Victims of Forex scam ROFX.net fail to secure class certification in US lawsuit
The victims of fraudulent Forex scheme ROFX.net have failed to secure class certification.
On May 11, 2023, Judge Robert N. Scola, Jr of the Florida Southern District Court issued an order denying the plaintiffs’ motion for class certification.
The motion was filed by plaintiffs Ryan Birmingham, Roman Leonov, Steven Hansen, Mitchell Parent, and Jonathan Zarley. None of the Defendants has responded to the Plaintiffs’ motion. The Court has carefully reviewed the motion, the record, and the applicable law.
The plaintiffs filed the instant action on September 29, 2021, and amended their complaint on February 14, 2022. The case arises from the Defendants’ purported scheme to defraud the Plaintiffs and similarly situated customers who invested in RoFx.net, a phony trading website.
Per the Plaintiffs, between 2018 and 2021, an informal association of Ukrainians (the “RoFx Operators”) operated a phony foreign exchange trading service via RoFx.net—a website hosted in Jacksonville, Florida. The RoFx Operators claimed to have artificially intelligent software that could conduct foreign exchange trading on behalf of customers; the customers needed only to send funds to the RoFx Operators and, in return, the customers were promised passive income.
The RoFx Operators perpetrated this years-long fraud using a sophisticated website, an active customer service team, invoices, account statements, Forex activity reported on third-party websites, and promotions via advertisements and sponsored articles—and even allowed some customers to withdraw limited funds.
However, according to the Plaintiffs, the entire RoFx platform was a fabrication. There was no trading algorithm, there was never a registered company, customers’ funds were not being invested on their behalf, the online advertising was fictitious, there was never going to be an IPO or a legitimate ICO, and customers were never free to withdraw their funds.
Instead, the Plaintiffs claim, the Defendants engaged in an illegitimate enterprise meant to steal the funds of RoFx customers for their own benefit. RoFx.net was shut down on or about September 17, 2021, and the RoFx Operators stopped responding to customers.
Based on the foregoing, the Plaintiffs’ amended complaint brings nine counts against the various Defendants. Twenty-six of the defendants that were served failed to appear, answer, or otherwise plead to the Amended Complaint, and the Clerk of Court entered defaults against them. The Plaintiffs moved for default judgment as to those Defendants, and on December 6, 2022, Magistrate Judge Goodman issued a report and recommendations on the Plaintiffs’ default judgment motions. Judge Goodman recommended that the Plaintiffs’ motions be granted only on the issue of liability with respect to 15 of the Defendants, as follows:
- Count Three for fraud against Defendants Peter Mohylny and The Investing Online;
- Count Three for fraud against Ester Holdings, Inc. but only with respect to Plaintiffs Leonov, Parent, and Zarley;
- Count Nine for unjust enrichment against Wealthy Developments LP, Notus, LLC, Global E-Advantages, LLC, Easy Com, LLC, ShopoStar, LLC, Grovee, LLC, Trans-Konsalt MR Ltd., Art Sea Group Ltd., VDD-Trading, Ltd., Brass Marker s.r.o., Profit Media Group LP, and Auro Advantages, LLC.
On January 5, 2023, the Court adopted Judge Goodman’s report and recommendations in full.
Now, prior to moving for default judgment as to damages, the Plaintiffs seek certification of the following proposed class of victims of the RoFx Scheme:
All persons who contributed funds to the RoFx foreign exchange trading scheme. Excluded from the Class are 1) Defendants, any entity or division in which Defendants have a controlling interest, and their legal representatives, officers, directors, agents, assigns, and successors; 2) anyone employed by counsel for Plaintiffs in this action; and 3) the judge to whom this case is assigned and the judge’s staff.
In denying the motion for class certification, the Judge explains that the Plaintiffs have made little to no attempt to either identify what laws apply to the potential class members’ claims or to address whether and, if so, how variations among those laws can be managed upon certification. Thus, the Court is unable to satisfactorily determine from the Plaintiffs’ briefing whether such variations are such that the legal questions governing each class members’ claims are predominantly subject to generalized proof.
The Judge notes that it is unclear from the Plaintiffs’ motion how many jurisdictions’ laws will be implicated if the Court grants certification.
While the Plaintiffs provide no information as to the identities or locations of the proposed class members, a review of the Plaintiffs’ submissions suggests that these might be located all over the world. For one, the amended complaint alleges that Plaintiffs “bring this action on behalf of a global class of RoFx customers under Federal Rule of Civil Procedure 23.”
In addition, the five named Plaintiffs themselves come from four different states, namely, Florida, Maine, Hawaii, and Arizona.
Moreover, per the Plaintiffs’ allegations, the RoFx Scheme was conducted entirely online, which would have made it possible for the Defendants to reach customers from all over.
Accordingly, it is likely that the potential class members’ claims are governed by many different jurisdictions’ laws, but the Court is unable to make this determination because the Plaintiffs’ briefing ignores all aspects of the relevant inquiry.
In short, the Court concluded that because the Plaintiffs have failed to meet their burden of showing the common issues of law predominate in this action, their motion for class certification must be denied. If the Plaintiffs deem that they are able to adequately address the deficiencies, they may file a renewed motion on or before May 31, 2023.