Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 1 of 30 PageID #:421
`
`
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`Plaintiff,
`
`
`
`vs.
`
`SECURITIES AND EXCHANGE
`COMMISSION,
`
`
`
`
`
`VLADIMIR OKHOTNIKOV,
`JANE DOE a/k/a LOLA FERRARI,
`MIKAIL SERGEEV,
`SERGEY MASLAKOV,
`SAMUEL D. ELLIS,
`MARK F. HAMLIN,
`SARAH L. THEISSEN,
`CARLOS L. MARTINEZ,
`RONALD R. DEERING,
`CHERI BETH BOWEN, and
`ALISHA R. SHEPPERD,
`
`
`
`
`
`
`Defendants.
`
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`)
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`)
`)
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`
`Case No. 22-CV-03978
`
`Judge Jorge L. Alonso
`
`MEMORANDUM IN SUPPORT OF DEFENDANT VLADIMIR OKHOTNIKOV’S
`MOTION TO DISMISS PLAINTIFF’S COMPLAINT
`
`
`
`
`
`
`
`

`

`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 2 of 30 PageID #:422
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`
`
`TABLE OF CONTENTS
`INTRODUCTION .......................................................................................................................... 1 
`
`FACTUAL BACKGROUND ......................................................................................................... 2 
`
`ARGUMENT .................................................................................................................................. 3 
`
`I. 
`
`This Court Lacks Personal Jurisdiction Over Okhotnikov ................................................. 3 
`
`A. 
`
`B. 
`
`C. 
`
`Legal Standards ....................................................................................................... 3 
`
`Okhotnikov Is A Foreign National And Is Not Subject to General
`Jurisdiction In The United States ............................................................................ 4 
`
`The SEC Fails to Make the Required Prima Facie Showing of Specific
`Jurisdiction .............................................................................................................. 4 
`
`1. 
`
`2. 
`
`Group Pleadings Cannot Satisfy the Personal Jurisdiction
`Requirement ................................................................................................ 5 
`
`Okhotnikov’s Alleged Use of Social Media & The Internet Do Not
`Show Purposeful Direction ......................................................................... 6 
`
`II. 
`
`The SEC Fails to State a Claim........................................................................................... 7 
`
`A. 
`
`B. 
`
`Legal Standards ....................................................................................................... 7 
`
`The SEC Fails to State A Claim Because the Smart Contracts Are Not
`Securities ................................................................................................................. 8 
`
`1. 
`
`Expected Profits Were Not Derived Solely from the Efforts of
`Others .......................................................................................................... 9 
`
`C. 
`
`The Securities Act and Exchange Act Do Not Apply To The
`Extraterritorial Transactions At Issue ................................................................... 11 
`
`1. 
`
`2. 
`
`3. 
`
`Forsage Was Not Listed on a Domestic Exchange ................................... 12 
`
`Forsage’s Smart Contract Transactions Occurred Outside of the
`United States ............................................................................................. 12 
`
`Any Offers Were Not Domestic ............................................................... 14 
`
`D. 
`
`Plaintiff Fails to Allege Securities Fraud with Particularity ................................. 14 
`
`1. 
`
`The SEC’s Section 10(b), 17 and Rule 10b-5 Claims against
`Okhotnikov Have Not Been Pled With Particularity ................................ 16 
`
`CONCLUSION ............................................................................................................................. 20
`
`ii
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`

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`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 3 of 30 PageID #:423
`
`
`
`Cases
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`Aaron v. SEC,
`446 U.S. 680 (1980) .................................................................................................................19
`Absolute Activist Value Master Fund Ltd. v. Ficeto,
`677 F.3d 60 (2d Cir. 2012).......................................................................................................12
`AFI Holdings of Ill., Inc. v. Nat’l Broad. Co.,
`239 F. Supp. 3d 1097 (N.D. Ill. 2017) .......................................................................................5
`Anderson v. Binance,
`2022 WL 976824 (S.D.N.Y. Mar. 31, 2022) ...........................................................................13
`be2 LLC v. Ivanov,
`642 F.3d 555 (7th Cir. 2011) .................................................................................................6, 7
`Bell Atl. Corp. v. Twombly,
`550 U.S. 544 (2007) ...................................................................................................................7
`Bell v. Disner,
`2014 WL 6978690 (W.D.N.C. Dec. 9, 2014) ............................................................................9
`Berdeaux v. OneCoin Ltd.,
`561 F. Supp. 3d 379 (S.D.N.Y. 2021) ........................................................................................5
`Bishop v. Airline Pilots Ass’n, Int’l,
`900 F.3d 388 (7th Cir. 2018) ...................................................................................................17
`Calder v. Jones,
`465 U.S. 783 (1984) ...................................................................................................................5
`Conlee v. WMS Indus., Inc.,
`2012 WL 3042498 (N.D. Ill. July 25, 2012) ......................................................................15, 16
`Cornielsen v. Infinium Capital Mgmt., LLC,
`916 F.3d 589 (7th Cir. 2019) .....................................................................................................8
`Deschepper v. Midwest Wine & Spirits, Inc.,
`84 F. Supp. 3d 767 (N.D. Ill. 2015) .........................................................................................15
`Einhaus v. Textmunication Holdings, Inc.,
`2018 WL 398258 (N.D. Ill. Jan. 12, 2018) ..............................................................................18
`Felland v. Clifton,
`682 F.3d 665 (7th Cir. 2012) .....................................................................................................4
`Ford Motor Co. v. Montana Eighth Jud. Dist. Ct.,
`592 U.S. ___, 141 S. Ct. 1017 (2021) ....................................................................................3, 4
`Forseth v. Village of Sussex,
`199 F.3d 363 (7th Cir. 2000) .....................................................................................................7
`
`iii
`
`

`

`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 4 of 30 PageID #:424
`
`
`
`Greer v. Advanced Equities, Inc.,
`683 F. Supp. 2d 761 (N.D. Ill. 2010) .......................................................................................18
`Heyde v. Pittenger,
`633 F.3d 512 (7th Cir. 2011) .....................................................................................................8
`Int’l Shoe Co. v. State of Wash., Off. of Unemployment Comp. & Placement,
`326 U.S. 310 (1945) ...................................................................................................................4
`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) .................................................................................................................20
`Keeton v. Hustler Mag., Inc.,
`465 U.S. 770 (1984) ...................................................................................................................4
`Loginovskaya v. Batratchenko,
`764 F.3d 266 (2d Cir. 2014).....................................................................................................13
`U.S. ex rel. Lusby v. Rolls-Royce Corp.,
`570 F.3d 849 (7th Cir. 2009) .....................................................................................................8
`Mitzner v. Cardet Int’l, Inc.,
`358 F. Supp. 1262 (N.D. Ill. 1973) ............................................................................................9
`Morrison v. Nat’l Australia Bank Ltd.,
`561 U.S. 247 (2010) ...........................................................................................................11, 12
`N. Grain Mktg., LLC v. Greving,
`743 F.3d 487 (7th Cir. 2014) .....................................................................................................3
`Nelson by Carson v. Park Indus., Inc.,
`717 F.2d 1120 (7th Cir. 1983) ...................................................................................................3
`Pearlstein v. BlackBerry Ltd.,
`93 F. Supp. 3d 233 (S.D.N.Y. 2015) ........................................................................................18
`Pinter v. Dahl,
`486 U.S. 622 (1988) ...........................................................................................................19, 20
`Plumbers & Pipefitters Loc. Union v. Zimmer,
`673 F. Supp. 2d 718 (S.D. Ind. 2009) ......................................................................................18
`Robinson v. Glynn,
`349 F.3d 166 (4th Cir. 2003) .....................................................................................................9
`Saleh as Tr. of Nabil Saleh M.D. LTD Pension Plan v. Merch.,
`2019 WL 1331788 (N.D. Ill. Mar. 25, 2019) ...........................................................................17
`SEC v. Chicago Convention Ctr., LLC,
`961 F. Supp. 2d 905 (N.D. Ill. 2013) ......................................................................................12
`SEC v. Fraser,
`2009 WL 2450508 (D. Ariz. Aug. 11, 2009) .....................................................................15, 16
`SEC v. Goldman Sachs & Co.,
`790 F. Supp. 2d 147 (S.D.N.Y. 2011) ................................................................................11, 14
`
`iv
`
`

`

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`
`
`
`SEC v. JB Oxford Holdings, Inc.,
`2004 WL 6234910 (C.D. Cal. Nov. 9, 2004) .....................................................................19, 20
`SEC v. Kameli,
`2020 WL 2542154 (N.D. Ill. May 19, 2020) ...........................................................................17
`SEC v. Koscot Interplanetary, Inc.,
`497 F.2d 473 (5th Cir. 1974) ...................................................................................................10
`SEC v. Lauer,
`864 F. Supp. 784 (N.D. Ill. 1994) ..............................................................................................9
`SEC v. Maio,
`51 F.3d 623 (7th Cir. 1995) .....................................................................................................16
`SEC v. Ogle,
`2000 WL 45260 (N.D. Ill. Jan. 11, 2000) ................................................................................19
`SEC v. Randy,
`38 F. Supp. 2d 657 (N.D. Ill. 1999) .........................................................................................17
`SEC v. Ripple Labs, Inc.,
`2022 WL 762966 (S.D.N.Y. Mar. 11, 2022) .....................................................................11, 14
`SEC v. SeeThruEquity, LLC,
`2019 WL 1998027 (S.D.N.Y. Apr. 26, 2019)............................................................................8
`SEC v. Steffes,
`805 F. Supp. 2d 601 (N.D. Ill. 2011) .......................................................................................17
`SEC v. Sys. Software Assocs., Inc.,
`145 F. Supp. 2d 954 (N.D. Ill. 2001) .......................................................................................17
`SEC v. Ustian,
`229 F. Supp. 3d 739 (N.D. Ill. 2017) .......................................................................................17
`SEC v. W.J. Howey Co.,
`328 U.S. 293 (1946) .............................................................................................................9, 10
`Shirley v. Jed Capital, LLC,
`724 F. Supp. 2d 904 (N.D. Ill. 2010) .........................................................................................9
`Sonterra Cap. Master Fund v. Credit Suisse AG,
`277 F. Supp. 3d 521 (S.D.N.Y. 2017) ......................................................................................14
`Tamburo v. Dworkin,
`601 F.3d 693 (7th Cir. 2010) .....................................................................................................6
`In re Tezos Sec. Litig.,
`2018 WL 4293341 (N.D. Cal. Aug. 7, 2018) ..........................................................................13
`uBID, Inc. v. GoDaddy Grp., Inc.,
`623 F.3d 421 (7th Cir. 2010) .....................................................................................................7
`United States v. Holtzclaw,
`950 F. Supp. 1306 (S.D.W.Va. 1997), aff’d in part, rev’d in part 131 F.3d 137 (4th Cir.
`1997) ........................................................................................................................................10
`
`v
`
`

`

`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 6 of 30 PageID #:426
`
`
`
`Virnich v. Vorwald,
`664 F.3d 206 (7th Cir. 2011) .....................................................................................................8
`Williams v. Block one,
`2022 WL 5294189 (S.D.N.Y. Aug. 15, 2022) .........................................................................13
`Zurich Cap. Mkt., Inc. v. Coglianese,
`388 F. Supp. 2d 847 (N.D. Ill. 2004) .........................................................................................3
`
`Statutes
`
`15 U.S.C.
`§ 77b(a)(1) .................................................................................................................................8
`§ 77v(a) ......................................................................................................................................3
`§ 78aa(a) .....................................................................................................................................3
`§ 78c(a)(10) ................................................................................................................................8
`
`Rules
`
`Fed. R. Civ. P. 9(b) ..........................................................................................................................8
`
`Other Authorities
`
`Annika Feign, What Is Blockchain Technology?,
`CoinDesk (Nov. 22, 2022), https://www.coindesk.com/learn/what-is-blockchain-
`technology/ ...............................................................................................................................13
`Benedict George, What Is a Node?
`CoinDesk (Mar 13, 2022), https://www.coindesk.com/learn/what-is-a-node/ ........................13
`
`vi
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`

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`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 7 of 30 PageID #:427
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`
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`Defendant Vladimir Okhotnikov (“Okhotnikov”), by and through the undersigned counsel,
`
`respectfully moves this Court to dismiss the Securities and Exchange Commission’s Complaint in
`
`its entirety under Federal Rules of Civil Procedure 12(b)(2) and (6), and in support states:
`
`INTRODUCTION
`
`The question before this Court is whether the SEC’s shotgun and puzzle pleadings satisfy
`
`the pleading requirements. These pleadings do not meet the minimum level of particularity
`
`required and the court should dismiss the Complaint, for this and the other reasons provided below.
`
`The SEC alleges that Okhotnikov and the other ten Defendants committed securities fraud
`
`in the sale of smart contracts that operated on the Ethereum, Tron, and Binance blockchains. The
`
`smart contracts were designed to automatically route tokens to purchasers’ crypto-wallets via an
`
`algorithm. The Complaint includes eleven different defendants with varying roles and alleged
`
`conduct.
`
`The problem is that the SEC’s Complaint does not make clear who did what. Rather, the
`
`SEC lumps the Defendants together and draws conclusory connections regarding their alleged
`
`conduct. The SEC’s tactless pleadings fail for a number of reasons. First, group pleadings, like the
`
`SEC uses here, cannot satisfy establishing personal jurisdiction over Okhotnikov. And, the SEC’s
`
`remaining Okhotnikov-specific allegations about his use of social media and Forsage’s website
`
`fail to establish personal jurisdiction in the United States. Second, despite the conclusory and
`
`arbitrary labelling of the smart contracts as a pyramid and Ponzi scheme, the Complaint does not
`
`show how the smart contracts satisfy the Howey test. Third, the SEC again fails to plead particular
`
`facts to show how the federal securities laws apply to the extraterritorial transactions here. Finally,
`
`the Complaint’s shotgun and puzzle pleadings do not meet Rule 9(b)’s particularity requirements.
`
`

`

`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 8 of 30 PageID #:428
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`
`
`
`
`FACTUAL BACKGROUND
`
`The SEC asserts five causes of action against eleven individual Defendants relating to the
`
`Forsage.io (“Forsage”) website. The SEC alleges that Forsage allowed members to enter into
`
`transactions via smart contracts that operated on the Ethereum, Tron, and Binance blockchains.
`
`(ECF No. 1, Compl. ¶ 1.) The Complaint asserts that four individual Defendants, including
`
`Okhotnikov, were the founders of the website (collectively, the “Founders”). (Id.) According to
`
`the Complaint, the Founders created, operated, and maintained Forsage and its smart contracts
`
`through online promotions and continuous development of new investment platforms. (Id.) The
`
`Complaint concludes that Forsage “is a textbook pyramid and Ponzi scheme” and that the Founders
`
`“engaged in a scheme to defraud investors and further engaged in practices that operated as a fraud
`
`or deceit upon those investors.” (Id. ¶¶ 1, 4.)
`
`Okhotnikov-Specific Allegations. The SEC alleges that Okhotnikov is “the face” of the
`
`Forsage operation, hosting many of its YouTube videos and appearing in interviews with
`
`promoters. (Id. ¶ 12.) The Complaint alleges that Okhotnikov has prior experience participating in
`
`multilevel marketing projects, but fails to mention a single fact or example in support of this claim.1
`
`(Id.) The Complaint alleges that Okhotnikov participated in various interviews shown on YouTube
`
`regarding Forsage and a separate website “Meta Force.” (Id. ¶¶ 16-18, 47-48, 54, 55, 65, 70-74,
`
`81, 87.) More specifically, the SEC alleges that Okhotnikov has appeared in multiple videos and
`
`that in the videos “he touted large profits earned by Forsage investors, as well as Forsage’s
`
`security.” (Id. ¶ 54.) The Complaint alleges that Okhotnikov “told new investors” where to locate
`
`video tutorials and instructions for working with the platform. (Id. ¶ 65.) While the Complaint
`
`
`1 Further, the SEC uses the term upon or on “information and belief” approximately 15 times in the
`Complaint, including the allegations regarding the money allegedly received by the defendants. (Id. ¶ 77.)
`Also, while the SEC’s press release claimed a $300 million scheme, the SEC fails to allege with specificity
`the amount of monetary harm purportedly suffered by the members.
`
`2
`
`

`

`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 9 of 30 PageID #:429
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`
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`contains numerous allegations regarding the website, and Founders and “Defendants” purported
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`deceptive acts and failure to disclose (see, e.g., ¶¶ 1, 37, 53, 61 83, 84, 85), the only purported
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`misrepresentations made by Okhotnikov are: (i) his denying that Forsage is a scheme (id. ¶ 81(x)),
`
`and (ii) that Forsage Binance was a new platform created in response to a slowed participation on
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`Forsage Ethereum and Forsage Tron. (Id. ¶ 87.)
`
`ARGUMENT
`
`I.
`
`This Court Lacks Personal Jurisdiction Over Okhotnikov
`A.
`
`Legal Standards
`
`The SEC bears the burden of making a prima facie showing of personal jurisdiction over
`
`Okhotnikov. N. Grain Mktg., LLC v. Greving, 743 F.3d 487, 491 (7th Cir. 2014). In determining
`
`whether personal jurisdiction is proper, the court may accept and consider affidavits from both
`
`parties. Nelson by Carson v. Park Indus., Inc., 717 F.2d 1120, 1123 (7th Cir. 1983). Jurisdiction
`
`in this case is based on the jurisdictional provisions of the Securities Act of 1933 (“Securities Act”)
`
`and the Securities Exchange Act of 1934 (“Exchange Act”). See 15 U.S.C. § 77v(a); 15 U.S.C. §
`
`78aa(a). The Securities Act and Exchange Act confer personal jurisdiction in federal court over
`
`defendants with minimum contacts with the United States, within the bounds of the Due Process
`
`Clause of the Fourteenth Amendment. See Zurich Cap. Mkt., Inc. v. Coglianese, 388 F. Supp. 2d
`
`847, 857 (N.D. Ill. 2004). Thus the court must analyze whether personal jurisdiction is proper
`
`under the limitations of Constitutional Due Process to find jurisdiction over Okhotnikov. Id.
`
`Under the Due Process Clause, personal jurisdiction is proper when there is either general
`
`jurisdiction or specific jurisdiction over a defendant. Ford Motor Co. v. Montana Eighth Jud. Dist.
`
`Ct., 592 U.S. ___, 141 S. Ct. 1017, 1024 (2021). The court has neither jurisdiction in this case.
`
`3
`
`

`

`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 10 of 30 PageID #:430
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`
`
`B.
`
`Okhotnikov Is A Foreign National And Is Not Subject to General
`Jurisdiction In The United States
`
`Okhotnikov resides abroad and is not subject to general jurisdiction in the United States.
`
`An individual is subject to general jurisdiction in the place of their domicile. Id. Because
`
`Okhotnikov does not reside in the United States, has not registered to do business in the United
`
`States, and has never traveled to the United States, the court does not have general jurisdiction
`
`over him. (Decl. Vladimir Okhotnikov (“Ex. 1”), ¶¶ 1-3.).
`
`C.
`
`The SEC Fails to Make the Required Prima Facie Showing of Specific
`Jurisdiction
`
`Specific jurisdiction over Okhotnikov is not proper because he did not purposefully direct
`
`his purported activities to the United States. Specific jurisdiction requires that a defendant have
`
`minimum contacts with the forum “such that the maintenance of the suit does not offend traditional
`
`notions of fair play and substantial justice.” Int’l Shoe Co. v. State of Wash., Off. of Unemployment
`
`Comp. & Placement, 326 U.S. 310, 315 (1945) (cleaned up). The defendant’s contacts must be
`
`purposeful and not “random, isolated, or fortuitous.” Keeton v. Hustler Mag., Inc., 465 U.S. 770,
`
`774 (1984). To show Okhotnikov had sufficient minimum contacts with the United States to satisfy
`
`specific jurisdiction, the SEC must meet three tests: (1) the defendant purposefully directed its
`
`activities to the forum; (2) the alleged injury at issue must have arisen out of defendant’s activities
`
`in the forum; and (3) any exercise of personal jurisdiction must comport with notions of fair play
`
`and substantial justice. Felland v. Clifton, 682 F.3d 665, 673 (7th Cir. 2012).
`
`The Complaint does not show how Okhotnikov purposefully directed his activities to the
`
`United States because: 1) it relies on imprecise group pleading; and 2) Okhotnikov’s alleged use
`
`of YouTube and Forsage’s website do not convey jurisdiction.
`
`4
`
`

`

`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 11 of 30 PageID #:431
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`
`
`1.
`
`Group Pleadings Cannot Satisfy the Personal Jurisdiction Requirement
`
`The SEC cannot meet its required prima facie showing of personal jurisdiction through
`
`obscure group pleadings. See Calder v. Jones, 465 U.S. 783, 790 (1984) (“Each defendant’s
`
`contacts with the forum State must be assessed individually.”); Berdeaux v. OneCoin Ltd., 561 F.
`
`Supp. 3d 379, 397 (S.D.N.Y. 2021) (“A plaintiff must carry his burden with respect to each
`
`defendant individually.”). The SEC must establish personal jurisdiction over each defendant for
`
`each claim. Berdeaux, 561 F. Supp. 3d at 396.
`
`The SEC’s Complaint is replete with allegations of how the “Founders” targeted the United
`
`States. (See, e.g., Compl. ¶ 1 (“[T]he Founders raised funds from retail investors in the United
`
`States and across the world.”); id. ¶ 2 (“[T]he Founders engaged individuals in the United States .
`
`. . to promote Forsage.”); id. ¶ 49 (“The Founders offered slots and actively promoted Forsage
`
`online to the general public.”); id. ¶ 52 (“[Forsage’s YouTube] was updated and maintained
`
`regularly . . . with the participation and under the direction and control of the Founders.”)) This
`
`generalized pleading is not enough to convey jurisdiction over an individual defendant.
`
`The court in Berdeaux dismissed a similar complaint that relied on group pleading to
`
`establish personal jurisdiction. 561 F. Supp. 3d at 397-98. Plaintiffs in that case made conclusory
`
`connections between the defendants and referred to a group of defendants as “the Scott Group
`
`Defendants” without distinguishing which action was taken by the four defendants within that
`
`group. Id. at 397. This style of pleading was insufficient to confer personal jurisdiction because it
`
`left the court with “no basis to discern who did what.” Id.; see also AFI Holdings of Ill., Inc. v.
`
`Nat’l Broad. Co., 239 F. Supp. 3d 1097, 1101-02 (N.D. Ill. 2017) (rejecting plaintiff’s attempt to
`
`“bootstrap jurisdiction” to a defendant based on its affiliation with the co-defendant). The SEC
`
`utilizes similar group pleading here. The SEC alleges that the “Founders” engaged in certain
`
`contacts with the United States, like how the “Founders engaged individuals in the United States.”
`
`5
`
`

`

`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 12 of 30 PageID #:432
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`
`
`(Compl. ¶ 49.) The unreliability of this group pleading is demonstrated by Okhotnikov’s
`
`declaration, which rebuts this allegation. (Ex. 1, ¶ 4.) Accordingly, the SEC cannot satisfy its
`
`personal jurisdiction requirements with its ambiguous group pleading.
`
`2.
`
`Okhotnikov’s Alleged Use of Social Media & The Internet Do Not Show
`Purposeful Direction
`
`The SEC’s remaining allegations that actually identify Okhotnikov do not make a prima
`
`facie showing as to how he directed his activities at the United States. The gravamen of the SEC’s
`
`remaining allegations is that Okhotnikov participated in a variety of videos and interviews posted
`
`on social media, including YouTube. At most, the SEC alleges that Okhotnikov appeared in three
`
`interviews posted on YouTube with co-defendants in the United States. (Compl. ¶ 16 (June 3, 2021
`
`interview with Ellis); id. ¶ 17 (April 23, 2020 interview with Hamlin); id. ¶ 18 (April 6, 2021
`
`interview with Theissen)). These are the only Okhotnikov-specific allegations which mention
`
`connections to the United States. For instance, the Complaint does not allege how many people in
`
`the United States even viewed Okhotnikov’s videos or how many people in the United States
`
`purchased smart contracts. Instead, we are left to speculate at how Okhotnikov’s conduct impacted
`
`the United States. See Tamburo v. Dworkin, 601 F.3d 693, 703 (7th Cir. 2010) (purposeful
`
`direction requires finding that defendant aimed his conduct at the United States with the knowledge
`
`that the effects would be felt there).
`
`Appearing in YouTube videos or operating a website does not direct conduct to the United
`
`States. Holding otherwise would open up the United States as a forum for any company that
`
`conducts routine business abroad. See, e.g., be2 LLC v. Ivanov, 642 F.3d 555, 559 (7th Cir. 2011)
`
`(“If the defendant merely operates a website, even a ‘highly interactive’ website, that is accessible
`
`from, but does not target, the forum state, then the defendant may not be haled [sic] into court in
`
`that state without offending the Constitution.”). Rather, courts require something more to show
`
`6
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`

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`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 13 of 30 PageID #:433
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`
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`purposeful direction, such as extensive marketing or sales in the forum, employing individuals in
`
`the forum, leasing buildings in a state, or registering to do business in a state. Compare uBID, Inc.
`
`v. GoDaddy Grp., Inc., 623 F.3d 421, 427, 432-33 (7th Cir. 2010) (finding personal jurisdiction in
`
`Illinois where defendant operated an interactive website, conducted extensive advertising, had
`
`hundreds of thousands of customers, and earned millions of dollars in the forum state), with be2
`
`LLC, 642 F.3d at 559 (no personal jurisdiction over matchmaking company that operated a website
`
`accessible to Illinois residents, did not market to Illinois residents, and had a small number of users
`
`with Illinois addresses). Anyone in the world with an internet connection could have accessed
`
`Okhotnikov’s videos or the Forsage website. This is not purposeful direction.2
`
`The SEC has not met its burden of showing specific jurisdiction under this prong and the
`
`Complaint must be dismissed.
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`II.
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`The SEC Fails to State a Claim
`A.
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`Legal Standards
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`To survive a motion to dismiss under Rule 12(b)(6), a complaint must allege facts sufficient
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`to show on its face that relief can granted. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 557 (2007).
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`In deciding a motion to dismiss, the court should “accept all well-pleaded allegations in the
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`complaint as true and draw all reasonable inferences in favor of the plaintiff.” Forseth v. Village
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`of Sussex, 199 F.3d 363, 368 (7th Cir. 2000). “However, legal conclusions and conclusory
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`allegations merely reciting the elements of the claim are not entitled to this presumption.” Virnich
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`2 Contrast Okhotnikov’s videos to the respondent’s behavior in the SEC’s settled enforcement action
`against Block.one. In the Matter of Block.one, Rel. No. 33-10714 (Sept. 30, 2019). In that case, the
`respondent engaged in directed selling efforts by participating in blockchain conferences in the U.S. to
`promote its crypto token and other means, going so far as advertising on a large billboard in Times Square.
`See id. at ¶ 11. But in Block.one, only the company was charged (no individuals were attacked); and only
`sales proven to have been made by that company to U.S. persons were subject to the agreed relief (sales
`made to non-U.S. persons were not prosecuted by the SEC).
`
`7
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`

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`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 14 of 30 PageID #:434
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`
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`v. Vorwald, 664 F.3d 206, 212 (7th Cir. 2011). Dismissal is proper under these standards when a
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`“complaint fails to set forth enough facts to state a claim to relief that is plausible on its face.”
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`Heyde v. Pittenger, 633 F.3d 512, 516-17 (7th Cir. 2011) (internal citations and quotations
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`omitted).
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`Securities fraud claims are also subject to the heightened pleading requirements of Federal
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`Rule of Civil Procedure Rule 9(b). Cornielsen v. Infinium Capital Mgmt., LLC, 916 F.3d 589, 599
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`(7th Cir. 2019); Fed. R. Civ. P. 9(b). Rule 9(b) requires the plaintiff to state “with particularity”
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`the circumstances constituting fraud, which means “the who, what, when, where, and how[.]” U.S.
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`ex rel. Lusby v. Rolls-Royce Corp., 570 F.3d 849, 853 (7th Cir. 2009) (internal citation omitted).
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`A complaint may not use “‘shotgun’ pleadings which leave ‘Defendants and the Court with the
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`task of combing the Complaint and inferring rightly or wrongly, what specific conduct the SEC
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`intended to assert as a violation.’” SEC v. SeeThruEquity, LLC, 2019 WL 1998027, at *3 (S.D.N.Y.
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`Apr. 26, 2019) (internal citation omitted).
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`B.
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`The SEC Fails to State A Claim Because the Smart Contracts Are Not
`Securities
`
`As an initial matter, the SEC’s Complaint fails to state a claim upon which relief can be
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`granted because there was no sale of a “security.” The SEC’s causes of action are premised on the
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`theory that Forsage’s smart contracts are securities. Without this hook, all of the SEC’s claims
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`must be dismissed.
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`Federal securities laws define a “security” as, among other things, “any note, stock,
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`treasury stock, . . . [or] investment contract” 15 U.S.C. § 77b(a)(1); 15 U.S.C. § 78c(a)(10). To
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`show Forsage’s smart contracts are securities subject to regulation, the SEC must show that the
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`smart contacts are “investment contracts.” The Supreme Court defined that term as “1) an
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`investment of money; 2) in a common enterprise; 3) with an expectation of profits to be derived
`
`8
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`

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`Case: 1:22-cv-03978 Document #: 73 Filed: 11/23/22 Page 15 of 30 PageID #:435
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`solely from the efforts of others.” SEC v. Lauer, 864 F. Supp. 784, 789-90 (N.D. Ill. 1994); see
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`also SEC v. W.J. Howey Co., 328 U.S. 293, 298-99 (1946).
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`1.
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`Expected Profits Were Not Derived Solely from the E