A Chatham woman has notified a Chatham investment company of her intent to launch a class action lawsuit on behalf of a large group of local investors alleging the company defrauded them of millions of dollars.
Emily Hime of Chatham told CK News Today on Wednesday that the notice to sue Banknote Capital Inc., head-quartered in Chatham, its directors, President Ryan Rumble, Secretary Michael Dziedzic, and Treasurer Justin Foss, and other unidentified persons and companies was filed in Chatham Superior Court in early May.
Hime said the pending lawsuit is seeking $5 million in damages, alleging the company duped investors into giving it money by misrepresenting or leaving out facts, adding investors did not receive a "full" return on their investment from August 1, 2021, to August 30, 2022.
The notice of action, dated May 2, 2023, stated Banknote continued to solicit and accept funds from investors and those funds were used to pay others. Hime, the plaintiff, also alleged day-trading by unqualified, incompetent and unlicensed traders, including Aiden Pleterski and his company AP Private Equity Limited, contrary to the terms of the contract.
Pleterski, also known as 'The Crypto King,' and his company allegedly owe $35 million to more than 140 investors.
Approximately $4 million was also transferred by Banknote to Pleterski and his company, which has now gone into bankruptcy. Pleterski was discovered to be operating a massive Ponzi scheme and Banknote and its directors did not conduct adequate or any due diligence on Pleterski, stated the court document. Banknote is a creditor to the Pleterski estate and is due to receive two dividend payments.
Hime also alleged that Banknote and its directors were not using a proprietary algorithm to achieve investment returns, which Banknote and its directors did not disclose to the investors.
Hime noted Banknote and its directors continued to solicit funds from the investors even when they knew that Banknote was "insolvent." Banknote redeemed or returned approximately $2.7 million to the investors between November 2021 and July 2022 and in January 2022, Banknote stopped accepting investor funds, according to the notice of action.
The documents filed in court stated that Banknote emailed investors in December 2022 telling them they would get their principal investment back, but two months later all communication stopped.
The court also heard that investors signed agreements between March 2022 and June 2022 stating that Banknote will not be liable for losses of any kind as a result of its actions or lack of action, unless the losses "result solely" from Banknote’s gross negligence or intentional misconduct.
Hime alleged that Banknote misappropriated funds and its directors used the money for their own personal use. According to the notice, Banknote and its directors represented that it would only earn a commission upon successful trading which would result in payment of principal and trading profits to the investor group, but no trading profits were received.
Hime said she felt compelled to do something after hearing heartbreaking stories, especially from elderly investors.
"I was listening to the stories and how it's impacted many of these people and that's what motivated me to go forward. I think everybody was just numb and didn't know what to do or how to move forward with this and I couldn't sit back and do nothing," said Hime. "That's the stories that got to me where the 80 year olds called me crying. Hearing that side of it where it's 'we've got nothing left' and how do we live. We have nothing to leave our kids now and hearing those kinds of stories."
She said this emotional roller coaster has affected a lot of people, not just her, and they demand accountability.
"There definitely has been a large impact to lives in this. A lot of people are out significant amounts of money that were planned for retirement savings or children's education, or their life savings or whatever," Hime said.
Hime is asking anyone with knowledge or information that could help in this case to come forward.
A judge froze Banknote's assets May 11, 2023 in light of the alleged wrongdoing and ordered Rumble, Dziedzic and Foss to hand over a sworn declaration describing the nature, value, and location of all Banknote's assets to Hime's lawyer.
The investigation continues and Hime is asking for all of Banknote's banking, tax and brokerage records.
A formal statement of claim has yet to be filed and the lawsuit has not been certified yet.
Matt Baer, the lawyer defending Dziedzic and Foss, told CK News Today that his clients are both "dismayed at what happened" and didn't "knowingly" do anything wrong. Baer added his clients are working cooperatively to get investors their money back.
He said a statement of defence has not yet been filed, adding typically it doesn't get filed until after the class action lawsuit is certified.
The case returns to court May 30, 2023.