts’
R e pl y M e m or a n d u m of L a w i n S u p p o rt of T h eir M oti o n t o Dis miss at 6.
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t h e i nf er e n c e t h at D ef e n da nts h a d a ct u al k n o wl e d g e t h at Bifi nit y w o ul d l et E q o n e x f ail a n d w o ul d
t er mi n at e a m er g er. Sl ayto n , 6 0 4 F. 3 d. at 7 7 7. B as e d o n t h e f a cts all e g e d, t h e m or e c o m p elli n g
i nf er e n c e is t hat D ef e n d a nts use d t h e Str at e gi c P art n ers hi p t o g et a c c ess t o t h e U. K. m ar k et i n g o o d
f ait h b ut w er e u n a bl e t o pr e v e nt E q o n e x’s i m p e n di n g c oll a ps e. T h er ef or e, t h e pl e a di n gs f ail t o
all e g e fa cts s uffi ci e nt u n d er F e d. R. Ci v. P. 9( b) a n d t h e P S L R A t o dra w a str o n g i nf er e n c e t h at t h e
M ar c h 7 a n d M ar c h 1 7 Pr ess R el e as es w er e m a d e wit h a ct u al k n o wl e d g e of t h eir falsit y . Slayto n , 6 0 4
F. 3 d at 7 7 7 .
4. L o s s C a u s ati o n
B e c a us e Plai ntiffs’ S e cti o n 1 0( b) cl ai ms f ail as t o s ci e nt er, t h e C o urt n e e d n ot a d dr ess
D ef e n d a nts’ ar g u m e nt t h at Pl ai ntiffs h a v e f ail e d t o est a blis h l oss c a us ati o n. See S as k atc he w a n
He alt hc are E m ployee ’s Pe nsio n Pl a n v. K E Hol di ngs I nc., 2 0 2 4 W L 7 7 5 1 9 5, at * 3 0 ( S. D. N. Y. F e b. 2 6,
2 0 2 4) ( W o o ds, J.) ( “B e c a us e t h e f ail ur e t o est a blis h a n y el e m e nt is f at al t o a s e ct i o n 1 0( b) / R ul e 1 0 b-
5 cl ai m, t h e C o urt n e e d n ot a d dr ess [ d]ef e n da nts’ ot h er ar g u m e nts f or . . . dis miss al. ”).
B. S e cti o n 2 0( a) Li a bilit y
B e c a us e Plai ntiffs f ail t o a d e q u at el y pl e a d a vi ol ati o n of S e cti o n 1 0( b) or R ul e 1 0 b -5, t h eir
S e cti o n 2 0( a) clai ms als o fai l. See A T SI Co m mc’ ns, I nc. v. S h a ar F u n d, Lt d. , 4 9 3 F. 3 d 8 7, 1 0 8 ( 2 d Cir.
2 0 0 7) ( “ A T SI f ails t o all e g e a n y pri m ar y vi olati o n; t h us, it c a n n ot est a blis h c o ntr ol p ers o n li a bilit y. ”) ;
E C A, Loc. 1 3 4 I B E W Joi nt Pe nsio n Tr. of C hic ago v. J P Morga n C h ase Co. , 5 53 F. 3 d 1 8 7 , 2 0 7 ( 2 d Cir.
2 0 0 9). H o w e v er, e v e n ass u mi n g Pl ai ntiffs a d e q uat el y pl e a d a 1 0( b) cl ai m b y a pri m ar y vi ol at or,
Pl ai ntiffs’ 2 0( a) cl ai ms s uff er fr o m ot h er d efi ci e n ci es.
1. L e g al St a n d ar d
U n d er S e cti o n 2 0( a) of t h e S e c uriti es E x c h a n g e A ct, “[ e] v er y p ers o n w h o, dir e ctl y or
i n dir e ctl y, c o ntr ols a n y p ers o n li a bl e u n d er [t h e E x c h a n g e A ct a n d its r e g ulati o ns] s h all als o b e li a bl e
j oi ntl y a n d s e v er all y wit h a n d t o t h e s a m e e xt e nt as s u c h c o ntr oll e d p ers o n t o a n y p ers o n t o w h o m
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s u c h c o ntr oll e d p ers o n is li a bl e . . . u nl ess t h e c o ntr olli n g p ers o n a ct e d i n g o o d f ait h a n d di d n ot
dir e ctl y or i n dir e ctl y i n d u c e t h e a ct or a cts c o nstit uti n g t h e vi ol ati o n or c a us e of a cti o n. ” 1 5 U. S. C.
§ 7 8t( a). “ A n y cl ai m f or ‘ c o ntr ol p ers o n’ li a bilit y u n d er § 2 0( a) of t h e E x c ha n g e A ct m ust b e
pr e di c at e d o n a pri m ar y vi ol ati o n of s e c uriti es l a w. ” P ac. I nv. Mg mt. Co. L L C v. M ayer Bro w n L L P ,
6 0 3 F. 3 d 1 4 4, 1 6 0 ( 2 d Cir. 2 0 1 0). T o stat e a cl ai m of c o ntr ol p ers o n li a bilit y, a pl ai ntiff m ust all e g e
“( 1) a pri m ar y vi ol ati o n b y t h e c o ntr oll e d p ers o n, ( 2) c o ntr ol of t h e pri m ar y vi ol at or b y t h e
d ef e n d a nt, a n d ( 3) t h at t h e d ef e n d a nt was, i n s o m e m e a ni n gf ul s e ns e, a c ul pa bl e p arti ci p a nt i n t h e
c o ntr oll e d p ers o n’s fr a u d. ” C ar pe nters Pe nsio n Tr. F u n d of St. Lo uis v. B arcl ays P L C , 7 5 0 F. 3 d 2 2 7, 2 3 6
( 2 d Cir. 2 0 1 4).
C o ntr ol p ers o n li a bilit y r e q uir es “ a ct u al c o ntr ol ” o v er t h e pri m ar y vi ol at or. I n re Bio Scri p, I nc.
Sec. Litig. , 9 5 F. S u p p. 3 d 7 1 1, 7 4 0 ( S. D. N. Y. 2 0 1 5). “ Co ntr ol i n t his c o nt e xt is n ot t h e m er e a bilit y
t o p ers u a d e, b ut al m ost al w a ys m e a ns t h e pr a cti cal a bilit y t o dir e ct t h e a cti o ns. ” I n re Fl ag Teleco m
Hol di ngs, Lt d. Sec. Litig. , 3 5 2 F. S u p p. 2 d 4 2 9, 4 5 8 ( S. D. N. Y. 2 0 0 5) (i nt er n al q u ot ati o n m ar ks
o mitt e d). As s u c h, “ mi n orit y st o c k o w n ers hi p a n d t h e a bilit y t o a p p oi nt a mi n orit y of t h e b o ar d d o
n ot cr e at e p o w er t o dir e ct m a n a g e m e nt a n d p oli ci es, a n d t h us d o n ot c o nstit ut e s uffi ci e nt c o ntr ol
u n d er S e cti o n 2 0( a). ” I n re Alsto m S A, 4 0 6 F. S u p p. 2 d 4 3 3, 4 9 2 ( S. D. N. Y. 2 0 0 5); see also I n re Fl ag
Teleco m Hol di ngs, Lt d. Sec. Litig. , 3 5 2 F. S u p p. 2 d 4 2 9, 4 5 8 ( S. D. N. Y. 2 0 0 5) ( “If t h e [t hr e e] V eri z o n
d esi g n e es c o n vi n c e d e n o u g h of t h e ot h er si x m e m b ers of t h e B o ar d of Dir e ct ors t o all o w Fl a g t o
e nt er i nt o u n d ul y s p e c ul at i v e v e nt ur es t o b e n efit V eri z o n, it w o ul d h a v e b e e n t h e r es ult of t h e
e x er cis e of t h eir p o w ers of p ers u asi o n, n ot t hr o u g h a ct u al c o ntr ol of Fl a g. ”); I n re Bio Scri p, I nc. Sec.
Litig. , 9 5 F. S u p p. 3 d 7 1 1 ( S. D. N. Y. 2 0 1 5) ( dis missi n g a S e cti o n 2 0( a) cl ai m a g ainst a d ef e n da nt w h o
o w n e d 2 6 p er c e nt of pri m ar y vi ol at or’s st o c k a n d ha d t h e ri g ht t o a p p oi nt t w o dir e ct ors t o a n ei g ht -
p ers o n b o ar d).
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T h e d et er mi n ati o n of w h et h er a d ef e n d a nt is a “ c o ntr olli n g p ers o n ” is “a f a ct -i nt e nsi v e
i n q uir y t h at g e n er all y s h o ul d n ot b e r es ol v e d o n a m oti o n t o dis miss. ” I d. at 7 4 1 ( cit ati o n a n d
alt er ati o n o mitt e d). N o n et h el ess, “it is n ot s uffi ci e nt f or [ a pl ai nti ff] t o all e g e t h at [ a d ef e n d a nt] h as
c o ntr ol p ers o n st at us; i nst ea d, [t h e pl ai ntiff] m ust ass ert t h at [t h e d ef e n d a nt] e x er cis e d act u al c o ntr ol
o v er t h e m att ers at iss u e. ” I n re S mit h B ar ney Tr a nsfer Age nt Litig., 8 8 4 F. S u p p. 2 d 1 5 2, 1 6 6 – 6 7
( S. D. N. Y. 2 0 1 2) ( h ol di n g t h at e v e n t h o u g h t h e d ef e n d a nt “ w as pr o vi d e d wit h or h a d u nli mit e d
a c c ess t o c o pi es of t h e [ vi ol ati n g c o m p a n y’s] p u bli c fili n gs, ” t h e pl e a di n gs w er e i ns uffi ci e nt f or
f aili n g t o all e g e t h e d ef e n da nt “si g n e d, dr aft e d, a p pr o v e d, or c o nfir m e d a misl e a di n g st at e m e nt ”) ; see
also I n re Bristol Myers S q ui b b Co. Sec. Litig., 5 8 6 F. S u p p. 2 d 1 4 8, 1 7 0 ( S. D. N. Y. 2 0 0 8). A d diti o n all y,
t his C o urt pr e vi o usl y h el d t h at a n e ntit y’s “st at us as a c or p or at e p ar e nt [] s a ys n ot hi n g r e g ar di n g t h e
c o ntr o l t h at [it] e x erts. ” Do u ble Li ne Ca p. L P v. O de brec ht Fi n., Lt d. , 3 2 3 F. S u p p. 3 d 3 9 3, 4 6 0
( S. D. N. Y. 2 0 1 8) ( W o o ds, J.). I n t h at c as e, t h e plai ntiffs’ all e gati o n t h at a p ar e nt c o m p a n y “ a ct e d as a
c o ntr olli n g p ers o n . . . a n d h a d t h e p o w er a n d a ut h orit y t o c a us e [t h e pri m ar y vi ol at or] t o e n g a g e i n
t h e wr o n gf ul c o n d u ct ” was “ n ot hi n g m or e t h a n a c o n cl us or y all e g ati o n of c o ntr ol. ” I d. at 4 6 1.
2. Pl ai ntiff s F ail t o A d e q u at el y All e g e C o ntr ol Li a bilit y Cl ai m s A g ai n st
Bi n a n c e a n d Z h a o
B e c a us e Plai ntiffs’ S e cti o n 2 0( a) cl ai ms a gai nst Bi n a n c e a n d Z ha o r est s ol el y o n t h eir st at us
as p ar e nt c o m pa n y a n d o w n er of t h e p ar e nt c o m p a n y, r es p e cti v el y, Pl ai ntiffs f ail t o a d e q u at el y pl ea d
Bi n a n c e a n d Z ha o’s c o ntr ol.
Pl ai ntiffs all e g e br o a dl y t hat “t h e [ S]trat e gi c [ P]art n ers hi p p ut Bifi nit y ( a n d, t hr o u g h Bifi nit y,
Bi n a n c e) i n c o ntr ol of E q o n e x b y t a ki n g o v er its e x e c uti v e m a na g e m e nt. ” A m. C o m pl. ¶ 7.
Pl ai ntiffs i m pli citl y all e g e t h at Z h a o t h er e aft er als o c o ntr oll e d E q o n e x b e c a us e “ Bifi nit y is w h oll y
c o ntr oll e d b y [ Z h a o] , its s ol e s h ar e h ol d er. ” I d. ¶ 6. Pl ai ntiffs f ail t o pl e a d a n y all e gati o ns t h at eit h er
Bi n a n c e or Z h a o e x er cis e d c o ntr ol o v er a n y o n e at Bifi nit y or E q o n e x , l et al o n e a b o ut a n y of t h e
M ar c h 7 a n d 1 7 P r ess R el e as es. See I n re Alsto m S A, 4 0 6 F. S u p p. 2 d 4 3 3, 4 8 7 ( S. D. N. Y. 2 0 0 5) ( “[ A]
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S e cti o n 2 0( a) d ef e n da nt m ust n ot o nl y h a v e a ct u al c o ntr ol o v er t h e pri m ar y vi ol at or, b ut h a v e a ct ual
c o ntr ol o v er t h e tr a ns a cti o n i n q u esti o n. ” (i nt er n al q u ot ati o n m ar ks o mitt e d)). Pl ai ntiffs o nl y ass ert
t h at “ Bifi nit y is p art of Bi n a n c e ” a n d Z h a o is Bifi nit y’s s ol e s har e h ol d er. A m. C o m pl. ¶ 4 4, 3 2. O n
t his b asis al o n e, Pl ai ntiffs c o n cl u d e t h at t h es e D ef e n d a nts ar e “ c o ntr oll er [s] of E q o n e x ” wit h t h e
“ p o w er t o dir e ct t h e a cti o ns of . . . E q o n e x t o e n g a g e i n t h e u nl a wf ul a cts .” I d. ¶ 9 5 . T his is
“ n ot hi n g m or e t h a n a c o n cl us or y all e g ati o n of c o ntr ol .” Do u ble Li ne , 3 2 3 F. S u p p. 3 d at 4 6 1 .
T h us, e v e n if Pl ai ntiffs a d e q u at el y all e g e d a pri m ar y vi ol ati o n of S e cti o n 1 0( b), Pl ai ntiffs h a v e
f ail e d t o st at e S e cti o n 2 0(a) c o ntr ol-p ers o n cl ai ms a gai nst Bi na n c e a n d Z h a o.
3. Pl ai ntiff s F ail t o A d e q u at el y All e g e C o ntr ol Li a bilit y Cl ai m s A g ai n st
Li n g a n d C e m m ell
T h e S e cti o n 2 0( a) clai ms a g ai nst Li n g a n d C e m m ell s h o ul d als o b e dis miss e d r e g ar dl ess of
t h e e xist e n c e of a pri m ar y vi ol ati o n b e c a us e Plai ntiffs f ail t o pl e a d f a cts s u p p orti n g t h eir c o ntr ol o v er
a n y p ers o n i n v ol v e d i n pr o d u ci n g t h e M ar c h 7 a n d 1 7 Pr ess R el eas es . T h e A m e n d e d C o m pl ai nt
r ef ers t o Li n g a n d C e m m ell b y n a m e o nl y w h e n e x plai ni n g t h at Bifi nit y a p p oi nt e d Li n g as a dir e ct or
a n d C F O a n d C e m m ell as C C A O f or E q o n e x. A m. C o m pl. ¶ 2 9 – 3 0. Plai ntiffs f ail t o pl e a d s p e cifi c
all e gati o ns r e gar di n g Li n g ’s or C e m m el l’s c o ntr ol o v er a n y p ers o n i n v ol v e d i n m a ki n g t h e all e g e d l y
f als e st at e m e nts. I n f a ct, Li n g w as n ot a p p oi nt e d t o E q o n e x as a n offi c er or dir e ct or u ntil A pril 2 8,
2 0 2 2, o v er a m o nt h aft er t h e all e g e d l y f als e st at e m e nts w er e m a d e. A m. C o m pl. ¶ 2 9. Li k e wi s e,
C e m m ell w as a p p oi nt e d o n M ar c h 3 1, 2 0 2 2, w ell aft er t h e M ar c h P r ess R el eas es w er e p u blis h e d. I d.
¶ 3 0. Pl ai ntiffs f ail t o pl ea d t h at Li n g or C e m m ell ha d c o ntr ol pri or t o t h e ir ass u m pti o n of t h eir
p ositi o ns at E q o n e x.
T h us, Pl ai ntiffs i nst ea d ar g u e i n t h eir o p p ositi o n bri ef t h at “[t] h e pr e cis e d at es of t h eir
offi ci al a p p oi nt m e nts t o E q o n e x ar e irr el e v a nt ” b e ca us e t h e Str at e gi c P art n ers hi p h a d alr e a d y
“ est a blis h e d Bifi nit y’s c o ntr ol of t h e C o m p a n y. ” Plai ntiffs’ O p p. at 2 1. B y t hat p oi nt, Pl ai n tiffs
cl ai m, “ E q o n e x c o ul d n o l o n g er a ct wit h o ut Bifi nit y’s dir e cti o n or a p pr o v al, w hi c h w o ul d i n e vita bl y
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m e a n t h e dir e cti o n or a p pr o v al of Bifi nit y’s C E O ( D ef e n d a nt Far n ell), Dir e ct or of Str at e g y
( D ef e n d a nt Li n g), S p e cial Pr oj e cts L e a d ( D ef e n d a nt C e m m ell), a n d Pr esi d e nt ( D ef e n d a nt H ai). ” I d.
H o w e v er , t h e pl e a di n gs d o n ot all e g e wit h p arti c ul arit y t h at t h es e Bifi nit y offi c ers e x er cis e d a n y
c o ntr ol o v er E q o n e x e m pl o y e es r el at e d t o t h e M ar c h Pr ess R el e as es. Pl ai ntiffs a g ai n r el y o n gr o u p
pl e a di n g wit h o ut p arti c ul arit y . Pl ai ntiffs’ h a v e f ail e d t o all e g e t h at Li n g or C e m m ell h a d a ct ual
c o ntr ol o v er t h e st at e m e nts at iss u e a n d t h er ef or e f ail t o st at e a cl ai m f or c o ntr ol -p ers o n li a bilit y.
4. Pl ai ntiff s F ail t o A d e q u at el y All e g e C o ntr ol Li a bilit y Cl ai m s A g ai n st
F ar n ell a n d H ai
Li k e wis e, Pl ai ntiffs f ail t o all e g e Far n ell’s a n d H ai’s c o ntr ol o v er a n y o n e i n v ol v e d wit h t h e
M ar c h 7 a n d 1 7 Pr ess R el e as es wit h a n y p arti c ularit y. U nli k e Li n g a n d C e m m ell, F ar n ell a n d Hai
w er e dir e ct ors ( a n d F ar n ell w as C E O) at t h e ti m e of t h e M ar c h 1 7 P r ess R el eas e , s o Pl ai ntiffs all e g e
t h at “[ b] e c a us e of t h eir p ositi o ns of c o ntr ol a n d a ut h orit y as s e ni or offi c ers a n d c o ntr oll ers of
E q o n e x, D ef e n da nts w er e a bl e t o, a n d di d, c o ntr ol t h e c o nt e nts of t h e v ari o us r e p orts, pr ess r el e as es
a n d p u bli c fili n gs w hi c h E q o n e x diss e mi n at e d i n t h e m ar k et pl a c e. ” A m. C o m pl. ¶ 9 4. Pl ai ntiffs g o
o n t o cit e “ t h eir s e ni or m a n a g e m e nt p ositi o ns ” a n d dir e ct or p ositi o ns as e vi d e n c e of t h eir “ p o w er t o
dir e ct t h e a cti o ns ” c o m pl ai n e d of. I d. ¶ 9 5. T h es e a p p e als t o F ar n ell’s a n d Hai’s c o ntr olli n g p ers o n
st at us al o n e ar e i ns uffi ci e nt t o all e g e S e cti o n 2 0( a) lia bilit y. See I n re S mit h B ar ney Tr a nsfer Age nt Litig. ,
8 8 4 F. S u p p. 2 d 1 5 2, 1 6 6 ( S. D. N. Y. 2 0 1 2) ( “[I]t is n ot s uffi ci e nt f or [ p]l ai ntiffs t o all e g e t h at
[ d ef e n d a nt] h as c o ntr ol p ers o n st at us; i nst ea d, [ p]l ai ntiffs m ust ass ert t h at [ d ef e n d a nt ] e x er cis e d act ual
c o ntr ol o v er t h e m att ers at iss u e. ”) . E v e n t h o u g h D ef e n d a nts h a d c o ntr ol o v er v ari o us r e p orts a n d
pr ess r el eas es p er t h eir p ositi o ns, Pl ai ntiffs “f ail[] t o all e g e [ D ef e n d a nts] si g n e d, dr aft e d, a p pr o v e d,
or c o nfir m e d a misl e a di n g st at e m e nt. ” I d. at 1 6 6 – 6 7; see also I n re CI N A R Cor p. Sec. Litig., 1 8 6 F.
S u p p. 2 d 2 7 9, 3 0 9 ( E. D. N. Y. 2 0 0 2) ( “It is w ell a c c e pt e d t h at m er el y all e gi n g t hat a p arti c ul ar
d ef e n d a nt is a dir e ct or or a n offi c er of a c o m p a n y is n ot s uffi c i e nt t o all e g e c o ntr ol. ”).
T h e S e cti o n 2 0( a) clai ms a g ai nst F ar n ell a n d H ai t h us f ail.
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5. Pl ai ntiff s F ail t o A d e q u at el y All e g e a C o ntr ol Li a bilit y Cl ai m A g ai n st
Bifi nit y
B e c a us e Plai ntiffs f ail t o a d e q u at el y all e g e c o ntr ol b y a n y of t h e Bifi nit y -a p p oi nt e d offi c ers
a n d dir e ct ors, Pl ai ntiffs’ all e g ati o ns of c o ntr ol lia bilit y a g ai nst Bifi nit y als o f ail. Pl ai ntiffs all e g e t h at
Bifi nit y e x er cis e d “ c o ntr ol of [ E q o n e x] ” b e ca us e “[t] h e Str at e gi c P art n ers hi p gr a nt e d Bifi nit y f ull
c o ntr ol o v er E q o n e x’s e x e c uti v e m a n a g e m e nt, as w ell as t w o s e ats o n its [ b] o ar d. ” Pl ai ntiffs’ O p p.
at 2 1. H o w e v er, Pl ai ntiffs f ail t o all e g e t hr o u g h w hi c h m a n a g ers or dir e ct ors Bifi nit y c o ntr oll e d t h e
M a r c h Pr ess R el e as es. T h e f a ct t h at Bifi nit y a p p oi nt e d t w o s eats o n a s e v e n-p ers o n b o ar d of
dir e ct ors is n ot , its elf, e n o u g h t o all e g e t h at Bifi nit y e x er cis e d “ a ct u al c o ntr ol ” o v er E q o n e x or t h e
Pr ess R el e as es. See I n re Alsto m S A, 4 0 6 F. S u p p. 2 d 4 3 3, 4 9 2 ( S. D. N. Y. 2 0 0 5) ( “[ T]h e a bilit y t o
a p p oi nt a mi n orit y of t h e b o ar d d o [ es] n ot cr e at e p o w er t o dir e ct m a n a g e m e nt a n d p oli ci es, a n d t h us
d o [ es] n ot c o nstit ut e s uffi ci e nt c o ntr ol u n d er S e cti o n 2 0( a) . ”). A d diti o n all y, as dis c uss e d a b o v e,
P l ai ntiffs f ail to pl e a d t h at t h e offi c er D ef e n d a nts u n d er Bifi nit y’s “ c o ntr ol ” e x er cis e d a ct u al c o ntr ol
o v er t h e Pr ess R el eas es. T h us, Pl ai ntiffs f ail t o pl e a d wit h p arti c ul arit y t h at Bifi nit y a ct u all y e x ert e d
c o ntr ol o v er “t h e m att ers at iss u e. ” See I n re S mit h Bar ney , 8 8 4 F. S u p p. 2 d at 1 6 6 . T h us, t h e S e cti o n
2 0( a) cl ai m a g ai nst Bifi nit y f ails.
C. P er s o n al J uri s di cti o n
T h e A m e n d e d C o m pl ai nt est a blis h es t h e C o urt’s p ers o n al j uris di cti o n o v er F ar n ell a n d H ai
b e c a us e it all e g es t h at t h e y m a d e misl e a di n g st at e m e nts dir e ct e d at i n v est ors i n t h e U nit e d St at es.
H o w e v er, b e c a us e t h e y r el y o n gr o u p pl e a di n g a n d c o n cl us or y all e g ati o ns, Pl ai ntiffs f ail t o pl e a d t h e
ot h er d ef e n d a nts’ i n v ol v e m e nt i n t h e all e g e d fr a u d s uffi ci e nt t o s atisf y t h e mi ni m u m c o nt a cts
r e q uir e m e nt.
1. L e g al St a n d ar d
I n d et er mi ni n g w h et h er it m a y e x er cis e p ers o n al j uris di cti o n o v er a d ef e n d a nt, t h e C o urt
m ust c o n d u ct a t w o -st e p i n q uir y. First, t h e C o urt m ust d et er mi n e w h et h er t h er e is a “st at ut or y b asis
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f or e x er cisi n g p ers o n al j uris di cti o n. ” M arvel C h ar acters, I nc. v. Kir by , 7 2 6 F. 3 d 1 1 9, 1 2 8 ( 2 d Cir. 2 0 1 3)
( cit ati o n o mitt e d). A f e d er al c o urt a p pli es t h e f or u m st at e’s p ers o n al j uris di cti o n r ul es u nl ess a
f e d er al st at ut e “s p e cifi c all y pr o vi d e[s] f or n ati o n al s er vi c e of pr o c ess. ” Bro w n v. Loc k hee d M arti n Cor p. ,
8 1 4 F. 3 d 6 1 9, 6 2 4 ( 2 d Cir. 2 0 1 6) ( q u oti n g P D K L a bs, I nc. v. Frie dl a n der , 1 0 3 F. 3 d 1 1 0 5, 1 1 0 8 ( 2 d Cir.
1 9 9 7)). S e c o n d, t h e C o urt m ust d et er mi n e w h et h er t h e e x er cis e of p ers o n al j uris di cti o n o v er t h e
d ef e n d a nt w o ul d c o m p ort wit h d u e pr o c ess u n d er t h e C o nstit uti o n. Licci e x rel. Licci v. Le b a nese
C a na di a n B a n k, S A L , 6 7 3 F. 3 d 5 0, 5 9– 6 0 ( 2 d Cir. 2 0 1 2).
T h e stat ut or y b asis f or p ers o n al j uris di cti o n i n s e c uriti es cas es i n v ol vi n g s e c uriti es list e d o n
d o m esti c e x c h a n g es is f o u n d i n S e cti o n 2 7 of t h e E x c h a n g e A ct, 1 5 U. S. C. § 7 8 a a, w hi c h “ p er mits
t h e e x er cis e of p ers o n al j uris di cti o n t o t h e li mit of t h e D u e Pr o c ess Cla us e of t h e Fift h
A m e n d m e nt. ” S. E. C. v. U nif u nd S A L , 9 1 0 F. 2 d 1 0 2 8, 1 0 3 3 ( 2 d Cir. 1 9 9 0) ( citi n g Le asco D at a
Processi ng E q ui p. Cor p. v. M a x well , 4 6 8 F. 2 d 1 3 2 6, 1 3 3 9 ( 2 d Cir. 1 9 7 2), abrog ate d o n ot her gro u n ds by
Morriso n v. N at’l A ust. B a n k Lt d. , 5 6 1 U. S. 2 4 7 ( 2 0 1 0); see also S. E. C. v. Str a u b , 9 2 1 F. S u p p. 2 d 2 4 4,
2 5 2 ( S. D. N. Y. 2 0 1 3) ( “I n s e c uriti es cas es li k e t his o n e i n v ol vi n g s e c uriti es list e d o n d o m esti c
e x c h a n g es, S e cti o n 2 7 . . . est a blis h es t h e e x cl usi v e basis f or p ers o n al j uris di cti o n. ”); 1 5 U. S. C. § §
7 7 v, 7 8 a a ( pr o vi di n g f or w orl d wi d e s er vi c e of pr o c ess). T h us, t h e s ol e q u esti o n h er e is w h et h er d u e
pr o c ess p er mits t h e e x er cis e of j uris di cti o n o v er D ef e n d a nts .
D u e pr o c ess r e q uir es t h at if a d ef e n d a nt is “ n ot pr es e nt wit hi n t h e t errit or y of t h e f or u m, h e
[ m ust] h a v e c ert ai n mi ni m u m c o nt a cts wit h it s u c h t h at t h e m ai nt e n a n c e of t h e s uit d o es n ot off e n d
tr a diti o n al n oti o ns of fair pl a y a n d s u bst a ntial j usti c e. ” I nt’l S hoe Co. v. W as hi ngto n, 3 2 6 U. S. 3 1 0, 3 1 6
( 1 9 4 5) ( cit ati o n o mitt e d). T h e a nal ysis c o nsists of t w o c o m p o n e nts: t h e “ mi ni m u m c o nt a cts ”
a n al ysis a n d t h e “r e as o n a bl e n ess ” i n q uir y. Metro. Life I ns. Co. v. Ro bertso n – Ceco Cor p. , 8 4 F. 3 d 5 6 0, 5 6 7
( 2 d Cir. 1 9 9 6) ( cit ati o ns o mitt e d).
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T o esta blis h t h e mi ni m u m c o nt a cts n e c essar y t o s atisf y d u e pr o c ess wit h r es p e ct t o a
n o nr esi d e nt d ef e n d a nt, t h e pl ai ntiff m ust s h o w t hat its “ clai m aris es o ut of, or r el at es t o, t h e
d ef e n d a nt’s c o nt a cts wit h t h e f or u m . . . [ a n d t h at] t h e d ef e n d a nt p ur p os ef ull y a v ail e d its elf of t h e
pri vil e g e of d oi n g b usi n ess i n t h e f or u m a n d c o ul d f or es e e b ei n g h al e d i nt o c o urt t h er e. ” B a n k
Br ussels L a m bert v. Fi d dler Go n z ale z & Ro drig ue z , 3 0 5 F. 3 d 1 2 0, 1 2 7 ( 2 d Cir. 2 0 0 2) ( cit ati o n o mitt e d).
Alt h o u g h f or es e e a bilit y is a c o m p o n e nt of t h e mi ni m u m c o nt a cts a nal ysis, “f or es e e a bilit y al o n e h as
n e v er b e e n a s uffi ci e nt b e n c h m ar k f or p ers o n al j uris di cti o n u n d er t h e D u e Pr o c ess Cla us e. ” Worl d –
Wi de Vol ks w age n Cor p. v. Woo dso n , 4 4 4 U. S. 2 8 6, 2 9 5 ( 1 9 8 0). B e c a us e t h e E x c h a n g e A ct a ut h ori z es
w orl d wi d e s er vi c e of pr o c ess, t h e r el e va nt c o nt a cts f or p ur p os es of t h e “ mi ni m u m c o nt a cts ” a n al ysis
ar e t h os e wit h t h e U nit e d St at es as a w h ol e. See, e.g. , Str a u b , 9 2 1 F. S u p p. 2 d at 2 5 3 ( “ W h e n t h e
j uris di cti o n al iss u e fl o ws fr o m a f e d er al st at ut or y gr a nt t h at a ut h ori z es s uit u n d er f e d er al-q u esti o n
j uris di cti o n a n d n ati o n wi d e s er vi c e of pr o c ess, . . . t h e Fift h A m e n d m e nt a p pli es, a n d t h e S e c o n d
Cir c uit h as c o nsist e ntl y h el d t h at t h e mi ni m u m c o nt a cts t est i n s u c h cir c u msta n c es l o o ks t o c o nt a cts
wi t h t h e e ntir e U nit e d St at es r at h er t h a n wit h t h e f or u m st at e. ” ( q u oti n g S E C v. Morto n , N o. 1 0– c v –
1 7 2 0 ( L A K)( M H D), 2 0 1 1 W L 1 3 4 4 2 5 9 , at * 1 2 ( S. D. N. Y. M ar. 3 1, 2 0 1 1), a do pte d , i d., E C F N o. 1 0 2,
2 0 1 1 W L 1 1 7 6 8 5 0 4 ( S. D. N. Y. N o v. 3, 2 0 1 1)); see I n re M ag netic A u diot a pe A ntitr ust Litig., 3 3 4 F. 3 d
2 0 4, 2 0 7 ( 2 d Cir. 2 0 0 3) ( dis c ussi n g a n al o g o us s er vi c e of pr o c ess pr o visi o n i n t h e Cl a yt o n A ct); C he w
v. Dietric h, 1 4 3 F. 3 d 2 4, 2 8 n. 4 ( 2 d Cir. 1 9 9 8) (st ati n g t h at “ u n d er t h e Fift h A m e n d m e nt t h e c o urt c a n
c o nsi d er t h e d ef e n da nt’s c o nt a cts t hr o u g h o ut t h e U nit e d St at es ”); accor d I n re Oil S pill by A moco C a di z
Off Co ast of Fr a nce o n M ar. 1 6, 1 9 7 8 , 9 5 4 F. 2 d 1 2 7 9, 1 2 9 4 ( 7t h Cir. 1 9 9 2) ( “ W h e n t h e n ati o n al
s o v er ei g n is a p pl yi n g n ati o n al l a w, t h e r el e v a nt c o nt a cts ar e t h e c o nt a cts b et w e e n t h e d ef e n da nt a n d
t h e s o v er ei g n’s n ati o n. [ T] h e d u e pr o c ess cla us e r e q uir es o nl y t h at t h e d ef e n da nt p oss ess s uffi ci e nt
c o nt a cts wit h t h e U nit e d St at es. ”).
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“ T h e s e c o n d part of t h e j uris di cti o n al a nal ysis as ks w h et h er t h e ass erti o n of p ers o n al
j uris dicti o n c o m p orts wit h ‘tr a diti o n al n oti o ns of fair pl a y a n d s u bst a nti al j usti c e’ — t h at is, w h et h er it
is r e as o n a bl e u n d er t h e cir c u mst a n c es of t h e p arti c ular c as e. ” B a n k Br ussels L a m bert , 3 0 5 F. 3 d at 1 2 9
( cit ati o ns o mitt e d). If t h e d ef e n d a nt’s c o nt a cts wit h t h e f or u m ris e t o t h e l e v el of “ mi ni m u m
c o nt a cts, ” a d ef e n da nt m a y d ef e at j uris di cti o n o nl y b y pr es e nti n g “a c o m p elli n g c as e t h at t h e
pr es e n c e of s o m e ot h er c o nsi d er ati o ns w o ul d r e n d er j uris di cti o n u nr e as o n a bl e. ” B urger Ki ng Cor p. v.
R u d ze wic z , 4 7 1 U. S. 4 6 2, 4 7 7 ( 1 9 8 5). I n d et er mi ni n g w h et h er t h e e x er cis e of p ers o n al j uris di cti o n
o v er a p arti c ul ar d ef e n da nt w o ul d b e r e as o na bl e, t h e c o urt m ust e v al u at e “( 1) t h e b ur d e n t h at t h e
e x er cis e of j uris di cti o n will i m p os e o n t h e d ef e n da nt; ( 2) t h e i nt er ests of t h e f or u m st at e i n
a dj u di c ati n g t h e c as e; ( 3) t h e pl ai ntiff ’s i nt er est i n o bt ai ni n g c o n v e ni e nt a n d eff e cti v e r eli ef; ( 4) t h e
i nt erst at e j u di ci al s yst e m’s i nt er est i n o bt ai ni n g t h e m ost effi ci e nt r es ol uti o n of t h e c o ntr o v ers y; a n d
( 5) t h e s h ar e d i nt er est of t he st at es i n f urt h eri n g s u bst a nti v e s o ci al p oli ci es. ” Metro. Life I ns. , 8 4 F. 3 d
at 5 6 8 ( citi n g As a hi Met al I n d us. Co. v. S u per. Ct. , 4 8 0 U. S. 1 0 2, 1 1 3– 1 4 ( 1 9 8 7)).
C o urts h a v e f o u n d p ers o nal j uris di cti o n t o e xist w h er e “ a n e x e c uti v e of a f or ei g n s e c uriti es
iss u er, w h er e v er l o cat e d, parti ci p at es i n a fra u d directe d to d e c ei vi n g U nit e d St at es s h ar e h ol d ers. ” I n re
Br as ke m S. A. Sec. Litig. , 2 4 6 F. S u p p. 3 d 7 3 1, 7 6 9 ( S. D.N. Y. 2 0 1 7) ( q u oti n g S. E. C. v. Str a ub , 9 2 1 F.
S u p p. 2 d 2 4 4, 2 5 6 – 5 7 ( S. D. N. Y. 2 0 1 3)); see also J. McI ntyre M ac hi nery, Lt d. v. Nic astro, 5 6 4 U. S. 8 7 3,
8 8 4 ( 2 0 1 1) ( “ T h e q u esti o n is w h et h er a d ef e n d a nt h as f oll o w e d a c o urs e of c o n d u ct dir e ct e d at t h e
s o ci et y or e c o n o m y e xisti n g wit hi n t h e j uris di cti o n of a gi v e n s o v er ei g n, s o t h at t h e s o v er ei g n h as t h e
p o w er t o s u bj e ct t h e d ef e n d a nt t o j u d g m e nt c o n c er ni n g t h at c o n d u ct. ”). “[I]t is b y n o w w ell -
est a blis h e d t h at si g ni n g or dir e ctl y m a ni p ulati n g fi n a n ci al stat e m e nt s t o c o v er u p ill e g al f or ei g n
a cti o n, wit h k n o wl e d g e t hat t h os e stat e m e nts will b e r eli e d u p o n b y U nit e d St at es i n v est ors satisfi es
t his t est. ” U. S. S. E. C. v. S h aref , 9 2 4 F. S u p p. 2 d 5 3 9, 5 4 7 ( S. D. N. Y. 2 0 1 3).
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H o w e v er, “ c o n cl us or y all e g ati o ns of p arti ci p at i o n i n t h e fra u d ar e i ns uffi ci e nt ” t o est a blis h
p ers o n al j uris di cti o n. I n re Astr a Ze nec a Sec. Litig., 5 5 9 F. S u p p. 2 d 4 5 3, 4 6 7 ( S. D. N. Y. 2 0 0 8), aff ’d s ub
no m. St ate U niversities Ret. Sys. of Illi nois v. Astr a ze nec a P L C , 3 3 4 F. A p p’x 4 0 4 ( 2 d Cir. 2 0 0 9) ( “[ A]n y
all e gati o ns t h at M o gr e n or B ar n e vi k c a us e d t h e distri b uti o n of fals e a n d misl e a di n g r e p orts a n d
st at e m e nts t o Astra Z e n e ca i n v est ors i n t h e U. S. or t h at t h e y h a d a ct u al k n o wl e d g e t h at ea c h of t h e
r e pr es e nt ati o ns all e g e d h er ei n w er e m at eri all y f als e or misl e a di n g ar e m er el y c o n cl us or y stat e m e nts
a p pli c a bl e t o all i n di vi d ual d ef e n d a nts as a r es ult of t h eir p ositi o ns wit hi n t h e C o m p a n y. ”). See also
I n re Br as ke m S. A. Sec. Litig., 2 4 6 F. S u p p. 3 d 7 3 1, 7 7 0 ( S. D. N. Y. 2 0 1 7) ( h ol di n g t h at t h e all e g ati o n
t h at “O d e br e c ht h a d t h e p o w er t o i nfl u e n c e a n d c o ntr ol a n d di d i nfl u e n c e a n d c o ntr ol . . . t h e
C o m p a n y, i n cl u di n g t h e diss e mi nati o n of t h e v ari o us st at e m e nts a n d o missi o ns ” is “ n ot e n o u g h t o
s u p p ort p ers o n al j uris di cti o n ”); I n re Aege a n M ari ne Petrole u m Net wor k, I nc. Sec. Litig., 5 2 9 F. S u p p. 3 d
1 1 1, 1 3 6 – 3 7 ( S. D. N. Y. 2 0 2 1) ( h ol di n g t h at s p e cifi c j uris di cti o n is n ot est a blis h e d m er el y b e c a us e t h e
“ d ef e n d a nt e x er cis e d c o ntr ol o v er t h e c o m p a n y b e ca us e h e h a d a maj orit y of v oti n g s h ar e ca pit al,
v et o p o w er o v er c or p orat e a cti o ns, t h e a bilit y t o a p p oi nt offi c ers a n d B o ar d m e m b ers, a n d p o w er t o
a p pr o v e t h e b usi n ess pl a n ”).
M or e o v er, “[t] o all e g e p ers o n al j uris di ctio n o v er a d ef e n d a nt, gr o u p pl e a di n g is n ot
p er mitt e d. I n re Aege a n, 5 2 9 F. S u p p. 3 d at 1 3 5. “A pl ai ntiff m ust c arr y his b ur d e n wit h r es p e ct t o
e a c h d ef e n da nt i n di vi d u all y. ” Ber de a u x v. O ne Coi n Ltd. , 5 6 1 F. S u p p. 3 d 3 7 9, 3 9 6 ( S. D. N. Y. 2 0 2 1)
( c oll e cti n g cas es).
2. A p pli c ati o n
T h e A m e n d e d C o m pl ai nt s uffi ci e ntl y pl e a ds t h e C o urt’s p ers o n al j uris di cti o n o v er Far n ell
a n d H ai. Pl ai ntiffs pl e a d t h at Far n ell a n d H ai i n di vi d u all y m a d e f als e st at e m e nts i n pr ess r el e as es t o
U nit e d St at es i n v est ors, A m. C o m pl. ¶ ¶ 4 8, 5 3, 7 2, c o n d u ct “ d esi g n e d t o vi ol at e U nit e d St at es
s e c uriti es r e g ulati o ns” a n d “ n e c essaril y dir e ct e d t o war d t h e U nit e d St at es . ” S. E. C. v. Str a ub , 9 2 1 F.
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S u p p. 2 d 2 4 4, 2 5 5 ( S. D. N. Y. 2 0 1 3) . W hil e t h e C o urt h as f o u n d t h at t h e all e g ati o ns of falsit y a n d
s ci e nt er ar e i ns uffi ci e nt t o est a blis h li a bilit y u n d er t h e h ei g ht e n e d pl e a di n g st a n d ar ds of F e d. R. Ci v.
P. 9( b) a n d t h e P S L R A, t h e pl e a di n gs d o c o nstit ut e a n all e gati o n of p arti ci p ati o n i n fra u d dir e ct e d at
t h e U nite d St at es a n d t h er ef or e est a blis h p ers o nal j uris di cti o n o v er Far n ell a n d H ai . See S h aref , 9 2 4
F. S u p p. 2 d at 5 4 7 ; I n re B a nco Br a desco S. A. Sec. Litig., 2 7 7 F. S u p p. 3 d 6 0 0, 6 4 4 ( S. D. N. Y. 2 0 1 7)
( W o o ds, J.) ( “Pl ai ntiff h as a d e q u at el y all e g e d t h at [t h e d ef e n d a nt] si g n e d off o n t h e pr ess r el e as e wit h
k n o wl e d g e t hat it w o ul d b e fil e d wit h t h e S E C a n d b e gi v e n t o pr os p e cti v e A m eri c a n
p ur c h as ers . . . , a n d t h at is e n o u g h t o est a blis h mi ni m u m c o nt a cts wit h t h e U nit ed St at es. ”).
As f or t h e ot h er d ef e n d a nts, t h e A m e n d e d C o m pl ai nt fails t o esta blis h p ers o nal j uris di cti o n
b e c a us e it r eli es o n gr o u p pl e a di n g a n d c o n cl us or y all e g ati o ns of c o ntr ol . Pl ai ntiffs f ail t o all e g e wit h
p arti c ul arit y t h at Bifi nit y, Bi n a n c e, or Z h a o h a d a n y a ct u al c o ntr ol o v er t h e all e g e dl y f als e or
misl e a di n g st at e m e nts; Pl ai ntiffs si m pl y all e g e t hat t h e y h a d c o ntr ol b y nat ur e of t h eir p ositi o ns,
w hi c h is i ns uffi ci e nt t o c o nf er p ers o n al j uris di cti o n. See I n re Br as ke m S. A. Sec. Litig., 2 4 6 F. S u p p. 3 d
at 7 7 0 ( h ol di n g t h at si m pl y all e gi n g c o ntr ol st at us is i ns uffi ci e nt f or est a blis hi n g p ers o n al
j uris di cti o n); I n re Aege a n, 5 2 9 F. S u p p. 3 d at 1 3 6 – 1 3 7 ( h ol di n g it i ns uffi ci e nt f or p ers o n al j uris di cti o n
m er el y t o all e g e “ t h e a bilit y t o a p p oi nt offi c ers a n d B o ar d m e m b ers ”). Li k e wis e, Pl ai ntiffs f ail t o
all e g e t hat Li n g or C e m m ell h a d a n y c o ntr ol o v er E q o n e x or its e m pl o y e es at t h e ti m e of t h e M ar c h
Pr ess R el e as es, b ef or e t h e y e v e n ass u m e d t h eir p ositi o ns at E q o n e x. T h er ef or e, Pl ai ntiffs h a v e fa il e d
t o all e g e t h eir “ p arti ci p ati o n i n t h e fr a u d. ” I n re Astr a Ze nec a, 5 5 9 F. S u p p. 2 d at 4 6 7 . As c urr e ntl y
pl e a d e d, Pl ai ntiffs’ A m e n d e d C o m pl ai nt d o es n ot s uffi ci e ntl y esta blis h t hat Bifi nit y, Bi n a n c e, Z ha o,
Li n g, or C e m m ell h a d mi ni m u m c o nt a cts r elat e d t o Pl ai ntiffs’ cl ai ms of fr a u d a g ai nst U nit e d St at es
i n v est ors b e c a us e Pl ai ntiffs f ail t o pl e a d, wit h p arti c ul arit y a n d o n a n i n di vi d ual b asis, f a cts
est a blis hi n g t h eir i n v ol v e m e nt i n t h e all e g e d fr a u d.
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V. C O N C L U SI O N
F or t h e f or e g oi n g r e as o ns, D ef e n d a nts’ m o ti o n t o dis miss is G R A N T E D.
Pl ai ntiffs h a v e f ail e d t o pl e a d a pri m ar y vi olati o n of S e cti o n 1 0( b) of t h e E x c ha n g e A ct b y
D ef e n d a nts F ar n ell a n d Hai or b y E q o n e x. Plai ntiffs h a v e s e par at el y f ail e d t o pl e a d S e cti o n 2 0( a)
c o ntr ol -p ers o n cl ai ms a g ai nst all D ef e n da nts.
B e c a us e t h e C o urt c a n n ot c o n cl u d e t h at f urt h er a m e n d m e nt of t h e c o m pl ai nt w o ul d b e
f util e, t h e C o urt gr a nts Pl ai ntiffs l e a v e t o fil e a s e c o n d a m e n d e d c o m plai nt s ol el y t o c ur e t h e
d efi ci e n ci es i d e ntifi e d i n t his o pi ni o n n o l at er t h a n 3 0 d a ys fr o m t h e d at e of t his or d er. See Loreley
Fi n. (Jersey) No. 3 Lt d. v. Wells Fargo Sec., L L C , 7 9 7 F. 3 d 1 6 0, 1 9 1 ( 2 d Cir. 2 0 1 5).
T h e Cl er k of C o urt is dir e ct e d t o t er mi n at e t h e m oti o n p e n di n g at E C F N o. 4 6.
S O O R D E R E D.
D at e d: S e pt e m b er 1 8, 2 0 2 4
N e w Y or k, N e w Y or k __________________________________
G R E G O R Y H. W O O D S
U nit e d St at es Distri ct J u d g e
40