759 F.Supp.3d 543
S.D.N.Y.2024Background
- Plaintiffs Oleg and Rimma Koziar, retired immigrants from Ukraine living in Pennsylvania, claimed to be victims of an international cryptocurrency fraud scheme run through a fictitious company, Blammo, Ltd., and individual defendant Jack Stars (a/k/a Evgeny Melnik).
- Blammo promoted itself online and lured Plaintiffs with advertisements, leading them to transfer a total of $669,400.10 in cryptocurrency and cash over several months in 2023, including wire transfers and Bitcoin ATM transfers.
- Plaintiffs never received any return or withdrawal from the scheme and, upon further inquiry, discovered Blammo and its representatives were unreachable; some co-defendants settled with Plaintiffs for $25,000 and were dismissed.
- Plaintiffs alleged conversion and common law fraud (as well as a Computer Fraud and Abuse Act claim which was not substantively addressed) against the defaulting Defendants, Blammo, Ltd. and Melnik.
- The court entered default judgment against Blammo and Melnik, referring damages to Magistrate Judge Lehrburger, who considered the record without a hearing due to sufficient documentary evidence.
- Plaintiffs sought out-of-pocket damages (net $644,400.10 after offset for prior settlement) and pre-judgment interest at the statutory rate under New York law.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Liability for Conversion | Defendants exercised unauthorized control over Plaintiffs’ funds and refused to return them | No appearance/defense | Plaintiffs established conversion |
| Liability for Common Law Fraud | Defendants made material misrepresentations to induce investment, causing Plaintiffs’ loss | No appearance/defense | Plaintiffs established fraud |
| CFAA Violation | Harm occurred by reason of computer fraud and abuse (statutory claim) | No appearance/defense | Not addressed substantively; not basis for relief |
| Damages and Pre-Judgment Interest | Plaintiffs entitled to recover net out-of-pocket losses and pre-judgment interest at 9% from 5/13/23 | No appearance/defense | Awarded requested damages and pre-judgment interest |
Key Cases Cited
- City of New York v. Mickalis Pawn Shop, 645 F.3d 114 (2d Cir. 2011) (defaulting defendant admits all well-pleaded factual allegations except damages)
- Finkel v. Romanowicz, 577 F.3d 79 (2d Cir. 2009) (trial court must accept factual allegations as true on default)
- Tamarin v. Adam Caterers, Inc., 13 F.3d 51 (2d Cir. 1993) (court may rely on affidavits for liability and damages on default)
- Thyroff v. Nationwide Mutual Insurance Co., 460 F.3d 400 (2d Cir. 2006) (standard for conversion under New York law)
- Crigger v. Fahnestock & Co., 443 F.3d 230 (2d Cir. 2006) (standard for common law fraud under New York law)