Blank v. Tripoint Global Equities, LLC

• Citation: 338 F.Supp.3d 194
• Decision Date: 31 August 2018
• Docket Number: 17-cv-00876 (ALC)
• Parties: Adam BLANK, individually and as trustee of the Adam Blank 2012 Grat, Acker Family 2012 Gift Trust and Acker Family 2013 Gift Trust, Plaintiffs, v. TRIPOINT GLOBAL EQUITIES, LLC, TriPoint Capital Advisors, LLC, Mark H. Elenowitz and Michael Boswell, Defendants.
• Court: U.S. District Court — Southern District of New York

338 F.Supp.3d 194

Adam BLANK, individually and as trustee of the Adam Blank 2012 Grat, Acker Family 2012 Gift Trust and Acker Family 2013 Gift Trust, Plaintiffs,

v.TRIPOINT GLOBAL EQUITIES, LLC, TriPoint Capital Advisors, LLC, Mark H. Elenowitz and Michael Boswell, Defendants.

17-cv-00876 (ALC)

United States District Court, S.D. New York.

Signed August 31, 2018

Sean Thomas Scuderi, David Jason Pfeffer, Richard Carl Schoenstein, Tarter Krinsky & Drogin LLP, New York, NY, for Plaintiffs.

Mark David Hunter, Jenny D. Johnson-Sardella, Leser Hunter Taubman & Taubman, PLLC, Coral Gables, FL, for Defendants.

OPINION AND ORDER

HON. ANDREW L. CARTER, JR., United States District Judge

Plaintiffs Adam Blank, Acker Family 2012 Gift Trust, and Acker Family 2013 Gift Trust (collectively "Plaintiffs") bring this action against Defendants TriPoint Global Equities, LLC ("TriPoint Global"), TriPoint Capital Advisors, LLC ("TriPoint Capital") (collectively, "TriPoint Entities"), along with Mark H. Elenowitz and Michael Boswell (all collectively "Defendants") alleging violations of Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act"), Sections 9(a)(4) and 9(f) of the Exchange Act, negligent misrepresentation, fraudulent misrepresentation, unjust enrichment and constructive trust, promissory estoppel, breach of fiduciary duty, and violations of New York General Business Law § 349.¹ Defendants move to dismiss the Complaint pursuant to Fed. R. Civ. P. 12(b)(6). For the reasons set forth below, Defendants' motions are GRANTED in part and DENIED in part.

BACKGROUND

I. Factual Background

The following facts are taken from the allegations contained in Plaintiffs' First Amended Complaint ("FAC") as well as the parties' declarations submitted in connection with the instant motion to dismiss. Plaintiffs' allegations are presumed true for the purposes of this motion to dismiss.

Blank is a duly appointed and authorized trustee of the Adam 2012 GRAT, a retained annuity trust, and the Acker Family 2012 and 2013 Gift Trusts, family gift trusts. FAC ¶¶ 7-10. TriPoint Global and TriPoint Capital sell and provide various financial services. Id. TriPoint Global is a registered broker-dealer with the SEC, id. ¶ 12, while TriPoint Capital is not authorized to conduct business in the State of New York and is not a registered broker-dealer, id. ¶ 14. Both entities operate out of the same office in New York and use the same contact information. Id. ¶¶ 11, 13, 21-26. Plaintiffs allege that TriPoint Global and TriPoint Capital operate together. Id. Elenowitz serves as the senior principal and Chief Executive Officer ("CEO") of TriPoint Global and TriPoint Capital as well as their unincorporated affiliate BANQ. Id. ¶ 16. Boswell is the co-founder, President, Chief Operating Officer ("COO"), and Chief Compliance Officer ("CCO") of TriPoint Global, as well as a Managing Director of TriPoint Capital. Id. ¶ 18. Together with Louis Taubman, Elenowitz and Boswell make up the TriPoint Entities' "Executive Team." Id. ¶ 20.

Plaintiffs allege that Defendants were part of a Ponzi scheme. According to the complaint, Defendants—along with Joseph Meli, Steven Simmons, Matthew Harriton, and their corporate entities—raised approximately $81 million from at least 125 investors for purported investments in ticket reselling enterprises in order to enrich themselves. FAC ¶ 1. Meli, Simmons, Hamilton and their corporate entities are currently facing a range of criminal and SEC charges related to this conduct. See id. & n.1. Essentially, Plaintiffs allege that Defendants convinced Plaintiffs to invest in the ticket resale business without conducting the necessary due diligence, and without disclosing that they were earning commissions from the Ponzi operators for soliciting investments in that business. Id. ¶¶ 4-5, 51.

A. January 11, 2016 Meeting

On January 11, 2016, Blank and Elenowitz met at a restaurant to discuss the possibility of developing a business relationship. FAC ¶ 30. Through this relationship, Defendants would provide financial advisory services and assist Plaintiffs in finding investment opportunities. Id. During the meeting, Blank informed Elenowitz that he "had no appetite for high risk investments" and that "due diligence and safe investments would be the primary considerations in determining whether [Plaintiffs] would authorize the trusts he directed to make investments with [TriPoint]." Id. ¶ 35.

Plaintiffs allege that Elenowitz made a series of material misstatements to Blank in response. First, Elenowitz represented himself as a trusted advisor that focused on protecting his clients and investors. Id. ¶ 36. Second, Elenowitz stated that the ticket resale business was secure. Elenowitz represented that the ticket resale business was a "no-brainer," Blank "can't lose," any investments would "fully meet [Plaintiff's] stated requirements," and such investments were the "the safest and most conservative investments." Id. ¶¶ 36, 38, 42. Specifically, Elenowitz conveyed that the investment was safe because the "tickets had intrinsic value," and thus "could always be sold at ‘face value’ " and, further, the operators of the investment scheme "had purchased solid insurance in case of event cancellations," meaning "all investors were fully covered should there even be one cancellation." Id. ¶ 43. Third, Elenowitz did not reveal that TriPoint Global was a licensed broker-dealer that was acting as a promoter for the operators of the alleged Ponzi scheme and was receiving commissions for recommending investments in the ticket resale business. Id. ¶¶ 51; 67. To the contrary, Elenowitz told Blank that Defendants would forgo commissions on Plaintiffs' investments to establish a long term business and investment relationship. Id. ¶ 51. Finally, Elenowitz represented that he and TriPoint conducted investigations into, and due diligence of, the ticket resale business. Elenowitz emphasized to Blank that the TriPoint Entities "conducted complete due diligence on every proposed investment." Id. ¶ 36. Indeed, he "personally reviewed and analyzed the ticket resale companies' financial statements and business records to ensure that all corporate governance was handled appropriately including ensuring that the operators were handling financial and related issues in a customary and prudent manner." Id. ¶ 40; accord ¶ 43 ("the TriPoint team reviewed the business records and documents to support the purchase and sale of the millions of dollars of event tickets"). Elenowitz further represented that, in addition to conducting due diligence, he "personally knew the owners of the ticket resale business" and met with them regularly. Id. ¶ 40. He also stated that two of his partners and many TriPoint clients have been invested in the ticket resale business, "always receiving the promised returns." Id. ¶ 41.

Also at this meeting, Elenowitz invited Blank to "take a look at the three TriPoint websites, including TriPoint Advisory, TriPoint Global and BANQ." Id. ¶ 31. At various points during 2016, Blank reviewed TriPoint's websites and relied upon the information, especially TriPoint's pronouncement that they provide "Trusted Advice" and have "specialized practices in capital markets, advisory, corporate consulting ... corporate governance and compliance services." Id.

B. January to December 2016 Conversations

Elenowitz made similar representations at various times between January and December 2016. For instance, Elenowitz represented that he would "have [Blank's] back and make sure that every investment was fully and completely vetted, reviewed and investigated before [Elenowitz] and TriPoint would make a recommendation to [Plaintiffs]" to make an investment. Id. ¶ 44. Indeed, Elenowitz represented that he and TriPoint were "uniquely positioned to assist" Plaintiffs. Id. ¶ 45. The "TriPoint Business Model" of the three experienced professionals would work together "to ensure that all investments were fully vetted and investigated" and there "would be regular evaluations concerning the issuer's representations about them." Id. ¶ 47. Defendants continually represented to Plaintiffs that their various companies would act together to provide Plaintiffs with "continued review, oversight, and investigation" of Plaintiffs' investments. Id. ¶ 60. They specified that they "appl[ied] financial and accounting tests to verify receipts and the subject ticket business activities," "examin[ed] the Ponzi Operators' books and records," and "attend[ed] regular meetings to ‘check in’ with the Ponzi Operators and to monitor business activity and performance." Id. ¶ 58.

Plaintiffs assert that, in reality, this due diligence was either not performed or not reasonably undertaken, and as such Defendants "had no reasonable basis whatsoever to recommend" these investments. Id. ¶ 61.

C. Investments

Blank made his first investment in ticket resales around March 14, 2016. Elenowitz had told Blank that he was able to get him two of the "best and most sought after ticket funds"—Hamilton and Adele—but "only if [Blank] also invested in the ‘Main Fund.’ " Id. ¶ 52. Accordingly, Blank invested $300,000 that would be split evenly between the ‘Hamilton Fund,’ ‘Main Fund,’ and ‘Desert Trip Fund.’ Id. ¶¶ 52-53.

From March through December 2016, Blank regularly checked in and spoke with Elenowitz, who continued to assure Blank that "the ticket business was in great shape," Plaintiffs' investments were sound, and Defendants were conducting "regular review of the ticket business" which "revealed absolutely no concern or red flags." Id. ¶¶ 54-55. After continually receiving assurances from Elenowitz, around August 10, 2016 Plaintiffs invested an additional $1,200,000. Id. ¶ 57.

Plaintiffs assert that they relied on the Defendants' misrepresentations and omissions in deciding to invest in the ticket resale scheme. Id. ¶ 62. Those misrepresentations, in conjunction with Defendants' "known failure to conduct a reasonable review and...