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COMMONWEALTH OF MASSACHUSETTS
SUFFOLK, ss. SUPERIOR COURT
CIVIL ACTION NO. a4. | eG
COMMONWEALTH OF MASSACHUSETTS ~
Plaintiff,
Vv. wn
0
XEX LTD.
Nn
Defendant
COMMONWEALTH’S MEMORANDUM IN SUPPORT
OF ITS EX PARTE MOTION FOR TEMPORARY RESTRAINING ORDER
The Commonwealth, by and through the Office of the Attorney General (“AGO”).
submits this memorandum in support of its ex parte motion for a temporary restraining order
(“TRO”) to enjoin XEX LTD. (“XEX”) from: (1) further violations of G.L. ch. 93A, § 2; (2)
making further transactions through cryptocurrency accounts on Binance.com (“Binance”)!, or
any other cryptocurrency exchange: (3) removing the assets in the Binance Wallets (defined
below); and (4) operating its website, www.xtjunyang.com, or any other websites used by the
Defendant in connection to the violations ofch. 93A, § 2 alleged in the Complaint, and from
transferring such website domains to a different registrar. A temporary restraining order is
necessary to ensure that victims’ funds are not absconded with before the AGO can collect
' BINANCE, https://www.binance.com/en (last visited Mar. 6, 2024). Binance is a cryptocurrency exchange that offers
services to account holders that involve facilitating the purchase, sale, and transfer of a variety of digital currencies.
disgorgement or any penalties obtained through a final judgment, and to prevent Defendant from
participating in further fraudulent activity.
XEX represents itself as a trading platform that allows investors to “buy, sell and trade
cryptocurrencies anytime anywhere” and “trade digital assets with confidence.” In reality, XEX
is just an investment scam and all of its representations about investing and earning profits
through its platform are false. This conduct violates Massachusetts consumer protection law G.L.
ch. 93A.
The Commonwealth traced XEX’s ill-gained assets to several wallets hosted by Binance
(the “Binance Wallets”). The AGO requested Binance freeze the assets in the Binance Wallets.
Binance agreed to a courtesy temporary freeze which is set to expire on June 28, 2024. Binance
has the sole discretion of whether to release the freeze upon its expiration or to even maintain the
courtesy freeze as agreed. Absent a TRO, Binance may release its freeze, which will allow XEX
to abscond with its victims’ funds by moving them to a cryptocurrency marketplace, such as a
peer-to-peer exchange,” where they would be inaccessible to the Commonwealth for any
recovery.*
Without a freeze on Defendant’s assets, victims’ funds are likely to be laundered through
decentralized peer-to-peer exchanges where U.S. law enforcement cannot access them.
Additionally, while it continues to operate its website, the Defendant has the potential to defraud
additional consumers.
? Peer-to-peer cryptocurrency exchanges are online marketplaces that connect buyers and sellers of cryptocurrencies.
These platforms enable them to conduct direct business with one another without the need for intermediaries. Because of
their decentralized nature, the cryptocurrency sent and received via peer-to-peer exchanges cannot be intercepted or frozen
by law enforcement.
3 According to Elliptic Connect, a blockchain analytics tool, some $1.2 billion worth of stolen crypto assets have
been swapped using decentralized exchanges. Arda Akartuna, Around $1.2 billion from crypto hacks funneled
through decentralized exchanges, ELLIPTIC CONNECT, https://hub.elliptic.co/analysis/around-1-2-billion-from-
crypto-hacks-funneled-through-decentralized-exchanges/ (June 10, 2022).
2
FACTS
The AGO’s Complaint arises out of the following facts, which are set forth in detail in
the accompanying documents: (1) the Affidavit of Rafal Lepicki (the “Lepicki Aff.”); (2) the
Affidavit of Benjamin Potter, together with the exhibits attached thereto (the “Potter Aff.”); (3)
the Affidavit of Edward Cherubin (“Cherubin Aff.”); and (4 the Affidavit of Diana Hooley,
along with the exhibits attached thereto (the “Hooley Aff.”).
Since at least February 2024, XEX has been operating a fraudulent investment scheme
that targets inexperienced investors who reside in the United States, including in the
Commonwealth. See generally Lepicki Aff., Cherubin Aff. §§ 3-4. XEX’s representatives seek
out potential victims through online social media websites such as X, formerly known as
Twitter.* Complaint § 11. Once the XEX representatives successfully connect with potential
victims, they transfer the conversation to WhatsApp,° a messaging application. Complaint 4 13.
To gain the potential victims’ trust, the XEX representatives engage in frequent and
personal conversations that display heightened interest in the daily, romantic, and work lives of
the victims. Lepicki Aff. §§ 3-5, Complaint §§§13-14. During these conversations, the XEX
representatives also mention that they engage in profitable cryptocurrency trading to get the
victims interested in investing. Lepicki Aff. § 3, Complaint § 15. They tell potential victims that
they have made great returns on buying and selling crypto. Lepicki Aff. 4 3, Complaint §§ 12-
ES:
4X, https://x.com. (last visited June 20, 2024).
5 WHATSAPP, https://www.whatsapp.com (last visited June 20, 2024).
3
XEX makes misrepresentations on its website. For example, XEX purports itselfto be a
platform on which investors can “buy, sell and trade cryptocurrencies anytime anywhere” and
“trade digital assets with confidence.” Complaint § 7.
Once the victims become interested in trading cryptocurrency through XEX, its
representatives instruct them to open an XEX account through its website and fund it with
cryptocurrency by using a legitimate cryptocurrency exchange, such as Kraken. Complaint { 18,
Lepicki Aff. § 4.
Once the victims fund their XEX accounts with cryptocurrency, the XEX platform shows
their investments earning substantial gains. Lepicki Aff. { 5, Complaint § 19.
To further encourage the victims to continue investing, the representatives offer
incentives such as bonuses for investing certain minimum amounts, and XEX representatives
also offer to invest their own funds into the victims’ XEX accounts. Lepicki Aff. §§ 4-5,
Complaint §f§ 22-23.
The victims realize that they have been scammed when they try to withdraw their
investments after seeing fictitious growth in their balance. Complaint §] 24-27, Lepicki {§ 6-7.
XEX requires victims to provide a fund password to withdraw their funds. Jd. When victims do
not have the fund password, they are required to pay a significant fee to “reset” the password. Jd.
However, after doing so, XEX cites additional hurdles, such as additional fees or security
concerns. /d. To overcome these hurdles, XEX tells victims they must deposit even more funds
into the account. /d. Once victims stop making the requested deposits, their requests for
withdrawals remain unanswered, and XEX freezes the accounts, preventing the victims from
withdrawing their funds. Jd.
© KRAKEN, https://kraken.com/is (last visited June 20, 2024). Kraken is a legitimate cryptocurrency exchange.
4
The AGO used blockchain analysis tools to examine the blockchain records of the
transfers of cryptocurreney made by a Massachusetts victim to XEX. Potter Aff. §§ 10-15. The
Commonwealth traced the victim’s funds, via several transactions, to wallets hosted by
Binance. Id.
The funds were traced to the following Binance wallets: wallet addresses ending in SMCJ
and uAsj. Potter Aff. (10-15. (“Binance Wallets”). The AGO contacted Binance to inquire
about the Binance Wallets. Binance advised that Binance Wallets were registered to residents of
East Asia and that they had a combined estimated $597,105 worth of cryptocurrency in it as of
May 9, 2024. Hooley Aff. §§ 4, 8. The AGO then requested that Binance place a withdrawal
freeze on the assets in the Binance Wallets and received an approval for a courtesy temporary
freeze that is set to expire on June 28, 2024. Hooley Aff. §§ 5-8.
Despite the above-mentioned temporary courtesy freeze granted by Binance, it is within
the sole discretion of Binance whether to release the courtesy freeze upon its expiration or even
maintain it as agreed. Absent a TRO, Binance will be free to release the courtesy freeze, which
will allow XEX to abscond with the victims’ funds by moving them to a cryptocurrency
marketplace, such as a peer-to-peer exchange, where they would be inaccessible to the
Commonwealth for any recovery.
As of the date of the filing, XEX maintains a website, however, a server error is
preventing access to the website. Potter Aff. {4. The AGO’s Complaint alleges that, based on
the foregoing, XEX violated Mass. Gen. Laws ch. 93A. The material submitted in support of the
AGO’s motion provides ample evidence, not only of XEX’s wrongdoing as alleged in the
Complaint, but also the need for a TRO that would prevent further violations of Mass. Gen.
Laws Ann. ch. 93A and protect investors from any additional harm arising out of XEX’s ongoing
conduct. And, to preserve the status quo and ensure that XEX does not further dissipate the
assets necessary to pay the likely monetary judgment the AGO will obtain, the AGO seeks an
order freezing the assets held in the Binance Wallets.
ARGUMENT
I. Defendant Is Subject to Personal Jurisdiction in the Commonwealth
XEX is subject to personal jurisdiction in the Commonwealth pursuant to Mass. Gen.
Laws Ann. ch. 223A, § 3 (c) or, alternatively, pursuant to Mass. Gen. Laws Ann. ch. 223A, § 3
(a). Subsection (c) of the statute permits jurisdiction over a nonresident defendant who “cause[s]
tortious injury by an act or omission in this commonwealth.” City of Springfield v. Purdue
Pharma, L.P., No. 1984CV01733, 2020 WL 2193690, at *3 (Mass. Super. Feb. 21, 2020).
“Knowingly sending or causing to be sent a false statement into a forum state, intending that it
should be relied upon to the injury of a resident of that state, is conduct which, for jurisdictional
purposes, falls within subsection (c).” /d., citing Scuderi Grp., LLC v. LGD Tech., LLC, 575
F.Sup.2d 312, 320-21 (D. Mass. 2008). See also Comm. v. Purdue Pharma, L.P., No.
1884CV01808 (Mass. Super. Oct. 8, 2019).
Here, XEX sent or caused to be sent numerous false representations regarding purported
lucrative earnings from investing in cryptocurrency through its platform. It distributed these
representations via WhatsApp and through its website, with knowledge that they would be
received in the Commonwealth and intending that the recipients rely on them to send funds to
XEX. The Massachusetts victim told the XEX representative with whom he communicated that
he lives and works in Massachusetts. Complaint { 12, Lepicki Aff. { 3.
Subsection 3(a) of Mass. Gen. Laws Ann. ch. 223A permits jurisdiction over a
nonresident defendant who transacts business in the Commonwealth. The term “transacting any
business” has been broadly construed, such that “anything but the most incidental commercial
contact” has been held to be sufficient. Pioneer Mun. High Income Advantage Tr. v. RBC Cap.
Markets, LLC, No. 2020C V00854BLS2, 2020 WL 8182867, at *2 (Mass. Super. Oct. 22, 2020),
citing Cannonball Fund y, Dutchess Capital Mgmt., LLC, 993 N.E.2d 350, 368-69 (Mass. App.
Ct. 2013). “Courts have long held that a nonresident’s communications with a Massachusetts
plaintiff for the purposes of soliciting plaintiff's business constitutes the transaction of business
within the meaning of Section 3(a).” Jd. Here, XEX did precisely that: it had its representatives
send WhatsApp messages and other communications with the knowledge that they would be
received in the Commonwealth, and those communications were sent for the purpose of
soliciting funds to be sent to XEX. The harm at the center of the AGO’s action arose from this
activity, since the communications included the misrepresentations constituting the alleged ch.
93A violations.
II. Ex Parte Temporary Restraining Order Standard Under G.L. ch. 93A, § 4
The Attorney General (through whom the Commonwealth is acting in this matter) has a
specific statutory mandate to protect the public, and pursuant to Mass. Gen. Laws ch. 93A, § 4
(1967), may seek injunctive relief, including a temporary restraining order, when she has reason
to believe that any person is using or is about to use any method or practice declared unlawful by
ch. 93A, § 2. Mass. Gen. Laws ch. 93A, § 4 (1967) (“Whenever the attorney general has reason
to believe that any person is using or is about to use any method, act, or practice declared by
section two to be unlawful, she may bring an action in the name of the commonwealth against
such person to restrain by temporary restraining order or preliminary or permanent injunction the
use of such method, act, or practice.”); see Commonwealth v. Mass. CRINC, 466 N.E.2d 792,
797-78 (Mass. 1984) (the Attorney General “has a general statutory mandate, in addition to any
specific statute mandate, to protect the public interest”). To obtain a temporary restraining order
under ch. 93A, § 4, the Attorney General must prove: (1) there is a likelihood that the Defendant
committed violations of the Massachusetts General Laws, and (2) the grant of the requested
relief will promote the public interest, or alternatively, will not adversely affect the public. See
Commonwealth v. Mass. CRINC, 466 N.E.2d. 792, 798-800 (Mass. 1984). Additionally, where
an ex parte temporary restraining order is requested, it must be the case that “it clearly appears
from specific facts shown by affidavit or by the verified complaint that immediate and
irreparable injury, loss, or damage will result to the applicant before the adverse party or his
attorney can be heard in opposition.” Mass. R. Civ. P. 65(a).
Here, the Commonwealth has met the requirements for an ex parte temporary restraining
order in that: (1) the evidence shows a likelihood that XEX committed violations of ch. 93A, §
2(a), and (2) the requested injunctive relief protects the public interest, specifically because it
would ensure that XEX does not harm more Massachusetts residents through the use of its
website and would protect XEX’s victims from the risk of being permanently deprived of their
funds after the freeze placed by Binance expires.
IIL. Commonwealth is Likely to Succeed on Its Claims
The AGO makes a substantial showing that XEX violated Mass. Gen. Laws Ann. ch.
93A, § 2(a) (1978) by obtaining investor funds through its investment scheme intended to
defraud U.S. customers, including those in the Commonwealth, and by making untrue statements
of material fact in its communications with potential investors. Attached to this memorandum is
an affidavit from a Massachusetts victim of XEX’s scheme. Also attached to this memorandum
is an affidavit from an AGO investigator showing how the AGO traced the Massachusetts
victim’s funds to the Binance Wallets.
There is also ample evidence that the statements made by XEX are material because they
tend to induce potential investors to invest their funds through promises of high rates of return
with low risk. A reasonable investor would want to know that their funds will not generate the
promised returns from trading through XEX, but instead, will simply be stolen. See Marram v.
Kobrick Offshore Fund, Ltd., 809 N.E.2d 1017, 1030 (Mass. 2004) (“The test whether a
statement or omission is material is objective: there must be a substantial likelihood that the
disclosure of the omitted fact would have been viewed by the reasonable investor as having
significantly altered the ‘total mix’ of information made available.”).
The victims entangled in XEX’s scheme are unable to retrieve their investments, let alone
the promised returns. Lepicki Aff. {{ 6-7. When victims reach out to XEX to request the release
of their investments, XEX requires additional, substantial payments that the victims may not be
able to afford. Id.
Defendant’s repeated and ongoing false statements regarding risk and expected returns on
trades made through XEX and its failure to return the victims’ investments constitute an unfair
practice in violation of M.G.L. ch. 93A, § 2(a). Chapter 93A, § 2(a) prohibits “unfair or
deceptive acts or practices in the conduct of any trade or commerce.” A practice is unfair under
ch. 93A if “it is (1) within the penumbra of a common law, statutory, or other established
concept of unfairness; [or] (2) immoral, unethical, oppressive, or unscrupulous...” Morrison v.
Toys “R” Us, Inc., 806 N.E.2d 388, 392 (Mass. 2004), quoting Heller Fin. v. Insurance Co. of N.
Am., 573 N.E.2d 8, 12-13 (Mass. 1991).
IV. The Attorney General’s Requested Relief Is in the Public Interest.
The Attorney General has a statutory mandate to protect the public interest. Mass. Gen.
Laws Ann. ch. 93A, § 4 (1978); Commonwealth v. Mass. CRINC, 466 N.E.2d. 792, 797-78
(Mass. 1984). In bringing actions to enforce Massachusetts law, the Attorney General is “acting
with his broad common law and statutory powers to represent the public interest.” Jd. An
injunction sought by the Attorney General should be granted if there is a likelihood of a statutory
violation and the injunction is in the public interest. Jd. at 798.
The proposed temporary restraining order would enjoin XEX from further harming
Massachusetts consumers through its website. It will also prevent XEX from dissipating victims”
funds and transferring them to a peer-to-peer exchange where they would be inaccessible to U.S.
law enforcement, rendering the AGO unable to collect disgorgement or any penalties obtained
through a final judgement. This relief is in the public interest.
V. The Requested Temporary Restraining Order is Necessary to Protect XEX’s
Victims from Irreparable Loss Before XEX Can Be Heard.
The facts in the Massachusetts victim’s affidavit provide ample support that a TRO is
needed to prevent any future harm to consumers. The TRO requires XEX to disable its website,
and prevent XEX from moving its website to another registrar, which will effectively prevent
XEX from soliciting new customers and therefore, will protect future victims from irreparable
harm. Also, the courtesy freeze placed by Binance is only temporary, and it is in Binance’s full
discretion whether to maintain the freeze. Once it is lifted, XEX would be free to launder the
victims’ funds through peer-to-peer exchanges where the AGO would be unable to collect on any
judgment it is likely to obtain in this litigation.
10
CONCLUSION
For all the foregoing reasons, the Commonwealth respectfully requests that the Court allow
the Commonwealth’s Ex Parte Motion for Temporary Restraining Order, filed herewith.
Respectfully Submitted,
COMMONWEALTH OF MASSACHUSETTS
ee CAMPBELL, ATTORNEY GENERAL
LAME
Diana Hooley, BBO # 685418
Assistant Attorney General
Public Protection & Advocacy Bureau
One Ashburton Place, 18" Floor
Boston, Massachusetts 02108
Tel. (857) 383-7025
diana.hooley@mass.gov
Dated: June 25, 2024
11
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COMMONWEALTH OF MASSACHUSETTS SUFFOLK, ss. SUPERIOR COURT CIVIL ACTION NO. a4. | eG COMMONWEALTH OF MASSACHUSETTS ~ Plaintiff, Vv. wn 0 XEX LTD. Nn Defendant COMMONWEALTH’S MEMORANDUM IN SUPPORT OF ITS EX PARTE MOTION FOR TEMPORARY RESTRAINING ORDER The Commonwealth, by and through the Office of the Attorney General (“AGO”). submits this memorandum in support of its ex parte motion for a temporary restraining order (“TRO”) to enjoin XEX LTD. (“XEX”) from: (1) further violations of G.L. ch. 93A, § 2; (2) making further transactions through cryptocurrency accounts on Binance.com (“Binance”)!, or any other cryptocurrency exchange: (3) removing the assets in the Binance Wallets (defined below); and (4) operating its website, www.xtjunyang.com, or any other websites used by the Defendant in connection to the violations ofch. 93A, § 2 alleged in the Complaint, and from transferring such website domains to a different registrar. A temporary restraining order is necessary to ensure that victims’ funds are not absconded with before the AGO can collect ' BINANCE, https://www.binance.com/en (last visited Mar. 6, 2024). Binance is a cryptocurrency exchange that offers services to account holders that involve facilitating the purchase, sale, and transfer of a variety of digital currencies. disgorgement or any penalties obtained through a final judgment, and to prevent Defendant from participating in further fraudulent activity. XEX represents itself as a trading platform that allows investors to “buy, sell and trade cryptocurrencies anytime anywhere” and “trade digital assets with confidence.” In reality, XEX is just an investment scam and all of its representations about investing and earning profits through its platform are false. This conduct violates Massachusetts consumer protection law G.L. ch. 93A. The Commonwealth traced XEX’s ill-gained assets to several wallets hosted by Binance (the “Binance Wallets”). The AGO requested Binance freeze the assets in the Binance Wallets. Binance agreed to a courtesy temporary freeze which is set to expire on June 28, 2024. Binance has the sole discretion of whether to release the freeze upon its expiration or to even maintain the courtesy freeze as agreed. Absent a TRO, Binance may release its freeze, which will allow XEX to abscond with its victims’ funds by moving them to a cryptocurrency marketplace, such as a peer-to-peer exchange,” where they would be inaccessible to the Commonwealth for any recovery.* Without a freeze on Defendant’s assets, victims’ funds are likely to be laundered through decentralized peer-to-peer exchanges where U.S. law enforcement cannot access them. Additionally, while it continues to operate its website, the Defendant has the potential to defraud additional consumers. ? Peer-to-peer cryptocurrency exchanges are online marketplaces that connect buyers and sellers of cryptocurrencies. These platforms enable them to conduct direct business with one another without the need for intermediaries. Because of their decentralized nature, the cryptocurrency sent and received via peer-to-peer exchanges cannot be intercepted or frozen by law enforcement. 3 According to Elliptic Connect, a blockchain analytics tool, some $1.2 billion worth of stolen crypto assets have been swapped using decentralized exchanges. Arda Akartuna, Around $1.2 billion from crypto hacks funneled through decentralized exchanges, ELLIPTIC CONNECT, https://hub.elliptic.co/analysis/around-1-2-billion-from- crypto-hacks-funneled-through-decentralized-exchanges/ (June 10, 2022). 2 FACTS The AGO’s Complaint arises out of the following facts, which are set forth in detail in the accompanying documents: (1) the Affidavit of Rafal Lepicki (the “Lepicki Aff.”); (2) the Affidavit of Benjamin Potter, together with the exhibits attached thereto (the “Potter Aff.”); (3) the Affidavit of Edward Cherubin (“Cherubin Aff.”); and (4 the Affidavit of Diana Hooley, along with the exhibits attached thereto (the “Hooley Aff.”). Since at least February 2024, XEX has been operating a fraudulent investment scheme that targets inexperienced investors who reside in the United States, including in the Commonwealth. See generally Lepicki Aff., Cherubin Aff. §§ 3-4. XEX’s representatives seek out potential victims through online social media websites such as X, formerly known as Twitter.* Complaint § 11. Once the XEX representatives successfully connect with potential victims, they transfer the conversation to WhatsApp,° a messaging application. Complaint 4 13. To gain the potential victims’ trust, the XEX representatives engage in frequent and personal conversations that display heightened interest in the daily, romantic, and work lives of the victims. Lepicki Aff. §§ 3-5, Complaint §§§13-14. During these conversations, the XEX representatives also mention that they engage in profitable cryptocurrency trading to get the victims interested in investing. Lepicki Aff. § 3, Complaint § 15. They tell potential victims that they have made great returns on buying and selling crypto. Lepicki Aff. 4 3, Complaint §§ 12- ES: 4X, https://x.com. (last visited June 20, 2024). 5 WHATSAPP, https://www.whatsapp.com (last visited June 20, 2024). 3 XEX makes misrepresentations on its website. For example, XEX purports itselfto be a platform on which investors can “buy, sell and trade cryptocurrencies anytime anywhere” and “trade digital assets with confidence.” Complaint § 7. Once the victims become interested in trading cryptocurrency through XEX, its representatives instruct them to open an XEX account through its website and fund it with cryptocurrency by using a legitimate cryptocurrency exchange, such as Kraken. Complaint { 18, Lepicki Aff. § 4. Once the victims fund their XEX accounts with cryptocurrency, the XEX platform shows their investments earning substantial gains. Lepicki Aff. { 5, Complaint § 19. To further encourage the victims to continue investing, the representatives offer incentives such as bonuses for investing certain minimum amounts, and XEX representatives also offer to invest their own funds into the victims’ XEX accounts. Lepicki Aff. §§ 4-5, Complaint §f§ 22-23. The victims realize that they have been scammed when they try to withdraw their investments after seeing fictitious growth in their balance. Complaint §] 24-27, Lepicki {§ 6-7. XEX requires victims to provide a fund password to withdraw their funds. Jd. When victims do not have the fund password, they are required to pay a significant fee to “reset” the password. Jd. However, after doing so, XEX cites additional hurdles, such as additional fees or security concerns. /d. To overcome these hurdles, XEX tells victims they must deposit even more funds into the account. /d. Once victims stop making the requested deposits, their requests for withdrawals remain unanswered, and XEX freezes the accounts, preventing the victims from withdrawing their funds. Jd. © KRAKEN, https://kraken.com/is (last visited June 20, 2024). Kraken is a legitimate cryptocurrency exchange. 4 The AGO used blockchain analysis tools to examine the blockchain records of the transfers of cryptocurreney made by a Massachusetts victim to XEX. Potter Aff. §§ 10-15. The Commonwealth traced the victim’s funds, via several transactions, to wallets hosted by Binance. Id. The funds were traced to the following Binance wallets: wallet addresses ending in SMCJ and uAsj. Potter Aff. (10-15. (“Binance Wallets”). The AGO contacted Binance to inquire about the Binance Wallets. Binance advised that Binance Wallets were registered to residents of East Asia and that they had a combined estimated $597,105 worth of cryptocurrency in it as of May 9, 2024. Hooley Aff. §§ 4, 8. The AGO then requested that Binance place a withdrawal freeze on the assets in the Binance Wallets and received an approval for a courtesy temporary freeze that is set to expire on June 28, 2024. Hooley Aff. §§ 5-8. Despite the above-mentioned temporary courtesy freeze granted by Binance, it is within the sole discretion of Binance whether to release the courtesy freeze upon its expiration or even maintain it as agreed. Absent a TRO, Binance will be free to release the courtesy freeze, which will allow XEX to abscond with the victims’ funds by moving them to a cryptocurrency marketplace, such as a peer-to-peer exchange, where they would be inaccessible to the Commonwealth for any recovery. As of the date of the filing, XEX maintains a website, however, a server error is preventing access to the website. Potter Aff. {4. The AGO’s Complaint alleges that, based on the foregoing, XEX violated Mass. Gen. Laws ch. 93A. The material submitted in support of the AGO’s motion provides ample evidence, not only of XEX’s wrongdoing as alleged in the Complaint, but also the need for a TRO that would prevent further violations of Mass. Gen. Laws Ann. ch. 93A and protect investors from any additional harm arising out of XEX’s ongoing conduct. And, to preserve the status quo and ensure that XEX does not further dissipate the assets necessary to pay the likely monetary judgment the AGO will obtain, the AGO seeks an order freezing the assets held in the Binance Wallets. ARGUMENT I. Defendant Is Subject to Personal Jurisdiction in the Commonwealth XEX is subject to personal jurisdiction in the Commonwealth pursuant to Mass. Gen. Laws Ann. ch. 223A, § 3 (c) or, alternatively, pursuant to Mass. Gen. Laws Ann. ch. 223A, § 3 (a). Subsection (c) of the statute permits jurisdiction over a nonresident defendant who “cause[s] tortious injury by an act or omission in this commonwealth.” City of Springfield v. Purdue Pharma, L.P., No. 1984CV01733, 2020 WL 2193690, at *3 (Mass. Super. Feb. 21, 2020). “Knowingly sending or causing to be sent a false statement into a forum state, intending that it should be relied upon to the injury of a resident of that state, is conduct which, for jurisdictional purposes, falls within subsection (c).” /d., citing Scuderi Grp., LLC v. LGD Tech., LLC, 575 F.Sup.2d 312, 320-21 (D. Mass. 2008). See also Comm. v. Purdue Pharma, L.P., No. 1884CV01808 (Mass. Super. Oct. 8, 2019). Here, XEX sent or caused to be sent numerous false representations regarding purported lucrative earnings from investing in cryptocurrency through its platform. It distributed these representations via WhatsApp and through its website, with knowledge that they would be received in the Commonwealth and intending that the recipients rely on them to send funds to XEX. The Massachusetts victim told the XEX representative with whom he communicated that he lives and works in Massachusetts. Complaint { 12, Lepicki Aff. { 3. Subsection 3(a) of Mass. Gen. Laws Ann. ch. 223A permits jurisdiction over a nonresident defendant who transacts business in the Commonwealth. The term “transacting any business” has been broadly construed, such that “anything but the most incidental commercial contact” has been held to be sufficient. Pioneer Mun. High Income Advantage Tr. v. RBC Cap. Markets, LLC, No. 2020C V00854BLS2, 2020 WL 8182867, at *2 (Mass. Super. Oct. 22, 2020), citing Cannonball Fund y, Dutchess Capital Mgmt., LLC, 993 N.E.2d 350, 368-69 (Mass. App. Ct. 2013). “Courts have long held that a nonresident’s communications with a Massachusetts plaintiff for the purposes of soliciting plaintiff's business constitutes the transaction of business within the meaning of Section 3(a).” Jd. Here, XEX did precisely that: it had its representatives send WhatsApp messages and other communications with the knowledge that they would be received in the Commonwealth, and those communications were sent for the purpose of soliciting funds to be sent to XEX. The harm at the center of the AGO’s action arose from this activity, since the communications included the misrepresentations constituting the alleged ch. 93A violations. II. Ex Parte Temporary Restraining Order Standard Under G.L. ch. 93A, § 4 The Attorney General (through whom the Commonwealth is acting in this matter) has a specific statutory mandate to protect the public, and pursuant to Mass. Gen. Laws ch. 93A, § 4 (1967), may seek injunctive relief, including a temporary restraining order, when she has reason to believe that any person is using or is about to use any method or practice declared unlawful by ch. 93A, § 2. Mass. Gen. Laws ch. 93A, § 4 (1967) (“Whenever the attorney general has reason to believe that any person is using or is about to use any method, act, or practice declared by section two to be unlawful, she may bring an action in the name of the commonwealth against such person to restrain by temporary restraining order or preliminary or permanent injunction the use of such method, act, or practice.”); see Commonwealth v. Mass. CRINC, 466 N.E.2d 792, 797-78 (Mass. 1984) (the Attorney General “has a general statutory mandate, in addition to any specific statute mandate, to protect the public interest”). To obtain a temporary restraining order under ch. 93A, § 4, the Attorney General must prove: (1) there is a likelihood that the Defendant committed violations of the Massachusetts General Laws, and (2) the grant of the requested relief will promote the public interest, or alternatively, will not adversely affect the public. See Commonwealth v. Mass. CRINC, 466 N.E.2d. 792, 798-800 (Mass. 1984). Additionally, where an ex parte temporary restraining order is requested, it must be the case that “it clearly appears from specific facts shown by affidavit or by the verified complaint that immediate and irreparable injury, loss, or damage will result to the applicant before the adverse party or his attorney can be heard in opposition.” Mass. R. Civ. P. 65(a). Here, the Commonwealth has met the requirements for an ex parte temporary restraining order in that: (1) the evidence shows a likelihood that XEX committed violations of ch. 93A, § 2(a), and (2) the requested injunctive relief protects the public interest, specifically because it would ensure that XEX does not harm more Massachusetts residents through the use of its website and would protect XEX’s victims from the risk of being permanently deprived of their funds after the freeze placed by Binance expires. IIL. Commonwealth is Likely to Succeed on Its Claims The AGO makes a substantial showing that XEX violated Mass. Gen. Laws Ann. ch. 93A, § 2(a) (1978) by obtaining investor funds through its investment scheme intended to defraud U.S. customers, including those in the Commonwealth, and by making untrue statements of material fact in its communications with potential investors. Attached to this memorandum is an affidavit from a Massachusetts victim of XEX’s scheme. Also attached to this memorandum is an affidavit from an AGO investigator showing how the AGO traced the Massachusetts victim’s funds to the Binance Wallets. There is also ample evidence that the statements made by XEX are material because they tend to induce potential investors to invest their funds through promises of high rates of return with low risk. A reasonable investor would want to know that their funds will not generate the promised returns from trading through XEX, but instead, will simply be stolen. See Marram v. Kobrick Offshore Fund, Ltd., 809 N.E.2d 1017, 1030 (Mass. 2004) (“The test whether a statement or omission is material is objective: there must be a substantial likelihood that the disclosure of the omitted fact would have been viewed by the reasonable investor as having significantly altered the ‘total mix’ of information made available.”). The victims entangled in XEX’s scheme are unable to retrieve their investments, let alone the promised returns. Lepicki Aff. {{ 6-7. When victims reach out to XEX to request the release of their investments, XEX requires additional, substantial payments that the victims may not be able to afford. Id. Defendant’s repeated and ongoing false statements regarding risk and expected returns on trades made through XEX and its failure to return the victims’ investments constitute an unfair practice in violation of M.G.L. ch. 93A, § 2(a). Chapter 93A, § 2(a) prohibits “unfair or deceptive acts or practices in the conduct of any trade or commerce.” A practice is unfair under ch. 93A if “it is (1) within the penumbra of a common law, statutory, or other established concept of unfairness; [or] (2) immoral, unethical, oppressive, or unscrupulous...” Morrison v. Toys “R” Us, Inc., 806 N.E.2d 388, 392 (Mass. 2004), quoting Heller Fin. v. Insurance Co. of N. Am., 573 N.E.2d 8, 12-13 (Mass. 1991). IV. The Attorney General’s Requested Relief Is in the Public Interest. The Attorney General has a statutory mandate to protect the public interest. Mass. Gen. Laws Ann. ch. 93A, § 4 (1978); Commonwealth v. Mass. CRINC, 466 N.E.2d. 792, 797-78 (Mass. 1984). In bringing actions to enforce Massachusetts law, the Attorney General is “acting with his broad common law and statutory powers to represent the public interest.” Jd. An injunction sought by the Attorney General should be granted if there is a likelihood of a statutory violation and the injunction is in the public interest. Jd. at 798. The proposed temporary restraining order would enjoin XEX from further harming Massachusetts consumers through its website. It will also prevent XEX from dissipating victims” funds and transferring them to a peer-to-peer exchange where they would be inaccessible to U.S. law enforcement, rendering the AGO unable to collect disgorgement or any penalties obtained through a final judgement. This relief is in the public interest. V. The Requested Temporary Restraining Order is Necessary to Protect XEX’s Victims from Irreparable Loss Before XEX Can Be Heard. The facts in the Massachusetts victim’s affidavit provide ample support that a TRO is needed to prevent any future harm to consumers. The TRO requires XEX to disable its website, and prevent XEX from moving its website to another registrar, which will effectively prevent XEX from soliciting new customers and therefore, will protect future victims from irreparable harm. Also, the courtesy freeze placed by Binance is only temporary, and it is in Binance’s full discretion whether to maintain the freeze. Once it is lifted, XEX would be free to launder the victims’ funds through peer-to-peer exchanges where the AGO would be unable to collect on any judgment it is likely to obtain in this litigation. 10 CONCLUSION For all the foregoing reasons, the Commonwealth respectfully requests that the Court allow the Commonwealth’s Ex Parte Motion for Temporary Restraining Order, filed herewith. Respectfully Submitted, COMMONWEALTH OF MASSACHUSETTS ee CAMPBELL, ATTORNEY GENERAL LAME Diana Hooley, BBO # 685418 Assistant Attorney General Public Protection & Advocacy Bureau One Ashburton Place, 18" Floor Boston, Massachusetts 02108 Tel. (857) 383-7025 diana.hooley@mass.gov Dated: June 25, 2024 11