District Court Dismisses Securities Fraud Case where Securities were not Traded on a US Exchange and the Complaint Alleged no Facts Describing where Relevant Transactions Occurred

The World in U.S. Courts: Winter 2016 - Securities Law/Commodities Exchange Act (CEA) | November.21.2016

Moreno-Gomez v. Ponce-Romay, US District Court for the District of Delaware, November 21, 2016

The plaintiffs, individuals and companies involved in the manufacture of plastic bottles for sale in Costa Rica, brought US federal securities law and other claims arising out the defendants’ allegedly fraudulent foreclosure on stock in a company that had been pledged as collateral for a loan.  The Court stated that the US securities laws had no extraterritorial effect and that a plaintiff must therefore plead a domestic purchase or sale, either through the stock in question being listed on a US stock exchange or “irrevocable liability” for the transaction having arisen in the US.  The Court observed that the plaintiffs admitted that the stock was not traded on a US exchange, and that they had not plead facts sufficient to show where any of the relevant transactions occurred.  The only reference to the US was a general averment that certain defendants “do business” in the country, and the Court found this allegation too vague to be given weight.  The complaint was dismissed and the plaintiffs were allowed to amend their complaint if facts supporting federal jurisdiction could be stated.

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