Kentucky Appeals Court Says Default Judgments Warranted in Unanswered Crypto Investment Case

News | February 16, 2024 By:

On Friday, February 9, 2024, the Kentucky Court of Appeals issued a mixed ruling in a case involving cryptocurrency investments gone wrong.

Rick Robinette, a retired West Virginia coal miner, had invested a total of $193,600 with several Lexington, Kentucky-based companies called Catapult Funding LLC and Catapult Marketing LLC between January and December 2021. The companies, run by businessman Mark Carroll, promised exorbitant returns on investments involving cryptocurrency and other like forms of investments.

Robinette entered into three agreements with Catapult that stated he would receive returns ranging from 85% to over 100% of his investments within six months. However, when the final investment of $400,000 did not pay out the promised return of $808,000 in June 2021, Robinette sued Catapult and its executives for breach of contract and fraud.

In his lawsuit, Robinette named as defendants Carroll, Carroll Foundation Inc., Catapult Funding, Catapult Marketing, and Luke Curry. However, none of the defendants filed a response to the complaint. Robinette then sought default judgments against all defendants.

The trial court partially granted the motion, entering default judgment solely against Catapult Funding for breach of contract. It denied default judgments against the other defendants, claiming the investment contract only implicated Catapult Funding.

The court also held a damages hearing. It found that while the agreements called the transactions “loans,” they were actually high-risk cryptocurrency investments. It noted the FBI had termed the arrangements a “Ponzi scheme.” Although Robinette recovered $217,500 total, recovering his original $193,600 investment plus a 12.3% return, the court ruled he suffered no “actual damages” as the expected returns were unconscionably high.

On appeal, the Kentucky Court of Appeals affirmed in part and reversed in part. It agreed Robinette suffered no damages under the unreasonable final contract promising over a 100% return.

However, the Court of Appeals ruled the trial court abused its discretion by not entering default judgments against all defendants on all legal claims. It noted Robinette’s complaint alleged not just breach of contract, but also fraud – a claim that did not require contractual privity. As none of the defendants filed a response, Robinette was entitled to default judgments on all claims.

The appellate court remanded the case back to the trial court to enter default judgments on the fraud claims and conduct further damages proceedings. It affirmed the ruling that Robinette could not recover under the ultimately unrealistic investment terms.

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