In $ 4 billion OneCoin fraud, jurisdiction condemns claims against former Big Law partner


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(Reuters) – A former Locke Lord partner who was convicted in Manhattan federal court in 2019 for laundering around $ 400 million in an alleged $ 4 billion cryptocurrency ponzi scheme must have appeared to be a big target for lawyers of plaintiffs who have filed a fraud class action on behalf of investors in the plan.

After all, prosecutors had described attorney Mark Scott as part of the so-called OneCoin fraud, alleging that he spent the $ 50 million he raised through the scheme on real estate in seaside, luxury cars and a million dollar yacht. .

So it’s hardly surprising that when investors filed an amended 69-page lawsuit last September in their class action lawsuit in Manhattan federal court, plaintiff attorneys at firms Levi & Korsinsky, Zelle and Silver Miller pointed out. the role that Scott and two fellow lawyers would have played in the pyramid scheme.

The complaint exposed the alleged international hoax, in which a Bulgarian woman known as “Cryptoqueen” teamed up with a marketing ace to sell investors material that would allegedly allow them to exploit what turned out to be a non-existent cryptocurrency called OneCoin. .

Scott and the other attorneys – one of whom also faces federal criminal charges in Manhattan – did not come up with the alleged scheme. But the complaint argues that lawyers were responsible for perpetuating the OneCoin fraud by funneling investor money through offshore funds. Investors have lost hundreds of millions, if not billions of dollars, according to the complaint, due to the involvement of lawyers.

Investors have now lost any chance to prove these claims. On Monday, Scott secured the rejection of all claims from OneCoin investors. The same goes for the other two lawyers who allegedly helped him launder OneCoin’s ill-gotten billions, David Pike and Nicole Huesmann.

U.S. District Judge Valerie Caproni of Manhattan has found that despite all the details of the international intrigue in the investors’ complaint – including the allegations of a witness who cooperated in the OneCoin criminal investigation – the action Collective failed at the first stage: the plaintiffs’ attorneys, she said, had utterly failed to establish New York’s jurisdiction over Scott and the other attorneys.

The judge, who was clearly exasperated by the group’s lawyers, rejected their request for discovery to support their jurisdictional arguments. “This case has been ongoing for over two years, the plaintiffs have had the help of a cooperator who has played a central role in the OneCoin program, and they are in their third iteration of the complaint,” wrote Caproni. . “The complainants’ claims of jurisdiction are condemned by multiple failures of the law and therefore further discovery would not remedy the jurisdictional failures. “

Lawyers for plaintiffs Donald Enright and Adam Apton of Levi & Korsinsky and John Carriel of Zelle did not respond to my emailed question about Caproni’s decision, which also dismissed class actions against Bank of New York Mellon Corp for allegedly aiding OneCoin money laundering. (Caproni said the class action did not bring a claim against BNY Mellon, who argued he was a victim of the fraud and not a participant.) The ruling appears to leave the plaintiffs without cause, since, according to the judge, all of the other defendants named in the investor’s complaint were in default.

Scott’s attorney, Kevin Brown of Mintz & Gold, said in an email his client felt “vindicated” by Caproni’s decision, in part because the investors’ claims were based on the witness’s disputed testimony. having cooperated. “The class actions were unfounded and should never have been filed in New York City,” said Brown, who is appealing Scott’s conviction. “We believe this is only the first step for Mr Scott,” said Brown, adding that he was anxious to “prove his innocence in his criminal proceedings.”

I have not had a response from Pike’s attorney at Raskin & Raskin or from Huesmann’s attorney at Hamilton, Miller & Birthisel.

Investors, the judge said, made all kinds of mistakes in their arguments for New York’s personal jurisdiction over Scott, Pike and Huesmann, who all live and work in Florida. Broadly speaking, investors alleged both that lawyers used banks in New York to carry out their wrongdoing and that the alleged money laundering program affected New Yorkers who lost money. money when they invested in OneCoin.

In their brief opposition to the defendants ‘motions to dismiss, the plaintiffs’ attorneys argued that Scott and the other attorneys “undoubtedly took advantage of the Southern District of New York” when they transferred OneCoin money from a bank to the other. Under New York’s Long Arm Act, they argued, that is enough to establish personal jurisdiction.

Not according to Caproni. The judge began by lambasting the investor lawyer for having grouped the three lawyers together in allegations concerning “the Scott group”. Group accusations, she said, are “utterly inadmissible” when it comes to establishing jurisdiction over individual defendants – and aside from inappropriate group allegations, she said. , investors have offered no facts to link Huesmann to an activity in New York.

To establish New York’s jurisdiction over Pike, the plaintiffs cited the Manhattan federal court criminal case against him. Caproni was not convinced. “The court,” she wrote, “is not aware of any authority supporting the proposition that personal jurisdiction can be exercised over a party in a particular jurisdiction because the venue was appropriate for criminal charges against. this part.”

What about allegations that Scott’s money laundering conspiracy relied on New York banks to transfer money? Caproni was not at all impressed. The complaint described only one specific transaction in which money went through BNY Mellon, she said. (Investors angered the judge by citing conflicting dates on this wire transfer.) New York law, Caproni said, is clear that just knowing that money will be transferred to or from a bank in New York York is not sufficient to establish the jurisdiction of New York. New York can only claim jurisdiction, she said, when a defendant has deliberately ordered the involvement of a state bank.

If Scott and the others have done wrong, Caproni said, they are from Florida. And if the named plaintiffs were injured, the injury took place in Montana or Tennessee. “None of these events,” the judge wrote, “happened in New York.”

After Monday’s decision, the class action won’t be either.

The opinions expressed here are those of the author. Reuters News, under the principles of trust, is committed to respecting integrity, independence and freedom from bias.

Read more:

Ex-Big Law Atty Asks Judge To Dismiss His Conviction In Cryptocurrency Case

Former Big Law partner convicted in cryptocurrency fraud trial

US calls huge pyramid scheme ‘OneCoin’, executives accuse

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The opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the principles of trust, is committed to respecting integrity, independence and freedom from bias.

Alison frankel

Alison Frankel has covered high-stakes commercial litigation as a columnist for Reuters since 2011. A graduate of Dartmouth University, she worked as a reporter in New York covering the legal and law industry for more than three decades. Prior to joining Reuters, she was a writer and editor for The American Lawyer. Frankel is the author of Double Eagle: The Epic Story of the World’s Most Valuable Coin. Contact her at [email protected]


Thelma J. Longworth

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