United States District Court, S.D. New York
I.B. TRADING, INC., IAN BEHAR, JORON MANAGEMENT, LLC, JORDAN LEVY, THOMAS MACEY AND ELIZABETH MACEY, Individually and as Tenancy by the Entirety, FUSION CAPITAL LLC, RYAN SASSON, ROBERT KOLTUN, and ARTHUR LUXENBERG, Plaintiffs,
TRIPOINT GLOBAL EQUITIES, LLC, ROBERT NATHAN, MARK H. ELENOWITZ, and MICHAEL BOSWELL, Defendants.
OPINION AND ORDER
G. KOELTL, DISTRICT JUDGE.
case is about an alleged Ponzi scheme marketed as an
investment to buy and resell tickets to popular Broadway
shows and national pop music tours. The plaintiffs are a
group of individual investors and their affiliated entities:
I.B. Trading, Inc., Ian Behar, JoRon Management, LLC, Jordan
Levy, Thomas and Elizabeth Macey, Fusion Capital LLC, Ryan
Sasson, Robert Koltun, and Arthur Luxenberg. The plaintiffs
commenced this action by filing a Complaint on March 17,
2017, which they amended on July 14, 2017, against the
defendants, TriPoint Global Equities, LLC, Robert Nathan,
Mark H. Elenowitz, and Michael Boswell. TriPoint is a
broker-dealer registered with the United States Securities
and Exchange Commission ("SEC"). Nathan is the
Director of TriPoint's Specialty Finance Group. Elenowitz
and Boswell are the co-founders of TriPoint. Elenowitz is the
Chief Executive Officer ("CEO") of TriPoint, and
Boswell is the Chief Operating Officer ("COO") and
Chief Compliance Officer ("CCO") of TriPoint.
Elenowitz and Boswell are each a Managing Director of
TriPoint and together make up TriPoint's "Executive
plaintiffs allege causes of action for violations of Section
10(b) of the Securities and Exchange Act of 1934, 15 U.S.C.
§ 78j(b), (the "Exchange Act") and Rule 10b-5
promulgated thereunder, 17 C.F.R. § 240.10b-5 (First
Cause of Action); Sections 9(a)(4) and 9(f) of the Exchange
Act, 15 U.S.C. §§ 781(a)(4), 781(f) (Second Cause
of Action); and Section 20(a) of the Exchange Act, 15 U.S.C.
§ 78t(a) (Third Cause of Action). The plaintiffs also
allege state law causes of action for breach of fiduciary
duty (Fourth Cause of Action); negligent misrepresentation
(Fifth Cause of Action); negligence (Sixth Cause of Action);
fraud (Seventh Cause of Action); violation of New York
General Business Law § 349 (Eighth Cause of Action); and
unjust enrichment and the establishment of a constructive
trust (Ninth Cause of Action). The defendants have moved to
dismiss the Amended Complaint in its entirety pursuant to
Federal Rule of Civil Procedure 12(b)(6). The defendants also
move to strike Exhibit B to the Amended Complaint, and
references thereto, pursuant to Federal Rule of Civil
deciding a motion to dismiss pursuant to Rule 12(b)(6), the
allegations in the Amended Complaint are accepted as true,
and all reasonable inferences must be drawn in the
plaintiffs' favor. McCarthy v. Dun & Bradstreet
Corp., 482 F.3d 184, 191 (2d Cir. 2007). The Court's
function on a motion to dismiss is "not to weigh the
evidence that might be presented at a trial but merely to
determine whether the complaint itself is legally
sufficient." Goldman v. Belden, 754 F.2d 1059,
1067 (2d Cir. 1985). The Court should not dismiss the Amended
Complaint if the plaintiffs have stated "enough facts to
state a claim to relief that is plausible on its face."
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007). "A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged." Ashcroft v. Igbal,
556 U.S. 662, 678 (2009}. While the Court should construe the
factual allegations in the light most favorable to the
plaintiffs, "the tenet that a court must accept as true
all of the allegations contained in the complaint is
inapplicable to legal conclusions." Id.
under Section 10(b) of the Exchange Act sounds in fraud and
must meet the pleading requirements of Rule 9(b) of the
Federal Rules of Civil Procedure and of the Private
Securities Litigation Reform Act ("PSLRA"), 15
U.S.C. § 78u-4(b). Rule 9(b) requires that the Amended
Complaint "(1) specify the statements that the
plaintiff[s] contends were fraudulent, (2) identify the
speaker, (3) state where and when the statements were made,
and (4) explain why the statements were fraudulent."
ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 4 93
F.3d 87, 99 (2d Cir. 2007). The PSLRA similarly requires that
the Amended Complaint "specify each statement alleged to
have been misleading [and] the reason or reasons why the
statement is misleading, " and it adds the requirement
that "if an allegation regarding the statement or
omission is made on information and belief, the complaint
shall state with particularity all facts on which that belief
is formed." 15 U.S.C. § 78u-4(b)(1); ATSI,
493 F.3d at 99; see also In re Eaton Corp. Sec.
Litig., No. 16-cv-5894, 2017 WL 4217146, at *1 (S.D.N.Y.
Sept. 20, 2017).
presented with a motion to dismiss pursuant to Rule 12(b)(6),
the Court may consider documents that are referenced in the
Amended Complaint, documents that the plaintiffs relied on in
bringing suit and that are either in the plaintiffs'
possession or that the plaintiffs knew of when bringing suit,
or matters of which judicial notice may be taken. See
Chambers v. Time Warner, Inc., 282 F.3d 147, 153 (2d
Cir. 2002). See also Silsby v. Icahn, 17
F.Supp.3d 348, 354 (S.D.N.Y. 2014), aff'd sub nom.
Lucas v. Icahn, 616 Fed.Appx.. 448 (2d Cir. 2015).
following facts alleged in the Amended Complaint are accepted
as true for the purposes of the defendants' motion to
early December 2015, Nathan, the Director of the Specialty
Finance Group at TriPoint, contacted Behar about an
investment opportunity in which Nathan thought Behar and
Behar's investment group would be interested. Am. Comp.
¶ 45. Nathan advised that the opportunity was a
"no-brainer." Id. Nathan and Behar had
known each other for approximately ten years, but this was
the first time Nathan had reached out to Behar regarding an
investment opportunity. Id. ¶¶ 44-45. On
December 10, 2015, Behar and Levy, on behalf of themselves
and their investment group, met with Nathan, and with Joseph
Meli and Matthew Harriton, at Behar's office in
Manhattan. Id. ¶ 49. Nathan, Meli, and Harriton
explained the investment opportunity, in which 875 Holdings,
LLC ("875 Holdings"), an entity majority-owned by
Harriton, would partner with TriPoint to purchase blocks of
tickets to popular events, such as Broadway musicals and pop
concerts, and resell them on the secondary market for a
profit. Id. ¶¶ 37, 38, 54. Nathan, Meli,
and Harriton told Behar and Levy that the investments were
extremely safe because the investments were backed by actual
tickets to the events, which in turn were insured such that
the investors would be reimbursed the purchase price if an
event was canceled. Id. ¶ 54. Nathan assured
Behar and Levy that TriPoint had vetted and conducted due
diligence on the investment and the companies offering it and
highly recommended it. Id.
Nathan provided Behar and Levy with an Executive Summary ---
marked with "875 Holdings, LLC" and "TriPoint
Global Equities, LLC, " as well as TriPoint's logo
--- which anticipated that investors would receive a return
on their investments "in excess of 20% per annum, "
touted the "deep and very unique mix of live event
promotion, ticketing, and entertainment finance
experience" of 875 Holdings' management, and assured
potential investors that there was "No Cancellation
Risk" because 875 Holdings would require event promotors
to reimburse 875 Holdings for canceled events and/or assure
that "acceptable insurance arrangements are in place
that will cover the purchased inventory and any expense
involved to process ticket refunds." Id. ¶
64. The Executive Summary also stated that TriPoint would
receive a 5% commission based on the total amount of capital
received by 875 Holdings. Id. ¶ 74. Nathan told
Behar and Levy that he had gone to high school with Harriton,
and that Nathan, Meli, Harriton, Elenowitz, and Boswell had
all personally invested substantial sums in the venture.
Id. ¶ 77.
mid-December, 2015, Behar, on behalf of himself and the other
plaintiffs, attended a meeting regarding the ticket
investment at TriPoint's offices with Nathan and
Elenowitz. Id. ¶ 81. Elenowitz told
Behar that the ticket investment was a "no-brainer"
because the investment was backed by physical tickets to the
events, which were insured against the risk an event was
canceled, and that TriPoint had verified this through its due
diligence. Id. ¶ 85. After this meeting, Nathan
reiterated that the ticket investment was low-risk, backed by
real tickets and insurance, and that Nathan, Elenowitz,
Boswell, Meli, and Harriton had all invested their own money.
Id. ¶ 95. When Macey asked to review the ticket
purchase agreements between 875 Holdings and the event
producers, Nathan told Macey that neither TriPoint nor 875
Holdings could allow Macey to review the agreements because
they were highly confidential. Id. However, Nathan
assured the plaintiffs that TriPoint had reviewed the
agreements and was satisfied. Id.
December 28 and 29, 2015, at Boswell's direction, Nathan
sent Levy and Macey e-mails touting TriPoint's compliance
department and TriPoint's compliance with Financial
Industry Regulatory Authority ("FINRA") "Anti
Money Laundering and Fraud Prevention" regulations.
Id. ¶ 110. Nathan advised that Boswell was
personally performing a compliance review of the ticket
investment, and the e-mails showed that Boswell had completed
his compliance review and approved the ticket investment.
Id. ¶¶ 111-12.
on the defendants' representations, between December 2015
and February 2016 the plaintiffs purchased Class B Interests
in 875 Holdings pursuant to the 875 Holdings Subscription
Agreement. Id. ¶l 119-20. Collectively, the
plaintiffs invested $550, 000 as follows:
• I.B. Trading and Behar, its principal and manager,
invested $100, 000;
• JoRon Management and Levy, its principal and manager,
invested $100, 000;
• Fusion Capital and Sasson, its principal and manager,
invested $100, 000;
• Koltun invested $100, 000; and
• Macey and his wife, Elizabeth Macey, as Tenancy by the
Entirety, invested $150, 000.
Id. ¶ 120.
January 27, 2016, Nathan circulated a solicitation for two
follow-on "Side Pocket" investments, available only
to investors in 875 Holdings. Id. ¶ 128. The
"Side Pocket" investments were for tickets to the
Broadway musical, Hamilton, and Adele's North American
tour. Id. ¶ 129. The solicitation explained
that the "Side Pocket" investments would be
conducted through a new entity, Advanced Entertainment II,
because Meli and Harriton did not think it was prudent to
increase 875 Holdings' existing stake in these events
until more capital was raised. Id. ¶ 128. In a
subsequent teleconference regarding the "Side
Pocket" investments, Nathan explained to the plaintiffs
that Advanced Entertainment II had a contract with the
producer of Hamilton to purchase 20% of the house seats for
every performance, and that the producer was planning to use
the funds to finance the upcoming London production.
Id. ¶¶ 136-37. Similarly, Nathan told the
plaintiffs that Advanced Entertainment II had a ticket
purchase agreement with the producer of Adele's North
American tour. Id. ¶ 138. Nathan also advised
that TriPoint was partnering with Meli, Harriton, and
Advanced Entertainment II to draft the Subscription Agreement
for the "Side Pocket" investments. Id.
a meeting on or around February 22, 2016 in Miami, Nathan
showed Levy documents on Nathan's cell phone that Nathan
claimed were the ticket purchase agreements between Advanced
Entertainment II and the producers of Hamilton and
Adele's North American tour. Id. ¶¶
151, 153. Nathan, Boswell, and Elenowitz were then copied on
a February 18, 2016 e-mail providing the plaintiffs with the
documents necessary to participate in the "Side
Pocket" investments. Id. ¶ 146. The Profit
Participation Purchase Agreement relating to the "Side
Pocket" investments, a revised copy of which Nathan
provided to the plaintiffs on February 24, 2016, provided
that TriPoint was entitled to a 3% broker fee on the gross
proceeds received by Advanced Entertainment II. Id.
¶ 165. The Profit Participation Purchase Agreement
included a Participation Schedule, which stated that within
nine months of the investment the investors would receive a
10% "preference percentage" return and 50% of any
additional profits from the ticket sales for the first two
events --- Hamilton and Adele's North American tour.
Id. ¶ 166. Between February 26, 2016 and March
3, 2016, the plaintiffs collectively invested in the
"Side Pocket", as follows:
• I.B. Trading and Behar invested $200, 000 in the
Hamilton "Side Pocket" and $200, 000 in the Adele
• Fusion Capital and Sasson invested $50, 000 in the
Hamilton "Side Pocket" and $50, 000 in the Adele
• Koltun invested $100, 000 in the Hamilton "Side
Pocket" and $100, 000 in the Adele "Side
• Macey and his wife, Elizabeth Macey, as Tenancy by the
Entirety, invested $300, 000 in the Hamilton "Side
Pocket" and $200, 000 in the Adele "Side
• Luxenberg invested $100, 000 in the Hamilton
Id. ¶ 169.
2016, in response to an inquiry from Macey, Nathan e-mailed
Macey and assured him that the ticket investments were in
"great shape, " that the investments were sound,
and that TriPoint continued to recommend the ticket
investments to clients. Id. ¶ 176. Nathan also
solicited further investments from the plaintiffs during the
summer of 2016, but the plaintiffs did not invest.
Id. ¶¶ 178-80.
December 29, 2016, Nathan e-mailed Macey and Behar telling
them that they would receive distributions related to the
"Side Pocket" investments "within the next
7-10 business days." Id. ¶ 183. Nathan
stated further that "we have received 91% of our
investment to date" in Hamilton and "the next
distribution will include profits from this investment."
Id. Nathan also stated that "we should expect
to receive 1/3 of our investment back shortly" with
regard to the Adele tickets, and "1/3 around the mid-end
of January and the final distribution mid to late
February." id. In response to the
plaintiffs' questions about why the managers had missed
their stated target of having all capital and profits
returned in 2016, Harriton replied, with a copy to Nathan,
that "inventory was pushed back to performances in 2017
for a variety of reasons but we expect to fully liquidate
during first half of 2017 with economics along the lines we
have been seeing. We sold Event II as a block to a financial
institution, the payment terms were for three payments with
the total received by January 31st 2017."
Id. ¶ 184.
plaintiffs allege that virtually every statement the
defendants made with respect to the ticket investments was
false. They claim that neither 875 Holdings nor Advanced
Entertainment II ever purchased any tickets, that no ticket
purchase agreements were ever executed, that no insurance was
ever purchased in connection with any tickets, and that no
returns were ever received based on the investments.
January 26, 2017, the Government filed a criminal complaint
against Meli for securities fraud and wire fraud related to
the ticket investments. On January 27, 2017, the SEC filed a
lawsuit against Meli, Harriton, 875 Holdings, and Advanced
Entertainment II, among others, for securities fraud related
to the ticket investments. Id. ¶¶ 188-89.
defendants move to dismiss the plaintiffs' federal
securities law claims asserted under Sections 10(b), 9(a)
(4), 9(f), and 20(a) of the ...