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THE ATTORNEY GENERAL PROPERLY SERVED VALID SUBPOENAS ON THE VIRTUAL CURRENCY COMPANIES PURSUANT TO GENERAL BUSINESS LAW 352 (MARTIN ACT) IN A FRAUD INVESTIGATION; ONCE THE MOTIONS TO VACATE OR MODIFY THE EX PARTE ORDER RE: THE ISSUANCE OF THE SUBPOENAS WAS DETERMINED, THE COURT NO LONGER HAD ANY AUTHORITY OVER THE ATTORNEY GENERAL’S INVESTIGATION; THEREFORE THE VIRTUAL CURRENCY COMPANIES’ SUBSEQUENT MOTION TO DISMISS WAS NOT PROPERLY BEFORE SUPREME COURT OR THE APPELLATE DIVISION (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Gesmer, determined that the Attorney General (petitioner) properly served subpoenas on the virtual currency companies (respondents) pursuant to General Business Law (GBL) 352 (Martin Act) in a fraud investigation. The subpoenas were attacked on several grounds, all of which were rejected: (1) subject matter jurisdiction (arguing the virtual currency is not a commodity or a security): (2) long-arm jurisdiction (arguing insufficient contacts with New York); (3) ex parte order was not certified as required by GBL 352 (court found this a technical not jurisdictional defect). But before addressing the issues raised on appeal, the Second Department held that the court did not have statutory authority under the GBL to address the respondents’ motion to dismiss (which was the basis of the appeal). Under the GBL, once the motions to vacate or modify the subpoenas were determined, the court has no authority over the Attorney General’s investigation:

… [U]nder the Martin Act’s statutory scheme, once Supreme Court has issued an order responding to a GBL 354 application, it has no further role in the Attorney General’s investigation, except to rule on a motion by either party to vacate or modify the order, as respondents made here. Accordingly, once the court issued the order authorized by GBL 354 on April 24, 2019, and modified it by order dated May 16, 2019, the proceeding before it was concluded and there was no action or proceeding for Supreme Court to “dismiss” on May 21, 2019 when respondents filed their motion that resulted in the order now before the court. All that remained was the Attorney General’s ongoing investigation, in which, by statute, the courts have no further role at this stage. Indeed, neither party cites to, and this Court is unaware of, any prior case in which the subject of a Martin Act investigation has moved to “dismiss” an application by the Attorney General for an order pursuant to GBL 354. Matter of James v iFinex Inc., 2020 NY Slip Op 03880, First Dept 7-9-20

 

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DEFENDANT DID NOT DEMONSTRATE WHEN THE AREA WHERE PLAINTIFF ALLEGEDLY SLIPPED... POLICE DID NOT HAVE REASONABLE SUSPICION DEFENDANT WAS ENGAGED IN CRIMINAL ACTIVITY...