Fei Jing v. Sun
| Docket Number | CV 21-2350 (GRB)(AYS) |
| Decision Date | 04 January 2022 |
| Parties | FEI JING, LUOSO LI, JINYU HE, DUANYANG WANG, TIAN LAN, CHUYAO FENG, Plaintiffs, v. YAN SUN, Defendant. |
| Court | U.S. District Court — Eastern District of New York |
REPORT AND RECOMMENDATION
Plaintiffs commenced this action on April 28, 2021 against Defendant Yan Sun (“Defendant” or “Sun”), pursuant to the Commodity Exchange Act (the “CEA” or the “Act”) and regulations promulgated thereunder, as well as state law. (Compl., Docket Entry (“DE”) [1].) The CEA causes of action allege claims of fraud pursuant to the Act and regulations promulgated thereunder and failure to register with the Commodity Futures Trading Commission (the “CFTC” or the “Commission”). See 7 U.S.C. §§ 6b, 6o1(B) and 9 (fraud claims) and 7 U.S.C. §§ 6d, 6m(1)(failure to register claims); 17 C.F.R. §180.1(a); 17 C.F.R. §3.10 (CFTC regulations). Plaintiffs' common law claims allege conversion, breach of contract and unjust enrichment.
Generally all claims are based upon the factual allegation that Defendant held himself out as an investment instructor well-versed in the buying and selling of the cryptocurrency known as Bitcoin (“BTC”). Plaintiffs, who often refer to Defendant as “Dean, ” allege that they were enrolled in Defendant's online investment academy referred to as the “Real Trade Institute” (“RTI”). Plaintiffs allege that Sun failed to invest funds transferred to him to purchase BTC. Those funds either in the form of U.S. dollars, Chinese Yuan (also referred to as “RMB”) and/or BTC, were transferred electronically to Sun for the purchase of BTC. Plaintiffs state that they were assured payment of quarterly dividends. Each was also specifically told that their investments were risk-free, in that they were guaranteed the return of principal at any time.
Each Plaintiff sought to exercise their right to withdraw their BTC and the guaranteed return of their investments. When their requests were ignored, they commenced this action. Here, Plaintiffs do not seek only the promised return of their investments in the form and amount of currencies used for their purchases of BTC. Instead, Plaintiffs seek a judgment in U.S. dollars representing the current/judgment day value of the 23 Bitcoins that the Defendant was supposed to have purchased for them. (See generally Compl., DE [1].)
After Defendant neither answered nor moved with respect to the Complaint, Plaintiffs sought, and the Clerk of the Court entered, a notation of default. (DE [8], [9].) Plaintiffs thereafter sought entry of judgment in, as noted above, the judgment day value of 23 BTC. (DE [10].) Relying on the known fluctuation of the value of BTC, Plaintiffs also sought expedited consideration of their request for a judgment of default. Shortly after directing Plaintiffs to complete the District Court's default judgment form, District Judge Brown vacated his order requiring that the form be completed. Instead, in light of the claimed fluctuation of damages, Judge Brown referred the motion to this Court for a Report and Recommendation as to whether the judgment sought should be granted and the appropriate amount of damages, costs and fees, if any, to be awarded. (Orders of Brown, J., dated June 8, 2021.)
After referral of the motion, this Court directed Plaintiffs to file a memorandum of law addressing the standards of law under the CEA and their position with respect to the claimed entitlement to relief thereunder. The Court also directed Plaintiffs to brief their claimed justification to expedited review, with supportive caselaw. (Order of Shields, M.J., dated June 14, 2021.) Plaintiffs promptly complied with this Court's directive. However, upon review of Plaintiffs' submissions (which consisted of nearly impossible to interpret screen shots of Chinese language conversations held via the “WeChat” app and evidence of wire transfers of dollars, RMB, and BTC to Defendant's account), the Court directed that an in-person hearing be held on November 15, 2021. (Order of Shields, M.J., dated Oct. 14, 2021.) Counsel was directed to be prepared to address Plaintiffs' claims on the merits and, in particular, the claim that they were entitled to a dollar judgment reflecting the value of BTC on the date that judgment would be entered. In addition to presenting each Plaintiff's testimony, Plaintiffs were directed to present an expert to explain and support their valuation of BTC.
On November 15, 2021, this Court held the scheduled hearing.[1] Neither the Plaintiffs nor their counsel appeared in Court. Instead, pursuant to their requests, this Court held a hearing where all attended remotely. While Plaintiffs' counsel provided for an interpreter to appear virtually, counsel did not provide for real-time interpreting. Given the fact that most of the six Plaintiffs do not speak English and each had their own set of circumstances to discuss, it became apparent that conducting the hearing without real-time interpreting was not a viable way to proceed. The Court therefore adjourned the hearing. Additionally, since the exhibits submitted in support of Plaintiffs' claims were presented in a nearly incomprehensible fashion, the Court directed Plaintiffs' counsel to re-submit those exhibits in a way that made more sense. The Court trusted that counsel would be able to re-submit the Chinese language WeChat screen shots, upon which the Plaintiffs rely in support of all claims, in a manner to make them understandable. The Court deemed clear presentation of this evidence critical to fulfill its obligation to make a comprehensible recommendation to the District Court. Clear presentation of the WeChat conversations supporting Plaintiffs' claims was particularly essential to this Court's task since there are no contracts, and nothing else in writing, between or among any of the Plaintiffs and the Defendant. Instead, the Chinese language WeChat screen shots are the only evidence of any purchase or investment agreement, or alleged fraud.
Plaintiffs submitted additional exhibits to the Court on November 22, 2021. While the newly filed exhibits include translations, the presentation of those exhibits are, to say the very least, less than helpful. Instead of presenting each Plaintiff's affidavit with their own translated WeChat conversations attached, counsel presented each Plaintiff's affidavit separately, with their WeChat screenshots elsewhere on the docket. To make matters worse, the “courtesy” copies of the affidavits are labeled with letters (without tracking or even noting the ECF docketing numbers), while the documents submitted on ECF bear numbers. Additionally, the newly submitted affidavits and documents, which appear under Docket Entry [16], make no clear reference to the earlier submitted documents under Docket Entry [13]. The eighty pages of group chat screenshots are nearly impossible to decipher because Plaintiffs' affidavits do not disclose any screen names or profile pictures they used during the course of conversations. To make sense of Plaintiffs' submission, the Court was required, as detailed below, to piece together the variously submitted affidavits and exhibits as best it could.
In any event, upon review of Plaintiffs' renewed submissions and exhibits, the Court finds that any further hearing, for which Plaintiffs will undoubtedly request virtual appearances, would no longer be helpful. Instead, upon review of the documents submitted and for the reasons set forth below, this Court respectfully recommends that Plaintiffs' motion for default judgment be granted in part and denied in part, such that it be held that the well-pleaded allegations of the Complaint entitle Plaintiffs to a judgment finding that Defendant violated the broadest anti-fraud provision of the Act by lying to the Plaintiffs about Sun's purchase of BTC, his expertise in the buying and management of BTC investment, and Plaintiffs' rights to withdraw the principal amount of their investments or their Bitcoins at any time. As to damages, the Court recommends that damages be awarded to each of the Plaintiffs in U.S. dollars in the amounts that each invested with Defendant. All Plaintiffs should also be awarded post-judgment interest.
Plaintiffs are six individuals who allege that they were induced to transfer funds (in either U.S. currency, BTC or RMB) to Defendant. The discussion below is based upon the Court's review of the confusing documents submitted, but upon which the Court is prepared to make factual recommendations to the District Court.
Before turning to the recommendations, the Court illustrates its frustration with Plaintiffs' submissions, and describes what is necessary to piece together the claim of just one Plaintiff - the first named Plaintiff, Fei Jing (“Jing”). To make sense of this claim, the Court had to refer to four separately submitted documents. First there is Jing's affidavit, which appears as Docket Entry [13-10]. This is Jing's affidavit in support of the motion for a judgment of default. That affidavit refers to confirmation of his wire transfer to Sun as “attached hereto as Exhibit 1.” Exhibit 1, however, is not “attached” to Jing's affidavit, but, instead, appears as Docket Entry [13-3]. The WeChat screenshots upon which all Plaintiffs rely similarly appear as unmoored Exhibits in Docket Entry [16]. For Plaintiff Jing, the affidavit attesting to the translation appears as Docket Entry [16-1]. That affidavit states that “attached hereto” as Exhibit 9 are copies of the translated conversations. Exhibit 9 is not attached to Docket Entry [16-1]. Instead, it appears as Docket Entry [16-9], which, while requiring an unwieldy navigation through the Court's ECF System, makes...
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