Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 1 of 40 U S D C S D DN RY A F T – A u g ust 2 9, 2 0 2 4 D OC U ME NT E L E C T R O NI C A L L Y FI L E D U NI T E D S T A T E S DI S T RI C T C O U R T D O C #: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ S O U T H E R N DI S T RI C T O F N E W Y O R K D A T E FI L E D: 9 / 1 8 / 2 0 2 4 ----------------------------------------------------------------- X : BI N LI, i n divi d u ally a n d o n be h alf of all ot hers si mil arly : sit u ate d, : : 1: 2 3 -c v -0 3 3 4 6 -G H W Pl ai ntiff, : : M E M O R A N D U M O PI NI O N & -v - : OR DER : E Q O N E X LI MI T E D, BI N A N C E G R O U P, : BI FI NI T Y U A B, J O N A T H A N F A R N E L L, : D A NI E L LI N G, A L MI R A C E M M E L L, Y U : H E L E N H AI, Z H A O C H A N G P E N G , : : D ef e n d a nt s. : : ------------------------------------------------------------------ X 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. 3 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 4 of 40 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 4 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 5 of 40 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 5 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 6 of 40 ‘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. 6 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 7 of 40 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, 7 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 8 of 40 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 8 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 9 of 40 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. 9 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 10 of 40 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 10 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 11 of 40 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. 11 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 12 of 40 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). 12 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 13 of 40 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). 13 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 14 of 40 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. 14 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 15 of 40 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.”). 15 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 16 of 40 “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. 16 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 17 of 40 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 17 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 18 of 40 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 18 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 19 of 40 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 . 19 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 20 of 40 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 20 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 21 of 40 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 21 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 22 of 40 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). 22 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 23 of 40 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. 23 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 24 of 40 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 24 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 25 of 40 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 25 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 26 of 40 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 26 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 27 of 40 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. 27 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 28 of 40 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. 28 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 29 of 40 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 29 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 30 of 40 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). 30 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 31 of 40 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] 31 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 32 of 40 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 32 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 33 of 40 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. 33 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 34 of 40 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 34 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 35 of 40 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). 35 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 36 of 40 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. ”). 36 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 37 of 40 “ 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). 37 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 38 of 40 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. 38 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 39 of 40 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. 39 Case 1:23-cv-03346-GHW Document 52 Filed 09/18/24 Page 40 of 40 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