SDNY Magistrate Finds $800k in damages in EPAN Pump And Dump Scheme for promoters’ false start

News | August 31, 2022 By:

On Friday, August 26, 2022, the United States District Court for the Southern District of New York awarded blockchain-based payment solution Paypolitan more than $800,000 in damages in a breach of contract case against Eloisa Marchesoni and Giacomo Arcaro. The case is styled as ‘Paypolitan v. Marchesoni et al’ with case number #21-CV-5397 (RA) (RWL).

Based in Germany, Paypolitan is a financial technology company that primarily provides business-to-business payment-processing services. It uses blockchain technology, smart contracts, and open banking APIs to provide a next-gen billing solution. In connection with its business, Paypolitan created a cryptocurrency called EPAN, which is “paired” with a major cryptocurrency in order to provide liquidity.

On March 22, 2021, Marchesoni, a cryptocurrency influencer who lives in New York, offered her services to Paypolitan to promote and increase the value of EPAN. Over the ensuing days, Paypolitan and the defendants entered into an oral agreement. Paypolitan agreed to supply 700,000 EPAN tokens to Marchesoni and her team, including Arcaro, solely for the purpose of the defendants’ promoting and increasing the value of EPAN. The defendants agreed they would promote EPAN to increase the value to approximately $2.40 (four times its value of $0.60 as of April 6, 2021), with an expected sustained value of $1.50.

As a result of the defendants’ promotion of EPAN tokens, the value rose to $1.08 per token as of April 8, 2021. But at that juncture, and without EPAN tokens having reached a sustained value of $1.50 as required by the Agreement, the defendants started selling EPAN tokens and exchanging them for ETH from the Paypolitan liquidity pool, all for their own gain and not to promote EPAN tokens.

The filing states:

“Specifically, on April 9, 2021, Defendants sold 263,605 EPAN tokens, enriching themselves by 112 ETH, and reducing the value of the Paypolitan liquidity pool by $232,076.32.4. On May 12, 2021, Defendants sold the remaining 397,789 EPAN tokens, enriching themselves by 33 ETH, and reducing the value of the Paypolitan liquidity pool by $142,106.58.”

The price of EPAN tokens crashed to $0.30 as a result of the defendants’ unauthorized sales of significant quantities of EPAN tokens over a brief period of time. This price was significantly lower than the price of EPAN tokens prior to the parties’ Agreement, under which the defendants were supposed to promote and raise the value of EPAN tokens.

The filing continues:

Plaintiff seeks to recover damages based on three losses resulting from Defendants’ breach of the Agreement: (1) $435,075.69 expended by Plaintiff on April 2, 2021 to purchase the 700,000 EPAN tokens that Defendants liquidated for their own benefit without having achieved the agreed upon benchmark for Defendants to be paid for their services; (2) $232,076.32, the amount by which Defendants reduced the value of the Paypolitan liquidity pool when they breached the Agreement on April 9, 2021; and (3) $142,106.58, the amount by which Defendants reduced the value of the Paypolitan liquidity pool, when they breached the Agreement on May 12, 2021. As set forth in the facts above, those dollar amounts are the actual amounts lost by Plaintiff from Defendants’ breach of the parties’ Agreement. The total sum of the three loss amounts is $809,258.59.”

According to United States Magistrate Judge Robert W. Lehrburger, to prevail on a breach of contract claim under New York law, a plaintiff must establish four elements: (1) the existence of a contract; (2) the plaintiff’s performance of that contract; (3) the defendant’s breach of that contract; and (4) that the plaintiff suffered damages as a result of the breach. The judge stated that all four elements were met.

Judge Lehrburger stated that:

“As a result, Plaintiff incurred monetary damage. Plaintiff’s well-plead allegations and supporting declarations thus establish Defendants liability for breach of contract… The Court has reviewed Plaintiff’s submissions and finds sufficient proof of the costs paid and that they are recoverable… For the foregoing reasons, I recommend awarding Plaintiff: $809,258.59 in damages and $532 in costs.”

Please contact BlockTribune for access to a copy of this filing.