Moeller-Bertram v. Gemini Trust Company, LLC

Background

Tobias Moeller-Bertram filed a proposed securities class action against Gemini Trust Company, LLC and Digital Currency Group, Inc. He alleged that he invested in the Gemini Earn program, which was administered by non-party Genesis Global Capital, LLC. Under that program, investors provided crypto assets to Genesis in exchange for interest. After Genesis announced in November 2022 that retail investors could no longer withdraw their assets, Moeller-Bertram alleged that he suffered losses.

The complaint asserts claims under Sections 5, 12, and 15 of the Securities Act of 1933. It alleges that the tri-party Gemini Earn agreements among investors, Genesis, and Gemini constituted an unregistered securities offering, and that Digital Currency Group was liable as a control person of Genesis. The case was filed in New York state court and later removed to the Southern District of New York. The court had previously denied Moeller-Bertram’s request to send the case back to state court. It also later granted Gemini’s motion to compel arbitration on consent and stayed the claims against Gemini while arbitration proceeded.

Motion to Transfer

Digital Currency Group moved under 28 U.S.C. § 1404(a) to transfer the case to the United States District Court for the District of Connecticut. That statute permits a federal court to transfer a civil case when the proposed court is an available forum and the transfer would promote convenience and justice.

The court found that the case could have been brought in Connecticut. Digital Currency Group’s principal place of business was there, and the court concluded that personal jurisdiction and venue were available in that district.

The court also found that the convenience and justice factors favored Connecticut. A substantially similar securities class action, McGreevy et al. v. Digital Currency Group, Inc., et al., had been filed earlier in the District of Connecticut. That case asserted nearly identical claims against Digital Currency Group and proposed an identical class. The court treated it as the first-filed action. The court found that Digital Currency Group’s location, the location of relevant documents, and the location of events connected to the claims supported transfer. It found the remaining factors neutral.

Moeller-Bertram argued that another case, Picha, filed earlier in the Southern District of New York, should receive priority. The court rejected that argument because Picha did not name Digital Currency Group and did not assert the same theory that the tri-party agreements were unregistered securities. The court also found no efficiency benefit in retaining this case because Picha had been stayed in favor of arbitration. The court rejected a similar argument concerning a Securities and Exchange Commission case because that case involved a government plaintiff rather than a substantially similar private plaintiff.

Ruling

Judge Lewis J. Liman granted Digital Currency Group’s motion to transfer. The Clerk was directed to close the motion and transfer the case to the United States District Court for the District of Connecticut without delay. The opinion decided venue and convenience, not whether the Securities Act claims were legally valid.