"the offer and sale of the Convertible Note have not been registered under the Securities Act," and that Plaintiff "is an 'accredited investor' within the meaning of Rule 501 of Regulation D under the Securities Act." Id. at 2-3. Inglis personally guaranteed the Note on behalf of Black Tusk. . . .
[O]n April 23, 2018, Inglis, on behalf of Black Tusk, and Plaintiff executed a subscription agreement that granted Plaintiff a 14.0625 percent membership interest in Broad Pine. Id. ¶ 21; id. Ex. C ("Subscription Agreement"). Pursuant to the Subscription Agreement, Plaintiff's purchased interest in Broad Pine was executed through the "conversion and surrender" of the Note. Subscription Agreement ¶ 1. Plaintiff nonetheless alleges that "Inglis breached the terms of the Note by failing to perform any of the terms outlined therein and allegedly converted Plaintiff's funds into membership interest in Broad Pine." Compl. ¶ 22. Moreover, "Plaintiff was never provided any documentation evidencing his membership interest in Broad Pine." Id. ¶ 23. "When Plaintiff would ask about the status of the entity and progress being made, Inglis would placate Plaintiff explaining what stage of the process they were supposedly in." Id. ¶ 24.
Id. Ex. D; see also id. ¶ 25. According to Plaintiff, "[p]ursuant to the terms of the Note, Defendant was to return all monies to Plaintiff," but has not done so. Id. ¶ 26On December 30, 2018, Plaintiff received an email from Inglis that stated: On December 21st AI Capital filed a form BD withdrawal with FINRA, so there is no longer any reason for [Broad Pine] to continue. I decided it was best to dissolve [Broad Pine] before the end of 2018 so those who committed capital can realize the tax loss. There are no contingent liabilities to the Members. No taxes were ever filed nor K-1s issued, and I am happy to provide any additional details or records you may need.
at Page 2 of the SDNY Opinion/Order
at Page 3 of the SDNY Opinion/Order1) violation of Section 10(b) of the Exchange Act and Rule 10b-5; 2) violation of Section 20(a) of the Securities Act by Inglis; 3) Violation of Sections 5 and 12(a)(1) of the Securities Act; 4) Violation of Section 15 of the Securities Act by Inglis, and under state law for 5) Breach of Contract; 6) Breach of the Covenant of Good Faith and Fair Dealing; and 7) Common Law Fraud
[W]ith respect to his claim for securities fraud, Plaintiff broadly alleges that Defendants made "false or misleading statement of fact and fail[ed] to disclose material information," Compl. ¶ 3, and made "untrue statements of material fact and omitted material facts necessary in order to make the statements made . . . not misleading, id. ¶ 30. These allegations, insofar as they are unsupported by any facts specific to the challenged transaction, are conclusory. Nowhere does the Complaint "specify each statement alleged to have been misleading," 15 U.S.C. § 78u-4(b)(1), let alone why any such statements were false or misleading were made, or why such statements would be material to a reasonable investor. In short, the Court cannot determine from the Complaint what alleged misrepresentations were made by Defendants to induce Plaintiff into entering this transaction, nor whether these misrepresentations relate to his execution of the 2016 Note, the 2018 Subscription Agreement, neither, or both.
provides no detail as to how Defendants solicited Plaintiff or other investors for this transaction, or the manner in which the transaction was effectuated. Absent some detail about how Defendants used the channels of interstate commerce to sell Broad Pine securities, such a "[t]hreadbare recital of [an] element of a cause of action," does not suffice to state a claim, Iqbal, 556 U.S. at 678; see Cobalt, 857 F. Supp. 2d at 358 (finding that testimony that defendant's representative "solicited investors" failed to establish that defendant "made calls or used other means of interstate commerce"). Indeed, none of the allegations or documents incorporated into the Complaint indicate that any relevant conduct took place outside of the state of New York. Nor do they permit such an inference. Plaintiff's Section 5 claim must therefore be dismissed.
at Page 10 of the SDNY Opinion/OrderShould Plaintiff need assistance, he may wish to consult the New York Legal Assistance Group's legal clinic for pro se litigants, by visiting its website at nylag.org/pro-se-clinic/ or by calling (212) 659-6190. This clinic, which is neither part of nor run by the Court, assists pro se litigants with federal civil cases.