Alchemy Finance respond that under the provisions of the Securities Exchange Act (SEA), only a licensed securities broker can collect commission on a capital raise. Honorable Justice Gregory H. Woods accepted the application.
NEW YORK, NY, June 17, 2019 /24-7PressRelease/ — On June 12, 2019, Defendant counsel in the case between Jared Polites v Alchemy Finance Inc. et. al. filed a pre-motion application to dismiss the case. The application was filed on the basis that the Plaintiff’s case was lacking in many essential evidential requirements.
Honorable Justice Gregory H. Woods of the US District Court for New York accepted the application on June 13, 2019. He has now given permission for the motion to be heard on June 19, 2019.
The case was filed by Jared Polites (the Plaintiff), against Alchemy Finance Inc. & Others (the Defendants). The Plaintiff’s case alleges that the Defendants refused to pay commission due under an Advisory Agreement between the parties.
According to the Plaintiff, he entered into the agreement with the Defendants on February 6, 2018. Under the agreement, he was to provide advisory, marketing, and public relations services on the Defendant’s blockchain project. The Plaintiff alleges that as part of his agreed obligations under the agreement, he was to provide services with respect to the Defendant’s Initial Coin Offering (ICO). These services would include introducing the Defendants to “necessary third parties”, as well as investors. The services would also include advertising the ICO by placing press articles in leading online publications.
The Plaintiff’s case is that after having provided these services, the Defendants have failed to compensate him for his services. While the Plaintiff is not entitled to any salary under the agreement, the Advisory Agreement states he may receive “1% of the total fundraising amount”. On this basis, the Plaintiff sued the Defendants for failure to pay his commission as agreed.
The Plaintiff’s suit raises 12 allegations including breach of contract, fraudulent and negligent misrepresentation and fraudulent concealment. It also alleges unjust enrichment, breach of the duty of good faith and fair dealing, and violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). Added to these are allegations of civil conspiracy and civil aiding and abetting.
Defendants’ Motion to Dismiss
Defendants’ Counsel, Ross Pitcoff Law, disagreed with the case of the Plaintiff and has now filed a pre-motion application to dismiss. The Defendants, in response to the Plaintiff’s allegations, arguing that he was never entitled to any commission because the agreement violates the law and is thus void. Specifically, the Defendants respond that under the provisions of the Securities Exchange Act (SEA), only a licensed securities broker can collect commission on a capital raise.
According to the Defendants, the factors that determine whether the transaction is one that can only be handled by a licensed broker are present in this case.
The receipt of transaction-based compensation instead of a flat fee;
Rendering advice about the structure, price or desirability of a securities transaction;
Finding investors actively, rather than passively;
Advertisement or solicitation on behalf of the securities; and
Involvement in negotiations between an issuer and investor
The Defendants argue that all these factors are present in this case since the Plaintiff has performed, substantially, all these services as an unlicensed broker. The agreement is therefore void pursuant to provisions of the SEA and obliterates any obligation on the Defendants to pay a commission.
The Defendants further argue that the Plaintiff’s allegations of fraud are without merit and redundant to his primary claim for breach of contract. Apart from this, they argue that the allegations fail to comply with the requirements of the Federal Rules of Civil Procedure (FRCP) for such claims. The FRCP requires that such claims specifically indicate the facts upon which the fraud allegations are hinged. These facts should also support the requisite elements that would constitute fraud.
The Defendants also argue that the Plaintiff’s allegations based on the RICO Act must fail since he has shown no proximate cause. In order for claims to be brought successfully under the Act, onerous requirements must be fulfilled. Principal amongst these is the obligation to show that an “enterprise” engaged in a “pattern of racketeering activity”. The Defendants’ case is that these allegations are a far cry from the breach of contract claim that founds the whole lawsuit.
Another ground upon which the Defendants move to dismiss the case is that the civil conspiracy and aiding and abetting allegations have no foundation. They argue that there is no underlying tort on which the conspiracy claim can stand. Besides, the claim for aiding and abetting cannot stand since the Plaintiff’s case cannot show fraud, having failed the requirements of the FRCP.
The Defendants finally argue that the court lacks jurisdiction over the Defendants since they are not resident in New York. They do not conduct business in New York, maintain offices in the state, or own any property there. The claims are thus subject to dismissal.
Jared Polites is also currently under SEC and FINRA investigations.
Grant of Application by the Court
Having received the Defendants’ pre-motion application, the court has granted the application for a motion to dismiss. The court will thus hear the parties regarding the proposed motion on June 19, 2019.
Case 1:19-cv-03862-GHW, Southern District Court of New York
Alchemy Finance, Inc is a peer-to-peer (P2P) lending marketplace. The platform allows for instant and direct lending between supply-side lenders and demand-side borrowers in a trusted manner. Alchemy offers a unique architecture to analyze and structure a credit risk-adjusted rate with the utilization of Artificial Intelligence (AI) and Machine Learning (ML) technologies. They aim to revolutionize the peer-to-peer lending market, and serve as the leading infrastructure for credit providers and credit seekers.
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