Lee v. Foris Dax, Inc.

Background

Lee alleged that unknown cryptocurrency scammers persuaded her husband, Patz, who was over 65, to withdraw community-property funds from accounts at First Republic Bank and invest them in fraudulent cryptocurrency schemes. She alleged losses of close to $1 million and claimed that Foris DAX, Inc., doing business as Crypto.com, First Republic Bank as receiver through the Federal Deposit Insurance Corporation (FDIC-R), and First Republic employee Catherine Evans aided and abetted fraud, unlawfully received stolen property, and violated the unlawful prong of California’s Unfair Competition Law (UCL).

The court had previously dismissed most claims and allowed Lee to amend her aiding-and-abetting and unlawful UCL theories. In her second amended complaint, Lee clarified that the alleged underlying torts were fraud, conversion, and trespass to chattels; added a claim for receiving stolen property under California Penal Code section 496(c); and added alleged violations of various statutes as possible bases for the unlawful UCL claim.

Crypto.com’s Motion

The court assumed, without deciding, that Lee had standing to bring the remaining claims because she alleged that the lost funds were community property. It dismissed the aiding-and-abetting claim because Lee did not plead facts showing that Crypto.com had the actual knowledge required for liability. Under the court’s analysis, actual knowledge could be inferred from circumstances only when the defendant “must have known” of the specific underlying wrong, rather than merely “should have known.”

The court found that Lee’s allegations about Crypto.com’s transaction data, security tools, knowledge of cryptocurrency scams, and allegedly flagged wallets did not meet that standard. The court also noted that Patz had no prior history with Crypto.com, making it difficult for the exchange to identify his transactions as unusual compared with his prior behavior, and that Crypto.com had asked him questions about his account activity. The court separately found that Lee had not shown the required substantial assistance. Because Lee had already received two opportunities to amend, the aiding-and-abetting claim was dismissed with prejudice.

The court also found the receiving-stolen-property claim implausible. Lee had to allege that the property was already stolen when Crypto.com received it, that Crypto.com knew it was stolen, and that Crypto.com received or possessed it. The court concluded that the complaint did not adequately allege either that the money was already stolen when Crypto.com received it or that Crypto.com had actual knowledge of that fact.

The court dismissed several proposed unlawful UCL predicates involving misrepresentations or consumer deception because Lee never had a Crypto.com account and therefore could not allege that she relied on Crypto.com’s representations. It rejected dismissal of the UCL theory based on alleged violations of the federal Bank Secrecy Act and related anti-money-laundering rules. The court reasoned that Lee was using those alleged violations as a predicate for the UCL claim, not asserting a free-standing Bank Secrecy Act claim, and that Crypto.com had not shown that the Bank Secrecy Act barred this use. The allegations that Crypto.com failed to maintain an effective anti-money-laundering program were therefore plausible at the pleading stage.

FDIC-R and Evans’ Motions

The court held that the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) makes the administrative claims process jurisdictional for claims involving a failed bank and its receiver. Lee filed her administrative claim more than a year after the September 5, 2023 claims deadline, and the FDIC-R disallowed it as untimely.

FIRREA contains a narrow exception for a late claim when the claimant did not receive notice of the receiver’s appointment in time to file. The court concluded that the exception did not apply. It explained that lack of mailed notice of the claims deadline does not excuse exhaustion, and that published notices and Lee’s own pleadings showed that she had adequate notice, or at least enough information to trigger an obligation to investigate the receivership. The court also applied the jurisdictional bar to Evans because Lee’s claims against her were based on alleged wrongdoing in her capacity as a First Republic employee.

Disposition

The court granted the FDIC-R and Evans motions to dismiss, and Lee’s claims against those defendants were dismissed with prejudice. The court granted Crypto.com’s motion to dismiss all of Lee’s claims except the unlawful UCL claim based on alleged Bank Secrecy Act violations. The court denied Crypto.com’s motion as to that remaining UCL theory. The case management conference remained scheduled for September 30, 2025.