Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 1 of 36 PageID #:521
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`Plaintiff,
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`SECURITIES AND EXCHANGE COMMISSION
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`v.
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`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,
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`Defendants.
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`__________________________________________
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`PLAINTIFF’S MEMORANDUM OF LAW IN OPPOSITION TO
`DEFENDANT VLADIMIR OKHOTNIKOV’S MOTION TO DISMISS COMPLAINT
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`Case No. 22 C 3978
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`Judge Jorge L. Alonso
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 2 of 36 PageID #:522
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`TABLE OF CONTENTS
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`INTRODUCTION …….……………………………….……………………….………………1
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`ARGUMENT………………………………………………….……………………….............. 2
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`Okhotnikov is Subject to Personal Jurisdiction in the United States……….………
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`A.
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`2
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`I.
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`II.
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`III.
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`B.
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`A.
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`B.
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`C.
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`B.
`
`C.
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`Standards Applicable to Fed. R. Civ. P. 12(b)(2)……….…………………2
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`
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`The Totality of the Circumstances Shows Okhotnikov Directed
`His Activities Toward the United States ………………………………...
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` 3
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` 3
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` 5
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`1.
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`2.
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`Okhotnikov’s Contentions in his Declaration are Disputed…….....
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`The Other Evidence Here Overwhelmingly Shows
`Okhotnikov Directed His Activities Toward the United States…
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`The SEC Has Stated Proper Claims Against Okhotnikov ………......…...……..9
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`Standards Applicable to Fed. R. Civ. P. 12(b)(6)………………………….
`9
`
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`The SEC Has Sufficiently Pleaded that Forsage’s Smart Contracts
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`are Securities …………………………………………………………….
`10
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`The SEC Has Sufficiently Pleaded A Basis for Jurisdiction…………….
`13
`
`
`1.
`Applicable Standards…………………………………………...
`13
`
`
`2.
`The SEC’s Complaint States Proper Claims.……………………...
`14
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`The SEC has Satisfied Fed. R. Civ. P. 9(b)…………………………………….….
`17
`
`
`A.
`Standards Applicable to Fed. R. Civ. P. 9(b)…………………..………….
`18
`
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`The SEC is Puzzled by the Accusations of “Shotgun” and
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` “Puzzle” Pleading……………………………………...………………..
`18
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`The SEC Has Pleaded its Anti-Fraud Claims with the
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`Requisite Particularity………………..…………………………………
`21
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`The SEC has Properly Alleged Scienter…………………………..
`21
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`The SEC has Charged Okhotnikov with Participating
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`in a Deceptive Scheme………………………………………….
`22
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`1.
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`CONCLUSION…………………………………...…………………….……………………… 25
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`2.
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`- i -
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 3 of 36 PageID #:523
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`TABLE OF AUTHORITIES
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` Page
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`Cases
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`
`
`Aaron v. SEC
`
`446 U.S. 680 (1980)…………………………………………………………
`24
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`
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`Absolute Activist Value Master Fund Ltd. v. Ficeto
`
`677 F.3d 60 (2d Cir. 2012……………………………………………………..
`14
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`Afi Holdings of Ill. v. NBC
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`239 F. Supp. 3d 1097 (N.D. Ill. 2017)………………………………………….
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`
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`Anderson v. Binance
`
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`2022 WL 976824 (S.D.N.Y. Mar. 31, 2022)……………………………….. 17
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`Berdeaux v. OneCoin Ltd.
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`561 F. Supp. 3d 979 (S.D.N.Y. 2021)……………………………………….
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`Bilek v. Fed. Ins. Co.
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`8 F. 4th 581 (7th Cir. 2021)……………………………………………………
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`
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`Di Leo v. Ernst & Young
`18, 21
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`901 F.2d 624 (7th Cir. 1990)………………………………………………...
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`
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`Europe and Overseas Commodity Traders, S.A. v. Banque Paribas London
`13, 15
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`147 F.3d 118 (2d Cir. 1998)…………………………………………………
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`
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`Haan Corp. Korea v. Sparkling Drink Sys. Innovation Ctr. Hong Kong
`2, 5
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`2017 WL 8186998 (N.D. Ill. Dec. 15, 2017)…………………………………..
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`Ill. v. Hemi Group LLC
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`622 F.3d 754 (7th Cir. 2010)………………………………………………...
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`
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`Jackson v. Ill. Bell Tel. Co.
`10, 11, 17
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`2002 WL 1466796 (N.D. Ill. July 8, 2002)…………………………………….
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`Kim v. Cochenour
`10
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`687 F.2d 210 (7th Cir. 1982)………………………………………………...
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`
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`Liu Meng-Lin v. Siemens AG
`14
`763 F.3d 175 (2d Cir. 2014)…………………………………………………
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`Lorenzo v. SEC
`23
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`139 S. Ct. 1094 (2019)…………………………...……….…………………
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` 8
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` 5
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` 8
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` 6
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`- ii -
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 4 of 36 PageID #:524
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`Mejia v. Arceo
`2, 5
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`2016 WL 1161319 (N.D. Ill. Mar. 23, 2016)……………………………….
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`Mid-Am. Tablewares v. Mogi Trading Co.
`3, 9
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`100 F.3d 1353 (7th Cir. 1996)…………………………………………………
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`
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`Morrison v. Nat’l Austl. Bank Ltd.
`13, 16
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`561 U.S. 247 (2010)…………………………………………………………...
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`Myun-Uk Choi v. Tower Research Capital LLC
`16
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`890 F.3d 60 (2d Cir. 2018)…………………………………………………..
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`SEC v. Allison
`25
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`1982 WL 1560 (D. Or. Jan. 17, 1982)……………………………………….
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`SEC v. Banner Fund Int’l
`13, 15
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`211 F.3d 602 (D.C. Cir. 2000)……………………………………………….
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`SEC v. Brown
`3, 14, 17
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`2015 WL 1010510 (N.D. Ill. Mar. 4, 2015)………………………………….
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`SEC v. Chen
`24
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`2016 WL 7469683 (C.D. Cal. Dec. 8, 2016)……………………………..….
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`SEC v. Chicago Convention Ctr., LLC
`14, 17
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`961 F. Supp. 2d 905 (N.D. Ill. 2013)………………………………………….
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`SEC v. CKB168 Holdings, Ltd.
`22, 24
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`210 F. Supp. 3d 421 (E.D.N.Y. 2016)………………………………………
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`SEC v. Czarnik
`24
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`2010 WL 4860678 (S.D.N.Y. Nov. 29, 2010)……………………………….
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`SEC v. Falor
`21
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`2010 WL 3385510 (N.D. Ill. Aug. 19, 2010)………………………………..
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`SEC v. Fraser
`20
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`2009 WL 2450508 (D. Ariz. Aug. 11, 2009)………………………………...
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`SEC v. Glenn W. Turner Enterprises, Inc.
`10, 12
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`474 F.2d 476 (9th Cir. 1973)………………………………………………..
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`SEC v. Holschuh
`25
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`694 F.2d 130 (7th Cir. 1982)………………..…………….…………………
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`SEC v. Homa
`20
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`2000 WL 1100783 (N.D. Ill. Aug. 4, 2000)……………………………………
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`- iii -
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 5 of 36 PageID #:525
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`SEC v. Kik Interactive Inc.
`12
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`492 F. Supp. 3d 169 (S.D.N.Y. 2020)……………………………………….
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`SEC v. Milan Capital Group, Inc.
`22
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`2000 WL 1682761 (S.D.N.Y. Nov. 9, 2000)………………………….…….
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`SEC v. Morrone
`14
`997 F.3d 52 (1st Cir. 2021)………………………………………………….
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`SEC v. NAC Found., LLC
`12
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`512 F. Supp. 3d 988 (N.D. Cal. 2021)……………………………………….
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`SEC v. Ogle
`3, 9
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`1999 WL 446857 (N.D. Ill. June 15, 1999)………………………………….
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`SEC v. PlexCorps
`7, 9
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`2018 WL 4299983 (E.D.N.Y. Aug. 9, 2018)………………………………..
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`SEC v. Rana Research, Inc.
`24
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`8 F.3d 1358 (9th Cir. 1993)……………………………….…………………
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`SEC v. Santos
`20
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`355 F. Supp. 2d 917 (N.D. Ill. Nov. 10, 2003)………………………………
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`SEC v. Scoville
`13
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`913 F.3d 1204 (10th Cir. 2019)……………………………………………...
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`SEC v. SG Ltd.
`12
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`265 F.3d 42 (1st Cir. 2001)………………………………………………….
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`SEC v. Telegram Group Inc.
`16
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`2020 WL 1547383 (S.D.N.Y. Apr. 1, 2020)…………………………………
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`SEC v. Terraform Labs Pte Ltd.
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`2022 WL 2066414 (2d Cir. June 8, 2022)…………………………………….
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`SEC v. Ustian
`19
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`229 F. Supp. 3d 739 (N.D. Ill. 2017)………………………………………...
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`SEC v. Winemaster
`18, 19
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`529 F. Supp. 3d 880 (N.D. Ill. 2021)…………………………………………..
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`SEC v. W.J. Howey Co.
`10
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`328 U.S. 293 (1946)…………………………………………………………
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`SEC v. Wolfson
`25
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`539 F.3d 1249 (10th Cir, 2008)……………………………………………...
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` 8
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`- iv -
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 6 of 36 PageID #:526
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`SEC v. Zandford
`23
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`535 U.S. 813 (2002)…………………….…………………...………………
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`Smith-Brown v. Ulta Beauty, Inc.,
`18, 20
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`2019 WL 932022 (N.D. Ill. Feb. 26, 2019)…………………………………….
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`Tamburo v. Dworkin
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`601 F.3d 693 (7th Cir. 2010)…………………………………………………..
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`Trex Props., LLC v. Able Electropolishing Co., Inc.
`10
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`2021 WL 5033467 (N.D. Ill. May 3, 2021)………………………………….
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`Turnock v. Cope
`2, 5
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`816 F.2d 332 (7th Cir. 1987)………………………………………………...
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`U.S. v. Naftalin
`23
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`441 U.S. 768 (1979)…………………….……………………...……………
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`U.S. v. Zaslavskiy
`12
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`2018 WL 4346339 (E.D.N.Y. Sept. 11, 2018)………………………………
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`ViaHart LLC v. P’ships & Unincorporated Assn’s
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`2021 WL 5113935 (N.D. Ill. Nov. 3, 2021)………………………………….
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`Walls v. Vre Chicago Eleven, LLC
`19
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`2016 WL 5477554 (N.D. Ill. Sept. 29, 2016)………………………………..
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`Webster v. Omnitrition Int’l, Inc.
`12, 24
`79 F.3d 776 (9th Cir. 1996)…………………………………………………
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`Williams v. Block One
`17
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`2022 WL 5294189 (S.D.N.Y. Aug. 15, 2022)……………………………….
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`Weiss v. SEC
`23
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`468 F.3d 849 (D.C. Cir. 2006)……………………………………………….
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`Statutes and Rules
`Page
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`Section 929P
`
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`Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010……….
`13
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`Securities Act Section 2
`
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`15 U.S.C. § 77b…………………….…..……………………………………
`25
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`Securities Act Section 5
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`15 U.S.C. § 77e…………………….…..……………………………………
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` 1
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 7 of 36 PageID #:527
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`Securities Act Section 17(a)
`1, 23
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`15 U.S.C. § 77q(a)……………………….……………..……………………
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`Securities Act Section 22(c)
`13, 15
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`15 U.S.C. § 77v(c)…………………….….……………..………...…………
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`Securities Exchange Act Section 10(b)
`1, 23
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`15 U.S.C. § 78j(b)………………………..……………..…...………………
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`Securities Exchange Act Section 27(b)
`13, 15
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`15 U.S.C. § 78aa(b)……………….…………..……...…………....……...…
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`Securities Exchange Act Rule 10b-5
`1, 23
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`17 C.F.R. § 240.10b-5………………..………..…...…………..……………
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`18
`Fed. R. Civ. P. 9(b)…………………………………………………………………….
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`18
`Fed. R. Civ. P. 10(c)…………………………………………………………………
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`Fed. R. Civ. P. 12(b)(2)………………………………………………………………..
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`Fed. R. Civ. P. 12(b)(6)………………………………………………………………..
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`LR Civ 7.1……………..…………………..…….………….……………………….
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 8 of 36 PageID #:528
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`Plaintiff Securities and Exchange Commission respectfully submits this Memorandum of
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`Law in opposition to the Motion to Dismiss the Complaint filed by Defendant Vladimir
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`Okhotnikov (“Okhotnikov”) (Dkt# 72).1 Contrary to Okhotnikov’s contentions, he is in fact
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`subject to personal jurisdiction in the United States as a result of the actions he chose to take, and
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`the SEC has stated proper claims against him. The Court therefore should deny the Motion in its
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`entirety.
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`INTRODUCTION
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`The SEC filed this action charging Okhotnikov and the other defendants with violations of
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`the registration and anti-fraud provisions of the federal securities laws – specifically, Sections 5
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`and 17(a) of the Securities Act of 1933 (“Securities Act”), and Section 10(b) and Rule 10b-5 of
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`the Securities Exchange Act of 1934 (“Exchange Act”). 15 U.S.C. §§ 77e, 77q(a), 78j(b), and 17
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`C.F.R. § 240.10b-5. The SEC’s Complaint (Dkt# 1) concerns defendants’ participation in Forsage,
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`a fraudulent crypto pyramid and Ponzi scheme that raised more than $300 million from retail
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`investors worldwide, including in the United States, by the use of smart contracts that operated on
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`various blockchains. The Complaint generally alleges that Okhotnikov, as the “face” of the
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`operation, along with his co-founders, partnered with the other defendants to aggressively market
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`Forsage in the United States. In addition, the SEC alleges – and Okhotnikov conveniently ignores
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`in his Motion – that despite prior cease-and-desist actions by other governmental authorities
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`accusing Forsage of operating as a fraud, he and the other defendants continued to promote the
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`scheme while repeatedly denying the accusations. As discussed further below, that alone is
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`sufficient evidence of scienter.
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`
`1
`During the telephonic status hearing on December 8, 2022, the Court granted the SEC leave
`pursuant to LR Civ. 7.1 to exceed the 15-page limit for this brief by an additional 10 pages.
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`

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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 9 of 36 PageID #:529
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`ARGUMENT
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`I.
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`Okhotnikov is Subject to Personal Jurisdiction in the United States
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`A.
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`Standards Applicable to Fed. R. Civ. P. 12(b)(2)
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`A motion to dismiss on the basis of personal jurisdiction under Fed. R. Civ. P. 12(b)(2) is
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`properly denied if a plaintiff makes a prima facie showing that jurisdiction exists. Mejia v. Arceo,
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`2016 WL 1161319, at *1 (N.D. Ill. Mar. 23, 2016). As part of that showing, a district court accepts
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`the allegations in a complaint as true, and any factual disputes concerning jurisdiction are resolved
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`in the plaintiff’s favor. Id.; see also Turnock v. Cope, 816 F.2d 332, 333 (7th Cir. 1987). If a
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`defendant submits affidavits or other evidence, this Court has held that a plaintiff must go beyond
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`the pleadings and provide affirmative evidence supporting jurisdiction. ViaHart LLC v. P’ships
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`& Unincorporated Assn’s, 2021 WL 5113935, at *2 (N.D. Ill. Nov. 3, 2021) (Alonso, J.).
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`As demonstrated below, because Okhotnikov’s declaration (Dkt# 73-1) only disputes one
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`of the allegations in the SEC’s Complaint as relevant to the personal jurisdiction question here, the
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`Court may accept the remainder of the allegations in the Complaint as true. See Haan Corp. Korea
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`v. Sparkling Drink Sys. Innovation Ctr. Hong Kong, 2017 WL 8186998, at *3 (N.D. Ill. Dec. 15,
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`2017) (Alonso, J.) (finding that defendant had failed to develop his argument regarding minimum
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`contacts and had not disputed the bulk of plaintiff’s jurisdictional allegations). In addition, because
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`the SEC has submitted affirmative evidence controverting Okhotnikov’s contention in his
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`declaration, the Court should resolve that factual dispute in the SEC’s favor. At bottom, the SEC
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`has met its obligation to make a prima facie showing that personal jurisdiction exists, and the
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`Motion to Dismiss therefore should be denied.
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`- 2 -
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 10 of 36 PageID #:530
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`B.
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`The Totality of the Circumstances Shows Okhotnikov Directed His Activities
`Toward the United States
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`As a preliminary matter, the SEC agrees with Okhotnikov that the relevant inquiry here is
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`the extent of his minimum contacts with the United States as a whole, rather than just with the
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`forum of Illinois. See SEC v. Brown, 2015 WL 1010510, at *2 (N.D. Ill. Mar. 4, 2015) (holding
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`that because the federal securities laws “authorize worldwide service of process,” the relevant
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`minimum contacts “are with the United States as a whole, rather than a particular state.”). The
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`SEC also agrees that the operative form of personal jurisdiction in this case is specific jurisdiction,
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`not general jurisdiction. The former arises out of specific activities related to the lawsuit, while
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`the latter is based on the defendant’s contacts with the United States in general such that the
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`defendant would be considered “at home” here. Id. at *3. Specific jurisdiction is proper where a
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`defendant through its minimum contacts has purposefully directed activities toward the United
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`States such that it should expect to be “haled into court” here to answer for its conduct. SEC v.
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`Ogle, 1999 WL 446857, at *1-2 (N.D. Ill. June 15, 1999).
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`What Okhotnikov overlooks in his Motion, however, is that in the context of the specific
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`jurisdiction analysis, the Seventh Circuit has held quite clearly that the “minimum contacts inquiry
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`is one that examines the totality of the circumstances.” Mid-Am. Tablewares v. Mogi Trading Co.,
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`100 F.3d 1353, 1361 (7th Cir. 1996). Here, that examination shows personal jurisdiction is proper.
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`1.
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`Okhotnikov’s Contentions in his Declaration are Disputed
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`In his declaration, the only contention relevant to specific jurisdiction that Okhotnikov
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`makes is that he did not hire or engage Defendants Ellis, Hamlin, or Theissen (collectively, the
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`“Promoters”) and did not direct or oversee their activities. See Dkt# 73-1, at ¶ 2.2
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`2
`Okhotnikov also avers that he has not traveled to the United States and does not have any
`real property or accounts here, and Forsage does not have any offices or accounts in the United
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 11 of 36 PageID #:531
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`During the SEC’s investigation of this matter, however, Ellis and Theissen told us
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`differently.3 For example, Ellis communicated extensively through Telegram chats with an
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`individual who went by the name of “Eddy” and who apparently acted as an interface between
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`Okhotnikov and the Promoters. (See Declaration of Elizabeth Canizares attached hereto
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`(“Canizares Dec.”), at ¶ 5.) In one exchange, Eddy informed Ellis that Okhotnikov had been
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`viewing Ellis’ various webinars about Forsage in the United States with enthusiasm, but that
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`Okhotnikov wanted Ellis to make the webinars more fun, such as by adding dancing to the
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`program. (Id.) In another exchange, Ellis pitched the idea of a “Forsage Empower Hour” that he
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`would host once a week with top Forsage earners on a webinar in the United States as a way to
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`“motivate” the Forsage community. Eddy discussed the idea with Okhotnikov, and reported back
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`to Ellis with “super news” that Okhotnikov had approved the event. (Id.) Notably, Ellis then
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`proceeded with the “Forsage Power Hour” series one week later, and Okhotnikov himself even
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`appeared on an episode as a featured guest. (Id.)
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`Theissen testified to a similar experience. She too communicated with Eddy over Telegram
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`who then set up a Zoom videoconference with Theissen, Okhotnikov and Defendant Lola Ferrari.
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`(Id., at ¶ 6.) During the conference, Okhotnikov asked Theissen to make promotional videos for
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`Forsage using what Theissen described as a “script” she received providing the general parameters
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`of the content Okhotnikov wanted to see. (Id.) Okhotnikov knew that Theissen was in the United
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`States because he had admired her prior videos demonstrating her enthusiasm for Forsage. (Id.)
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`States, and is not an entity based in or registered to do business here. (Dkt# 73-1, at ¶¶ 2-3.)
`Okhotnikov argues in his Motion, however, that these allegations are relevant to general
`jurisdiction, and the SEC does not contend that Okhotnikov is “at home” here.
`3
`Hamlin declined to testify in the SEC’s investigation based on his Fifth Amendment
`privilege against self-incrimination. (Complaint, at ¶ 17.)
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 12 of 36 PageID #:532
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`This testimony of Ellis and Theissen controverts Okhotnikov’s contention that he did not
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`engage with any of the Promoters or direct or oversee their activities. The SEC therefore has come
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`forward with affirmative evidence supporting jurisdiction, and this factual dispute should be
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`resolved in the SEC’s favor at this very early stage of the proceedings. Turnock, 816 F.2d at 333;
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`Mejia, 2016 WL 1161319, at *1.
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`2.
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`The Other Evidence Here Overwhelmingly Shows Okhotnikov
`Directed His Activities Toward the United States
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`Because Okhotnikov does not challenge the bulk of the allegations in the SEC’s Complaint
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`as relevant to jurisdiction, the Court may accept those as true. See Haan, 2017 WL 8186998, at
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`*3. In the totality of the circumstances, these allegations show that personal jurisdiction over
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`Okhotnikov is appropriate.
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`First, as a preliminary matter, Okhotnikov freely admits in his declaration that he is a “co-
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`founder” of Forsage (Dkt# 73-1, at ¶ 2), but he does not dispute the allegations in the Complaint
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`that as a co-founder, he controlled, among other things, (i) Forsage itself; (ii) the smart contracts,
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`the “back office,” and the training and support tools including the Forsage Academy; and (iii)
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`Forsage’s website and official YouTube channel and other social media accounts that were used
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`heavily to promote the operation. (Complaint, at ¶¶ 1, 6, 23, 28, 49, 50, 51, 52, 64.) Those are
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`specific factual allegations in the Complaint related to Okhotnikov’s involvement as a co-founder.
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`As such, his citation to Berdeaux v. OneCoin Ltd., 561 F. Supp. 3d 979 (S.D.N.Y. 2021) is
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`misplaced. There, the defendants had disputed the allegations in the so-called group pleading
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`paragraphs, which were nothing more than general conclusory allegations that the group
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`“substantially assisted” the fraud.
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`Second, slots on Forsage’s smart contracts were offered and sold in the United States and
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`were open to investors here. (Complaint, at ¶ 1.) Indeed, Forsage’s website was made publicly
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 13 of 36 PageID #:533
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`available in the United States and did not require a login or password to access content, including
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`the “back office” and the Forsage Academy. (Id., at ¶ 23.) Interestingly, however, after the SEC
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`filed its Complaint in this matter, Forsage’s website suddenly became restricted and now states
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`that “US Persons are prohibited from accessing” it. (Canizares Dec., at ¶ 14.)
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`The accessibility of the website is critical – indeed, contrary to what Okhotnikov contends,
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`the Seventh Circuit has noted specifically that where, as here, the operation of a website is
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`unrestricted and thus available to residents in the forum, the same means the defendant is “ready
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`and willing to do business with [forum] residents.” Ill. v. Hemi Group LLC, 622 F.3d 754, 758 (7th
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`Cir. 2010). In Hemi Group, the defendant-company excluded only residents of New York from
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`its online sales of tobacco products, but its website was otherwise unrestricted in the rest of the
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`country, including the forum of Illinois. Id. That led the Seventh Circuit to conclude that the
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`defendant “should not be surprised by [] the jurisdictional consequences of [its] actions” about
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`being sued in Illinois. Id. The fact that the company tried to limit its exposure to litigation in New
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`York, while pursuing an otherwise “expansive, sophisticated commercial venture online,” showed
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`that it wanted to “have its cake and eat it too: it wants the benefit of a nationwide business model
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`with none of the exposure.” Id. at 760. That same principle is applicable here. The fact that
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`Forsage now purports to block access to its website from the United States shows it is cognizant
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`of the exposure it faces here for the securities fraud that was committed. As an admitted co-
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`founder of Forsage with control over the website, Okhotnikov also cannot have his cake and eat it
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`too. He cannot now claim surprise at the jurisdictional consequences of operating an expansive
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`sophisticated commercial venture that was unrestricted to the United States at the time in question.
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`Third, Forsage’s website was hosted by Cloudfare Inc., a U.S.-based web hosting platform.
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`(Complaint, at ¶ 23.) As an admitted co-founder of Forsage with control over the website,
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 14 of 36 PageID #:534
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`Okhotnikov’s decision to do business with a U.S. platform is significant. Indeed, in SEC v.
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`PlexCorps, 2018 WL 4299983, at *17 (E.D.N.Y. Aug. 9, 2018), the district court noted that the
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`foreign defendants, who like Okhotnikov were offering and selling crypto assets to investors in
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`the United States, had directed their activities toward the United States by registering their website
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`with GoDaddy.com, another U.S.-based website hosting platform. That website, much like the
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`Forsage website here, contained a plethora of information about the operation, and had the “in-
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`forum effect” in the United States of perpetuating the fraudulent scheme. Id. Notably, the district
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`court still found personal jurisdiction appropriate even though the defendants there, unlike
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`Okhotnikov, attempted to exclude U.S. investors from participating in the offering. Id. at *18.
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`Fourth, Forsage chose to heavily promote the scheme on its official YouTube channel,
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`which Okhotnikov not only controlled as an admitted co-founder of Forsage, but on which he also
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`appeared himself in at least 45 separate videos of his own where he touted Forsage as being, among
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`other things, “fast and furious.” (Complaint, at ¶ 54.) In PlexCorps, the district court emphasized
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`that the foreign defendants had elected to create accounts on U.S.-based Facebook, which the court
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`found to be a “significant United States contact.” PlexCorps, 2018 WL 4299983, at *14. As with
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`Okhotnikov’s use of U.S.-based YouTube here, the foreign defendants’ use of Facebook in
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`PlexCorps was “integral to finding investors and directing statements at them to encourage them
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`to participate in the alleged fraudulent scheme.” Id. at *15.
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`Fifth, Okhotnikov himself was the featured guest in YouTube and Facebook interviews
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`conducted by Ellis, Hamlin, and Theissen, each of whom was a lead promoter of Forsage in the
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`United States. (Complaint, at ¶¶ 16-18; see also Canizares Dec., at ¶¶ 7-12.) The SEC finds it
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`ironic that Okhotnikov would point out in his Motion that “[a]nyone in the world with an internet
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`connection” could have viewed these videos (Motion, at 13) when candidly, he too could have
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 15 of 36 PageID #:535
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`elected to be interviewed by promoters based anywhere in the world. Yet he chose specifically to
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`be part of interviews conducted by U.S.-based promoters. That alone shows his activities toward
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`the United States were not “random, isolated, or fortuitous” as he contends, but purposeful. It
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`should come as no surprise to him then that he is now also featured in the SEC’s lawsuit.
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`And sixth, Okhotnikov, as an admitted co-founder of Forsage with control over the website,
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`official YouTube channel and Forsage Academy, was responsible for the content posted on those
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`various outlets, including the numerous training videos and materials and interviews that Ellis,
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`Theissen, and Hamlin posted on the Forsage Academy and the official YouTube channel from the
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`United States. (Complaint, at ¶¶ 55.) In that regard, Okhotnikov’s citation to Afi Holdings of Ill.
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`v. NBC, 239 F. Supp. 3d 1097, 1106 (N.D. Ill. 2017) is inapposite because there, the defendant
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`was unaware he was even making contact with the forum. The opposite is true here – Okhotnikov
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`was well aware he was utilizing U.S.-based platforms to host Forsage’s website and social media
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`pages, and that he was working directly with Ellis and Theissen on the promotion of Forsage in
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`the United States. See SEC v. Terraform Labs Pte Ltd., 2022 WL 2066414, at *3 (2d Cir. June 8,
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`2022) (noting that foreign defendants, among other things, retained U.S.-based employees and
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`entered into agreements with U.S.-based platforms, and thus “purposefully availed themselves of
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`the U.S. by promoting the digital assets at issue in the SEC’s investigation to U.S.-based consumers
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`and investors.”); see also Bilek v. Fed. Ins. Co., 8 F. 4th 581, 591 (7th Cir. 2021) (holding that an
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`agent’s conduct in the forum may be used to establish specific jurisdiction over the principal outside
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`the forum when the agent’s conduct is “intertwined with the very controversy at issue”).
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`Okhotnikov’s attempt to downplay the Forsage website and YouTube accounts is
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`unavailing, and has little significance to the question of minimum contacts in this case. Where, as
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`here, the website and social media accounts were hosted on U.S.-based servers, the website and
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 16 of 36 PageID #:536
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`accounts were unrestricted to U.S.-investors, and Okhotnikov maintained control over the system
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`as an admitted co-founder and even used YouTube to make his own videos and to star in videos
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`made by the U.S.-based Promoters, the “totality of the circumstances” analysis for personal
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`jurisdiction is satisfied. See PlexCorps, 2018 WL 4299983, at *8 (holding that the various aspects
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`of defendants’ online presence constituted the required “totality of the circumstances”).
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`It is irrelevant that Okhotnikov was not present in the United States when he created
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`Forsage and directed his online activities toward the United States. See Tamburo v. Dworkin, 601
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`F.3d 693, 706 (7th Cir. 2010) (finding specific jurisdiction exists where a defendant “specifically
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`aim[s]” conduct at the forum even if he or she acts “from points outside the forum.” See also Mogi
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`Trading, 100 F.3d at 1361 (noting that “modern commercial life” involves transacting business
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`across state lines, thus “obviating the need for physical presence within a state in which business
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`is conducted.”) Furthermore, if defendants like Okhotnikov were able to escape liability for
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`directing their activities at the United States from afar, that would frustrate our nation’s interest in
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`protecting its securities markets and would effectively hamstring the SEC, as the governmental
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`agency charged with regulating and enforcing the securities laws, which “has a strong interest in
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`the efficient resolution of claims of securities fraud.” Ogle, 1999 WL 446857, at *2.
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`At bottom, Okhotnikov chose to direct his activities toward the United States, and cannot
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`now claim surprise about being “haled into court” here. Id. The Court therefore should deny
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`Okhotnikov’s Motion.
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`II.
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`The SEC Has Stated Proper Claims Against Okhotnikov
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`A.
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`Standards Applicable to Fed. R. Civ. P. 12(b)(6)
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`Apart from personal jurisdiction under Fed. R. Civ. P. 12(b)(2), Okhotnikov also has
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`moved to dismiss the SEC’s Complaint substantively under Fed. R. Civ. P. 12(b)(6). Such a
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 17 of 36 PageID #:537
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`motion, however, only tests the sufficiency of the allegations in a complaint, not the merits of the
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`lawsuit, and a district court accepts all well-pleaded facts in a complaint as true. Jackson v. Ill.
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`Bell Tel. Co., 2002 WL 1466796, at *2 (N.D. Ill. July 8, 2002); Trex Props., LLC v. Able
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`Electropolishing Co., Inc., 2021 WL 5033467, at *1 (N.D. Ill. May 3, 2021) (Alonso, J.). To
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`survive a motion to dismiss, the allegations “must only contain enough to allow the court and the
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`defendant to understand the gravamen of the plaintiff’s complaint.” Jackson, 2002 WL 1466796,
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`at *2. The SEC’s Complaint in this case satisfies that standard.
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`B.
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`The SEC Has Sufficiently Pleaded that Forsage’s Smart Contracts are Securities
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`Contrary to Okhotnikov’s position, the SEC in fact has sufficiently alleged that slots in
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`Forsage’s smart contracts and the right to earn compensation from offers and sales thereof are
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`securities. He correctly notes the operative form of the security here is an “investment contract,”
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`and identifies the three elements utilized in the analysis: (i) an investment of money; (ii) in a
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`common enterprise; and (iii) with an expectation of profits to be derived solely from the efforts of
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`others. SEC v. W.J. Howey Co., 328 U.S. 293, 298-99 (1946). With respect to the “expectation
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`of profits” element, he also correctly points out that the term “solely” is not to be taken literally,
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`but instead focuses on the economic realities of the operation and “whether the efforts made by
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`those other than the investor are the undeniably significant ones, those essential managerial
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`efforts which affect the failure or success of the enterprise.” Kim v. Cochenour, 687 F.2d 210,
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`213 n.7 (7th Cir. 1982) (quoting SEC v. Glenn W. Turner Enterprises, Inc., 474 F.2d 476, 482 (9th
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`Cir. 1973)) (emphasis added).
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`What Okhotnikov gets wrong is that a motion to dismiss is not the proper forum to resolve
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`his competing interpretations of the evidence. Indeed, he contends with respect to the “expectation
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`of profits” element that “Forsage’s decentralized structure meant that individuals’ expectations of
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`Case: 1:22-cv-03978 Document #: 84 Filed: 12/29/22 Page 18 of 36 PageID #:538
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`profit were driven substantially through their own efforts, not the efforts of others.” (Motion, at 9-
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`11.) At this very early stage of the proceedings, however, the issue is whether the SEC has
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`sufficiently alleged facts to allow the Court and Okhotnikov to understand the gravamen of the
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`Complaint on the “expectation of profits” element, and the only question is whether “it appears
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`beyond doubt that the [SEC] can prove no set of facts entitling [it] to relief.” Jackson, 2002 WL
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`1466796, at *2.4 Here, the Complaint specifically alleges in detail that the defendants touted
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`Forsage as a “long-term source of passive income”; a way to “make an extra three to four figures
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`a week”; and as an “opportunity to make dreams come true.” (Complaint, at ¶¶ 54-55.) The
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`promised profits were based primarily on the defendants’ efforts w