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NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
TALIPOT ESG INVESTMENTS LLC and
TIERRA PE LLC,
Index No. 650028/2024
Plaintiffs,
-against-
BULLTICK FINANCIAL ADVISORY
SERVICES LLC, HECTOR VILLAESCUSA,
JAVIER MARTIN RIVA, ADOLFO DEL
CUETO, AITHRE CAPITAL
MANAGEMENT LLC and JAMIL SWATI,
Defendants.
JAMIL SWATI’S MEMORANDUM OF LAW IN SUPPORT OF
MOTION TO DISMISS
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Jamil Swati, by and through his undersigned attorneys, respectfully submits this
memorandum of law in support of his Motion to Dismiss the January 3, 2024 Verified Complaint
(“Complaint”) filed by Talipot ESG Investments LLC (“Talipot”) and Tierra PE LLC (“Tierra”)
(collectively “Plaintiffs”). Mr. Swati moves to dismiss both causes of action asserted against
him, for common law fraud and aiding and abetting the same, pursuant to CPLR 3211(a)(7) for
failure to state a claim.
PRELIMINARY STATEMENT
Plaintiffs Talipot and Tierra are private investment vehicles that invested a combined $20
million in Theia International Group LLC (“Theia”) in the hopes of profiting from a
revolutionary satellite technology that Theia was developing. The investments failed, and
Plaintiffs have now sued six different entities and individuals – but not Theia or the two
executives at Theia who spoke with Plaintiffs about their prospective investments and allegedly
lied to them – in an effort to get their money back.
The thrust of the Complaint is that Plaintiffs made their investments based in part on
misrepresentations about Theia’s financial situation that they received from Theia’s placement
agent, Bulltick Financial Advisory Services (“Bulltick”) and from Theia’s CEO and COO,
Stephen O’Neil and Erlend Olson, respectively. They have brought claims for fraud and aiding
and abetting fraud against Bulltick; against three Bulltick partners with whom they
communicated leading up to their investments (Hector Villaescusa, Javier Martin Riva, and
Adolfo del Cueto); and against Jamil Swati. As alleged, Mr. Swati held the title of Head of
Strategic Investments at Theia, and he also co-managed a special purpose vehicle called Aithre
Capital Partners LLC that was designed to pool investor funds in order to invest in convertible
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notes to be issued by Theia. 1 The Complaint makes no specific allegations about Mr. Swati’s
actual responsibilities at Theia or about any communications he had with Plaintiffs, and for good
reason – he had barely any interactions with Plaintiffs at all. Nor does the Complaint identify
any wrongful actions that Mr. Swati took in his role at Aithre Capital Partners LLC or its
managing member, Aithre Capital Management LLC – neither of which has been sued for fraud.
The Complaint fails to state a claim for common law fraud or aiding and abetting
common law fraud against Mr. Swati. Mr. Swati is essentially invisible throughout the entirety
of the Complaint – an accurate reflection of his lack of involvement in the alleged series of
events. In describing the circumstances leading up to Talipot’s investment in Theia, Complaint
¶¶ 48-94, Plaintiffs literally fail to mention Mr. Swati a single time, except for a footnote that
mistakenly suggests that Mr. Swati’s roles with Theia and Aithre were not disclosed – in fact,
they were, in the private offering memorandum for the investment. See Exhibit A at 31 (“TGI,
the Sponsor and the Company,” under the heading “Potential Conflicts of Interest”).
Similarly, in describing the circumstances leading up to Tierra’s investment in Theia, id.
¶¶ 95-116, Plaintiffs attribute only one action to Mr. Swati: the anodyne step of sending out a
calendar invite for a Microsoft Teams meeting that he is not even alleged to have attended.
Given Mr. Swati’s nearly total absence from the allegations in the Complaint describing how
Plaintiffs came to make their investments, Plaintiffs cannot say with a straight face that they
relied on material misrepresentations or omissions made to them by Mr. Swati in deciding to
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The Complaint also bring claims for unjust enrichment and breach of fiduciary duty against
Bulltick, Hector Villaescusa, and Aithre Capital Management LLC, which was the managing
manager of Aithre Capital Partners. Because Mr. Swati is not included in either of those causes
of action, they are not discussed substantively in this motion.
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invest. Indeed, taking every allegation in the Complaint as true for purposes of this motion, Mr.
Swati played no role at all in Plaintiffs’ decisions to invest.
Mr. Swati’s absence from the factual allegations in the Complaint is dispositive, as
Plaintiffs have not met the heightened pleading requirement that applies to claims based on
fraud. In any event, the statutory allegations set forth in the two causes of action against Mr.
Swati, for which the factual allegations in the Complaint are supposed to, but do not, provide a
basis, are also hollow as to him. In setting forth the statutory allegations for their first cause of
action, for common law fraud, Plaintiffs provide a list of allegations with respect to each
defendant except Mr. Swati. Id. ¶¶ 142-45. They simply omit him from the statutory
allegations. This is an explicit acknowledgment on their part that they have not alleged a
common law fraud claim against him.
In setting forth the statutory allegations for their second cause of action, for aiding and
abetting common law fraud, Plaintiffs assert for the first time that Mr. Swati was “fully aware of
frauds committed by Theia,” id. ¶ 147, a conclusory attempt to allege scienter that is unsupported
by a single specific or particularized allegation in the Complaint. A conclusory accusation of
this kind is insufficient to allege scienter in a fraud-based cause of action. Plaintiffs then assert
that Mr. Swati prepared and disseminated “the Theia presentations containing false statements to
Talipot and [Terria].” Id. ¶ 150. But they fail to specify the presentations that Mr. Swati
allegedly prepared and disseminated, or – critically – whether he prepared or had anything to do
with the particular statements within those presentations that Plaintiffs claim to have been false.
There is not a single particularized allegation in the entire Complaint about how Mr. Swati
perpetrated or substantially assisted a fraud against Plaintiffs.
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Mr. Swati is a throw-in to this lawsuit, and the Complaint against him falls well short of
the pleading standard for fraud-based claims. In fact, the Complaint barely mentions him at all.
Plaintiffs have not stated a claim against Mr. Swati, and the Complaint must be dismissed as to
him.
FACTUAL BACKGROUND RELEVANT TO MR. SWATI’S MOTION TO DISMISS
Talipot is a private investment company that manages investments for members of a
certain family in Mexico. Complaint ¶ 48. 2 Tierra is an investment vehicle that is managed by
Grupo Koval (“Koval”), which in turn is a private investment company that manages
investments for members of a certain family in Mexico. ¶ 48.
Theia is a limited liability company that in May 2019 secured a license from the Federal
Communications Commission to build a network of 112 satellites capable of providing real-time,
in-depth imaging of the Earth’s surface (the “Spectrum License”). ¶ 39. This license required
Theia to launch 56 of the satellites by May 9, 2024. The technology that Theia was developing
represented a potentially revolutionary breakthrough. ¶ 40. The Complaint does not specify the
individuals at Theia who developed the technology or had knowledge of its progress. The
Complaint does not allege that Mr. Swati was aware at any given time of the status of various
projects or operations that Theia had planned, or of the financial situation that Theia was in at
any particular time.
In June 2020, as alleged, Theia engaged Bulltick as its placement agent for soliciting
investors. ¶ 45. Later in June, Theia entered into a Secured Note Purchase and Security
Agreement with FCS Advisors LLC d/b/a Brevet Capital Advisors (“FCS/Brevet”), which
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Unless specifically stated otherwise, ¶ shall refer to a paragraph of the Complaint. The truth of
the allegations stated in the Complaint is assumed for the limited purposes of this motion.
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refinanced certain debt Theia previously owed to FCS/Brevet by the issuance of two separate
$100 million promissory notes; one due on December 29, 2020 and the other due on June 29,
2021. ¶ 46. The Complaint does not allege that Mr. Swati ever provided instruction or direction
to Bulltick as to what to say to potential investors.
On October 5, 2020, as alleged, Bulltick formed Aithre Capital Partners, a special
purpose vehicle designed to pool investor funds in order to invest in convertible notes to be
issued by Theia. ¶ 47. The managing member of Aithre Capital Partners was Aithre Capital
Management, which in turn was 50% owned by an entity controlled by Mr. Swati. Later in
October 2020, a partner at Bulltick, Hector Villaescusa, approached representatives of Talipot
and Koval about potentially investing in Theia as part of a capital raise, a series of
communications in which Mr. Swati is not alleged to have played any part. ¶ 55. Mr.
Villaescusa told Talipot and Koval that investments were to be made in Aithre, and Aithre would
invest the pooled funds in Theia convertible notes with a 24-month maturity and with an option
to convert into equity at a 90% discount. ¶ 57. Mr. Villaescusa told them that the investments
had to be made quickly due to intense interest and competition among investors to participate in
the capital raise, which he anticipated would be fully subscribed. ¶ 58. He said that the purpose
of the Aithre investment was to provide bridge financing for operational costs to Theia until
several billion dollars in additional funding became available to Theia through a partnership
program involving government entities. ¶ 59. He told Talipot and Koval that this larger
commitment was already in place, but was reserved for major operations that Theia was not
ready to commence. ¶ 59. Plaintiffs do not allege that Mr. Swati knew that Mr. Villaescusa was
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making any of the above representations to Talipot and Koval, or that Mr. Swati knew that such
representations would have been misleading.
Talipot ultimately invested $15 million in Theia. The primary individuals who are
alleged to have pitched the investment to Talipot are Mr. Villaescusa, Mr. Martin, and Mr. del
Cueto, all of whom worked at Bulltick. ¶¶ 61-69, ¶¶ 74-76. The Complaint also alleges that the
individuals who ran Theia – its CEO, Stephen O’Neill, and its COO, Erlend Olson – met once
with Talipot and misrepresented Theia’s plan for how it would use Talipot’s investment. ¶¶ 70-
71. There is no allegation that Mr. Swati was present for these discussions or even that he heard
about them later. Inexplicably, given Plaintiffs’ allegations that Mr. O’Neill and Mr. Olson were
the individuals at Theia who made misrepresentations to them, and that they were the CEO and
the COO of Theia, Plaintiffs have elected not to sue those individuals, but instead to sue Mr.
Swati, whose role in the events described in the Complaint is left to the imagination.
On November 23, 2020, as alleged, Mr. Martin (from Bulltick) sent Talipot a draft term
sheet, prepared by Bulltick’s counsel, for Aithre Capital Partners’ purchase of convertible notes
issued by Theia and collateralized with a security interest in the Spectrum license. ¶ 78. Bulltick
had previously sent Talipot a document estimating the value of the Spectrum License to be
between $6.55 billion and $10 billion. ¶ 74. On December 13, 2020, after a series of further
discussions in which Mr. Swati is not alleged to have participated, Bulltick sent Talipot the
Aithre Capital Partners membership subscription documents. ¶¶ 77-83. On December 15, 2020,
Theia and Brevet agreed to restructure the short-term debt facility to extend the maturity date of
the First Brevet Note to June 29, 2021, to match the maturity date of the Second Brevet Note. ¶
87. This was not disclosed to Talipot. ¶ 88. Plaintiffs do not allege that Mr. Swati had any role
in the restructuring of this debt facility, or that he was aware of what Theia or Bulltick had or had
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not disclosed to Plaintiffs about the debt facility. Nor do Plaintiffs allege that Mr. Swati played
any role in estimating the value of the Spectrum license. In fact, at this point in the factual
allegations of the Complaint, Mr. Swati’s name has not even appeared.
On December 18, 2020, Talipot executed a soft commitment letter with Bulltick for an
investment in Theia. ¶ 89. On December 28, 2020, Talipot received from Bulltick and Aithre
Capital Partners a copy of the Secured Note Purchase Agreement to be entered into between
Theia and Aithre Capital Partners. ¶ 90. For purposes of the Agreement, Theia and Aithre
Capital Partners set the value of the Spectrum license at $2.67 billion. ¶ 90. Under the Secured
Note Purchase Agreement, as alleged, the convertible notes to be issued by Theia to Aithre
Capital Partners were to be secured both by 100% of the common stock of Theia and the value of
the Spectrum License that Theia held. ¶ 91. Thus, by virtue of its investment in Aithre, Talipot
would receive an indirect interest in both the equity of Theia and the Spectrum License. ¶ 91.
Plaintiffs do not allege that Mr. Swati negotiated the soft commitment letter with Talipot; that he
participated in the valuation of the Spectrum license; or that there was any aspect of these
documents or valuations that he believed to be false.
On January 5, 2021, Talipot signed the subscription agreement for its $15 million
investment. Talipot fully funded its investment on January 6, 2021. ¶¶ 93-94. In the entire
factual leadup to this event in the Complaint – Talipot’s execution of the subscription agreement
and funding of its investment – Mr. Swati is not mentioned a single time except for a footnote.
Accepting every allegation that Plaintiffs make in the Complaint as true for purposes of this
motion to dismiss, Mr. Swati had nothing to do with circumstances leading up to Talipot’s
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investment, did not have knowledge of any falsity surrounding it, and neither committed nor
aided and abetted any fraud on Talipot.
Mr. Swati is similarly absent from Plaintiffs’ narrative of how Tierra came to invest in
Theia. Plaintiffs allege that Bulltick, through Mr. Martin and Mr. Villaescusa, reached out to
Tierra and had a series of communications with Tierra about the appeal of Theia’s technology,
interest shown by other investors, and other factors that made the investment attractive, certain of
which Plaintiffs allege were false or misleading. ¶¶ 96-100, 102-111. Mr. Swati is not alleged to
have been involved in any of these communications or to have known which of them, if any of
them, would have been false. Plaintiffs further allege that on November 17, 2020, “Theia’s
management team” walked Tierra through a PowerPoint with information about Theia’s
technology, capitalization table, business model, and projected valuation. ¶ 101. Plaintiffs do
not allege that Mr. Swati was present for this meeting or that he knew that there was anything
false about Theia’s capitalization table, business model, or projected valuation. Indeed, nowhere
in the Complaint do Plaintiffs allege which representations, if any, were made to them that Mr.
Swati knew to be false.
On December 18, 2020, Tierra made a soft commitment to make a $5 million investment
in Theia. ¶ 112. On December 21, 2020, Mr. Swati organized a Microsoft Teams meeting
among Koval, Bulltick, and Theia. ¶ 113. However, Plaintiffs do not allege that he participated
in the meeting or that he knew what was discussed. ¶ 113. Erlend Olson participated on behalf
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of Theia, and Mr. del Cueto and Mr. Martin participated on behalf of Bulltick. ¶ 113. Mr. Swati
is alleged to have done nothing other than hit “send” on the calendar invite.
On January 4, 2021, Tierra signed the subscription agreement for a $5 million investment
in Theia. ¶ 115. On January 7, 2021, Tierra funded the investment. ¶ 116.
The Complaint goes on to discuss a time period after Talipot and Tierra had already
agreed to, and fully funded, their investments. These allegations consist primarily of
communications that Bulltick had with Plaintiffs about monitoring Plaintiffs’ investments and
about other potential investment opportunities. ¶¶ 117-121. Mr. Swati does not figure in any of
these alleged discussions.
On April 19, 2021, over four months after Tierra made its investment, Brevet delivered a
Notice of Default to Theia. ¶ 122. Plaintiffs were not told about this Notice of Default. ¶ 122.
On June 29, 2021, Theia defaulted on the First and Second Brevet Notes. ¶ 126. Plaintiffs make
no allegations about Mr. Swati with respect to either of these Notices of Default; and in any
event, they also do not allege that learning of them in April and June of 2021 would have
allowed them to avoid their investment losses.
On July 6, 2021, roughly seven months after Plaintiffs had both fully funded their
investments, Talipot met with Bulltick and Theia’s executive management team. ¶ 127.
Plaintiffs do not allege that Mr. Swati was a member of that team. Plaintiffs do allege that Mr.
Swati was also present for this meeting, which he believes to be inaccurate. In any event, the
Complaint does not allege that Mr. Swati said anything during the meeting or participated in it in
any way. Nor does it make any allegations about his understanding at the time of the meeting as
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to underlying events, or about whether he believed anything that someone else said during the
meeting was false.
On August 19, 2021, FCS/Brevet commenced an action against Theia in the United
States District Court for the Southern District of New York seeking the appointment of a
receiver. ¶ 134. Theia was placed into receivership on November 8, 2021. ¶ 136. As alleged,
Bulltick made representations to Plaintiffs – in which Mr. Swati is not alleged to have played any
part and of which he is not alleged to have had knowledge – about Plaintiffs being able to recoup
their investments once a receiver was appointed and was able to find a buyer for the licenses. ¶
137. This turned out to be incorrect, as on October 23, 2023, the District Court approved a
motion by the receiver to sell Theia’s assets for only $40 million. ¶ 141.
On January 3, 2024, Plaintiffs filed this lawsuit. The Complaint alleges four causes of
action: (1) common law fraud, (2) aiding and abetting common law fraud, (3) unjust enrichment,
and (4) breach of fiduciary duty and the imposition of a constructive trust. Mr. Swati is named
only in the first two causes of action. In the first cause of action, for common law fraud,
Plaintiffs set forth specific statutory allegations with respect to Bulltick, Mr. del Cueto, Mr.
Martin, and Mr. Villaescusa. ¶¶ 142-45. Despite naming Mr. Swati in the first cause of action,
Plaintiffs make no statutory allegations against him. ¶¶ 142-45. He is the only defendant named
in the first cause of action as to whom this is true. Moreover, in the course of making statutory
allegations with respect to Theia, which has not been sued because it is in receivership, Plaintiffs
specify that Theia acted “via its CEO Stephen O’Neil and COO Erend Olson” – i.e., not through
Mr. Swati. Mr. O’Neil and Mr. Olson have not been sued.
In the statutory allegations set forth under the second cause of action, for aiding and
abetting common law fraud, plaintiffs make the conclusory statement that Mr. Swati was “fully
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aware of frauds committed by Theia and the real reasons behind Theia’s misrepresentations and
omissions.” ¶ 147. Nowhere in the Complaint do Plaintiffs allege which frauds Mr. Swati was
aware of, how he became aware of them, or what he believed the “real reasons” were behind
Theia’s “misrepresentations and omissions.” The conclusory swipe at Mr. Swati being “fully
aware” is Plaintiffs’ sole attempt in the entire Complaint to allege scienter on his part. Plaintiffs
also assert in the statutory allegations for their second cause of action (without support in the
factual allegations of the Complaint) that Mr. Swati prepared and disseminated “the Theia
presentations containing false statements to Talipot and Koval.” ¶ 150. They fail to allege
which Theia presentations they are talking about, or, critically, what false statements within
those presentations Mr. Swati is alleged to have played a role in preparing – if any. They
provide no further information at all about what Mr. Swati is alleged to have done.
ARGUMENT
A. Applicable Law
A party may move for judgment dismissing one or more causes of action asserted against
him on the ground that the pleading fails to state a cause of action. New York Civil Practice Law
and Rules (“CPLR”) 3211(a)(7). In evaluating a motion to dismiss, “a court must accept as true
the facts alleged in the complaint as well as all reasonable inferences that may be gleaned from
those facts.” Skillgames, LLC v. Brody, 1 A.D.3d 247, 250 (1st Dept. 2003). However, “[i]t is
well settled that bare legal conclusions and factual claims which are flatly contradicted by the
evidence are not presumed to be true on a motion to dismiss for failure to state a cause of
action.” Meyer v. Guinta, 262 A.D.2d 463, 464 (2d Dept. 1999). See also, e.g., Goel v.
Ramachandran, 111 A.D.3d 783, 791 (2d Dept. 2013) (“[O]n a motion to dismiss pursuant to
CPLR 3211(a)(7), bare legal conclusions are not presumed to be true.” (quotation marks
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omitted)). A motion to dismiss for failure to state a claim “should be granted where, even
viewing the allegations as true, the plaintiff cannot establish a cause of action.” Parekh v. Cain,
96 A.D. 3d 812, 815 (2d Dept. 2012).
A cause of action for common law fraud or aiding and abetting common law fraud, such
as the claims asserted against Mr. Swati, is subject to a “heightened pleading requirement[].”
Nomura Home Equity Loan, Inc. v. Nomura Credit and Cap., Inc., 133 A.D. 3d 96, 109 (1st
Dept. 2015). “Where a cause of action . . . is based upon misrepresentation [or] fraud . . . the
circumstances constituting the wrong shall be stated in detail.” CPLR 3016(b). “Section
3016(b) imposes a more stringent standard of pleading than the generally-applicable notice of the
transaction rule of CPLR 3013.” N. Valley Partners, LLC v. Jenkins, 23 Misc. 3d 1112(A), 885
N.Y.S.2d 712, at *5 (N.Y. Sup. 2009) (applying same heightened pleading requirement to cause
of action for aiding and abetting fraud). Fraud claims that are not pleaded against individuals
with sufficient particularity under this heightened standard must be dismissed. See, e.g., Credit
All. Corp. v. Arthur Andersen & Co., 483 N.E.2d 110, 120 (1985) (holding that fraud claim must
be dismissed where it fell short of “the special pleading standards required under CPLR
3016(b)”); Greentech Research LLC v. Wissman, 104 A.D.3d 540 (1st Dept. 2013) (“The court
properly dismissed the fraud claim for failure to plead fraud with the particularity required by
CPLR 3016(b) . . . .”).
“Under New York Law, plaintiffs must allege five elements to state a common law fraud
claim: (1) a material misrepresentation or omission of fact (2) made by defendants with
knowledge of its falsity (3) and intent to defraud, which (4) plaintiffs reasonably relied on, (5)
resulting in damage to plaintiffs.” Steadman v. Citigroup Glob. Markets Holdings Inc., 592 F.
Supp. 3d 230, 237 (S.D.N.Y. 2022) (quotation marks omitted). The heightened pleading
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requirement of sufficient particularity applies to each one of the five elements of a common law
fraud claim. See, e.g., Silva Run Worldwide Ltd. v. Bear Stearns & Co., No. 96 Civ. 5102 (WK),
2000 WL 1672324, at *4 (S.D.N.Y. Nov. 6, 2000) (“To establish scienter in misrepresentation
cases, facts must be alleged which particularize how and why each defendant actually knew, or
was reckless in not knowing, that the statements were false at the time made.”); Loreley
Financing (Jersey) No. 4 Ltd. v. UBS Limited, 42 Misc. 3d 858, 978 N.Y.S.2d 615, 619 (N.Y.
Sup. 2013) (“a common law fraud claim must be dismissed if loss causation is not pled with
particularity”); Zappin v. Comfort, No. 18 Civ. 1693 (ALC) (OTW), 2022 WL 6241248, at *15
(S.D.N.Y. Aug. 29, 2022), report and recommendation adopted, No. 18 Civ. 1693 (ALC)
(OTW), 2022 WL 4592551 (S.D.N.Y. Sept. 30, 2022), reconsideration denied, No. 18 Civ. 1693
(ALC), 2023 WL 5916564 (S.D.N.Y. Sept. 11, 2023) (applying heightened standard of
particularity to the element of reasonable reliance); CIFG Assur. N. Am., Inc. v. Bank of Am.,
N.A., 41 Misc. 3d 1203(A), 980 N.Y.S.2d 275 (N.Y. Sup. 2013) (applying heightened standard
of particularity to the element of knowledge of falsity).
“The elements of a cause of action alleging aiding and abetting fraud are an underlying
fraud, the defendants’ knowledge of this fraud, and the defendants’ substantial assistance in the
achievement of the fraud, and, pursuant to CPLR 3016(b), the circumstances constituting the
wrong must be stated in detail.” Swartz v. Swartz, 145 A.D.3d 818, 824 (2d Dept. 2016)
(quotation marks, citations, and brackets omitted). “Substantial assistance exists where (1) a
defendant affirmatively assists, helps conceal, or by virtue of failing to act when required to do
so enables the fraud to proceed, and (2) the actions of the aider/abettor proximately caused the
harm on which the primary liability is predicated.” Stanfield Offshore Leveraged Assets, Ltd. v.
Met. Life Ins. Co., 64 A.D.3d 472, 476 (1st Dept. 2009).
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The Complaint alleges that the Aithre Capital Partners operating agreement contains a
choice of law clause requiring that disputes arising under or relating to the agreement be
governed by Delaware law. This should not affect the choice of law analysis in this case, as Mr.
Swati has been sued for fraud, not breach of contract, nor do the tiny handful of occasions on
which he is mentioned in the Complaint relate to the Aithre Capital Partners operating
agreement. See, e.g., J.A.O. Acquisition Corp. v. Stavitsky, 192 Misc. 2d 7, 745 N.Y.S. 2d 634,
638 (N.Y. Sup. 2001) (“New York law applies to these fraudulent inducement claims. While the
Stock purchase agreement provides that the parties must apply New Jersey law to claims that
arise under the contract, the fraud claim sound in tort, not contract, so the contractual choice of
law provision in the Stock purchase agreement is inapplicable to the fraud causes of action.”).
In any event, the application of Delaware law to evaluate the sufficiency of Plaintiffs’
fraud claims would yield the same analysis, and result, as the application of New York law. The
elements of common law fraud in Delaware are substantially the same as those described above
under New York law. See, e.g., Gaffin v. Teledyne, Inc., 611 A.2d 467, 472 (Del. Supr. 1992)
(requiring a false representation, defendant’s knowledge or belief that the representation was
false, intent to induce the plaintiff to act, justifiable reliance by the plaintiff in acting on the
alleged misrepresentation, and damage to the plaintiff); Browne v. Robb, 583 A.2d 949, 955
(Del. Supr. 1990) (same). Causes of action for common law fraud under Delaware law, as under
New York law, are subject to a heightened pleading requirement. See, e.g., Browne, 583 A.2d at
955 (plaintiff is required to plead fraud with “particularity”); Brevet Capital Special
Opportunities Fund, LP v. Fourth Third, LLC, 2011 WL 3452821, at *7 (Superior Court of
Delaware, Aug. 5, 2011) (“Fraud must be plead with particularity.”); Wood v. Baum, 953 A.2d
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136, 141 (Del. Supr. 2008) (in a fraud claim, “a plaintiff must also plead particularized facts that
demonstrate that the [defendants] acted with scienter]”).
The elements of a cause of action for aiding and abetting common law fraud are also
substantially identical under Delaware and New York law. See, e.g., Clark v. Davenport, 2019
WL 3230928, at *15 (Del. Ch. July 18, 2019) (“The elements of a claim for aiding and abetting
fraud are (i) an act of fraud by the primary actor, (ii) the secondary actor’s knowledge of the
primary actor’s conduct, (iii) substantial encouragement or assistance from the secondary actor,
and (iv) causally related damages.”).
B. The Complaint Fails to State a Cause of Action for Common Law Fraud against
Jamil Swati
The Complaint fails to state a cause of action for common law fraud against Mr.
Swati. Indeed, it barely mentions Mr. Swati at all. Plaintiffs have not met the heightened
pleading requirement for alleging that Mr. Swati made a material misrepresentation or omission;
that he had knowledge of falsity, or scienter; that Plaintiffs acted in just reliance on a
misrepresentation by Mr. Swati; or that Mr. Swati’s conduct caused their losses. Plaintiffs’
failure to sufficiently plead any one of these elements of common law fraud is fatal to their
claim. The cause of action must be dismissed.
1. The Complaint Fails to Allege a Material Misrepresentation or Omission
of Fact against Jamil Swati
The first element of a common law fraud claim is a material misrepresentation or
omission of fact. Plaintiffs have failed to meet this threshold element as to Mr. Swati.
The factual allegations in the Complaint – that is, paragraphs 1-141, which are supposed
to provide the basis for the causes of action that follow – provide no substantive information
about a single interaction that Mr. Swati had with either Plaintiff, let alone a material
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misrepresentation or omission that he made to them. Not one statement referenced in the
Complaint is attributed to Mr. Swati. He is simply not alleged to have said anything to Talipot or
Tierra to induce them to make their investments.
According to the Complaint, the main points of contact for Talipot and Tierra in
connection with their investments were members of Bulltick, who communicated with Plaintiffs
without Mr. Swati present. When Theia made representations to Plaintiffs, it was through the
individuals who actually ran Theia – CEO Stephen O’Neill and COO Erlend Olson. In all of
their factual allegations, Plaintiffs fail to specify a single misrepresentation or omission that Mr.
Swati himself made to them. This is fatal to their fraud claim against him. “In cases with
multiple defendants, the plaintiff must allege facts specifying each defendant's contribution to the
fraud.” Zappin, 2022 WL 6241248, at *14. Plaintiffs have not done so here with respect to Mr.
Swati. Just the opposite – after substantially omitting Mr. Swati from the factual allegations in
the Complaint, Plaintiffs omit him entirely from the statutory allegations they set forth under
their cause of action for common law fraud. ¶¶ 142-45. They have not alleged that Mr. Swati
contributed to the fraud in this case.
Mr. Swati appears to be named as a defendant in this action solely by virtue of his
association with Aithre and Theia. But that is not nearly enough to show that a person made
material misrepresentations or omissions, with knowledge of falsity, that were justifiably relied
on and caused losses – and it is not a sufficient basis for a fraud claim. See, e.g., N. Valley
Partners, 885 N.Y.S.2d 712 (dismissing common law fraud claims against defendants who were
members of a Board of Directors whom “plaintiffs’ pleading sweeps . . . in with bald, conclusory
allegations that each of [them] collectively were aware of [the] false representations [at issue]
and participated in, approved of and lent support to the alleged fraud”). There are no factual
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allegations in the Complaint – let alone allegations that meet the requisite heightened pleading
standard – to the effect that Mr. Swati personally made or caused to be made a material
misrepresentation or omission to Plaintiffs relating to their prospective investments. Plaintiffs
have not satisfied this threshold element of stating a fraud claim against Mr. Swati. 3
2. The Complaint Fails to Allege that Mr. Swati Had Knowledge of Falsity
Even if the Complaint passed the threshold of alleging a material misrepresentation or
omission as to Mr. Swati – and it does not – it would fail to state a claim for fraud because it
does not meet the requirement of alleging scienter. The Complaint does not sufficiently allege
that Mr. Swati had knowledge of the falsity of any material misrepresentation or omission.
The sole effort Plaintiffs make toward satisfying this fundamental element of a fraud
claim is the generic assertion – which comes only in the context of Plaintiffs’ statutory
allegations for their aiding-and-abetting cause of action, ¶ 150 - that Mr. Swati was “fully aware
of frauds committed by Theia.” This type of bald, conclusory assertion falls well short of the
heightened pleading standard for a fraud claim. See, e.g., N. Valley Partners, 885 N.Y.S.2d 712
(dismissing common law fraud claims where scienter was alleged through “bald, conclusory
allegations that each of [the defendants at issue] collectively were aware of these false
representations”); Silva Run Worldwide Ltd., 2000 WL 1672324, at *4 (“To establish scienter in
misrepresentation cases, facts must be alleged which particularize how and why each defendant
3
The Complaint asserts in a passing footnote that it was not disclosed to Plaintiffs that Mr. Swati
was Director of Strategic Investments at Theia in addition to his involvement with Aithre. ¶ 90
n.2. On the contrary, it is stated in Aithre Capital Partners’ Private Offering Memorandum,
attached hereto as Exhibit A (see page 31, “TGI, the Sponsor and the Company”). In any event,
Plaintiffs do not allege that this purported non-disclosure was a misrepresentation or omission
that Mr. Swati made to them, or that it constituted part of the alleged fraud against them. Other
than the passing footnote, the purported non-disclosure is mentioned only in the context of an
allegation that defendant Martin (not Mr. Swati) failed to discuss Mr. Swati’s role in an email
that Mr. Martin sent to Plaintiffs, on which Mr. Swati was not copied. ¶ 105.
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actually knew, or was reckless in not knowing, that the statements were false at the time made . .
. . Conclusory allegations are not sufficient to establish intent to deceive.”); In re Nanthealth,
Inc. v. Stockholder Litig., 2020 WL 211065, at *6 n.47 (Del. Ch. Jan. 14, 2020) (finding that an
allegation that is conclusory lacks the requisite particularity to demonstrate scienter at the
motion-to-dismiss phase). Plaintiffs make absolutely no effort to allege facts which particularize
how and why Mr. Swati knew that specific statements were false at the time they were made.
In asserting merely that Mr. Swati was “fully aware of frauds,” Plaintiffs simply state
their own conclusion, with no attempt to provide a basis for it in alleged facts. The Complaint is
utterly silent as to which statements Mr. Swati knew to be false, how and why he knew that those
statements were false, or any other facts that would reflect his state of mind. Accepting for
purposes of this motion that every allegation in the Complaint is true, Plaintiffs have made no
showing at all that Mr. Swati had knowledge of falsity. They have not met this element of a
fraud claim.
3. The Complaint Fails to Allege That Plaintiffs Reasonably Relied on Any
Misrepresentations or Omissions by Jamil Swati
Plaintiffs also fail to state a common law fraud claim against Mr. Swati because they do
not allege that they reasonably relied on anything he said or did. Nor could they, because given
their lack of interactions with him, it would strain credulity that they acted in reliance on him.
Their failure to meet this element of a fraud claim requires dismissal of the claim. See, e.g.,
Zappin, 2022 WL 6241248, at *14 (dismissing fraud claim where plaintiff “fail[ed] to state with
particularity that he justifiably relied on [the defendant’s] alleged misrepresentation.”
Nowhere in the Complaint do Plaintiffs identify particular information that they sought or
received from Mr. Swati that they then justifiably relied upon in making their investments. Even
a cursory reading of the Complaint would reveal that Mr. Swati was not someone they were
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relying on in their decision-making process: he was not included in the meetings they had with
individuals at Bulltick; he was not one of the two individuals at Theia who spoke with Plaintiffs
about their prospective investments; and there are no written statements attributed to him in the
Complaint. The first – and only – time that Plaintiffs associate Mr. Swati with any “reliance” on
their part is in the course of setting forth the statutory allegations for their second cause of action,
for aiding and abetting common law fraud. In seeking to rope Mr. Swati into the aiding-and-
abetting cause of action, Plaintiffs assert that Mr. Swati “prepared and disseminated the Theia
presentations containing false statements to Talipot and [Tierra]” and that Plaintiffs relied on
those “misrepresentations.” As discussed above, supra at 10-11, Plaintiffs fail even to identify
what Theia presentations they are talking about, and critically, whether Mr. Swati had anything
to do with the allegedly misleading statements that were contained in those presentations (or
what those were). This failure is dispositive of their claims against Mr. Swati. See, e.g., Brevet
Capital, 2011 WL 3452821, at *7 (“In order to meet the particularity standard [for a claim based
on fraud], a complaint must allege (1), the time, place and contents of the false rep
Preview
FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK TALIPOT ESG INVESTMENTS LLC and TIERRA PE LLC, Index No. 650028/2024 Plaintiffs, -against- BULLTICK FINANCIAL ADVISORY SERVICES LLC, HECTOR VILLAESCUSA, JAVIER MARTIN RIVA, ADOLFO DEL CUETO, AITHRE CAPITAL MANAGEMENT LLC and JAMIL SWATI, Defendants. JAMIL SWATI’S MEMORANDUM OF LAW IN SUPPORT OF MOTION TO DISMISS i 1 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 Jamil Swati, by and through his undersigned attorneys, respectfully submits this memorandum of law in support of his Motion to Dismiss the January 3, 2024 Verified Complaint (“Complaint”) filed by Talipot ESG Investments LLC (“Talipot”) and Tierra PE LLC (“Tierra”) (collectively “Plaintiffs”). Mr. Swati moves to dismiss both causes of action asserted against him, for common law fraud and aiding and abetting the same, pursuant to CPLR 3211(a)(7) for failure to state a claim. PRELIMINARY STATEMENT Plaintiffs Talipot and Tierra are private investment vehicles that invested a combined $20 million in Theia International Group LLC (“Theia”) in the hopes of profiting from a revolutionary satellite technology that Theia was developing. The investments failed, and Plaintiffs have now sued six different entities and individuals – but not Theia or the two executives at Theia who spoke with Plaintiffs about their prospective investments and allegedly lied to them – in an effort to get their money back. The thrust of the Complaint is that Plaintiffs made their investments based in part on misrepresentations about Theia’s financial situation that they received from Theia’s placement agent, Bulltick Financial Advisory Services (“Bulltick”) and from Theia’s CEO and COO, Stephen O’Neil and Erlend Olson, respectively. They have brought claims for fraud and aiding and abetting fraud against Bulltick; against three Bulltick partners with whom they communicated leading up to their investments (Hector Villaescusa, Javier Martin Riva, and Adolfo del Cueto); and against Jamil Swati. As alleged, Mr. Swati held the title of Head of Strategic Investments at Theia, and he also co-managed a special purpose vehicle called Aithre Capital Partners LLC that was designed to pool investor funds in order to invest in convertible 1 2 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 notes to be issued by Theia. 1 The Complaint makes no specific allegations about Mr. Swati’s actual responsibilities at Theia or about any communications he had with Plaintiffs, and for good reason – he had barely any interactions with Plaintiffs at all. Nor does the Complaint identify any wrongful actions that Mr. Swati took in his role at Aithre Capital Partners LLC or its managing member, Aithre Capital Management LLC – neither of which has been sued for fraud. The Complaint fails to state a claim for common law fraud or aiding and abetting common law fraud against Mr. Swati. Mr. Swati is essentially invisible throughout the entirety of the Complaint – an accurate reflection of his lack of involvement in the alleged series of events. In describing the circumstances leading up to Talipot’s investment in Theia, Complaint ¶¶ 48-94, Plaintiffs literally fail to mention Mr. Swati a single time, except for a footnote that mistakenly suggests that Mr. Swati’s roles with Theia and Aithre were not disclosed – in fact, they were, in the private offering memorandum for the investment. See Exhibit A at 31 (“TGI, the Sponsor and the Company,” under the heading “Potential Conflicts of Interest”). Similarly, in describing the circumstances leading up to Tierra’s investment in Theia, id. ¶¶ 95-116, Plaintiffs attribute only one action to Mr. Swati: the anodyne step of sending out a calendar invite for a Microsoft Teams meeting that he is not even alleged to have attended. Given Mr. Swati’s nearly total absence from the allegations in the Complaint describing how Plaintiffs came to make their investments, Plaintiffs cannot say with a straight face that they relied on material misrepresentations or omissions made to them by Mr. Swati in deciding to 1 The Complaint also bring claims for unjust enrichment and breach of fiduciary duty against Bulltick, Hector Villaescusa, and Aithre Capital Management LLC, which was the managing manager of Aithre Capital Partners. Because Mr. Swati is not included in either of those causes of action, they are not discussed substantively in this motion. 2 3 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 invest. Indeed, taking every allegation in the Complaint as true for purposes of this motion, Mr. Swati played no role at all in Plaintiffs’ decisions to invest. Mr. Swati’s absence from the factual allegations in the Complaint is dispositive, as Plaintiffs have not met the heightened pleading requirement that applies to claims based on fraud. In any event, the statutory allegations set forth in the two causes of action against Mr. Swati, for which the factual allegations in the Complaint are supposed to, but do not, provide a basis, are also hollow as to him. In setting forth the statutory allegations for their first cause of action, for common law fraud, Plaintiffs provide a list of allegations with respect to each defendant except Mr. Swati. Id. ¶¶ 142-45. They simply omit him from the statutory allegations. This is an explicit acknowledgment on their part that they have not alleged a common law fraud claim against him. In setting forth the statutory allegations for their second cause of action, for aiding and abetting common law fraud, Plaintiffs assert for the first time that Mr. Swati was “fully aware of frauds committed by Theia,” id. ¶ 147, a conclusory attempt to allege scienter that is unsupported by a single specific or particularized allegation in the Complaint. A conclusory accusation of this kind is insufficient to allege scienter in a fraud-based cause of action. Plaintiffs then assert that Mr. Swati prepared and disseminated “the Theia presentations containing false statements to Talipot and [Terria].” Id. ¶ 150. But they fail to specify the presentations that Mr. Swati allegedly prepared and disseminated, or – critically – whether he prepared or had anything to do with the particular statements within those presentations that Plaintiffs claim to have been false. There is not a single particularized allegation in the entire Complaint about how Mr. Swati perpetrated or substantially assisted a fraud against Plaintiffs. 3 4 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 Mr. Swati is a throw-in to this lawsuit, and the Complaint against him falls well short of the pleading standard for fraud-based claims. In fact, the Complaint barely mentions him at all. Plaintiffs have not stated a claim against Mr. Swati, and the Complaint must be dismissed as to him. FACTUAL BACKGROUND RELEVANT TO MR. SWATI’S MOTION TO DISMISS Talipot is a private investment company that manages investments for members of a certain family in Mexico. Complaint ¶ 48. 2 Tierra is an investment vehicle that is managed by Grupo Koval (“Koval”), which in turn is a private investment company that manages investments for members of a certain family in Mexico. ¶ 48. Theia is a limited liability company that in May 2019 secured a license from the Federal Communications Commission to build a network of 112 satellites capable of providing real-time, in-depth imaging of the Earth’s surface (the “Spectrum License”). ¶ 39. This license required Theia to launch 56 of the satellites by May 9, 2024. The technology that Theia was developing represented a potentially revolutionary breakthrough. ¶ 40. The Complaint does not specify the individuals at Theia who developed the technology or had knowledge of its progress. The Complaint does not allege that Mr. Swati was aware at any given time of the status of various projects or operations that Theia had planned, or of the financial situation that Theia was in at any particular time. In June 2020, as alleged, Theia engaged Bulltick as its placement agent for soliciting investors. ¶ 45. Later in June, Theia entered into a Secured Note Purchase and Security Agreement with FCS Advisors LLC d/b/a Brevet Capital Advisors (“FCS/Brevet”), which 2 Unless specifically stated otherwise, ¶ shall refer to a paragraph of the Complaint. The truth of the allegations stated in the Complaint is assumed for the limited purposes of this motion. 4 5 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 refinanced certain debt Theia previously owed to FCS/Brevet by the issuance of two separate $100 million promissory notes; one due on December 29, 2020 and the other due on June 29, 2021. ¶ 46. The Complaint does not allege that Mr. Swati ever provided instruction or direction to Bulltick as to what to say to potential investors. On October 5, 2020, as alleged, Bulltick formed Aithre Capital Partners, a special purpose vehicle designed to pool investor funds in order to invest in convertible notes to be issued by Theia. ¶ 47. The managing member of Aithre Capital Partners was Aithre Capital Management, which in turn was 50% owned by an entity controlled by Mr. Swati. Later in October 2020, a partner at Bulltick, Hector Villaescusa, approached representatives of Talipot and Koval about potentially investing in Theia as part of a capital raise, a series of communications in which Mr. Swati is not alleged to have played any part. ¶ 55. Mr. Villaescusa told Talipot and Koval that investments were to be made in Aithre, and Aithre would invest the pooled funds in Theia convertible notes with a 24-month maturity and with an option to convert into equity at a 90% discount. ¶ 57. Mr. Villaescusa told them that the investments had to be made quickly due to intense interest and competition among investors to participate in the capital raise, which he anticipated would be fully subscribed. ¶ 58. He said that the purpose of the Aithre investment was to provide bridge financing for operational costs to Theia until several billion dollars in additional funding became available to Theia through a partnership program involving government entities. ¶ 59. He told Talipot and Koval that this larger commitment was already in place, but was reserved for major operations that Theia was not ready to commence. ¶ 59. Plaintiffs do not allege that Mr. Swati knew that Mr. Villaescusa was 5 6 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 making any of the above representations to Talipot and Koval, or that Mr. Swati knew that such representations would have been misleading. Talipot ultimately invested $15 million in Theia. The primary individuals who are alleged to have pitched the investment to Talipot are Mr. Villaescusa, Mr. Martin, and Mr. del Cueto, all of whom worked at Bulltick. ¶¶ 61-69, ¶¶ 74-76. The Complaint also alleges that the individuals who ran Theia – its CEO, Stephen O’Neill, and its COO, Erlend Olson – met once with Talipot and misrepresented Theia’s plan for how it would use Talipot’s investment. ¶¶ 70- 71. There is no allegation that Mr. Swati was present for these discussions or even that he heard about them later. Inexplicably, given Plaintiffs’ allegations that Mr. O’Neill and Mr. Olson were the individuals at Theia who made misrepresentations to them, and that they were the CEO and the COO of Theia, Plaintiffs have elected not to sue those individuals, but instead to sue Mr. Swati, whose role in the events described in the Complaint is left to the imagination. On November 23, 2020, as alleged, Mr. Martin (from Bulltick) sent Talipot a draft term sheet, prepared by Bulltick’s counsel, for Aithre Capital Partners’ purchase of convertible notes issued by Theia and collateralized with a security interest in the Spectrum license. ¶ 78. Bulltick had previously sent Talipot a document estimating the value of the Spectrum License to be between $6.55 billion and $10 billion. ¶ 74. On December 13, 2020, after a series of further discussions in which Mr. Swati is not alleged to have participated, Bulltick sent Talipot the Aithre Capital Partners membership subscription documents. ¶¶ 77-83. On December 15, 2020, Theia and Brevet agreed to restructure the short-term debt facility to extend the maturity date of the First Brevet Note to June 29, 2021, to match the maturity date of the Second Brevet Note. ¶ 87. This was not disclosed to Talipot. ¶ 88. Plaintiffs do not allege that Mr. Swati had any role in the restructuring of this debt facility, or that he was aware of what Theia or Bulltick had or had 6 7 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 not disclosed to Plaintiffs about the debt facility. Nor do Plaintiffs allege that Mr. Swati played any role in estimating the value of the Spectrum license. In fact, at this point in the factual allegations of the Complaint, Mr. Swati’s name has not even appeared. On December 18, 2020, Talipot executed a soft commitment letter with Bulltick for an investment in Theia. ¶ 89. On December 28, 2020, Talipot received from Bulltick and Aithre Capital Partners a copy of the Secured Note Purchase Agreement to be entered into between Theia and Aithre Capital Partners. ¶ 90. For purposes of the Agreement, Theia and Aithre Capital Partners set the value of the Spectrum license at $2.67 billion. ¶ 90. Under the Secured Note Purchase Agreement, as alleged, the convertible notes to be issued by Theia to Aithre Capital Partners were to be secured both by 100% of the common stock of Theia and the value of the Spectrum License that Theia held. ¶ 91. Thus, by virtue of its investment in Aithre, Talipot would receive an indirect interest in both the equity of Theia and the Spectrum License. ¶ 91. Plaintiffs do not allege that Mr. Swati negotiated the soft commitment letter with Talipot; that he participated in the valuation of the Spectrum license; or that there was any aspect of these documents or valuations that he believed to be false. On January 5, 2021, Talipot signed the subscription agreement for its $15 million investment. Talipot fully funded its investment on January 6, 2021. ¶¶ 93-94. In the entire factual leadup to this event in the Complaint – Talipot’s execution of the subscription agreement and funding of its investment – Mr. Swati is not mentioned a single time except for a footnote. Accepting every allegation that Plaintiffs make in the Complaint as true for purposes of this motion to dismiss, Mr. Swati had nothing to do with circumstances leading up to Talipot’s 7 8 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 investment, did not have knowledge of any falsity surrounding it, and neither committed nor aided and abetted any fraud on Talipot. Mr. Swati is similarly absent from Plaintiffs’ narrative of how Tierra came to invest in Theia. Plaintiffs allege that Bulltick, through Mr. Martin and Mr. Villaescusa, reached out to Tierra and had a series of communications with Tierra about the appeal of Theia’s technology, interest shown by other investors, and other factors that made the investment attractive, certain of which Plaintiffs allege were false or misleading. ¶¶ 96-100, 102-111. Mr. Swati is not alleged to have been involved in any of these communications or to have known which of them, if any of them, would have been false. Plaintiffs further allege that on November 17, 2020, “Theia’s management team” walked Tierra through a PowerPoint with information about Theia’s technology, capitalization table, business model, and projected valuation. ¶ 101. Plaintiffs do not allege that Mr. Swati was present for this meeting or that he knew that there was anything false about Theia’s capitalization table, business model, or projected valuation. Indeed, nowhere in the Complaint do Plaintiffs allege which representations, if any, were made to them that Mr. Swati knew to be false. On December 18, 2020, Tierra made a soft commitment to make a $5 million investment in Theia. ¶ 112. On December 21, 2020, Mr. Swati organized a Microsoft Teams meeting among Koval, Bulltick, and Theia. ¶ 113. However, Plaintiffs do not allege that he participated in the meeting or that he knew what was discussed. ¶ 113. Erlend Olson participated on behalf 8 9 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 of Theia, and Mr. del Cueto and Mr. Martin participated on behalf of Bulltick. ¶ 113. Mr. Swati is alleged to have done nothing other than hit “send” on the calendar invite. On January 4, 2021, Tierra signed the subscription agreement for a $5 million investment in Theia. ¶ 115. On January 7, 2021, Tierra funded the investment. ¶ 116. The Complaint goes on to discuss a time period after Talipot and Tierra had already agreed to, and fully funded, their investments. These allegations consist primarily of communications that Bulltick had with Plaintiffs about monitoring Plaintiffs’ investments and about other potential investment opportunities. ¶¶ 117-121. Mr. Swati does not figure in any of these alleged discussions. On April 19, 2021, over four months after Tierra made its investment, Brevet delivered a Notice of Default to Theia. ¶ 122. Plaintiffs were not told about this Notice of Default. ¶ 122. On June 29, 2021, Theia defaulted on the First and Second Brevet Notes. ¶ 126. Plaintiffs make no allegations about Mr. Swati with respect to either of these Notices of Default; and in any event, they also do not allege that learning of them in April and June of 2021 would have allowed them to avoid their investment losses. On July 6, 2021, roughly seven months after Plaintiffs had both fully funded their investments, Talipot met with Bulltick and Theia’s executive management team. ¶ 127. Plaintiffs do not allege that Mr. Swati was a member of that team. Plaintiffs do allege that Mr. Swati was also present for this meeting, which he believes to be inaccurate. In any event, the Complaint does not allege that Mr. Swati said anything during the meeting or participated in it in any way. Nor does it make any allegations about his understanding at the time of the meeting as 9 10 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 to underlying events, or about whether he believed anything that someone else said during the meeting was false. On August 19, 2021, FCS/Brevet commenced an action against Theia in the United States District Court for the Southern District of New York seeking the appointment of a receiver. ¶ 134. Theia was placed into receivership on November 8, 2021. ¶ 136. As alleged, Bulltick made representations to Plaintiffs – in which Mr. Swati is not alleged to have played any part and of which he is not alleged to have had knowledge – about Plaintiffs being able to recoup their investments once a receiver was appointed and was able to find a buyer for the licenses. ¶ 137. This turned out to be incorrect, as on October 23, 2023, the District Court approved a motion by the receiver to sell Theia’s assets for only $40 million. ¶ 141. On January 3, 2024, Plaintiffs filed this lawsuit. The Complaint alleges four causes of action: (1) common law fraud, (2) aiding and abetting common law fraud, (3) unjust enrichment, and (4) breach of fiduciary duty and the imposition of a constructive trust. Mr. Swati is named only in the first two causes of action. In the first cause of action, for common law fraud, Plaintiffs set forth specific statutory allegations with respect to Bulltick, Mr. del Cueto, Mr. Martin, and Mr. Villaescusa. ¶¶ 142-45. Despite naming Mr. Swati in the first cause of action, Plaintiffs make no statutory allegations against him. ¶¶ 142-45. He is the only defendant named in the first cause of action as to whom this is true. Moreover, in the course of making statutory allegations with respect to Theia, which has not been sued because it is in receivership, Plaintiffs specify that Theia acted “via its CEO Stephen O’Neil and COO Erend Olson” – i.e., not through Mr. Swati. Mr. O’Neil and Mr. Olson have not been sued. In the statutory allegations set forth under the second cause of action, for aiding and abetting common law fraud, plaintiffs make the conclusory statement that Mr. Swati was “fully 10 11 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 aware of frauds committed by Theia and the real reasons behind Theia’s misrepresentations and omissions.” ¶ 147. Nowhere in the Complaint do Plaintiffs allege which frauds Mr. Swati was aware of, how he became aware of them, or what he believed the “real reasons” were behind Theia’s “misrepresentations and omissions.” The conclusory swipe at Mr. Swati being “fully aware” is Plaintiffs’ sole attempt in the entire Complaint to allege scienter on his part. Plaintiffs also assert in the statutory allegations for their second cause of action (without support in the factual allegations of the Complaint) that Mr. Swati prepared and disseminated “the Theia presentations containing false statements to Talipot and Koval.” ¶ 150. They fail to allege which Theia presentations they are talking about, or, critically, what false statements within those presentations Mr. Swati is alleged to have played a role in preparing – if any. They provide no further information at all about what Mr. Swati is alleged to have done. ARGUMENT A. Applicable Law A party may move for judgment dismissing one or more causes of action asserted against him on the ground that the pleading fails to state a cause of action. New York Civil Practice Law and Rules (“CPLR”) 3211(a)(7). In evaluating a motion to dismiss, “a court must accept as true the facts alleged in the complaint as well as all reasonable inferences that may be gleaned from those facts.” Skillgames, LLC v. Brody, 1 A.D.3d 247, 250 (1st Dept. 2003). However, “[i]t is well settled that bare legal conclusions and factual claims which are flatly contradicted by the evidence are not presumed to be true on a motion to dismiss for failure to state a cause of action.” Meyer v. Guinta, 262 A.D.2d 463, 464 (2d Dept. 1999). See also, e.g., Goel v. Ramachandran, 111 A.D.3d 783, 791 (2d Dept. 2013) (“[O]n a motion to dismiss pursuant to CPLR 3211(a)(7), bare legal conclusions are not presumed to be true.” (quotation marks 11 12 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 omitted)). A motion to dismiss for failure to state a claim “should be granted where, even viewing the allegations as true, the plaintiff cannot establish a cause of action.” Parekh v. Cain, 96 A.D. 3d 812, 815 (2d Dept. 2012). A cause of action for common law fraud or aiding and abetting common law fraud, such as the claims asserted against Mr. Swati, is subject to a “heightened pleading requirement[].” Nomura Home Equity Loan, Inc. v. Nomura Credit and Cap., Inc., 133 A.D. 3d 96, 109 (1st Dept. 2015). “Where a cause of action . . . is based upon misrepresentation [or] fraud . . . the circumstances constituting the wrong shall be stated in detail.” CPLR 3016(b). “Section 3016(b) imposes a more stringent standard of pleading than the generally-applicable notice of the transaction rule of CPLR 3013.” N. Valley Partners, LLC v. Jenkins, 23 Misc. 3d 1112(A), 885 N.Y.S.2d 712, at *5 (N.Y. Sup. 2009) (applying same heightened pleading requirement to cause of action for aiding and abetting fraud). Fraud claims that are not pleaded against individuals with sufficient particularity under this heightened standard must be dismissed. See, e.g., Credit All. Corp. v. Arthur Andersen & Co., 483 N.E.2d 110, 120 (1985) (holding that fraud claim must be dismissed where it fell short of “the special pleading standards required under CPLR 3016(b)”); Greentech Research LLC v. Wissman, 104 A.D.3d 540 (1st Dept. 2013) (“The court properly dismissed the fraud claim for failure to plead fraud with the particularity required by CPLR 3016(b) . . . .”). “Under New York Law, plaintiffs must allege five elements to state a common law fraud claim: (1) a material misrepresentation or omission of fact (2) made by defendants with knowledge of its falsity (3) and intent to defraud, which (4) plaintiffs reasonably relied on, (5) resulting in damage to plaintiffs.” Steadman v. Citigroup Glob. Markets Holdings Inc., 592 F. Supp. 3d 230, 237 (S.D.N.Y. 2022) (quotation marks omitted). The heightened pleading 12 13 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 requirement of sufficient particularity applies to each one of the five elements of a common law fraud claim. See, e.g., Silva Run Worldwide Ltd. v. Bear Stearns & Co., No. 96 Civ. 5102 (WK), 2000 WL 1672324, at *4 (S.D.N.Y. Nov. 6, 2000) (“To establish scienter in misrepresentation cases, facts must be alleged which particularize how and why each defendant actually knew, or was reckless in not knowing, that the statements were false at the time made.”); Loreley Financing (Jersey) No. 4 Ltd. v. UBS Limited, 42 Misc. 3d 858, 978 N.Y.S.2d 615, 619 (N.Y. Sup. 2013) (“a common law fraud claim must be dismissed if loss causation is not pled with particularity”); Zappin v. Comfort, No. 18 Civ. 1693 (ALC) (OTW), 2022 WL 6241248, at *15 (S.D.N.Y. Aug. 29, 2022), report and recommendation adopted, No. 18 Civ. 1693 (ALC) (OTW), 2022 WL 4592551 (S.D.N.Y. Sept. 30, 2022), reconsideration denied, No. 18 Civ. 1693 (ALC), 2023 WL 5916564 (S.D.N.Y. Sept. 11, 2023) (applying heightened standard of particularity to the element of reasonable reliance); CIFG Assur. N. Am., Inc. v. Bank of Am., N.A., 41 Misc. 3d 1203(A), 980 N.Y.S.2d 275 (N.Y. Sup. 2013) (applying heightened standard of particularity to the element of knowledge of falsity). “The elements of a cause of action alleging aiding and abetting fraud are an underlying fraud, the defendants’ knowledge of this fraud, and the defendants’ substantial assistance in the achievement of the fraud, and, pursuant to CPLR 3016(b), the circumstances constituting the wrong must be stated in detail.” Swartz v. Swartz, 145 A.D.3d 818, 824 (2d Dept. 2016) (quotation marks, citations, and brackets omitted). “Substantial assistance exists where (1) a defendant affirmatively assists, helps conceal, or by virtue of failing to act when required to do so enables the fraud to proceed, and (2) the actions of the aider/abettor proximately caused the harm on which the primary liability is predicated.” Stanfield Offshore Leveraged Assets, Ltd. v. Met. Life Ins. Co., 64 A.D.3d 472, 476 (1st Dept. 2009). 13 14 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 The Complaint alleges that the Aithre Capital Partners operating agreement contains a choice of law clause requiring that disputes arising under or relating to the agreement be governed by Delaware law. This should not affect the choice of law analysis in this case, as Mr. Swati has been sued for fraud, not breach of contract, nor do the tiny handful of occasions on which he is mentioned in the Complaint relate to the Aithre Capital Partners operating agreement. See, e.g., J.A.O. Acquisition Corp. v. Stavitsky, 192 Misc. 2d 7, 745 N.Y.S. 2d 634, 638 (N.Y. Sup. 2001) (“New York law applies to these fraudulent inducement claims. While the Stock purchase agreement provides that the parties must apply New Jersey law to claims that arise under the contract, the fraud claim sound in tort, not contract, so the contractual choice of law provision in the Stock purchase agreement is inapplicable to the fraud causes of action.”). In any event, the application of Delaware law to evaluate the sufficiency of Plaintiffs’ fraud claims would yield the same analysis, and result, as the application of New York law. The elements of common law fraud in Delaware are substantially the same as those described above under New York law. See, e.g., Gaffin v. Teledyne, Inc., 611 A.2d 467, 472 (Del. Supr. 1992) (requiring a false representation, defendant’s knowledge or belief that the representation was false, intent to induce the plaintiff to act, justifiable reliance by the plaintiff in acting on the alleged misrepresentation, and damage to the plaintiff); Browne v. Robb, 583 A.2d 949, 955 (Del. Supr. 1990) (same). Causes of action for common law fraud under Delaware law, as under New York law, are subject to a heightened pleading requirement. See, e.g., Browne, 583 A.2d at 955 (plaintiff is required to plead fraud with “particularity”); Brevet Capital Special Opportunities Fund, LP v. Fourth Third, LLC, 2011 WL 3452821, at *7 (Superior Court of Delaware, Aug. 5, 2011) (“Fraud must be plead with particularity.”); Wood v. Baum, 953 A.2d 14 15 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 136, 141 (Del. Supr. 2008) (in a fraud claim, “a plaintiff must also plead particularized facts that demonstrate that the [defendants] acted with scienter]”). The elements of a cause of action for aiding and abetting common law fraud are also substantially identical under Delaware and New York law. See, e.g., Clark v. Davenport, 2019 WL 3230928, at *15 (Del. Ch. July 18, 2019) (“The elements of a claim for aiding and abetting fraud are (i) an act of fraud by the primary actor, (ii) the secondary actor’s knowledge of the primary actor’s conduct, (iii) substantial encouragement or assistance from the secondary actor, and (iv) causally related damages.”). B. The Complaint Fails to State a Cause of Action for Common Law Fraud against Jamil Swati The Complaint fails to state a cause of action for common law fraud against Mr. Swati. Indeed, it barely mentions Mr. Swati at all. Plaintiffs have not met the heightened pleading requirement for alleging that Mr. Swati made a material misrepresentation or omission; that he had knowledge of falsity, or scienter; that Plaintiffs acted in just reliance on a misrepresentation by Mr. Swati; or that Mr. Swati’s conduct caused their losses. Plaintiffs’ failure to sufficiently plead any one of these elements of common law fraud is fatal to their claim. The cause of action must be dismissed. 1. The Complaint Fails to Allege a Material Misrepresentation or Omission of Fact against Jamil Swati The first element of a common law fraud claim is a material misrepresentation or omission of fact. Plaintiffs have failed to meet this threshold element as to Mr. Swati. The factual allegations in the Complaint – that is, paragraphs 1-141, which are supposed to provide the basis for the causes of action that follow – provide no substantive information about a single interaction that Mr. Swati had with either Plaintiff, let alone a material 15 16 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 misrepresentation or omission that he made to them. Not one statement referenced in the Complaint is attributed to Mr. Swati. He is simply not alleged to have said anything to Talipot or Tierra to induce them to make their investments. According to the Complaint, the main points of contact for Talipot and Tierra in connection with their investments were members of Bulltick, who communicated with Plaintiffs without Mr. Swati present. When Theia made representations to Plaintiffs, it was through the individuals who actually ran Theia – CEO Stephen O’Neill and COO Erlend Olson. In all of their factual allegations, Plaintiffs fail to specify a single misrepresentation or omission that Mr. Swati himself made to them. This is fatal to their fraud claim against him. “In cases with multiple defendants, the plaintiff must allege facts specifying each defendant's contribution to the fraud.” Zappin, 2022 WL 6241248, at *14. Plaintiffs have not done so here with respect to Mr. Swati. Just the opposite – after substantially omitting Mr. Swati from the factual allegations in the Complaint, Plaintiffs omit him entirely from the statutory allegations they set forth under their cause of action for common law fraud. ¶¶ 142-45. They have not alleged that Mr. Swati contributed to the fraud in this case. Mr. Swati appears to be named as a defendant in this action solely by virtue of his association with Aithre and Theia. But that is not nearly enough to show that a person made material misrepresentations or omissions, with knowledge of falsity, that were justifiably relied on and caused losses – and it is not a sufficient basis for a fraud claim. See, e.g., N. Valley Partners, 885 N.Y.S.2d 712 (dismissing common law fraud claims against defendants who were members of a Board of Directors whom “plaintiffs’ pleading sweeps . . . in with bald, conclusory allegations that each of [them] collectively were aware of [the] false representations [at issue] and participated in, approved of and lent support to the alleged fraud”). There are no factual 16 17 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 allegations in the Complaint – let alone allegations that meet the requisite heightened pleading standard – to the effect that Mr. Swati personally made or caused to be made a material misrepresentation or omission to Plaintiffs relating to their prospective investments. Plaintiffs have not satisfied this threshold element of stating a fraud claim against Mr. Swati. 3 2. The Complaint Fails to Allege that Mr. Swati Had Knowledge of Falsity Even if the Complaint passed the threshold of alleging a material misrepresentation or omission as to Mr. Swati – and it does not – it would fail to state a claim for fraud because it does not meet the requirement of alleging scienter. The Complaint does not sufficiently allege that Mr. Swati had knowledge of the falsity of any material misrepresentation or omission. The sole effort Plaintiffs make toward satisfying this fundamental element of a fraud claim is the generic assertion – which comes only in the context of Plaintiffs’ statutory allegations for their aiding-and-abetting cause of action, ¶ 150 - that Mr. Swati was “fully aware of frauds committed by Theia.” This type of bald, conclusory assertion falls well short of the heightened pleading standard for a fraud claim. See, e.g., N. Valley Partners, 885 N.Y.S.2d 712 (dismissing common law fraud claims where scienter was alleged through “bald, conclusory allegations that each of [the defendants at issue] collectively were aware of these false representations”); Silva Run Worldwide Ltd., 2000 WL 1672324, at *4 (“To establish scienter in misrepresentation cases, facts must be alleged which particularize how and why each defendant 3 The Complaint asserts in a passing footnote that it was not disclosed to Plaintiffs that Mr. Swati was Director of Strategic Investments at Theia in addition to his involvement with Aithre. ¶ 90 n.2. On the contrary, it is stated in Aithre Capital Partners’ Private Offering Memorandum, attached hereto as Exhibit A (see page 31, “TGI, the Sponsor and the Company”). In any event, Plaintiffs do not allege that this purported non-disclosure was a misrepresentation or omission that Mr. Swati made to them, or that it constituted part of the alleged fraud against them. Other than the passing footnote, the purported non-disclosure is mentioned only in the context of an allegation that defendant Martin (not Mr. Swati) failed to discuss Mr. Swati’s role in an email that Mr. Martin sent to Plaintiffs, on which Mr. Swati was not copied. ¶ 105. 17 18 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 actually knew, or was reckless in not knowing, that the statements were false at the time made . . . . Conclusory allegations are not sufficient to establish intent to deceive.”); In re Nanthealth, Inc. v. Stockholder Litig., 2020 WL 211065, at *6 n.47 (Del. Ch. Jan. 14, 2020) (finding that an allegation that is conclusory lacks the requisite particularity to demonstrate scienter at the motion-to-dismiss phase). Plaintiffs make absolutely no effort to allege facts which particularize how and why Mr. Swati knew that specific statements were false at the time they were made. In asserting merely that Mr. Swati was “fully aware of frauds,” Plaintiffs simply state their own conclusion, with no attempt to provide a basis for it in alleged facts. The Complaint is utterly silent as to which statements Mr. Swati knew to be false, how and why he knew that those statements were false, or any other facts that would reflect his state of mind. Accepting for purposes of this motion that every allegation in the Complaint is true, Plaintiffs have made no showing at all that Mr. Swati had knowledge of falsity. They have not met this element of a fraud claim. 3. The Complaint Fails to Allege That Plaintiffs Reasonably Relied on Any Misrepresentations or Omissions by Jamil Swati Plaintiffs also fail to state a common law fraud claim against Mr. Swati because they do not allege that they reasonably relied on anything he said or did. Nor could they, because given their lack of interactions with him, it would strain credulity that they acted in reliance on him. Their failure to meet this element of a fraud claim requires dismissal of the claim. See, e.g., Zappin, 2022 WL 6241248, at *14 (dismissing fraud claim where plaintiff “fail[ed] to state with particularity that he justifiably relied on [the defendant’s] alleged misrepresentation.” Nowhere in the Complaint do Plaintiffs identify particular information that they sought or received from Mr. Swati that they then justifiably relied upon in making their investments. Even a cursory reading of the Complaint would reveal that Mr. Swati was not someone they were 18 19 of 23 FILED: NEW YORK COUNTY CLERK 03/13/2024 06:55 PM INDEX NO. 650028/2024 NYSCEF DOC. NO. 37 RECEIVED NYSCEF: 03/13/2024 relying on in their decision-making process: he was not included in the meetings they had with individuals at Bulltick; he was not one of the two individuals at Theia who spoke with Plaintiffs about their prospective investments; and there are no written statements attributed to him in the Complaint. The first – and only – time that Plaintiffs associate Mr. Swati with any “reliance” on their part is in the course of setting forth the statutory allegations for their second cause of action, for aiding and abetting common law fraud. In seeking to rope Mr. Swati into the aiding-and- abetting cause of action, Plaintiffs assert that Mr. Swati “prepared and disseminated the Theia presentations containing false statements to Talipot and [Tierra]” and that Plaintiffs relied on those “misrepresentations.” As discussed above, supra at 10-11, Plaintiffs fail even to identify what Theia presentations they are talking about, and critically, whether Mr. Swati had anything to do with the allegedly misleading statements that were contained in those presentations (or what those were). This failure is dispositive of their claims against Mr. Swati. See, e.g., Brevet Capital, 2011 WL 3452821, at *7 (“In order to meet the particularity standard [for a claim based on fraud], a complaint must allege (1), the time, place and contents of the false rep