United States District Court, S.D. New York
For Ludmila Loginovskaya, Plaintiff: Nancy Chung, LEAD ATTORNEY, Akin Gump Strauss Hauer & Feld LLP (NYC), New York, NY; Jane Margaret Dattilo, Akin Gump Strauss Hauer & Feld (1 Battery Pk.), New York, NY; Roxanne Tizravesh, Akin Gump Strauss Hauer & Feld, New York, NY.
For Oleg Batratchenko, Thor United Corp., Thor United Corp. (Nevis), Thor Asset Management Inc., Thor Real Estate Management LLC, Thor Opti-Max LLC, Thor Capital LLC, Thor Futures LLC, Thor Realty LLC, Thor Guarant Real Estate Fund, Ltd. (BVI), Thor Opti-Max Fund, Ltd., Thor Real Estate Master Fund, Ltd., Defendants: Alexander Malyshev, LEAD ATTORNEY, Carter Ledyard & Milburn, LLP (NYC), New York, NY; Gary Douglas Sesser, Judith Wallace, LEAD ATTORNEYS, Carter Ledyard & Milburn LLP, New York, NY.
J. PAUL OETKEN, United States District Judge.
MEMORANDUM AND ORDER
Plaintiff Ludmila Loginovskaya (" Loginovskaya" or " Plaintiff" ) brings this action pursuant to § § 4? and 22 of the Commodity Exchange Act (the " CEA" ), 7 U.S.C. § § 6?, 25, against Defendants Oleg Batratchenko (" Batratchenko" ), Tatiana Smirnova (" Smirnova" ), John Does 1-20, and Thor United Corp., Thor United Corp. (Nevis), Thor Real Estate Master Fund, Ltd., Thor Asset Management, Inc. (" TAM" ), Thor Real Estate Management LLC, Thor Capital LLC, Thor Futures LLC, and Thor Realty LLC (collectively " Thor Defendants" or " Thor Entities" ). Plaintiff also brings several state law claims sounding in contract law, fraud, and breach of fiduciary duty. Batratchenko and the Thor Defendants have moved to dismiss the Amended Complaint pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). For the reasons that follow, Defendants' motion is granted.
A. Factual Background
1. The Parties
The so-called " Thor Group" is an international financial services organization based in New York. Each of the Thor Entities is a member of the Thor Group. (Amended Complaint, Dkt. No. 24 (" Compl." ), at ¶ 24.) Thor United is the parent corporation for the Thor Group, which provides " service, logistics, and marketing functions within the Thor Group, administers funds invested in the Thor Programs . . . and invests these funds on behalf of the investors of the Thor Programs." ( Id. at ¶ 29.) Thor United Corp. (Nevis) is an international holding company for the Thor Group. ( Id. at ¶ 25.) Among the Thor Entities are commodity futures and real estate based investment programs, or the " Thor Programs," which were " touted" to potential investors as " western-style" funds based out of the Thor Entities' New York office. ( Id. at ¶ ¶ 31, 33.) Of these programs, Thor Guarant is a fund that invests in real estate property and development, Thor Optima invests in options, futures, securities, and financial instruments, and Thor Opti-Max combines real estate and financial instrument assets through both Thor Optima and Thor Guarant. ( Id. ¶ 33.) Thor United administered the three Thor Programs; TAM, Thor Opti-Max LLC, and Thor Real Estate Management LLC managed the Thor Programs; and Thor Futures LLC and Thor Capital LLC acted as brokers for the Thor Programs. ( Id. at ¶ 33.)
During the relevant time, Defendant TAM was registered with the National Futures Association as both a " Commodity Trading Advisor" and " Commodity Pool Operator." ( Id. at ¶ 101.) Defendant Thor Opti-Max LLC is or was an Exempt Commodity Pool Operator, Defendant Thor United has been registered as a Commodity Pool Operator, Thor Opti-Max Fund, Ltd. is a commodity pool, and Batratchenko was registered with the National Futures Association as a " Principal Approved" of TAM and Thor United. ( Id. at ¶ ¶ 102-105.)
Defendant Batratchenko is a United States citizen who now resides in Moscow, and operates as CEO of the Thor Group, and co-founder, principal, officer, director, agent, owner, or employee of the other Thor Entities. ( Id. at ¶ 11.) Smirnova is a director of the Thor Opti-Max Program and Thor Guarant Program, and has served in various managerial capacities for the Thor Entities. ( Id. at ¶ 12.) Plaintiff alleges that during the relevant period, the Thor Defendants acted as Commodity Pool Operators and Advisors, while Batrachenko and Smirnova operated as associated persons or principals of said Operators and Advisors. ( Id. at ¶ ¶ 106-07.) Plaintiff is a citizen of the Russian Federation who resides in Surgut, Russia. ( Id. at ¶ 10.)
2. The Investments
Plaintiff first met Batratchenko in January 2006. ( Id. at ¶ 40.) Batratchenko solicited Plaintiff to invest in the Thor Entities, providing Plaintiff with brochures and other materials in Russian, which described the Thor Entities' assets. ( Id.) These assets included options, futures, real estate, securities with guaranteed income, United States Treasury bonds, and money market accounts. ( Id.) Plaintiff alleges that Defendants, namely Batretchenko through his agents, falsely represented to her that: (1) " she would have the ability as an investor to withdraw both principal and investment returns at any time upon a set
period of notice, as short as 12 to 15 business days and up to 40 business days after the quarter in which she requested withdrawal ; " (2) funds in Thor Optima and Thor Opti-Max Programs would be placed in financial instruments, including commodities futures, and " traded on a short-term, low-risk basis using 'market neutral' algorithms and strategies, and would be placed in risk-free U.S. money market accounts when not engaged in such trading; " (3) " investments in the Thor Guarant Program would achieve a controlled level of investment risk; " (4) " investments would be managed by Peter Kambolin and Alexei Cheklov," both of whom are experienced, futures trading and investment experts; (5) " investments would be valued regularly and even on a daily basis; " and (6) the three Thor Programs would receive audits by " reputable international audit firms." ( Id. at ¶ 41.)
Based on these representations, Plaintiff entered into two investment contracts with Batratchenko and Thor United in 2006 and 2007. ( Id. at ¶ 50.) These contracts expressly incorporated the terms of several investment memoranda, which outline the terms and conditions of Plaintiff's various investments. ( Id. at ¶ ¶ 51-60.) Plaintiff first transferred approximately $400,000 to Thor United's JP Morgan Chase Bank account in New York on March 13, 2006. ( Id. at ¶ 52.) Later, in 2007, after another meeting with Batratchenko, Plaintiff invested another $320,000 in the Thor Entities--again through an account administered by Thor United. ( Id. at ¶ ¶ 53-54.) Prior to this second investment, Defendants redeemed an initial redemption request, and Plaintiff received, as a result, around $50,000 of her investment. ( Id. at ¶ 56.) Between 2008 and 2009, Plaintiff made four withdrawals of approximately $20,000 each, leaving a remaining principal in the Thor Programs of $590,000. ( Id.)
3. The Representations
Over the course of several years, Defendants sent Plaintiff account statements, which generally showed positive returns. ( See id . at ¶ 61 (statement for March 8, 2009 showed 48.19% gain on Plaintiff's investment; May 17, 2009 statement showed 48.60% total gain on invested capital).) Around May 2009, Plaintiff sought to withdraw the funds from her account, but Defendants did not return the requested funds. For the next seven months, Plaintiff received no account statements from Defendants, eventually obtaining one in November 2009 for Account Number 7724. ( Id. at ¶ ¶ 62-65.) This November 2009 statement reported that Plaintiff's investment had lost more than 50% of its value since May 2009, decreasing from over $520,000 to approximately $250,000. Similarly, for her second account, Account Number 11631, a March 2009 statement represented a 24.03% gain, whereas a November 2009 statement reported a massive loss. ( Id. at ¶ 65.) Plaintiff also requested a return of this account's funds, again to no avail. ( Id.)
Plaintiff additionally alleges that " [w]hile reporting enormous returns from 2007 through the first half of 2009, Defendants made numerous other representations falsely assuring Plaintiff and other investors of the safety of their funds." ( Id. at ¶ 66.) Citing 2008 letters, which accompanied account statements, Plaintiffs allege that Defendants " insisted that Thor Opti-Max provided liquidity, safety of investments, and stable high returns." ( Id.) Moreover, " Defendants asserted that the New York residential property market would need to experience a threefold decline from then-current levels for Thor Guarant's investment in the Williamsburg Terrace project located in Brooklyn, New York to break even." ( Id.) In March 2010, Plaintiff again applied to terminate her
account and withdraw her funds from the Thor Guarant Program. Defendants, however, never returned her principal.
Plaintiff also cites several other specific communications with Batrachenko, which include:
o Communications and meetings in late 2009 with Batratchenko in which he reassured Plaintiff that the " Thor Programs were merely experiencing a temporary dip in liquidity, as opposed to value, and that her funds would soon be returned." ( Id. at ¶ 69.)
o A response to a November 6, 2009 letter from Plaintiff requesting a full accounting of her assets and investments in the Thor Programs, in which " Batratchenko replied on behalf of the Thor Programs, reassuring investors that the long-term potential of their investments was strong." ( Id. at ¶ 70.)
o An in-person meeting on January 21, 2010, between Plaintiff, other investors, and Batratchenko, during which Batratchenko made " further assurances regarding the Thor Programs and the safety of their investments," and " agreed to provide detailed financial statements, investment information, and redemption schedules for return of the funds by April 1, 2010." ( Id. at ¶ 71.)
o An April 16, 2010 letter from Batratchenko asserting that " due to onerous new regulations in the United States, investors could not withdraw their funds from the investment accounts without providing [certain] official confirmations and documents." Such confirmations included, inter alia, " (i) an officially confirmed net worth of at least $1 million, and a total annual family income of at least $200,000; (ii) official confirmation that the investor is the sole owner of the funds; and (iii) official confirmation of the source of investments and proper payment of all taxes due thereon." ( Id. at ¶ 73 (emphasis in original).)
4. The Unraveling
During the three-year period from 2006 to 2009, under Batratchenko's direction, Thor Guarant, via Thor Real Estate Master Fund, Ltd., invested $40 million worth of investors' funds, which included Plaintiff's funds, as unsecured loans to an undercapitalized entity known as Atlant Capital Holdings LLC (" Atlant" ). ( Id. at ¶ 75.) Atlant is not an affiliate of the Thor Programs, but rather, constitutes an " entity that made equity investments in commercial and residential property developments in New York using funds loaned by Thor Real Estate Master Fund, Ltd." ( Id. at ¶ 76.) Several of the Atlant loans were signed after the credit markets had ceased functioning properly due to the financial crisis in late 2008 and early 2009. Batretchenko executed each of the loan agreements for Thor Real Estate Master Fund, Ltd., which were in turn paid out to Atlant. ( Id. at ¶ 81.)
Atlant invested these loan proceeds in commercial and residential real estate ventures in New York. As these loans were unsecured, and Atlant itself undercapitalized, the Thor Programs investors assumed the risk of these transaction. Plaintiff alleges that, by June 2009, nearly half of the original $40 million loaned to Atlant was " irretrievably lost," with the real estate ventures having failed and remaining subject to secured commercial mortgages at that time. ( Id. at ¶ 85.) For example, Peter Kambolin (" Kambolin" ) of Atlant, wrote in a letter to Batratchenko in June 2009 that, with respect to certain real estate investments, the " total invested
amount of $15,425,000 therefor [sic] would be lost and Borrower [i.e., Atlant] may not be able to repay such amounts to Lender [i.e., Thor Guarant]." ( Id.) By the end of 2009, " commercial loans guaranteed by Atlant and personally by Batratchenko, and secured by liens on Williamsburg Terrace, entered into default." ( Id. at ¶ 86.) This property was Atlant's largest real estate project, and Plaintiff alleges that Atlant had invested approximately $23 million of the $40 million in unsecured loans from the Thor Guarant Progam in said Williamsburg Terrace property. ( Id.)
On November 8, 2009, Atlant, Kambolin, and Batratchenko signed an assignment and release with MB Financial Bank, N.A., the commercial lender which had assumed a predecessor bank's right and interest in the commercial loan for Williamsburg Terrace. This agreement required that in exchange for a full release from liability for any outstanding debt for the commercial loans associated with Batratchenko's personal guarantees, Batratchenko agreed that neither he nor his affiliates would receive any consideration from the sale of the Williamsburg property or would acquire any direct or indirect ownership or interest in said property. ( Id. at ¶ ¶ 87-88.) Plaintiff alleges that Defendants failed to disclose to Plaintiff that Batratchenko had personal financial interests in Atlant's investments, along with the fact that the Thor Entities may not obtain any future recovery from the sale of Williamsburg Terrace. ( Id. ¶ 91.) To date, Atlant's real estate investments have lost their value, and $35 million of the $39 million owed to Thor Guarant remains unpaid, " with no prospect of recovery." ( Id.)
5. Procedural Background
Loginovskaya filed the Amended Complaint in this action on June 21, 2012. ( See Compl.) Batratchenko and the Thor Entities promptly moved to dismiss on July 5, 2012; Plaintiff opposed the motion on September 14, 2012; and Defendants replied on October 26, 2012. ( See ...