The opinion of the court was delivered by: Hurley, Senior District Judge:
Plaintiff brings this action alleging violations of the Securities Exchange Act, 15 U.S.C. §§ 78j and 77q, the Racketeer Influenced and Corrupt Practices Act, 18 U.S.C. § 1961 et seq., and for fraud, conversion, and breach of contract. Currently before the Court is plaintiff's motion for summary judgment solely as to its claims for (1) both fraud and conversion against defendants Jason Michael Meyer ("Meyer"), M5 Enterprises LLC ("M5"), 3 Hooligans Investment Properties LLC ("3 Hooligans"), and Fortune Financial Investments and Consulting LLC ("Fortune") (collectively, "Meyer defendants");*fn1 (2) fraud against Lawrence Durbin ("Durbin") and SBC Lending Inc. ("SBC"); and (3) conversion against Anthony Cappaze ("Cappaze") and the Royal Sovereign Group LLC ("Royal Sovereign"). (Pl.'s Notice of Motion for Summary Judgment.) Plaintiff's claims against all other defendants, viz. Kenneth Morelli, Gerald Dale Hendrix, M. Harood Rashid, and Worldwide Resources, USA, LLC have been dismissed either by stipulation of dismissal or voluntary discontinuance. (See Orders Dated 12/23/10 and 1/11/11.) For the reasons that follow, plaintiff's motion is denied.
a.Facts Pertaining to the Meyer Defendants
The allegations in the Complaint arise from investments that Alan J. Watson ("Watson"), plaintiff's principal, made with defendant Meyer to perform leveraged trades of United States Treasury Bills ("T-bills"). (Id. ¶¶ 2-3.) The investments consisted of two money transfers in the amounts of $2.5 million and $1.4 million from plaintiff's account at Charter One Bank to a Merrill Lynch investment account managed by Meyer. (Plaintiff's Statement Pursuant to Local Civil Rule 56.1 ("Pl.'s 56.1") ¶ 1.)*fn2 Leading up to these transfers, Meyer had told Watson that he had a "system for leveraged trading of T-bills that could produce profits of fifty percent per month," and that could yield as much as $200,000 per day on certain days. (Id. ¶¶ 2-4.)
Shortly after Watson made the first transfer of $2.5 million on June 5, 2009, Meyer informed him that in order to execute the trades, the money would have to be transferred into a separate Merrill Lynch account at the same branch belonging to defendant Royal Sovereign and managed by defendant Cappaze. (Id. ¶ 6.) Watson initially expressed his reluctance in making the transfer, but later relented when Meyer presented a proposed agreement between Royal Sovereign and Watson limiting the use of plaintiff's funds to the purchase of "Zero Coupon" T-bills, and promising that the purchased T-bills would be transferred back into Watson's account. (Id. ¶ 7; Pl.'s Ex. C.) Watson now suggests, however, that the agreement was a "fake" and that Meyer forged Cappaze's signature. (Pl.'s 56.1 ¶ 7.)
Between mid-June and late-July of 2009, Watson received a number of emails from Meyer stating that his investments were doing well. (Id. ¶ 9; see, e.g.,Email dated 6/25/09, Pl.'s Ex. G.) Then, at some point towards the end of July 2009, Meyer informed Watson that in order to engage in "the kind of leveraged investments that [Meyer] wanted to do," plaintiff would need to maintain $5 million in his investment account. (Pl.'s 56.1 ¶ 10.) As Watson's account had purportedly earned a $1.1 million profit at that point, an additional $1.4 million transfer by Watson into Meyer's investment account would suffice.*fn3 (Watson Decl. ¶ 16.) Watson agreed to increase his investment and, at Meyer's direction, transferred the $1.4 million to the escrow account of former defendant Morelli in a Chase Bank branch in Bellport, New York. (Pl.'s 56.1 ¶ 11.)
Plaintiff claims that in the end, none of these funds were used for the leveraged acquisition of T-bills or any other leveraged transaction, but were instead diverted to different investments without plaintiff's consent. (Id. ¶ 12.) Specifically, plaintiff asserts that Morelli, who at times held these funds in his escrow account, transferred $712,240 of plaintiff's money, at Meyer's behest, to an account in the United Arab Emirates maintained by Red Orange LLC. (Id.) Meyer also purportedly instructed Morelli to transfer $761,000 to the defendant company 3 Hooligans, which was, or is, allegedly "controlled" by Meyer. (Id.) Despite numerous demands from Watson for an accounting and return of his capital, Meyer has only paid back $635,000 of the investments. (Id. ¶ 13.)
In defense of plaintiff's claims, the Meyer defendants have furnished, inter alia, releases from both plaintiff and Watson-both signed by Watson-which, in exchange for the payment of $2,265,000, discharge all claims that either plaintiff or Watson may have against the Meyer defendants arising from events occurring before the date of the execution of that document.*fn4
(Meyer Defs.' Ex. 3.) The releases explicitly acknowledge receipt of the consideration payment.
b.Facts Pertaining to Defendants Cappaze and Royal Sovereign
Cappaze became involved in the investment scheme when, according to his testimony, Meyer called him in or around May of 2009 to tell him that he had a "friend," i.e. Watson, who was interested in investing with Cappaze. (Cappaze Dep. 34.) Cappaze floated a number of possible investment ideas with Meyer, but focused primarily on a certain gold-mining venture in Ecuador. (Id. 35-36.) Watson then made the $2.5 million transfer, mentioned above, into the account of Cappaze's company Royal Sovereign.*fn5 (Id. 37-38.) Shortly after this transfer, Cappaze began speaking directly to Watson about investing in the gold venture. (Id. 38.) According to Cappaze, no firm commitments were made at that point. Watson allegedly told him that he "trust[ed]" what Cappaze was doing, and Cappaze asked Watson to send him a letter of commitment. (Id.)
Cappeze testified that he then got a call from Meyer in late June or early July 2009 stating that Watson wanted Cappeze to wire the investment money back to Meyer through Morelli's escrow account because he was not "moving [the] money fast enough." (Id. at 39, 41; Pl.'s 56.1 ¶ 14.) As Watson states in his written declaration submitted in conjunction with the present motion, Meyer told him at that time that he was growing unhappy with "Cappaze's conservative approach." (Watson Decl. ¶ 12.)
Of the funds due to be returned, however, plaintiff alleges, and Cappaze admits, that Cappaze retained $500,000. (Meyer Defendants' Statement of Material Facts Pursuant to Local Civil Rule 56.1 ("Meyer 56.1") ¶ 71; Cappaze Dep. 51-52, 59.) In his deposition, Cappaze stated that he kept this money because, as he told Watson at the time, he "needed at least to retain some capital until he sent me the other money."*fn6 (Cappaze Dep.53.) Cappaze insists that Watson agreed to this arrangement. (Id.) In September 2009, Cappaze returned another $200,000. (Id. 59-60; Meyer 56.1 ¶ 72.)
Cappaze does not dispute that he failed to remit the remaining $300,000 to plaintiff, but contends that it had been invested in the gold venture, which Watson purportedly had originally "agreed to." (Cappaze Dep. at 60.) However, Cappaze's testimony as to what he represented to Watson regarding the use of plaintiff's money appears to conflict with itself. The following excerpts illustrate the discrepancy.
Q. Had you had a conversation with Mr. Watson and told him you were going to take his two and a half million dollars and invest it in an Ecuadorean gold company?
Q. At any time did Mr. Watson tell you okay, take my money and invest it in your gold deal, ...