A man defending himself against Securities and Exchange Commission (SEC) charges of fraud and the selling of unregistered digital currency has moved to dismiss the agency’s case. Last week, Vladimir Okhotnikov argued that the SEC’s charges against him fail because of the complaint’s jurisdictional shortcomings and “shotgun and puzzle pleadings.”
The case dates to August when the SEC accused Okhotnikov and ten others of involvement in a worldwide crypto Ponzi scheme, and specifically the website Forsage.io, which allowed retail investors to enter into smart contracts that operated on the Ethereum, Tron, and Binance blockchains. So far, several defendants have made agreements with the SEC to resolve the disputes.
As for Okhotnikov, the SEC described him as “the face” of the Forsage operation. The agency said that he appeared in interviews with crypto promoters and hosted many YouTube videos touting Forsage investors’ profits and the platform’s security. However, the motion to dismiss asserts that the SEC made unsupported claims against Okhotnikov, like that he has prior experience participating in multilevel marketing projects.
Substantively, the defendant asserts that the SEC’s “group pleadings” do not establish personal jurisdiction over him. Even the SEC’s Okhotnikov-specific allegations about his use of social media and Forsage’s website fail to establish personal jurisdiction in the United States, the motion says, noting that he is neither a U.S. resident nor has ever been to the country.
In addition, the filing faults the complaint’s “conclusory and arbitrary labeling of the smart contracts as a pyramid and Ponzi scheme.” The SEC does not show how the smart contracts satisfy the applicable legal test that would convert them into securities, the motion argues to counter the unregistered securities claim.
The filing further says that the SEC fails to meet the heightened pleading requirements associated with fraud and lastly, that the agency does not show how the federal securities laws apply to the extraterritorial transactions made using Forsage.
The defendant is represented by Foley & Lardner LLP, Kuchinski Law Group LLC, and Azhari LLC.
