“Pumping a few squirts of vanilla hazelnut syrup into your latte—nothing wrong with that. Pumping up a coffee stock with hype and false statements? That’s illegal, and the Securities and Exchange Commission (SEC) recently announced fraud charges against alleged perpetrators of just such a scheme:” a long-running international securities fraud scheme in which the promoters and their associates allegedly sold millions of shares in multiple microcap—or “penny”—stock companies us

On July 27, 2021, the Securities and Exchange Commission’s (the “SEC” or the “Commission”) Office of Investor Education and Advocacy (“OIEA”) issued an investor alert ( here ) with the FBI Criminal Investigative Division about fraudsters who are posing as brokers or investment advisers (the “Alert”). According to the Alert, people looking to perpetrate a fraud on unsuspecting investors are, among other things, falsely claiming to be registered with the SEC, the Financial Indu

A recurring theme in the jurisprudence concerning claims of fraud and breach of contract is duplication – that is, whether the fraud claim duplicates the breach of contract claim. It is well settled that “ cause of action to recover damages for fraud will not lie where the only fraud claimed arises from the breach of a contract.” Gorman v. Fowkes , 97 A.D.3d 726, 727 (2d Dept. 2012); see also Selinger Enters., Inc. v. Cassuto , 50 A.D.3d 766, 768 (2d Dept. 2008); Tiffany at

Cherry picking is the process of selecting securities to invest in by mimicking the trading of other investors (both individual and institutions) who are successful over a long period of time. In other words, cherry-pickers base their trading around the techniques and strategies of other investors. Anyone can implement a cherry-picking strategy. Indeed, cherry picking is used by both professional and retail investors alike. Cherry picking can be an effective way to generate

In P & HR Solutions, LLC v. Ram Capital Funding , LLC, 2021 N.Y. Slip Op. 03554 (1st Dept. June 8, 2021) ( here ), the Appellate Division, First Department was faced with the situation that is all too common in commercial litigation, plaintiffs trying to assert contract and fraud claims without differentiation. In fact, over the past few months, this Blog has written about numerous appellate cases in which the plaintiffs’ fraud claims were dismissed because they were indistin

In today’s Fraud Notes, we examine Bullen v. CohnReznick, LLP (1st Dept. May 27, 2021) ( here ), and Sabourin v. Chodos , (1st Dept. May 27, 2021) ( here ), both decided by the Appellate Division, First Department. Bullen involved an alleged fraud in which CohnReznick was accused of being a participant through the issuance of audit reports that gave the entities being audited a clean bill of health – i.e. , the financial statements presented fairly, in all material respects

Sometimes a fraud is so undetectable that even an expert hired to assist in due diligence activities can be the victim of fraud. That’s what happened in VXI Lux Holdco, S.A.R.L. v. SIC Holdings, LLC , 2021 N.Y. Slip Op. 03294 (1st Dept. May 25, 2021) ( here ). VXI Lux arose from plaintiff’s $112 million purchase of Symbio S.A. (“Symbio”) from defendants. Plaintiff alleged that defendants, faced with a Chinese government audit, engaged in fraud to hide the fact that they had

As we have discussed in numerous posts, plaintiffs alleging breach of contract and fraud risk having the latter cause of action dismissed because it is duplicative of the former one. Plaintiffs can avoid this fate by alleging: a legal duty owed by the defendant that is separate and apart from the duty to perform under the contract or a duty that is collateral or extraneous to the contract; and damages that are different from the contract damages. In Principia Partners LLC v.

Readers of this Blog know that to state a cause of action for fraudulent inducement, the complaint must allege “that the defendant intentionally made a material misrepresentation of fact in order to defraud or mislead the plaintiff, and that the plaintiff reasonably relied on the misrepresentation and suffered damages as a result.” Connaughton v. Chipotle Mexican Grill, Inc. , 135 A.D.3d 535, 537 (1st Dept. 2016), aff’d , 29 N.Y.3d 137 (2017) (citations omitted). Significantl

This Blog frequently highlights cases analyzing the viability of fraud claims when contract claims are also made. See, e.g., < here =">here</a>"> , < here =">here</a>"> , < here =">here</a>"> , < here =">here</a>"> , < here =">here</a>"> , < here =">here</a>"> . In Michael Davis Construction, Inc. v. 129 Parsonage Lane, LLC , decided on May 12, 2021, the Second Department dismissed defendant’s negligent construction counterclaim as duplicative of its breach of contract coun

“If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.” This saying best describes the duplication of claims doctrine that this Blog often writes about – that is, the doctrine whereby a fraud claim will duplicate a contract claim when “the only fraud alleged is that the defendant was not sincere when it promised to perform under the contract.” Mañas v. VMS Assoc., LLC , 53 A.D.3d 451, 453 (1st Dept. 2008) (quoting First Bank of Ams. v

A “recurring question” New York courts grapple with is whether the facts alleged in a complaint give rise to claims for both breach of contract and fraudulent inducement. Cronos Grp. v. XComIP, LLC , 156 A.D.3d 54, 56 (1st Dept. 2017). Readers of this Blog know that a fraud claim, which “ar from the same facts , s identical damages and d not allege a breach of any duty collateral to or independent of the parties’ agreements<,> is subject to dismissal as redundant of the c

It has been over 100 years since Charles Ponzi was indicted for the fraudulent scheme that bears his name. In a Ponzi scheme, the operator creates an investment program in which “profits” are paid to earlier investors with money taken from later investors. The “profits” are, therefore, fictitious instead of returns on investment. Ultimately, Ponzi schemes collapse under their own weight, taking investors, many of whom are the later ones in the scheme, down with them. Unfortun

March 2021 has been a busy month for the Enforcement Division of the Securities and Exchange Commission (“SEC” or “Commission”). Since our last Enforcement News article (here), the SEC has announced six enforcements proceedings and/or settlements involving some type of securities fraud. The type of conduct addressed by the SEC in these proceedings and/or settlements is varied and limited only by the imagination of those who perpetrated the fraud. Thus, for example, fraudster

Fraud in the sale of securities. Such an allegation is often governed by an arbitration clause, requiring the parties to resolve their dispute before a FINRA tribunal. Not all investment claims, however, require resolution in arbitration. Sometimes the dispute can be adjudicated in a court of law. Such was the case in Pottorff v. Centra Fin. Group, Inc. , 2021 N.Y. Slip Op. 01645 (1st Dept. Mar. 19, 2021 ( here ). Pottorff v. Centra Financial Group, Inc. Background Pottorff

It has long been the law in New York that a party’s disclaimer of reliance on extra-contractual representations and omissions will not preclude a fraudulent inducement claim unless: (1) the disclaimer is specific to the fact alleged to be misrepresented or omitted; and (2) the alleged misrepresentation or omission does not concern facts peculiarly within the knowledge of the non-moving party. Basis Yield Alpha Fund v. Goldman Sachs Group, Inc. , 115 A.D.3d 128, 137 (1st Dept

In the past, this Blog has examined cases in which the plaintiff brings a breach of contract claim and fraud claim in the same proceeding. < e.g. , here,=">here</a>," and="and" >here.=">here</a>."> e.g.,> Those cases show that where the two claims arise from the same facts and circumstances and seek the same relief, the fraud claim will be dismissed as duplicative of the contract claim. Indeed, as this Blog has explained previously, New York courts will not permit a fraud c

Concealment of material information and market manipulation. Both forms of improper conduct were on display in Securities and Exchange Commission v. Airborne Wireless Network, 21-cv-01772 (S.D.N.Y.) (here), a case we examine below. The Importance of The Disclosure of Information Disclosure of information has long been a mission of the Securities and Exchange Commission (“SEC” or the “Commission”). As noted on the SEC’s website: “he laws and rules that govern the securities i

“You can’t have fraud if you disclose it,” said the motion court in Ibarrondo v. Evans , 2020 N.Y. Slip Op 30051(U) (Sup. Ct., N.Y. County Jan. 6, 2020) ( here ), aff’d , 2021 N.Y. Slip Op. 01200 (1st Dept. Feb. 25, 2021) ( here ). Yet, without alleging any new facts detailing how the alleged fraud was not disclosed, the plaintiff in Ibarrondo sought to amend her complaint to reallege the cause of action. In today’s article, we examine Ibarrondo . Ibarrondo involved a dispu

As the title of this article suggests, there are times in litigation where the facts simply do not support a claim or defense advanced by one or more of the parties. That was the case in Alston v. Golfo , 2021 N.Y. Slip Op. 30471(U) (Sup. Ct., N.Y. County Feb. 17, 2021) ( here ). Alston was commenced by a labor union welfare fund (the “Fund”) in July 2018 against one of its enrollees, Salvatore Golfo (“Salvatore”), and his former wife, defendant Denise Golfo (“Denise”), for