Wu v. Bitfloor, Inc.
- Ronnie Abrams
- 1:19-cv-00238
- U.S. District Court · Southern District of New York
- 18
In Wu v. Bitfloor, Inc., Judge Abrams granted dismissal of the federal commodities-fraud claim as untimely and dismissed state-law claims without prejudice.
The plaintiffs’ federal commodities-fraud claim was barred by the statute of limitations. Their New York state-law claims were dismissed without prejudice after the court declined to exercise jurisdiction over them. Bitfloor, Inc. and Roman Shtylman obtained dismissal of the federal claim.
What happened
In Wu v. Bitfloor, Inc., customers of Bitfloor, Inc. and Roman Shtylman alleged that defendants made misleading statements about Bitfloor’s operations and closure, causing them to lose access to money and Bitcoin in their accounts. They sued under the Commodities Exchange Act and New York law.
The court ruled that the federal claim was filed too late. It found that the plaintiffs should have investigated no later than August 31, 2016, when Bitfloor’s dissolution became publicly available, but they did not file the case until January 11, 2019. The court did not decide whether the alleged conduct violated the federal commodities law.
Judge Abrams granted defendants’ motion to dismiss the federal claim as time-barred, declined to decide the remaining New York claims in federal court, and dismissed those state-law claims without prejudice. The court directed the Clerk to close the case.
The detailed version
- Wu v. Bitfloor, Inc. · No. 1:19-cv-00238
- Ronnie Abrams
- May 15, 2020
Background
Twelve plaintiffs sued Bitfloor, Inc. and Roman Shtylman. The plaintiffs alleged that they had bought, sold, and held Bitcoin through Bitfloor and that they could no longer access or sell Bitcoin held in their Bitfloor wallets. They claimed that defendants made false or misleading statements and omissions about Bitfloor’s operations, closure, and ability to return customer property.
The First Amended Complaint asserted a commodities-fraud claim under Section 6(c)(1) of the Commodities Exchange Act and Regulation 180.1(a). It also asserted New York claims including breach of contract, conversion, fraud, deceptive business practices, breach of fiduciary duty, negligent misrepresentation, unjust enrichment, and bailment or constructive trust. Defendants moved to dismiss under Federal Rules of Civil Procedure 9(b) and 12(b)(6).
Statute of Limitations
The Commodities Exchange Act requires claims to be filed within two years after the cause of action arises. The court applied a discovery rule under which the limitations period begins when a plaintiff discovers the injury. The court also explained that a plaintiff may be treated as knowing of the injury when the surrounding circumstances would have led a reasonably intelligent person to investigate possible fraud.
The court found that the complaint and its attached documents showed that the plaintiffs were on inquiry notice of their alleged injury no later than August 31, 2016. By then, publicly available New York records showed that Bitfloor had been dissolved. The court also relied on the April 2013 report that Bitfloor would cease trading indefinitely, the plaintiffs’ alleged loss of access to their accounts, and the alleged lack of communication from defendants.
The court concluded that a reasonably diligent investigation would have revealed the alleged fraud by August 31, 2016, at the latest. Because the plaintiffs filed their initial complaint on January 11, 2019, more than two years later, the court held that the Commodities Exchange Act claim was time-barred.
Claims Not Decided
Defendants also argued that the federal claim failed to adequately plead a plausible violation. The court expressly declined to decide that issue because the claim was already barred by the statute of limitations.
After dismissing the federal claim, the court declined to exercise supplemental jurisdiction, meaning authority to hear related state-law claims, over the remaining New York claims. The court stated that the relevant considerations favored leaving those claims for another forum and dismissed the state-law claims without prejudice.
Disposition
The court granted Defendants’ motion to dismiss the Commodities Exchange Act claim as time-barred, declined to exercise jurisdiction over the plaintiffs’ state-law claims, and dismissed those state-law claims without prejudice. The Clerk was directed to terminate the motion and close the case.
Read the full 18-page opinion on CourtListener, the free public archive maintained by the Free Law Project.