On February 24, 2026, Justice Crane of the New York County Commercial Division issued a decision in A Participations Ltd. v. Velissaris, 2026 NY Slip Op. 30684(U), dismissing fraud claim because of impermissible group pleading, explaining:
[P]laintiffs have not pled facts implicating IQCM’s participation in the purported fraudulent scheme with the requisite particularity that CPLR 3016 (b) requires. The SAC fails to plead the particular misrepresentations IQCM’s officers allegedly made about the Hedge Fund’s performance, governance, connection with Wildcat, assets, and Level 3 Valuation Procedures. Contrary to plaintiffs’ contention, plaintiffs should be in possession of those facts and therefore, they could have included those details in the SAC.
With the exception of two plaintiffs (Mark H. Sonnenberg and Susan L. Sonnenberg), the 102 plaintiffs or their advisors, generally, allege that they held telephone calls, conferences and in-person meetings and had written exchanges with IQCM personnel, including (without differentiation) Lindell, Velissaris, Potter, Shawn Rowatt (Rowatt), and Scott Griffith (both IQCM investor relations managers. Eighty-six plaintiffs allege that IQCM represented, corroborated, always represented or always described that the marketing materials depicted the Hedge Fund’s valuation procedures. Absent from the SAC, however, are any specific misrepresentation attributed to these IQCM officers or any particular details as to when, how and to whom they might have made them. This alone is a sufficient ground upon which to dismiss the instant fraud claim.
In addition, however, IQCM is also correct to assert that group pleading in fraud claims is impermissible, and that IQCM cannot be held liable for statements made by undifferentiated personnel to plaintiffs. As the court noted elsewhere, the SAC generally describes the fraud claim as including a years-long scheme in which Velissaris fraudulently manipulated asset values, and a central component of this scheme was to claim that IQCM played no role in the valuation of the Hedge Fund’s exotic OTC Derivatives, that resulted in a more than $1 billion overvaluation of the Mutual Fund and Hedge Fund. However, the controlling caselaw makes it clear that Velissaris’s guilty plea to securities fraud may not be broadly imputed to all other IQCM personnel as well. Because the SAC fails to identify IQCM officers, to impute discrete fraudulent statements to them and/or to allege the time, place and manner in which they made those statements, the court deems that the nineteenth cause of action therein is an impermissible group pleading that does not withstand scrutiny under CPLR 3016(b).
(Internal quotations and citations omitted).