Magistrate Judge Recommends Dismissal of Lawsuit Over Cryptocurrency Investment Dispute

On Wednesday, August 21, 2024, Lauren F. Louis, a federal magistrate judge for the United States District Court for the Southern District of Florida, recommended dismissing Eli Blatt’s amended complaint against Marc Goldner, Rachel Korsen, Simon Divilov, and The Dharma Initiative LLC with leave to amend.

Mr. Blatt and Mr. Goldner had formed an LLC called Goldner Blatt Investments to invest in cryptocurrency and digital assets. However, a dispute arose over investments into miners and non-fungible tokens (NFTs). Mr. Blatt had wired over $400,000 to Mr. Goldner and a company called Compass Mining to purchase the assets for their LLC, but claimed Mr. Goldner stored them in his own personal accounts instead of the LLC.

In her recommendation, Judge Louis found that Mr. Blatt’s amended complaint constituted an improper “shotgun pleading” under the Eleventh Circuit precedent. Shotgun pleadings fail to provide clear notice of the factual and legal grounds for each claim. Mr. Blatt had incorporated all 116 paragraphs of factual allegations into each individual count, making it unclear which specific facts supported each cause of action.

Judge Louis recommended dismissing the complaint and granting leave to amend. She instructed Mr. Blatt that any second amended complaint must clearly state which factual allegations support each separate claim in a simple, concise manner without incorporating prior allegations by reference. This was necessary to fix the shotgun pleading issues.

The recommendation also addressed other deficiencies in certain claims raised by the defendants’ motion to dismiss. Judge Louis found that Mr. Blatt had not sufficiently alleged facts to support his claim of aiding and abetting a breach of fiduciary duty against Ms. Korsen and Mr. Divilov. She also noted issues with whether the LLC, Goldner Blatt Investments, needed to be joined as a required party for some counts.

However, Judge Louis recommended denying the motion to the extent it argued Mr. Blatt lacked standing to bring claims for unjust enrichment and conversion regarding the assets. If given leave to amend, she advised Mr. Blatt to clarify whether the alleged harms were to himself individually or the LLC. The case has now been referred to the presiding district judge for review and final ruling.

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