Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 1 of 52 PageID: 357
`
`UNITED STATES DISTRICT COURT
`DISTRICT OF NEW JERSEY
`
`
`JOHN MANGANO and MICHAEL
`LEIFMAN, individually and on behalf
`of all others similarly situated,
`
`Plaintiffs,
`
`v.
`
`BLOCKFI, BLOCKFI, INC.,
`BLOCKFI TRADING, LLC,
`BLOCKFI LENDING, LLC,
`
`Defendants.
`
`
`
`
`
`Case No. 2:22-cv-01112
`
`Hon. Kevin McNulty, U.S.D.J.
`
`Hon. Cathy L. Waldor, U.S.M.J.
`
`Motion Day: December 5, 2022
`
`Oral Argument Requested
`
`
`
`
`
`
`DEFENDANTS’ MEMORANDUM OF LAW IN SUPPORT OF THEIR
`MOTION TO DISMISS THE CLASS ACTION AMENDED COMPLAINT
`OR IN THE ALTERNATIVE TO STRIKE THE CLASS ALLEGATIONS
`
`
`
`Judith H. Germano (N.J. Atty. #017172010)
`Gwen M. Schoenfeld (N.J. Atty. #025491990)
`GERMANO LAW LLC
`460 Bloomfield Avenue, Suite 200
`Montclair, New Jersey 07042
`jgermano@germanolaw.com
`gwens@germanolaw.com
`(201) 247-7970
`
`
`September 12, 2022
`
`Jeffrey T. Scott (N.J. Atty. #051881996)
`Julia A. Malkina (admitted pro hac vice)
`SULLIVAN & CROMWELL LLP
`125 Broad Street
`New York, New York 10004
`scottj@sullcrom.com
`malkinaj@sullcrom.com
`(212) 558-4000
`
`Attorneys for BlockFi Inc., BlockFi Lending
`LLC, and BlockFi Trading LLC
`
`
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 2 of 52 PageID: 358
`
`
`
`TABLE OF CONTENTS
`
`Page
`
`PRELIMINARY STATEMENT ............................................................................ 1
`
`BACKGROUND ...................................................................................................... 5
`
`A.
`
`B.
`
`C.
`
`D.
`
`The Parties ............................................................................................. 5
`
`The BIA ................................................................................................. 5
`
`The SEC and State Resolutions ............................................................. 8
`
`Plaintiffs’ Claims ................................................................................... 8
`
`ARGUMENT .......................................................................................................... 10
`
`I.
`
`The Amended Complaint Must Be Dismissed Because Plaintiffs
`Lack Article III Standing ............................................................................ 11
`
`A.
`
`B.
`
`Plaintiffs fail to plead an injury in fact ................................................ 12
`
`Plaintiffs fail to plead causation .......................................................... 17
`
`II. The Amended Complaint Must Be Dismissed Because Plaintiffs
`Do Not State a Claim ................................................................................... 19
`
`A.
`
`B.
`
`Plaintiffs’ federal securities claims suffer from a myriad of
`defects .................................................................................................. 19
`
`The Amended Complaint’s grab bag of state common law,
`registration, and consumer claims cannot save it from dismissal ....... 29
`
`III. Plaintiffs’ Securities Act and Blue Sky Claims Must Be Dismissed
`Because Plaintiffs Do Not Satisfy the Tender Requirement .................... 36
`
`IV. Even if the Amended Complaint States a Claim (It Does Not), the
`Class Allegations Must Be Stricken Because Plaintiffs Waived
`Their Right to Bring Class Claims ............................................................. 37
`
`CONCLUSION ....................................................................................................... 40
`
`
`
`
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 3 of 52 PageID: 359
`
`
`
`Cases
`
`TABLE OF AUTHORITIES
`
` Page(s)
`
`Abel Holding Co. v. Am. Dist. Tel. Co.,
`350 A.2d 292 (N.J. Super. Ct. 1975) .................................................................. 36
`
`In re Adams Golf, Inc. Sec. Litig.,
`381 F.3d 267 (3d Cir. 2004) ............................................................................... 21
`
`Adv. Acupuncture Clinic, Inc. v. Allstate Ins. Co.,
`2008 WL 4056244 (D.N.J. Aug. 26, 2008) ........................................................ 38
`
`Affiliated Ute v. United States,
`406 U.S. 128 (1972) ............................................................................................ 27
`
`In re Am. Med. Collection Agency, Inc. Sec. Litig.,
`2021 WL 5937742 (D.N.J. Dec. 16, 2021) ......................................................... 14
`
`Anisfeld v. Cantor Fitzgerald & Co.,
`631 F. Supp. 1461 (S.D.N.Y. 1986) ................................................................... 36
`
`In re AOL Time Warner, Inc. Sec. & ERISA Litig.,
`381 F. Supp. 2d 192 (S.D.N.Y. 2004) .......................................................... 16, 37
`
`Arafa v. Health Express Corp.,
`243 N.J. 147 (2020) ............................................................................................ 39
`
`Argabright v. Rheem Mfg. Co.,
`201 F. Supp. 3d 578 (D.N.J. 2016) ..................................................................... 34
`
`Armstrong v. Exceptional Child Ctr., Inc.,
`575 U.S. 320 (2015) ............................................................................................ 27
`
`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) ............................................................................................ 11
`
`Atalese v. U.S. Legal Servs. Grp., LP,
`219 N.J. 430 (2014) ............................................................................................ 39
`
`Ato Ram, II, Ltd. v. SMC Multimedia Corp.,
`2004 WL 744792 (S.D.N.Y. Apr. 7, 2004) .................................................. 27, 28
`ii
`
`
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 4 of 52 PageID: 360
`
`
`
`Ballay v. Legg Mason Wood Walker, Inc.,
`925 F.2d 682 (3d Cir. 1991) ............................................................................... 21
`
`Ballentine v. United States,
`486 F.3d 806 (3d Cir. 2007) ............................................................................... 11
`
`Baraka v. McGreevey,
`481 F.3d 187 (3d Cir. 2007) ............................................................................... 11
`
`Basic Inc. v. Levinson,
`485 U.S. 224 (1988) ............................................................................................ 27
`
`Bell Atl. Corp. v. Twombly,
`550 U.S. 544 (2007) ...................................................................................... 10, 11
`
`Belmont v. MB Inv. Partners, Inc.,
`708 F.3d 470 (3d Cir. 2013) ............................................................................... 26
`
`Boluka Garment Co. v. Canaan, Inc.,
`547 F. Supp. 3d 439 (S.D.N.Y. 2021) .................................................................. 4
`
`Bosland v. Warnock Dodge, Inc.,
`933 A.2d 942 (N.J. App. Div. 2007) ............................................................ 34, 35
`
`In re Broderbund/Learning Co. Sec. Litig.,
`294 F.3d 1201 (9th Cir. 2002) ........................................................................ 3, 20
`
`Brokers’ Servs. Mktg. Grp. v. Cellco P’ship,
`2012 WL 1048423 (D.N.J. Mar. 28, 2012) ........................................................ 39
`
`Browne v. Nat’l Coll. Student Loan Tr.,
`2021 WL 6062306 (D.N.J. Dec. 22, 2021) ................................................... 11, 17
`
`Buck v. Hampton Twp. Sch. Dist.,
`452 F.3d 256 (3d Cir. 2006) ................................................................................. 6
`
`Carmack v. Amaya Inc.,
`258 F. Supp. 3d 454 (D.N.J. 2017) ..................................................................... 28
`
`City of Pontiac Ret. Sys. v. UBS AG,
`752 F.3d 173 (2d Cir. 2014) ............................................................................... 22
`
`
`
`iii
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 5 of 52 PageID: 361
`
`
`
`Clapper v. Amnesty Int’l USA,
`568 U.S. 398 (2013) ............................................................................................ 12
`
`Clark v. McDonald’s Corp.,
`213 F.R.D. 198 (D.N.J. 2003) ............................................................................... 5
`
`D’Agostino v. Appliances Buy Phone, Inc.,
`2015 WL 10434721 (N.J. App. Div. Mar. 8, 2016) ........................................... 36
`
`DaimlerChrysler Corp. v. Cuno,
`547 U.S. 332 (2006) ............................................................................................ 12
`
`Davis v. Michael Anthony Auto Sales Inc.,
`2017 WL 1034444 (N.J. App. Div. Mar. 17, 2017) ........................................... 39
`
`In re Dreyfus Aggressive Growth Mut. Fund Litig.,
`2000 WL 1357509 (S.D.N.Y. Sept. 20, 2000) ................................................... 23
`
`Edmonson v. Lincoln Nat’l Life Ins. Co.,
`725 F.3d 406 (3d Cir. 2013) ............................................................................... 18
`
`Erica P. John Fund, Inc. v. Halliburton Co.,
`563 U.S. 804 (2011) ............................................................................................ 27
`
`Estrada v. J&J,
`2017 WL 2999026 (D.N.J. July 14, 2017) ......................................................... 14
`
`Finkelman v. Nat’l Football League,
`877 F.3d 504 (3d Cir. 2017) ................................................................................. 3
`
`Fischer v. Governor of N.J.,
`842 F. App’x 741 (3d Cir. 2021) ........................................................................ 18
`
`Fogel v. Vega,
`759 F. App’x 18 (2d Cir. 2018) .......................................................................... 22
`
`G.A. Thompson & Co. v. Partridge,
`636 F.2d 945 (5th Cir. 1981) ........................................................................ 36, 37
`
`Goldfarb v. Solimine,
`245 A.3d 570 (N.J. 2021) ................................................................................... 29
`
`
`
`iv
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 6 of 52 PageID: 362
`
`
`
`Goode v. City of Phil.,
`539 F.3d 311 (3d Cir. 2008) ............................................................................... 15
`
`Gould v. Borough,
`615 F. App’x 112 (3d Cir. 2015) ........................................................................ 33
`
`GSC Partners CDO Fund v. Washington,
`368 F.3d 228 (3d Cir. 2004) ............................................................................... 26
`
`Gundell v. Sleepy’s Inc.,
`2019 WL 6040004 (D.N.J. Nov. 14, 2019) ........................................................ 36
`
`Gustafson v. Alloyd Co.,
`513 U.S. 561 (1995) ............................................................................................ 21
`
`Halprin v. Verizon Wireless Servs.,
`2008 WL 961239 (D.N.J. Apr. 8, 2008) ....................................................... 38, 39
`
`Hartig Drug Co. v. Senju Pharm. Co.,
`836 F.3d 261 (3d Cir. 2016) ............................................................................... 10
`
`Hassler v. Sovereign Bank,
`374 F. App’x 341 (3d Cir. 2010) ........................................................................ 32
`
`Institutional Invs. Grp. v. Avaya, Inc.,
`564 F.3d 242 (3d Cir. 2009) ............................................................................... 26
`
`Int’l Union of Operating Eng’rs v. Merck & Co.,
`929 A.2d 1076 (N.J. App. Div. 2007) ................................................................ 34
`
`Jordan v. Chase Manhattan Bank,
`91 F. Supp. 3d 491 (S.D.N.Y. 2015) .................................................................. 27
`
`Kamal v. J. Crew Grp., Inc.,
`918 F.3d 102 (3d Cir. 2019) ............................................................................... 15
`
`Kavon v. BMW of N. Am., LLC,
`2022 WL 1830797 (D.N.J. June 3, 2022) ........................................................... 10
`
`Korkala v. Allpro Imaging, Inc.,
`2009 WL 2496506 (D.N.J. Aug. 12, 2009) ........................................................ 15
`
`
`
`v
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 7 of 52 PageID: 363
`
`
`
`In re Lehman Bros. Sec. Litig.,
`650 F.3d 167 (2d Cir. 2011) ............................................................................... 28
`
`Levins v. Healthcare Revenue Recovery Grp. LLC,
`902 F.3d 274 (3d Cir. 2018) ................................................................................. 6
`
`Lubin v. Sybedon Corp.,
`688 F. Supp. 1425 (S.D. Cal. 1988) .................................................................... 33
`
`Lujan v. Defenders of Wildlife,
`504 U.S. 555 (1992) ............................................................................................ 11
`
`Martinez v. Equifax Inc.,
`2016 WL 226639 (D.N.J. Jan. 19, 2016) ............................................................ 38
`
`McCabe v. Ernst & Young, LLP,
`494 F.3d 418 (3d Cir. 2007) ......................................................................... 20, 22
`
`In re Merrill Lynch & Co. Rsch. Rpts. Sec. Litig.,
`272 F. Supp. 2d 243 (S.D.N.Y. 2003) ................................................................ 19
`
`Metz v. United Cntys. Bancorp,
`61 F. Supp. 2d 364 (D.N.J. 1999) ....................................................................... 37
`
`Mladenov v. Wegmens Food Mkts., Inc.,
`124 F. Supp. 3d 360 (D.N.J. 2015) ..................................................................... 37
`
`In re Morgan Stanley Info. Fund Sec. Litig.,
`592 F.3d 347 (2d Cir. 2010) ............................................................................... 24
`
`Morgan v. Sanford Brown Inst.,
`225 N.J. 289 (2016) ............................................................................................ 39
`
`Morin v. Trupin,
`747 F. Supp. 1051 (S.D.N.Y. 1990) ................................................................... 36
`
`Mucciariello v. Viator, Inc.,
`2019 WL 4727896 (D.N.J. Sept. 27, 2019) .......................................................... 6
`
`In re Mut. Funds Inv. Litig.,
`384 F. Supp. 2d 845 (D. Md. 2005) .................................................................... 20
`
`
`
`vi
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 8 of 52 PageID: 364
`
`
`
`Nat’l Junior Baseball League v. Pharmanet Dev. Grp. Inc.,
`720 F. Supp. 2d 517 (D.N.J. 2010) ..................................................................... 20
`
`Olkey v. Hyperion 1999 Term Trust, Inc.,
`98 F.3d 2 (2d Cir. 1996) ..................................................................................... 25
`
`Ong v. Chipotle Mexican Grill, Inc.,
`294 F. Supp. 3d 199 (S.D.N.Y. 2018) ................................................................ 25
`
`Ortiz v. Canopy Growth Corp.,
`537 F. Supp. 3d 621 (D.N.J. 2021) ..................................................................... 24
`
`Oxenberg v. Cochran,
`518 F. Supp. 3d 831 (E.D. Pa. 2021) .................................................................. 13
`
`Park v. Bae,
`2016 WL 1435715 (D.N.J. Apr. 12, 2016) ......................................................... 21
`
`In re Paulsboro Derailment Cases,
`2014 WL 1371712 (D.N.J. Apr. 8, 2014) ........................................................... 37
`
`Pierce v. Morris,
`2006 WL 2370343 (N.D. Tex. Aug. 16, 2006) .................................................. 20
`
`Pilgrim v. Universal Health Card, LLC,
`660 F.3d 943 (6th Cir. 2011) .............................................................................. 37
`
`Plastic Surgery Ctr., P.A. v. Aetna Life Ins. Co.,
`967 F.3d 218 (3d Cir. 2020) ............................................................................... 32
`
`Pop’s Cones, Inc. v. Resorts Int’l Hotel, Inc.,
`704 A.2d 1321 (N.J. App. Div. 1998) ................................................................ 31
`
`Potts v. Johnson & Johnson Consumer, Inc.,
`2021 WL 2177386 (D.N.J. May 28, 2021) ......................................................... 10
`
`Ramon v. Budget Rent-A-Car Sys., Inc.,
`2007 WL 604795 (D.N.J. Feb. 20, 2007) ............................................................. 6
`
`Reilly v. Ceridian Corp.,
`664 F.3d 38 (3d Cir. 2011) ................................................................................. 13
`
`
`
`vii
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 9 of 52 PageID: 365
`
`
`
`Rensel v. Centra Tech, Inc.,
`2018 WL 4410126 (S.D. Fla. June 25, 2018) ..................................................... 15
`
`Rombach v. Chang,
`355 F.3d 164 (2d Cir. 2004) ............................................................................... 22
`
`Rosen v. Fidelity Fixed Income Trust,
`169 F.R.D. 295 (E.D. Pa.1995) ........................................................................... 23
`
`In re Schering Plough Corp. Consumer Class Action,
`678 F.3d 235 (3d Cir. 2012) ............................................................................... 18
`
`Semerenko v. Cendant Corp.,
`223 F.3d 165 (3d Cir. 2000) ............................................................................... 23
`
`Siperavage v. Uber Techs., Inc.,
`2021 WL 2680060 (D.N.J. June 30, 2021) ......................................................... 39
`
`Smith v. Antares Pharma, Inc.,
`2020 WL 2041752 (D.N.J. Apr. 28, 2020) ......................................................... 20
`
`Sowell v. Butcher & Singer, Inc.,
`1987 WL 10712 (E.D. Pa. May 13, 1987) .......................................................... 27
`
`Spade v. Select Comfort Corp.,
`232 N.J. 504 (2018) ...................................................................................... 35, 36
`
`Spokeo, Inc. v. Robins,
`578 U.S. 330 (2016) ................................................................................ 12, 13, 16
`
`Thorne v. Square, Inc.,
`2022 WL 542383 (E.D.N.Y. Feb. 23, 2022) ...................................................... 40
`
`Toll Bros., Inc. v. Bd. Chosen Freeholders,
`944 A.2d 1 (N.J. 2008) ....................................................................................... 31
`
`TransUnion LLC v. Ramirez,
`141 S. Ct. 2190 (2021) .................................................................................passim
`
`Ulferts v. Franklin Res., Inc.,
`554 F. Supp. 2d 568 (D.N.J. 2008) ..................................................................... 24
`
`
`
`viii
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 10 of 52 PageID: 366
`
`
`
`In re Vonage IPO Sec. Litig.,
`2009 WL 936872 (D.N.J. Apr. 6, 2009) ............................................................. 27
`
`Williams v. Zhou,
`2019 WL 1379876 (D.N.J. Mar. 27, 2019) ........................................................ 40
`
`Wilson v. Amerada Hess Corp.,
`773 A.2d 1121 (N.J. 2001) ................................................................................. 30
`
`Winer Fam. Tr. v. Queen,
`503 F.3d 319 (3d Cir. 2007) ............................................................................... 26
`
`In re WorldCom, Inc., Sec. Litig.,
`2004 WL 1097786 (S.D.N.Y. May 18, 2004) .................................................... 28
`
`Statutes and Rules
`
`15 U.S.C § 77aa ....................................................................................................... 22
`
`15 U.S.C. § 77e .............................................................................................. 4, 19, 27
`
`15 U.S.C. § 77l ..................................................................................................passim
`
`15 U.S.C. § 77o ........................................................................................................ 28
`
`15 U.S.C. § 78j(b) .............................................................................................passim
`
`15 U.S.C. § 78t ..................................................................................................... 9, 28
`
`15 U.S.C. § 1681n(a) ............................................................................................... 16
`
`Cal. Corp. Code § 25503 ............................................................................ 4, 9, 33, 37
`
`Cal. Corp. Code § 25507(a) ............................................................................... 33, 34
`
`Cal. Corp. Code § 25110 ................................................................................ 9, 33, 34
`
`Fed. R. Civ. P. 9(b) ............................................................................................ 22, 34
`
`Fed. R. Civ. P. 12(b)(1) .................................................................................. 2, 10, 11
`
`Fed. R. Civ. P. 12(b)(6) .............................................................................. 3, 4, 10, 19
`
`Fed. R. Civ. P. 12(f) ............................................................................................. 5, 37
`
`
`
`ix
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 11 of 52 PageID: 367
`
`
`
`Fed. R. Civ. P. 23 ..................................................................................................... 37
`
`N.J.S.A. 49:3-60 ......................................................................................................... 9
`
`N.J.S.A. 49:3-71(c) .......................................................................................... 4, 5, 37
`
`N.J.S.A. 56:8-2 ......................................................................................... 9, 10, 34, 35
`
`N.J.S.A. 56:12-15 ................................................................................................. 9, 35
`
`Other Authorities
`
`Promise, BLACK’S LAW DICTIONARY (11th ed. 2004) ............................................. 31
`
`
`
`x
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 12 of 52 PageID: 368
`
`
`
`PRELIMINARY STATEMENT
`
`This Action arises out of Plaintiffs’ alleged enrollment in BlockFi Interest
`
`Accounts (“BIAs”). The BIA is a custody solution for cryptocurrency that allows
`
`BIA clients to earn interest on their cryptocurrency. BIA clients agree to permit
`
`BlockFi to loan cryptocurrency placed in BIAs to institutional and corporate
`
`borrowers to generate that interest, which BlockFi sets at its sole discretion.1 BIA
`
`clients may withdraw cryptocurrency from their BIAs at any time. Plaintiffs
`
`nowhere allege that they or any other putative class member lost any cryptocurrency
`
`in their BIAs or that BlockFi misappropriated it. Nor do Plaintiffs plead that BlockFi
`
`failed to make any interest payment to them or to any other putative class member.
`
`Plaintiffs also do not allege that they or any other putative class member were unable
`
`to withdraw any cryptocurrency from their BIAs.
`
`Nonetheless, the initial complaint claimed that the purported class somehow
`
`“suffered damages” as a “direct and proximate result” of BlockFi not registering the
`
`BIA as a “security” with the SEC and a California securities regulator. (Compl.
`
`¶¶ 73, 82.) BlockFi moved for dismissal arguing, among other things, that the
`
`complaint’s failure to plead any injury doomed it on Article III standing grounds and
`
`barred its claims for violation of the registration provisions of the Securities Act of
`
`
`1 As used herein, “BlockFi” refers to Defendants BlockFi Inc., BlockFi Trading
`LLC, and BlockFi Lending LLC. The Amended Complaint also includes “BlockFi”
`as a defendant (AC ¶ 26), but such an entity does not exist.
`
`
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 13 of 52 PageID: 369
`
`
`
`1933 (“Securities Act”) and the California Blue Sky laws and for unjust enrichment.
`
`Acknowledging their allegations’ deficiencies, Plaintiffs amended their
`
`complaint instead of responding to BlockFi’s motion. To try to paper over the lack
`
`of any harm, the Amended Complaint adds a menagerie of misstatements, consumer,
`
`and common law claims, raising the total number of counts from three to 11. But
`
`recognizing that merely tossing in everything but the kitchen sink is unlikely to avoid
`
`dismissal, Plaintiffs also try to concoct an injury. The most the Amended Complaint
`
`conjures up is asserting that Plaintiffs “would have required a higher rate of return
`
`or greater interest payments” had they known of various supposedly concealed risks.
`
`(AC ¶¶ 18-20.) But that theory fails to fix the fatal flaw in Plaintiffs’ pleading
`
`because it is both entirely counterfactual—Plaintiffs had no right or ability to
`
`negotiate the interest rate for their BIAs—and entirely speculative.
`
`That, and other fundamental faults, require dismissal for several independent
`
`reasons. Because Plaintiffs have failed to cure their pleading’s defects, the Court
`
`should dismiss the Amended Complaint with prejudice.
`
`First, the Amended Complaint should be dismissed under Rule 12(b)(1)
`
`because it fails to plead two essential requirements for standing under Article III of
`
`the Constitution—an injury in fact and causation. Far from alleging an injury,
`
`Plaintiffs admit that they received the interest payments they were due and could
`
`withdraw the cryptocurrency from their BIAs on demand. The Amended Complaint
`
`-2-
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 14 of 52 PageID: 370
`
`
`
`relies mainly on unsupported assertions of damages and purported risks that never
`
`materialized, which fail the basic principle of “[n]o concrete harm, no standing.”
`
`TransUnion LLC v. Ramirez, 141 S. Ct. 2190, 2200 (2021). And Plaintiffs’ new
`
`theory that they somehow would have required BlockFi to pay more interest
`
`impermissibly posits a fictional world where interest was negotiable (it was not). To
`
`the extent Plaintiffs rely on a statutory private right of action and remedy for a
`
`registration violation, that cannot bridge the gap. The Supreme Court has made clear
`
`that only those “who have been concretely harmed by a defendant’s statutory
`
`violation may sue.” Id. at 2205.
`
`Nor do Plaintiffs allege that any purported injury is “fairly traceable to the
`
`challenged action” by BlockFi as required to establish causation. Finkelman v. Nat’l
`
`Football League, 877 F.3d 504, 510-11 (3d Cir. 2017). Simply put, even if Plaintiffs
`
`had pled a plausible injury (they have not), it would not have been caused by BlockFi
`
`not registering the BIA as a security or supposedly misstating risks. Plaintiffs fail
`
`to plead that such conduct caused them not to receive any contractual right.
`
`Second, the Amended Complaint should be dismissed under Rule 12(b)(6)
`
`because it fails to state a claim. To begin, Plaintiffs’ inability to plead an injury is
`
`also fatal to their federal securities claims. “[T]here can be no recovery” for such
`
`claims “unless the purchaser has suffered a loss,” In re Broderbund/Learning Co.
`
`Sec. Litig., 294 F.3d 1201, 1205 (9th Cir. 2002), and where “it is apparent from the
`
`-3-
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 15 of 52 PageID: 371
`
`
`
`face of the complaint that the plaintiff cannot recover her alleged losses, dismissal”
`
`under “[Rule] 12(b)(6) is proper,” Boluka Garment Co. v. Canaan, Inc., 547 F. Supp.
`
`3d 439, 447 (S.D.N.Y. 2021). The federal securities claims also fail for other
`
`reasons: Plaintiffs do not allege a material misstatement or an offering under a
`
`prospectus or oral communication for their claim under Section 12(a)(2) of the
`
`Securities Act; a material misstatement, scienter, loss causation, or reliance for their
`
`claim under Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act”);
`
`a private right of action for their claim under Section 5 of the Securities Act; and a
`
`predicate violation or control for their control person liability claims.
`
`The Amended Complaint’s motley assembly of consumer and common law
`
`claims fares no better. Those claims come nowhere close to fitting the facts alleged
`
`here. Among other things, Plaintiffs do not plead a breach of contract; a failure to
`
`receive anything they were contractually due, had a right to, or were otherwise
`
`promised; or a bad motive or unconscionable or fraudulent conduct. Here too,
`
`Plaintiffs’ inability to allege a loss or causation permeates their faulty claims.
`
`Third, Plaintiffs’ Securities Act and Blue Sky claims must be dismissed for
`
`the additional and independent reason that the Amended Complaint contains neither
`
`a tender of the BIA nor an offer to tender the BIA. Under the Securities Act and the
`
`California and New Jersey Blue Sky laws, a plaintiff may recover only “upon the
`
`tender of [the] security,” 15 U.S.C. § 77l(a); Cal. Corp. Code § 25503; N.J.S.A.
`
`-4-
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 16 of 52 PageID: 372
`
`
`
`49:3-71(c), which Plaintiffs fail to do here despite amending their pleading.
`
`Finally, even if the Amended Complaint stated a claim (it does not), the Court
`
`should strike the class allegations under Rule 12(f). “A defendant may move to
`
`strike class action allegations prior to discovery in those rare cases where the
`
`complaint itself demonstrates that the requirements for maintaining a class action
`
`cannot be met.” Clark v. McDonald’s Corp., 213 F.R.D. 198, 205 n.3 (D.N.J. 2003).
`
`This is such a case. The Amended Complaint and the documents on which it is based
`
`make clear that Plaintiffs agreed to a valid and enforceable waiver of their right to
`
`bring class claims against BlockFi relating to the BIA.
`
`BACKGROUND
`
`A. The Parties
`
`Plaintiff John Mangano, a purported California resident, alleges that he
`
`enrolled in a BIA “on or around” August 31, 2021. (AC ¶ 23.) Plaintiff Michael
`
`Leifman, a purported New Jersey resident, alleges that he “opened” an unspecified
`
`“account” with BlockFi “on or around” April 5, 2021. (Id. ¶ 24.)
`
`Defendant BlockFi Inc. was founded in 2017 as a financial services company
`
`focused on cryptocurrency. (Id. ¶¶ 3, 25.) BlockFi Inc. is a Delaware corporation
`
`that maintains an office in New Jersey. (Id. ¶ 25.) Defendants BlockFi Trading LLC
`
`and BlockFi Lending LLC are wholly owned subsidiaries of BlockFi Inc. (Id.)
`
`B.
`
`The BIA
`
`In March 2019, BlockFi launched the BIA as a custody solution that allows
`
`-5-
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 17 of 52 PageID: 373
`
`
`
`BIA clients to earn interest on their cryptocurrency. (Id. ¶¶ 4, 33.) All BIA clients
`
`agreed to the BlockFi Terms of Service (“BlockFi Terms”) and Interest Account
`
`Terms (“BIA Terms”) in enrolling in a BIA. (Id. ¶ 37; Exs. A-D.)2 Under the BIA
`
`Terms, BIA clients agreed that BlockFi could “pledge, repledge, hypothecate,
`
`rehypothecate, sell, lend, or otherwise transfer, invest or use” the cryptocurrency
`
`placed in BIAs. (AC ¶ 38; Exs. C & D § H.1.) They also granted BlockFi “all
`
`attendant rights of ownership” in such cryptocurrency. (Id.) Those rights allowed
`
`BlockFi to “generate[] the interest paid” to BIA clients “by deploying [the
`
`cryptocurrency] in various ways, including loans of . . . crypto assets made to
`
`institutional . . . borrowers, lending U.S. dollars to retail investors, and by investing
`
`in equities and futures.” (AC ¶ 4.) BIA clients agreed that “BlockFi may receive
`
`compensation in connection with lending or otherwise using” such cryptocurrency.
`
`
`2 Citations to “Ex.” refer to exhibits to the Declaration of Marcelo Villar, dated
`September 12, 2022 (“Villar Decl.”). In assessing a motion to dismiss, this Court
`may consider any documents upon which “the plaintiff’s claims are based,” Levins
`v. Healthcare Revenue Recovery Grp. LLC, 902 F.3d 274, 279 (3d Cir. 2018), or
`which are “incorporated by reference or integral to the claim,” Buck v. Hampton
`Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006). The Amended Complaint quotes
`and incorporates by reference the BIA Terms, Wallet Terms, Trading Terms,
`disclosures on BlockFi’s website, and SEC Order (see, e.g., AC ¶¶ 29, 37-38, 41,
`47, 48, 50, 51, 82, 123, 156-58), and the BlockFi Terms—which governed Plaintiffs’
`use of BlockFi’s website—are “integral to[] Plaintiff[s’] Complaint.” Mucciariello
`v. Viator, Inc., 2019 WL 4727896, at *1 & n.1 (D.N.J. Sept. 27, 2019) (considering
`“Terms and Conditions” because “they directly relate to Viator’s website”); see, e.g.,
`Ramon v. Budget Rent-A-Car Sys., Inc., 2007 WL 604795, at *2 n.2 (D.N.J. Feb. 20,
`2007) (considering “terms of use”).
`
`-6-
`
`

`

`Case 2:22-cv-01112-KM-CLW Document 34-1 Filed 09/12/22 Page 18 of 52 PageID: 374
`
`
`
`(Exs. C & D § H.2; see AC ¶¶ 37, 39.) The BIA Terms disclosed that the
`
`cryptocurrency would be “exposed to various risks as a result of such transactions,”
`
`(Exs. C & D § L.1),