Cress v. Nexo Financial LLC et al

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United States District Court
Northern District of California
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF CALIFORNIA
JOHN CRESS,
Plaintiff,
v.
NEXO CAPITAL INC.,
Defendant.
Case No. 23-cv-00882-TSH
ORDER DENYING DEFENDANT’S
MOTION TO DISMISS PURSUANT TO
RULE 12(b)(6)
Re: Dkt. No. 94
I. INTRODUCTION
Plaintiff John Cress filed this action against Defendants Nexo Financial LLC, Nexo
Financial Services Ltd., Nexo AG, Nexo Capital, Inc., and Antoni Trenchev, Nexo’s CEO
(collectively, “Defendants”), alleging the Nexo parties fraudulently induced him to take out loans
collateralized by millions of dollars in digital assets, which were ultimately sold by the Nexo
parties. ECF No. 1. Nexo Capital, Inc. (“Nexo”) is the only remaining defendant in the case.
ECF No. 37 at 7. Pending before the Court is Nexo’s Motion to Dismiss the Second Amended
Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF No. 94 (“Mot.”). For the
reasons stated below, the Court DENIES the motion.1
II. BACKGROUND
A. Factual Background
Cress, a resident of San Francisco, California, began purchasing cryptocurrency in 2014
and transferred his crypto-assets to Nexo in 2021 to earn passive returns on his assets. Second
Am. Compl. (“SAC”) ¶¶ 8, 20–21 (ECF No. 88). Nexo, a Cayman Islands corporation with its
1 The parties consent to magistrate judge jurisdiction pursuant to 28 U.S.C. § 636(c). ECF Nos. 6,
16.
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principal place of business in London, England, issued credit to Cress that was collateralized by
Cress’s digital assets. Id. ¶¶ 1, 9.
Antoni Trenchev is the Co-Founder, Managing Partner, and Chief Executive Officer of
Nexo. Id. ¶¶ 55, 207–08. Nexo conducts its affairs with several individuals and business entities
(the “Related Persons”).2 Id. ¶ 207. “For example, Nexo contracts with NDS EOOD to provide
employees from its operation.” Id. ¶ 212. One employee provided by NDS EOOD, Hristiyan
Hristov, informed Cress that he would be Cress’s “dedicated relationship manager.” Id. ¶¶ 23,
212. “Nexo and the Related Persons collectively operate and maintain the Nexo website and offer
the Nexo services advertised on that website and through the Nexo whitepaper.” Id. ¶ 208.
Overall, Cress alleges that Nexo fraudulently induced “him to take out loans collateralized
by millions of dollars in digital assets, which were ultimately sold (‘liquidated’) by Nexo.” Id. ¶ 1.
Cress further alleges that Nexo and the Related Persons (the “Nexo Enterprise”) engaged in a
scheme of “maximizing profits by fraudulently concealing commissions, fees, and profits it takes
from its customers in digital asset trades and transactions and the ‘liquidation’ of its customers’
digital assets.” Id. ¶ 210.
1. Nexo’s Services
Digital assets include cryptocurrency, such as Bitcoin (“BTC”) Ether (“ETH”), and USDC
(a USD stable coin). Id. ¶¶ 20–21, 86. Since April 2018, Nexo has maintained a website through
which customers can use their digital assets as collateral, held in their “Credit Line Wallet,” to
borrow fiat currency, such as U.S. Dollars. Id. ¶ 15. Beginning in October 2020, Nexo also
offered customers interest-bearing accounts (“Earn Account”) on deposited digital assets through a
“Savings Wallet,” which serves as back-up collateral. Id. ¶¶ 15, 21.
A customer can borrow as much cash as they want if they maintain a particular loan-to-
2 The Related Persons include Nexo’s “directors, employees, and agents, along with Nexo
Services, LLC, Nexo Inc., Nexo Financial LLC, Nexo Services UAB, Nexo Global Investments
LLC, Nexo MENA Holding Ltd., Nexo Services S.r.l., Nexo Payments Limited, Nexo Clearing
and Custody Ltd., Nexo Finance Limited, AFS Holding Ltd., AFS Advance Financial Solutions
Ltd., Nexo Markets Ltd., Nexo Bank Inc., NPEM Ltd., Nexo AG, NDS EOOD, MIRASTAR
EOOD, Nexo Financial Services LTD, Nexo Trading Inc., Nexo Financial Services Inc., Nexo
Services Ltd, Nexo Payments, Inc., Antoni Trenchev, and Kosta Kantchev.” SAC ¶ 207.
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value (“LTV”) ratio—the ratio between the amount of cash they have borrowed and the value of
the collateral in their Credit Line Wallet. Id. ¶ 16. The value of the collateral fluctuates with the
price of the digital assets held as collateral. Id. If a customer’s LTV ratio rises above a certain
threshold, to bring the LTV ratio back in line Nexo will transfer assets from the Savings Wallet to
the Credit Line Wallet and/or automatically sell (liquidate) the collateral. Id. ¶ 17. Customers
may also use their borrowed fiat currency to purchase additional digital assets, which in turn
provide additional collateral for the loan. Id. ¶ 18.
Nexo has a “VIP Relationship Program” for customers whose accounts have grown to a
certain point. Id. ¶ 23. Nexo offers services through its OTC Desk to members of the VIP
Program, which include executing purchase orders for members to purchase digital assets (“OTC
transactions”). Id. ¶¶ 26, 52–54.
2. Nexo’s Advertising
“Nexo advertises borrowing interest rates as low as zero percent.” Id. ¶ 34. In order to
receive more favorable interest rates on borrowing as well as the Earn Account, Nexo requires
customers to purchase “NEXO Tokens” and maintain 10% of their portfolio balance in NEXO
Token, “which Nexo concedes are securities under U.S. law.” Id. ¶¶ 34–35, 42.
In its VIP Program brochure, Nexo states that participants in the VIP Relationship
Program: 1) “get a response from the support team in 2 hours, 24/7,” and receive a “dedicated
relationship manager” and “direct phone number availability”; and 2) can utilize certain “OTC
services,” which included Nexo’s “Liquidation Relief Program,” described as a “service in the
event of a market crash to recover your liquidated assets[.]” Id. ¶¶ 24, 26. The brochure also
states that for “[p]urchases of large quantities of cryptocurrency,” customers will “get institutional
rates for amounts larger than $100,000.” Id. ¶ 117. Further, Nexo advertises that VIP members
will receive “OTC services with some of the best rates on the market.” Id.
“Throughout 2020 and early 2021, Nexo publicly advertised that it did not charge any fees
for any services on its platform, including transactions.” Id. ¶ 53. For example,
a. On or about March 15, 2020, Nexo posted on its blog: ‘No fees:
Banks also tend to charge all sorts of fees for their services, whereas
Nexo adheres to a #ZeroFees policy. There are no additional costs
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associated with our services.’
b. On or about June 24, 2020, Nexo posted on its blog: ‘No minimum
contribution requirements and transactions at #ZeroFees.’
c. On or about February 19, 2021, Nexo posted on its blog: ‘Under
our #ZeroFees policy you can make unlimited free-of-charge fiat
withdrawals, crypto and fiat transfers into your Nexo Wallet, and
credit line withdrawals. Nexo does not charge any credit line,
origination, forex, and exchange fees.’
d. In March 2021, Nexo’s customer account page advertised ‘no
hidden fees.’
e. Nexo’s Whitepaper also advertises ‘No Hidden Fees.’
Id.; see Declaration of Ian S. Shelton (“Shelton Decl.”) (ECF No. 94-1), Exs. 1 (ECF No. 94-2)
(Nexo Whitepaper), 2 (ECF No. 94-3) (Nexo Blog Post on March 15, 2020), 3 (ECF No. 94-4)
(Nexo Blog Post on June 24, 2020), 4 (ECF No. 94-5) (Nexo Blog Post on February 19, 2021);
Declaration of Max Ambrose (“Ambrose Decl.”) (ECF No. 95-1), Ex. 1 (ECF No. 95-2)
(Screenshot of Cress’s Nexo Account Page from March 24, 2021).
In a March 26, 2021, “Ask Me Anything” (“AMA”), Trenchev states, “There is no concept
of hidden fees at Nexo. We pioneered #ZeroFees and we are proud to be transparent about all
charges we make.” SAC ¶ 55; see Ambrose Decl., Exs. 2, 3 (ECF Nos. 95-3, 95-4) (AMA
Transcripts).
3. The Parties’ Relationship
Cress alleges the following events. In March 2021, Cress decided to transfer Bitcoin and
Ether he had accumulated on Coinbase, a cryptocurrency exchange, to his Nexo Savings Wallet in
order to earn passive returns through Nexo’s interest-bearing Earn Account. SAC ¶ 21.
On March 15, 2021, Hristov emailed Cress and told him that he was eligible for Nexo’s
“VIP Relationship Program.” Id. ¶ 23. Hristov emailed Cress on March 17, 2021, attaching the
VIP Program brochure advertising the benefits of the VIP Relationship Program. Id. ¶ 24.
On March 23, 2021, Cress emailed Hristov asking how much interest the Bitcoin he posted
as collateral would “be earning and if all the interest was applied to the monthly loan payment,
how short would the payments be and is that ok?” Id. ¶¶ 27–28. Hristov responded: “You will be
earning 5% annually on the Bitcoin which you used as collateral. Keep in mind that the interest
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rate will be paid out daily in BTC, so you will benefit from the potential upside in the Bitcoin
price.” Id.
On March 24, 2021, Cress and Nexo “executed a Cryptocurrency Purchase Agreement
(‘CPA’), which provided that [Cress] could ‘submit a Purchase Order to Nexo’ and Nexo ‘shall
have ten minutes (the “Review Period”) to confirm such Purchase Order via email after which
Review Period such Purchase Order shall be deemed to be rejected and expired.’” Id. ¶ 57. Under
the CPA, the Purchase Order reflects the Purchase Price of the digital assets. Id. ¶¶ 57–60. “The
CPA does not state that Nexo will charge any fees or take any profits in connection with fulfilling
Purchase Orders under the CPA. Nor did Nexo inform [Cress] that it would charge any fees or
take any profits from his purchases of digital assets.” Id. ¶ 61.
Prior to taking out his first loan with Nexo, Cress emailed Hristov to request options for
purchasing additional Bitcoin with a Nexo loan secured by digital assets. Id. ¶¶ 36–40. Hristov
sent Cress options for purchasing Bitcoin. Id. ¶ 36. These options all required that Cress purchase
NEXO Tokens, but did not reflect the cost of the NEXO Tokens in the LTV ratio and liquidation
numbers provided by Hristov. Id. By not accounting for the NEXO Tokens, Hristov understated
the riskiness of the potential loans. Id.
Cress had not previously considered purchasing NEXO Tokens; to allay Cress’s concerns,
Hristov told Cress that “the NEXO token is registered with the SEC as a security therefore we are
only allowed to facilitate deals with American citizens who are also certified, accredited
investors.” Id. ¶¶ 37, 39. “This statement was untrue as Nexo has never registered the NEXO
Token with the SEC.” Id. ¶ 39. Nexo’s Terms and Conditions of Token Sale—which were never
provided to Cress—state that “the offer and sale of this security instrument has not been registered
under the U.S. Securities Act of 1933 . . . or under the securities laws of certain states.” Id. ¶ 108.
In 2020, the SEC contacted Nexo regarding the NEXO Token and informed Nexo that its
marketing materials falsely state that Nexo is “SEC-compliant.” Id. ¶ 110. In April 2021, a
customer contacted Nexo after learning from the SEC that the Nexo was not registered with the
SEC, stating “Nexo falsely stated on it’s [sic] website it is SEC Compliant.” Id. ¶ 109.
Based on the representation that the NEXO Token was registered with the SEC and
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“Nexo’s requirement that [Cress] purchase the NEXO Tokens to obtain favorable borrowing
rates,” Cress proceeded to take out a loan to purchase BTC and Nexo Tokens. Id. ¶ 40. On March
26, 2021, Cress took out a $5.4 million loan collateralized by his digital assets through Nexo’s
OTC Desk. Id. ¶¶ 32, 62–63. Nexo did not execute Cress’s order until March 27, 2021. Id. ¶ 64.
That day, Hristov sent an internal email to Nexo’s payments team reflecting that Nexo profited
$86,000 from Cress’s OTC transaction. Id. ¶ 64. “In addition to the profits retained by the OTC
Desk, Nexo’s records reflect that it sold [Cress] the NEXO Token at a 134.3% markup and took an
additional $680,627 profit on the transaction.” Id. ¶ 65. Nexo had never disclosed to Cress that it
would take these substantial profits on his asset purchases. Id. ¶ 66. Later that same day, Hristov
emailed Cress and “lied to [Cress] regarding the price at which it acquired BTC and NEXO.
Hristov also lied to [Cress] in representing that the OTC team had purchased NEXO Tokens when
in fact it was selling those tokens itself and taking a massive undisclosed profit.” Id.
Cress then borrowed $7.45 million more through loans in March and April 2021. Id. ¶ 32.
On March 30, 2021, Cress sent $4.3 million to Nexo’s OTC Desk to purchase BTC and NEXO
Tokens. Id. ¶ 68. Nexo did not execute Cress’s order until over twenty-four hours later. Id. ¶ 70.
When Hristov emailed Cress the statement for this OTC transaction, the “prices were significantly
higher than those at which [Cress] could have acquired these assets on a retail exchange.” Id. ¶
71. “Once again, Nexo sold [Cress] its own NEXO Token at an astronomical 134.4% markup,
taking an undisclosed profit of $817,243.” Id. ¶ 72.
On April 14, 2021, Cress sent $2.15 million to Nexo’s OTC Desk to purchase BTC and
NEXO Tokens. Id. ¶ 74. On “April 14, 2021, Nexo unilaterally took $102,125 from what should
have been deposited as [Cress’s] loan collateral as part of his April 14 OTC transaction,” as a
“portfolio booster.” Id. ¶ 76. Cress “never once discussed a portfolio booster with Nexo, let alone
assented to one.” Id. Nexo did not execute Cress’s order until April 16, 2021. Id. ¶ 75. Nexo
lied to Cress about this transaction—its “records show that it acquired the NEXO Token for $1.27
and resold it to [Cress] at a 184.1% markup, taking an undisclosed $214,508 profit.” Id.
On May 2, 2021, Cress sent $1 million to Nexo’s OTC Desk to purchase ETH. Id. ¶ 77.
Nexo did not execute Cress’s order until May 3, 2021. Id. Cress asked Nexo to detail the total
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amount that was spent and the price per token, stating
[i]f I’m calculating correctly, I sent $1,000,000 and if that only
purchased 312 ETH, that means the price was $3,205 . . . Those
numbers seem impossible because ETH never reached a price of
$3,205. I can’t be paying more than a price where ETH ever traded.
Id. Nexo responded, stating that this cost included “the 0.5% cost of execution through the NEXO
OTC desk and what the partner OTC desk charged for the transaction which is estimated around
~0.5% as well.” Id. ¶ 78. Nexo had never previously informed Cress of any fees associated with
purchases through the OTC desk. Id. “Nexo’s internal emails state that the OTC desk took a
profit of 8,000 USDT and .7513 ETH. The internal email from Octavian Dinca reflects that Nexo
purchased the ETH for $3,171.57, but provided it to the ‘customer’ at $3,203.60.” Id. ¶ 79.
In taking out the collateralized loans, Cress relied upon Nexo’s representations regarding
its responsiveness and Liquidation Relief Program because the digital asset market is highly
volatile, and he believed these benefits reduced the risk of losing his digital assets to liquidation.
Id. ¶ 29. Cress also relied upon Nexo’s representation that his collateral would earn interest
because it helped to offset any interest he would pay on his loans. Id. ¶ 30. Finally, Cress “relied
upon Nexo’s representations regarding its OTC Desk and its zero-fee policy in choosing to utilize
Nexo’s OTC Desk to purchase millions of dollars in digital assets collateralized by [Cress’s] BTC
and ETH.” Id. ¶ 54.
Nexo’s internal documents show that Nexo was aware that its OTC Desk was a sham
designed to defraud customers. Id. ¶ 80. An internal memo states: “We tell customers Nexo does
not charge commission on the [OTC] transaction[s], while in fact we do.” Id. The memo notes
that the “problems with the set up” include that “[o]ften, when the customer sees the result of the
trade he feels misled in regards to what costs he is facing,” and “[s]ince the pricing of the deal is
not transparently communicated in advance to the customer, the [Account Manager]s waste a
significant amount of time post the execution timing when to report the deal to the customer so we
can justify the commission we add up[.]” Id. Further, internal memos state that Nexo’s OTC
sales of NEXO Tokens are priced “3-5% over the spot price,” and BTC and ETH sales are priced
“1-3% over the spot price.” Id. ¶ 81.
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Cress’s purchase of NEXO Tokens dramatically increased the likelihood that Cress’s
assets would be liquidated as NEXO Tokens are far more volatile than Bitcoin. Id. ¶ 44. As a
result, when the crypto market experienced downside volatility, the value of Cress’s collateral
decreased more sharply than it would have if he had only been holding Bitcoin. Id. This, in turn,
increased Cress’s LTV more rapidly, resulting in the liquidation of his assets. Id. In essence,
Nexo sold Cress “a complex and highly risky leveraged long of a bundle of digital assets,
including its NEXO Token security (the ‘Leveraged Investment Instrument’).” Id. ¶ 46.
By May 23, 2021, the price of NEXO Tokens sank, causing the partial liquidation of
Cress’s digital assets. Id. ¶ 50. Nexo liquidated “millions of dollars’ worth of [Cress’s] more
stable USDC, BTC, and ETH holdings,” but left Cress holding Nexo Tokens. Id. ¶¶ 51, 86.
Nexo’s VIP brochure explicitly states that it will provide customers notice and opportunity to
furnish additional collateral prior to liquidating the assets, but Nexo provided Cress no warnings.
Id. ¶¶ 26, 152. In addition,
Nexo profited from these liquidations, taking a substantial fee on each
liquidation—thus leaving [Cress’s] account more susceptible to
further liquidations. These liquidation fees were not disclosed to
[Cress]. Moreover, Nexo credited [Cress] thousands of dollars less
per BTC liquidated than the prevailing market price on reputable
exchanges.
Id. ¶ 87.
On June 21 and 22, 2021, the price of NEXO Tokens plunged, resulting in the liquidation
of nearly all of Cress’s digital assets. Id. ¶ 50. Nexo
profited from these liquidations, once again, taking a substantial
undisclosed fee on each liquidation. Moreover, Nexo credited [Cress]
thousands of dollars less per BTC liquidated than the prevailing
market price on reputable exchanges.
Id. ¶ 90.
Nexo’s internal documents reveal that it actively sought to conceal these liquidation fees
from Cress and its other customers, stating
WE SHOULD NEVER, UNDER ANY CIRCUMSTANCES
MENTION THERE IS A LIQUIDATION TAX. Most of you have
probably worked on cases, in which the customer is disputing the
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amount received as part of the liquidation, claiming it is smaller than
it should be.
Id. ¶ 92. “The same document then provides instructions to ‘convince them there is no mistake,’
which include withholding information on the ‘tax which we SHOULD NEVER mention. That’s
why, we should also not mention the sell price[.]’” Id. “Nexo has not provided any records or
evidence showing that it actually sold any of the digital assets it claims to have ‘liquidated,’ much
less the sale price received for those assets.” Id. ¶ 93.
On June 22, 2021, Cress emailed Hristov regarding the Liquidation Relief Program. Id. ¶
97. Nexo informed him under the Program he could take out a new loan from Nexo to repurchase
his liquidated assets from Nexo. Id. In sum, Cress ultimately suffered millions of dollars in losses
because of Nexo’s misrepresentations when he was liquidated of substantially all his digital assets.
Id. ¶ 4.
B. Procedural Background
Cress filed this case on February 27, 2023, alleging five causes of action: (1) Fraudulent
Inducement of Contract (against all Nexo Defendants); (2) California Unfair Competition Law
(Cal. Bus. & Prof. Code §§ 17200, et seq. (“UCL”)) (against all Nexo Defendants); (3)
Unregistered Offer and Sale of Securities (Cal. Corp. Code §§ 25110, 25503) (against all
Defendants); (4) Unregistered Offer and Sale of Securities (Cal. Corp. Code §§ 25110, 25504)
(against Trenchev); and (5) Fraud in the Offer and Sale of Securities (Cal. Corp. Code §§ 25401,
25504.1) (against all Defendants). ECF No. 1.
On May 15, 2023, Defendants moved to dismiss the original Complaint pursuant to Rule
12(b)(2) and Rule 12(b)(6). ECF No. 19. On October 10, 2023, the Court granted in part and
denied in part Defendants’ motion. ECF No. 26. The Court dismissed all claims against all
Defendants, except Nexo, for lack of personal jurisdiction. Id. at 7–15. The Court denied
Defendants’ motion as to Cress’s first claim for fraudulent inducement of contract, finding his
allegations plausible at the motion to dismiss stage. Id. at 15–21. As to the UCL claim, the Court
granted Defendants’ motion to the extent it was based on Nexo’s alleged deceptive conduct in the
sale of the NEXO Token and Cress’s Nexo Earn Account, and also to the extent it is based on
Nexo’s advertised interest rates being available only to customers who maintain 10% of their
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portfolio balance in the NEXO Token or on Nexo’s alleged failure to provide Cress notice before
liquidating his assets. Id. at 24–25. As to Cress’s third claim under California Corporations Code
sections 25110 and 25503, the Court granted Defendants’ motion, finding Cress had not plausibly
alleged the existence of a non-exempt, unregistered security. Id. at 31. The Court also dismissed
Cress’s state law securities fraud claim, except as to the single alleged misrepresentation that the
NEXO Token was registered with the Securities and Exchange Commission (“SEC”) as a security.
Id. at 33. The Court granted Cress leave to amend. Id.
On November 10, 2023, Cress filed his First Amended Complaint (“FAC”), re-pleading
the same five causes of action. ECF No. 29. Defendants again moved to dismiss pursuant to Rule
12(b)(2) and Rule 12(b)(6). ECF No. 32. On June 25, 2024, the Court granted in part and denied
in part Defendants’ motion. ECF No. 37. The Court granted Defendants’ request to dismiss all
Defendants, except Nexo, without leave to amend. Id. at 7. The Court granted Defendants’
motion as to the UCL claim for the same reasons articulated in the Court’s first dismissal order.
Id. at 8. As to Cress’s claims under California Corporations Code sections 25110 and 25503, the
Court granted Defendants’ motion to the extent it was based on the Earn Account and Leveraged
Investment Instrument but denied Defendants’ motion to the extent the claim was based on the
NEXO Token. Id. at 8–13. The Court also dismissed Cress’s state law securities fraud claim,
except as to the single alleged misrepresentation that the NEXO Token was registered with the
SEC as a security. Id. at 13. The Court denied Cress leave to amend his dismissed claims. Id. at
8, 10, 13.
On July 23, 2024, Nexo filed an answer to the FAC. ECF No. 45. Nexo filed an amended
answer to the FAC on August 13, 2024. ECF No. 50. On September 30, 2025, Cress sought leave
to amend the FAC “to add additional misrepresentations as the basis for his fraudulent inducement
claim, and add causes of action for fraudulent omission, common law fraud, civil theft, civil
RICO, and breach of contract.” ECF No. 76. The Court granted Cress leave to amend the FAC on
October 30, 2025. ECF No. 86.
On October 30, 2025, Cress filed the operative Second Amended Complaint (“SAC”).
ECF No. 88. Cress alleges ten causes of action in the SAC under federal law and California state
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law: (1) Fraudulent Inducement; (2) California Unfair Competition Law (Cal. Bus. & Prof. Code
§§ 17200, et seq. (“UCL”)); (3) Unregistered Offer and Sale of Securities (Cal. Corp. Code §§
25110, 25503); (4) Fraud in the Offer and Sale of Securities (Cal. Corp. Code § 25401); (5) Fraud;
(6) Civil Theft (Cal. Penal Code § 496(C)); (7) Violations of the Racketeer Influenced and Corrupt
Organizations Act (“RICO”) (18 U.S.C. § 1962(C)); (8) Violations of RICO, Conspiracy to
Violate 1962(C)) (18 U.S.C. § 1962(D)); (9) Fraudulent Omission; and (10) Breach of
Cryptocurrency Purchase Agreement. SAC ¶¶ 139–264. Cress seeks, inter alia, damages
including treble and punitive damages. Id. at 47.
On December 5, 2025, Nexo filed the instant Motion to Dismiss the Second Amended
Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). ECF No. 94 (“Mot.”). On
January 2, 2026, Cress filed an Opposition. ECF No. 95 (“Opp.”). On January 15, 2026, Nexo
filed a Reply. ECF No. 96 (“Reply”).
III. LEGAL STANDARD
A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) “tests the legal
sufficiency of a claim. A claim may be dismissed only if it appears beyond doubt that the plaintiff
can prove no set of facts in support of his claim which would entitle him to relief.” Cook v.
Brewer, 637 F.3d 1002, 1004 (9th Cir. 2011) (cleaned up). Rule 8 provides that a complaint must
contain a “short and plain statement of the claim showing that the pleader is entitled to relief.”
Fed. R. Civ. P. 8(a)(2). Thus, a complaint must plead “enough facts to state a claim to relief that
is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Plausibility does
not mean probability, but it requires “more than a sheer possibility that a defendant has acted
unlawfully.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A complaint must therefore provide a
defendant with “fair notice” of the claims against it and the grounds for relief. Twombly, 550 U.S.
at 555 (citation omitted).
In considering a motion to dismiss, the court accepts factual allegations in the complaint as
true and construes the pleadings in the light most favorable to the nonmoving party. Manzarek v.
St. Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008); accord Erickson v. Pardus,
551 U.S. 89, 93–94 (2007). However, “the tenet that a court must accept as true all of the
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allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of
the elements of a cause of action, supported by mere conclusory statements, do not suffice.”
Iqbal, 556 U.S. at 678.
If a Rule 12(b)(6) motion is granted, the “court should grant leave to amend even if no
request to amend the pleading was made, unless it determines that the pleading could not possibly
be cured by the allegation of other facts.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en
banc) (cleaned up). A court “may exercise its discretion to deny leave to amend due to ‘undue
delay, bad faith or dilatory motive on part of the movant, repeated failure to cure deficiencies by
amendments previously allowed, undue prejudice to the opposing party . . ., [and] futility of
amendment.’” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 892–93 (9th Cir. 2010)
(alterations in original) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)). Courts have broader
discretion in denying motions for leave to amend after leave to amend has already been granted.
See Rich v. Shrader, 823 F.3d 1205, 1209 (9th Cir. 2016) (“[W]hen the district court has already
afforded a plaintiff an opportunity to amend the complaint, it has wide discretion in granting or
refusing leave to amend after the first amendment, and only upon gross abuse will its rulings be
disturbed.”) (cleaned up); Chodos v. W. Publ’g Co., 292 F.3d 992, 1003 (9th Cir. 2002) (“[W]hen
a district court has already granted a plaintiff leave to amend, its discretion in deciding subsequent
motions to amend is particularly broad.”) (cleaned up).
IV. DISCUSSION
Nexo moves to dismiss Cress’s fraudulent inducement and UCL claims (Claims 1 and 2)
“to the extent they are predicated on the new allegations regarding ‘some of the best rates on the
market’ and OTC fees.” Mot. at 34. Nexo further moves to dismiss Cress’s fraud, civil theft,
RICO, RICO conspiracy, fraudulent omission, and breach of the CPA claims (Claims 5–10) for
failing to state a cognizable claim. Id. Cress contends that the Court should deny Nexo’s Motion
in its entirely because he plausibly alleges that Nexo misrepresented its fees then concealed those
fees, and Nexo’s Motion improperly asks the Court to decide fact-intensive questions. Opp. at 1.
In sum, the Court concludes that Cress alleges cognizable fraudulent inducement, UCL,
fraud, civil theft, RICO, RICO conspiracy, fraudulent omission, and breach of the CPA claims.
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Therefore, dismissal of Claims 1–2 and 5–10 is not warranted.
A. Requests For Judicial Notice
1. Nexo’s Request
Nexo requests the Court take judicial notice of four documents:
1. Nexo’s Whitepaper, at Bates number NEXO-0017900.
2. A March 15, 2020, Nexo blog post, available at
https://nexo.com/blog/why-nexobank-loans-vs-selling-crypto-vs-
crypto-backed-credit.
3. A June 24, 2020, Nexo blog post, available at
https://nexo.com/blog/earn-on-crypto-is-here.
4. A February 19, 2021, Nexo blog post, available at
https://medium.com/nexo/nexos-loyaltyprogram-now-features-free-
crypto-withdrawals-9e346cd4b134.
Mot. at 13 n.2; see Shelton Decl., Exs. 1–4. Nexo argues that judicial notice is appropriate
because “the SAC explicitly cites to” the documents, and Cress “relies on them as the bases for his
claims.” Mot. at 13 n.2. The Court therefore construes Nexo’s request for judicial notice also as a
request for incorporation by reference. Cress does not respond to Nexo’s request. See generally
Opp.
Normally, when adjudicating a motion to dismiss brought pursuant to Rule 12(b)(6), the
Court’s consideration of extra-pleading materials is limited and matters outside of the pleading
cannot be considered without converting the motion into a motion for summary judgment. See
Fed. R. Civ. P. 12(b)(6), 12(d). However, there are two exceptions—the incorporation-by-
reference doctrine and judicial notice. Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 998
(9th Cir. 2018).
Under the Federal Rules of Evidence, the Court may take judicial notice of matters that are
(1) generally known within the trial court’s territorial jurisdiction; or (2) capable of accurate and
ready determination by resort to sources whose accuracy cannot reasonably be questioned. Fed.
R. Evid. 201(b).
Under the doctrine of incorporation-by-reference, the Court may consider a document not
attached to the complaint provided the complaint “necessarily relies” on the document or contents
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thereof, the document’s authenticity is uncontested, and the document’s relevance is uncontested.
Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010); see United States v. Ritchie,
342 F.3d 903, 908 (9th Cir. 2003) (“Even if a document is not attached to a complaint, it may be
incorporated by reference into a complaint if the plaintiff refers extensively to the document or the
document forms the basis of the plaintiff’s claim.”). “The defendant may offer such a document,
and the district court may treat such a document as part of the complaint, and thus may assume
that its contents are true for purposes of a motion to dismiss under Rule 12(b)(6).” Ritchie, 342
F.3d at 908.
Here, the Court agrees that it is appropriate to incorporate by reference the four documents
requested by Nexo. Cress does not contest the authenticity or relevance of the documents, and the
Court agrees that the SAC and Cress’s claims necessarily rely upon the Nexo Whitepaper and
Nexo blog posts. See SAC ¶ 53. Therefore, the Court considers the documents incorporated for
purposes of this Motion and assumes their contents are true for purposes of this Motion. Ritchie,
342 F.3d at 908.
Accordingly, the Court DENIES Nexo’s request for judicial notice but GRANTS Nexo’s
request to incorporate by reference the Nexo Whitepaper and Nexo blog posts from March 15,
2020; June 24, 2020; and February 19, 2021.
2. Cress’s Request
In response to Nexo’s argument that Cress did not attach a copy of an alleged
advertisement to support his claim, Cress attaches a copy of one document to his Opposition:
A screenshot of Cress’s Nexo Account Page from March 24, 2021,
that Cress produced to Nexo in discovery on January 30, 2025, at
Bates number CRESS-00001382.
Opp. at 2:7–16; see Ambrose Decl., Ex. 1. Cress also attaches two additional documents to his
Opposition:
1. The English (auto-generated) YouTube transcript of the March 26,
2021, “Monthly AMA March 2021 - # AskAntoni” Ask-MeAnything
video on YouTube, available at
https://www.youtube.com/live/fz_oyZo7Jxg?si=HoF9VRh_qhLaPjL
V&t=708.
2. A summarized, non-verbatim transcript of the March 26, 2021,
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“Monthly AMA March 2021 - #AskAntoni” (i.e., AMA Video with
Antoni Trenchev) that was posted to Nexo’s website on March 29,
2021.
Opp. at 8:2–16; see Ambrose Decl., Exs. 2, 3. The Court construes Cress’s attachment of the three
documents as a request for incorporation by reference. Nexo does not indicate that it opposes
incorporating these documents for purposes of its Motion. See generally Reply.
Here, the Court finds that it is appropriate to incorporate by reference the Nexo Account
Page and AMA transcripts as Cress’s SAC and claims necessarily rely on these documents. See
SAC ¶¶ 53, 55. Nexo does not contest the authenticity or relevance of the documents. Therefore,
the Court considers the documents incorporated for purposes of this Motion and assumes their
contents are true for purposes of this Motion. Ritchie, 342 F.3d at 908.
Accordingly, the Court GRANTS Cress’s request to incorporate by reference the Nexo
Account Page and AMA transcripts.
B. Fraudulent Inducement And UCL Claims (Claims 1 And 2)
Cress alleged claims for fraudulent inducement and violation of the UCL in his FAC; these
claims survived dismissal. See ECF No. 26 at 15–25. In his SAC, Cress alleges that Nexo made
false promises to induce him “to take out loans from Nexo and utilize its OTC trading desk to
purchase digital assets.” SAC ¶ 142. Cress alleges new facts to support these two claims: (1)
Nexo falsely promised Cress “the best rates on his OTC purchases”; and (2) Nexo falsely
advertised that it “did not charge any fees on digital asset purchases or any other hidden fees.”
SAC ¶¶ 53, 111–18, 140–42, 153–54.
Nexo requests that the Court dismiss Cress’s Fraudulent Inducement and UCL claims
(Claims 1 and 2) “to the extent they are predicated on the new allegations regarding ‘some of the
best rates on the market’ and OTC fees.” Mot. at 34. Nexo argues that this is warranted because
(1) “Cress’s allegations do not establish a misrepresentation sufficient to support a fraudulent
inducement claim”; and (2) “Cress fails to plead the alleged affirmative misrepresentations with
particularity.” Id. at 26:11–27:28.
“California law distinguishes between fraud in the ‘execution’ or ‘inception’ of a contract
and fraud in the ‘inducement’ of a contract.” Rosenthal v. Great W. Fin. Sec. Corp., 14 Cal. 4th
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394, 415 (1996). Fraud in the inducement “occurs when the promisor knows what he is signing
but his consent is induced by fraud, mutual assent is present and a contract is formed, which, by
reason of the fraud, is voidable.” Id. (emphasis in original) (cleaned up). Under California law,
the “elements of fraud are: (1) a misrepresentation (false representation, concealment, or
nondisclosure); (2) knowledge of falsity (or scienter); (3) intent to defraud, i.e., to induce reliance;
(4) justifiable reliance; and (5) resulting damage.” Robinson Helicopter Co. v. Dana Corp., 34
Cal. 4th 979, 990 (2004).
Under the UCL, any person or entity that has engaged, is engaging, or threatens to engage
“in unfair competition may be enjoined in any court of competent jurisdiction.” Cal. Bus. & Prof.
Code § 17203. The UCL’s “purpose is to protect both consumers and competitors by promoting
fair competition in commercial markets for goods and services.” Kwikset Corp. v. Superior Ct.,
51 Cal. 4th 310, 320 (2011). “Unfair competition” includes “any unlawful, unfair or fraudulent
business act or practice and unfair, deceptive, untrue or misleading advertising.” Cal. Bus. & Prof.
Code § 17200. The UCL’s coverage is “sweeping, embracing anything that can properly be called
a business practice and that at the same time is forbidden by law.” Cel-Tech Commc’ns, Inc. v.
L.A. Cellular Tel. Co., 20 Cal. 4th 163, 180 (1999) (cleaned up).
Each prong of the UCL is a separate and distinct theory of liability. In re Tobacco II
Cases, 46 Cal. 4th 298, 311 (2009); accord Kearns v. Ford Motor Co., 567 F.3d 1120, 1127 (9th
Cir. 2009). The UCL’s fraud prong covers “claims of deceptive advertisements and
misrepresentations.” In re Tobacco II Cases, 46 Cal. 4th at 311–12.
Here, the Court concludes that Cress alleges cognizable fraudulent inducement and UCL
claims against Nexo based on his allegations regarding Nexo’s rates and fees. Accordingly, the
Court DENIES Nexo’s motion to dismiss Cress’s Fraudulent Inducement and UCL claims
(Claims 1 and 2) to the extent they are predicated on the statement “some of the best rates on the
market” and OTC fees.
1. Misrepresentations
Nexo argues that Cress’s new allegations do not establish misrepresentations because (1)
the allegation that “Nexo falsely represented ‘some of the best rates on the market’ is non-
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actionable puffery”; and (2) the “allegation—that Nexo misrepresented its fees about OTC
transactions and liquidations—does not point to any specific statement that Nexo does not charge
fees for OTC transactions or liquidations.” Mot. at 26:23–27:9. Cress contends that (1) Nexo’s
representation regarding rates is an “actionable misrepresentation of fact because it asserts a
specific, measurable attribute of the service: price”; and (2) the “SAC identifies specific,
unqualified statements” regarding Nexo’s fees. Opp. at 6:8–8:1.
A misrepresentation can occur through “false representation, concealment, or
nondisclosure.” Robinson, 34 Cal. 4th at 990. “False representations made recklessly and without
regard for their truth in order to induce action by another are the equivalent of misrepresentations
knowingly and intentionally uttered.” Engalla v. Permanente Med. Grp., Inc., 15 Cal. 4th 951,
974 (1997) (cleaned up).
“[T]o be actionable, a misrepresentation must be of an existing fact, not an opinion or
prediction of future events.” Brakke v. Econ. Concepts, Inc., 213 Cal. App. 4th 761, 769 (2013).
Thus, if an assertion “is merely a statement of opinion—mere ‘puffing’—[a defendant] cannot be
held liable for its falsity.” Hauter v. Zogarts, 14 Cal. 3d 104, 111 (1975). “A representation is an
opinion if it expresses only (a) the belief of the maker, without certainty, as to the existence of a
fact; or (b) his judgment as to quality, value or other matters of judgment.” Graham v. Bank of
Am., N.A., 226 Cal. App. 4th 594, 606–07 (2014) (cleaned up). “Whether a statement is
nonactionable opinion or actionable misrepresentation of fact is a question of fact for the jury.”
Furla v. Jon Douglas Co., 65 Cal. App. 4th 1069, 1081 (1998).
Here, the Court finds that Cress pleads sufficient facts to plausibly allege that Nexo made
misrepresentations regarding its rates and fees. First, the parties disagree over whether Nexo’s
alleged statement that it provided “some of the best rates on the market” constitutes inactionable
puffery. Mot. at 26:23–27:9; Opp. at 6:8–8:1. The Court need not decide the issue at this stage.
Cress alleges that Nexo knew its rates were worse than those through retail transactions because it
took fees above the spot price and its internal documents state that Nexo falsely tells customers it
does not charge commission. Opp. at 7:5–23 (citing SAC ¶¶ 67, 80–82). Because Cress plausibly
alleges that Nexo did not honestly believe that it offered “some of the best rates,” even assuming,
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arguendo, that the statement regarding rates is an opinion, it can still give rise to liability. See
People v. Webb, 74 Cal. App. 4th 688, 694 (1999) (“A dishonest opinion expressed to one entitled
to rely upon it is actionable deceit. It is false pretense to take the property of another by force of
an opinion asserted in bad faith and with a design to mislead. A statement of opinion may also
support fraud liability where the statement is based on facts known by the speaker to be
nonexistent, or where the speaker has knowledge of facts, not warranting the opinion.”) (cleaned
up). Therefore, the Court declines to dismiss Claims 1 and 2 to the extent they are based on
Cress’s allegation regarding rates.
Second, the parties disagree over whether Cress identifies an affirmative statement by
Nexo that it does not charge fees on OTC transactions and liquidations. Cress points to five Nexo
advertisements between 2020–21 where Nexo states, “No fees,” “#ZeroFees,” and “No Hidden
Fees.” Opp. at 8:2–16 (citing SAC ¶¶ 53–55). Cress further points to an “Ask Me Anything”
(AMA) on March 26, 2021, where Trenchev, Nexo’s CEO states, “There is no concept of hidden
fees at Nexo. We pioneered #ZeroFees and we are proud to be transparent about all charges we
make.” Id. (citing SAC ¶ 55; Ambrose Decl., Exs. 2–3). Nexo argues that these advertisements
do not state that Nexo “does not charge fees for OTC transactions or liquidations”; instead, they
are “about different services for which Nexo did not charge fees.” Mot. at 27:5–9. According to
Nexo, four of the ads relate to Nexo’s Credit Line Product, Earn Interest Product, or Loyalty
Program, not OTC fees or liquidations. Id. at 13:16–14:16 (citing Shelton Decl., Exs. 2–4). Cress
counters that (1) he was charged fees through Nexo’s Credit Line because his OTC transactions
were purchased through the Credit Line, and (2) Nexo’s ads were not limited to certain services
because Nexo “represented most of its entire platform had no fees.” Opp. at 2:17–4:3. Taking
Cress’s allegations as true, it is plausible that Nexo’s ads, stating “no fees” are charged, represent
that Nexo does not charge fees on OTC transactions or liquidations when Nexo in fact does charge
fees. This is sufficient to plausibly allege a misrepresentation at the pleadings stage. Cf. Brady v.
Bayer Corp., 26 Cal. App. 5th 1156, 1166–67 (2018) (explaining “there is no protection for literal
falseness” contained within a label). Therefore, the Court declines to dismiss Claims 1 and 2 to
the extent they are based on Cress’s allegation regarding fees.
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Nexo’s argument that Cress cites “to generalized allegations which are not relevant to
Cress’s individual claim” is unavailing. Reply at 5:1–5. Nexo takes issue with the Trenchev
AMA because Cress “signed the [CPA] two days before the alleged public AMA.” Id. But
Cress’s claims are not cabined to the CPA—Cress alleges that he was fraudulently induced to take
out loans and engage in OTC transactions. SAC ¶¶ 139–43. Thus, the AMA on March 26, 2021,
could plausibly serve as a misrepresentation for Cress’s transactions on and after that date. See
SAC ¶¶ 62, 68, 74, 77.
2. Particularity Under Rule 9(b)
Nexo argues that Cress’s “vague allegations . . . lack the specificity required by Rule 9(b).”
Mot. at 27:10–28. Cress contends that his new allegations comply with Rule 9(b) because “the
SAC pleads who made the statements, what was said, when and where it was said, and how it
misled Cress.” Opp. at 7:24–11:4.
Under the Federal Rules of Civil Procedure, where a plaintiff asserts a claim sounding in
fraud, the plaintiff must “state with particularity the circumstances regarding fraud or mistake.”
Fed. R. Civ. P. 9(b). A claim sounds in fraud if the plaintiff alleges “a unified course of fraudulent
conduct and rel[ies] entirely on that course of conduct as the basis of a claim.” Vess v. Ciba-Geigy
Corp. USA, 317 F.3d 1097, 1103 (9th Cir. 2003). The context surrounding the fraud must “be
specific enough to give defendants notice of the particular misconduct so that they can defend
against the charge and not just deny that they have done anything wrong.” Kearns, 567 F.3d at
1124 (cleaned up). Thus, “[a]verments of fraud must be accompanied by the who, what, when,
where, and how of the misconduct charged.” Vess, 317 F.3d at 1106 (cleaned up).
Here, the Court finds that Cress pleads sufficient facts to allege his fraudulent inducement
and UCL claims with the requisite particularity. Nexo argues that Cress’s claims do not comply
with Rule 9(b) because “he relies solely on generic ads and does not identify which specific
misrepresentations he viewed, heard, or read—or that he relied upon them at all when transacting
with Nexo.” Reply at 4:3–6:1. The Court disagrees. Cress alleges that Nexo (the “who”) induced
Cress to take out loans and engage in OTC transactions (the “what”) on the dates Nexo publicly
advertised (the “when”) through Nexo’s website, marketing materials, and CEO (the “where”)
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“that it did not charge any fees for any services on its platforms, including transactions” (the
“how”). SAC ¶¶ 53–56, 139–43; see Opp. at 7:24–8:16. This is all that Rule 9(b) requires. Vess,
317 F.3d at 1106; cf. Doe v. Roblox Corp., 602 F. Supp. 3d 1243, 1263 (N.D. Cal. 2022) (“These
allegations are specific enough to give Roblox notice of how Doe believes it defrauded her.”).
Nexo’s arguments to the contrary are unavailing. First, Nexo is incorrect that Cress does
not plead viewing or relying on the advertisements with specificity. Mot. at 27:10–28. Cress
alleges that he “relied upon Nexo’s representations regarding its OTC desk and its zero-fee policy
in choosing to utilize Nexo’s OTC Desk to purchase millions of dollars in digital assets
collateralized by [Cress’s] BTC and ETH.” SAC ¶ 54. Nexo complains that this paragraph does
not elaborate on what advertisements or statements Cress saw or when he saw them. Mot. at
27:10–28. But the paragraph immediately follows Cress’s allegations detailing five Nexo ads.
SAC ¶ 53. The Court must draw all reasonable inferences in Cress’s favor. Iqbal, 556 U.S. at
678. The allegations give rise to a reasonable inference that Cress viewed and relied on all the ads
prior to taking out loans or executing OTC transactions. Second, Nexo’s assertion that “at least
two referenced advertisements are from 2020—about a year before Cress’s involvement with
Nexo” is immaterial. Mot. at 27:10–28. While that may be relevant to a justifiable reliance
analysis—an element that Nexo does not challenge for these claims—it has no bearing on a Rule
9(b) analysis. Finally, Nexo vaguely attacks Cress’s specificity regarding liquidation fees. Id.
Cress alleges that around the time of his liquidations, Nexo emailed him that it “may initiate small
partial loan repayments automatically (without any penalty or added fees).” Opp. at 10:21–11:1
(citing SAC ¶ 116). The Court agrees with Cress that this “is a concrete representation about fees
associated with liquidation mechanics.” Id. Therefore, Cress’s fraudulent inducement and UCL
claims comply with Rule 9(b).
C. Fraud Claim (Claim 5)
Cress alleges that Nexo falsely stated that “[t]he NEXO token is registered with the SEC as
a security.” SAC ¶¶ 106–07, 182–92. Nexo argues that Cress’s Fraud claim (Claim 5) fails
because he “fails to plausibly allege causation, scienter, and reasonable reliance.” Mot. at 31:1–
33:27.
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Again, a California fraud claim requires five elements: “(1) a misrepresentation (false
representation, concealment, or nondisclosure); (2) knowledge of falsity (or scienter); (3) intent to
defraud, i.e., to induce reliance; (4) justifiable reliance; and (5) resulting damage.” Robinson, 34
Cal. 4th at 990.
Here, the Court concludes that Cress alleges a cognizable fraud claim against Nexo.
Accordingly, the Court DENIES Nexo’s motion to dismiss Cress’s Fraud Claim (Claim 5).
1. Causation
Nexo argues that “Cress fails to plausibly allege causation because the liquidation damages
he seeks are untethered from the alleged false representation regarding the SEC status of the
NEXO token.” Mot. at 31:11–32:20. Cress contends that Nexo “improperly seeks a merits
determination on causation and the scope of recoverable damages.” Opp. at 15:25–16:17.
“A plaintiff asserting fraud by misrepresentation is obliged to establish a complete causal
relationship between the alleged misrepresentations and the harm claimed to have resulted
therefrom.” Beckwith v. Dahl, 205 Cal. App. 4th 1039, 1062 (2012) (cleaned up). “[T]here are
two causation elements in a fraud cause of action. First, the plaintiff’s actual and justifiable
reliance on the defendant’s misrepresentation must have caused him to take a detrimental course
of action. Second, the detrimental action taken by the plaintiff must have caused his alleged
damage.” Id.
“Under California law, a party asserting fraud must establish that its damages are the
‘proximate’ or ‘legal’ result of the fraudulent conduct.” OCM Principal Opportunities Fund, L.P.
v. CIBC World Markets Corp., 157 Cal. App. 4th 835, 869–70 (2007). Thus, “[d]eception without
resulting loss is not actionable fraud. Whatever form it takes, the injury or damage must not only
be distinctly alleged but its causal connection with the reliance on the representations must be
shown.” Id. at 870 (cleaned up). “Causation is generally a question of fact for the jury, unless
reasonable minds could not dispute the absence of causation.” Lombardo v. Huysentruyt, 91 Cal.
App. 4th 656, 666 (2001).
“Because of the extra measure of blameworthiness inhering in fraud, and because in fraud
cases we are not concerned about the need for predictability about the cost of contractual
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relationships, fraud plaintiffs may recover out-of-pocket damages in addition to benefit-of-the-
bargain damages.” Lazar v. Superior Ct., 12 Cal. 4th 631, 646 (1996) (cleaned up). Moreover,
“[p]unitive damages are recoverable in those fraud actions involving intentional, but not negligent,
misrepresentations.” All. Mortg. Co. v. Rothwell, 10 Cal. 4th 1226, 1241 (1995).
Here, the Court finds that Cress pleads sufficient facts to plausibly allege that Nexo’s false
representation regarding the NEXO Token’s SEC status caused his alleged damages. Nexo
challenges causation as it relates to damages—it argues that Cress’s damages are “limited to losses
associated with the NEXO Token.” Mot. at 31:11–32:20; Reply at 10:25–11:11. Cress alleges
that Nexo’s false statement about the NEXO Token’s SEC status induced him to purchase the
Token, the Token’s poor performance contributed substantially to the decrease in value of his
collateral which led to liquidation of his assets, and he suffered millions of dollars in losses from
the liquidation. SAC ¶¶ 4, 37–40, 49–50; see Opp. at 16:10–17. In other words, he alleges
distinct damages resulting from a causal chain that began with Nexo’s false SEC status statement.
This is all that is required at the pleadings stage. OCM, 157 Cal. App. 4th at 870. Nexo’s reliance
on the Court’s prior order regarding Cress’s securities claims is misplaced. See Mot. at 31:18–
32:11 (citing ECF No. 26). Nexo asserts that because the Court held that Cress could only seek
damages associated with the losses on the NEXO Token, Cress is limited to those losses here. Id.
While it is true that the Court concluded that Cress could not recover for damages beyond losses
on a security itself, this was in the context of Cress’s claim under California statutory law. See
ECF No. 26 at 26 (“The Court agrees with Nexo that this is not a harm or loss for which there is a
remedy available under Cal. Corp. Code § 25503.”). Damages on a California securities claim are
calculated as the difference between the purchase price and the value at disposal for the security.
Cal. Corp. Code § 25503. To that end, Nexo’s argument that Cress cannot “radically expand his
damages beyond the NEXO Token” fails. Because public policy favors preventing fraud, a wider
range of damages are permitted for a fraud claim than for a securities claim. Compare All. Mortg.,
10 Cal. 4th at 1240–41 (explaining out-of-pocket damages, benefit-of-the-bargain damages,
punitive damages, and interest are all permitted for fraud claim) and Cal. Civ. Code § 3343(a)
(“One defrauded in the purchase, sale or exchange of property is entitled to recover the difference
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between the actual value of that with which the defrauded person parted and the actual value of
that which he received, together with any additional damage arising from the particular
transaction[.]”) with Cal. Corp. Code § 25503 (permitting loss in value damages for a security);
see Opp. at 16:1–2. Therefore, Cress sufficiently alleges causation regarding damages at the
pleadings stage.
2. Scienter
Nexo argues that Cress fails to establish scienter because regarding Nexo’s statement that
the NEXO token was registered with the SEC, the “Nexo representative did not act with the intent
to deceive Cress, but instead to explain why he was asking for Cress’s accredited investor
certificate.” Mot. at 32:21–33:27. Cress contends that he plausibly alleges scienter because
Nexo’s “statement regarding SEC registration was ‘literally false.’” Opp. at 14:12–15:15 (citing
ECF No. 26 at 32).
Actual knowledge of a statement’s falsity is not required—“[i]f the defendant has no belief
in the truth of the statement, and makes it recklessly, without knowing whether it is true or false,
the element of scienter is satisfied.” Bily v. Arthur Young & Co., 3 Cal. 4th 370, 415 (1992).
Fraudulent intent is a question of fact. Beckwith, 205 Cal. App. 4th at 1061.
Here, the Court finds that Cress pleads sufficient facts to plausibly allege that Nexo knew
that its statement regarding the NEXO Token’s SEC status was false. Cress alleges that Nexo’s
own Terms and Conditions of Token Sale state that the NEXO Token is not registered with the
SEC, a Nexo customer notified Nexo that its website falsely stated that it was SEC compliant, and
that the SEC notified Nexo that its marketing materials falsely stated that it was SEC compliant.”
SAC ¶¶ 108–110. These allegations create a reasonable inference that Nexo knew that the NEXO
Token was not registered with the SEC. Nexo insists that its representative “did not act with
intent to deceive Cress” when he made the statement regarding SEC status because the second part
of the statement shows that Nexo “was only selling the NEXO Token to U.S. accredited investors
in an abundance of caution.” Mot. at 32:28–33:27. This argument is unpersuasive. A statement is
not exempted from liability merely because it is partially true. See Mktg. W., Inc. v. Sanyo Fisher
(USA) Corp., 6 Cal. App. 4th 603, 613 (1992) (explaining that if one chooses to speak, “he must
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make a full and fair disclosure”). Therefore, because Cress plausibly alleges Nexo’s actual
knowledge of the statement’s falsity, scienter is satisfied at the pleadings stage. Bily, 3 Cal. 4th at
415.
3. Justifiable Reliance
Nexo argues that Cress fails to establish justifiable reliance because the “intent and effect”
of Nexo’s statement regarding the NEXO token’s registration with the SEC “show that it was
intended by Nexo, and reasonably understood by Cress, to mean that Nexo was only selling the
NEXO token to U.S. accredited investors in an abundance of caution.” Mot. at 32:21–33:27.
Cress contends that he plausibly alleges this element given that it depends heavily on the facts.
Opp. at 15:16–24.
“[A] presumption, or at least an inference, of reliance arises wherever there is a showing
that a misrepresentation was material.” Engalla, 15 Cal. 4th at 977. “After establishing actual
reliance, the plaintiff must show that the reliance was reasonable by showing that (1) the matter
was material in the sense that a reasonable person would find it important in determining how he
or she would act; and (2) it was reasonable for the plaintiff to have relied on the
misrepresentation.” Hoffman v. 162 N. Wolfe LLC, 228 Cal. App. 4th 1178, 1194 (2014) (cleaned
up).
“[T]he issue is whether the person who claims reliance was justified in believing the
representation in the light of his own knowledge and experience.” Gray v. Don Miller & Assocs.,
Inc., 35 Cal. 3d 498, 503 (1984). However, “[n]egligence on the part of the plaintiff in failing to
discover the falsity of a statement is no defense when the misrepresentation was intentional rather
than negligent.” All. Mortg., 10 Cal. 4th at 1239–40. “Except in the rare case where the
undisputed facts leave no room for a reasonable difference of opinion, the question of whether a
plaintiff’s reliance is reasonable is a question of fact.” Id. at 1239 (citation omitted).
Here, the Court finds that Cress pleads sufficient facts to plausibly allege that he
reasonably relied on Nexo’s statement that the NEXO Token was registered with the SEC. The
Court previously found that Cress plausibly alleges that this statement is material. ECF No. 26 at
33; see Opp. at 15:19–20. As such, an inference exists that Cress actually relied on the statement.
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Engalla, 15 Cal. 4th at 977. The only remaining question is whether Cress’s reliance was
justified. As discussed, Cress plausibly alleges that Nexo knew that the NEXO Token was not
registered with the SEC. SAC ¶¶ 108–110. Thus, because Cress plausibly alleges that Nexo
internationally misrepresented the Token’s SEC status to Cress, Nexo cannot rely on Cress’s
purported unreasonable reliance on that falsity to defeat his claim on motion to dismiss. All.
Mortg., 10 Cal. 4th at 1239–40. Therefore, Cress sufficiently alleges justifiable reliance at the
pleadings stage.
D. Civil Theft (Claim 6)
Cress alleges that “Nexo knowingly received, withheld, concealed, and/or sold [Cress’s]
property—namely his BTC and ETH—which Nexo obtained by false pretenses, embezzlement,
and trick.” SAC ¶¶ 193–202. Nexo argues that Cress’s Civil Theft claim (Claim 6) fails because
(1) “a dispute about fees arising from a voluntary commercial transaction is not ‘theft’”; and (2)
the claim does not “meet the requirements of Rule 9 regarding the allegedly false statements.”
Mot. at 24:26–26:10. Cress contends that the claim (1) is cognizable under California law because
it alleges “business misconduct involving ‘theft by false pretense’”; and (2) complies with Rule
9(b) because it contains detailed allegations regarding Nexo’s fraudulent misrepresentations, “and
further describes how Nexo’s theft was executed and concealed.” Opp. at 11:5–12:21.
Section 496(a) of the California Penal Code “defines the criminal offense of what is
commonly referred to as receiving stolen property.” Siry Inv., L.P. v. Farkhondehpour, 13 Cal.
5th 333, 346 (2022) (citing Cal. Penal Code § 496(a)). This section provides, in relevant part:
Every person who buys or receives any property that has been stolen
or that has been obtained in any manner constituting theft or extortion,
knowing the property to be so stolen or obtained, or who conceals,
sells, withholds, or aids in concealing, selling, or withholding any
property from the owner, knowing the property to be so stolen or
obtained, is subject to incarceration.
Id. (cleaned up). Section 496(c) permits a cause of action for civil theft when a violation of
section 496(a) has occurred. Id. at 346–47 (citing Cal. Penal Code § 496(c)). Subdivision (c)
“states that any person who has been injured by a violation of section 496(a) may bring an action
for three times the amount of actual damages, if any, sustained by the plaintiff, costs of suit, and
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reasonable attorney’s fees.” Id. at 347.
“A plaintiff may recover treble damages and attorney’s fees under section 496(c) when
property has been obtained in any manner constituting theft.” Id. at 361. “To prove theft, a
plaintiff must establish criminal intent on the part of the defendant beyond mere proof of
nonperformance or actual falsity.” Id. at 361–62 (cleaned up). As such, “not all commercial or
consumer disputes alleging that a defendant obtained money or property through fraud,
misrepresentation, or breach of a contractual promise will amount to a theft.” Id. at 361.
Here, the Court concludes that Cress alleges a cognizable civil theft claim against Nexo.
First, Cress’s civil theft claim is not precluded under section 496. See id. (holding section 496
permits recovery “when property has been obtained in any manner constituting theft”); see also,
e.g., Johnson v. Connie, LLC, 113 Cal. App. 5th 850, 855 (2025) (permitting plaintiff to bring both
breach of contract and section 496 claims based on allegations that defendants illegally increased
rent payments). Indeed, Nexo concedes as much in its Reply. See Reply at 6:6–7 (“[I]n Siry Inv.,
L.P. v. Farkhondehpour, the California Supreme Court held that § 496(c) can apply in the business
context.”). Instead, Nexo argues the SAC fails to allege “that Nexo had intent to ‘steal’ Cress’s
property.” Mot. at 25:22–26:3; Reply at 6:20–7:12. Not so. Cress alleges that Nexo’s acquisition
of his crypto-assets amounts to theft by false pretenses. SAC ¶¶ 193–202. The offense of theft by
false pretenses “requires only that (1) the defendant made a false pretense or representation to the
owner of property; (2) with the intent to defraud the owner of that property; and (3) the owner
transferred the property to the defendant in reliance on the representation.” People v. Williams, 57
Cal. 4th 776, 787 (2013). Cress alleges that Nexo affirmatively represented it charged no fees,
secretly took fees it knew it had no right to collect, affirmatively concealed these fees from
customers through false transaction confirmations, and acknowledged the concealment in internal
documents and communications. Opp. at 11:13–12:21 (citing SAC ¶¶ 52–93, 111–16, 195–202).
Collectively, these allegations give rise to a reasonable inference that Nexo “acted not innocently
or inadvertently, but with careful planning and deliberation reflecting the requisite criminal
intent.” Siry, 13 Cal. 5th at 362. Therefore, Cress sufficiently alleges the requisite intent to
support liability under section 496.
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Second, the Court finds that Cress pleads sufficient facts to allege his civil theft claim with
the requisite particularity. Nexo argues that Cress fails to plead false statements with particularity
because the “generic advertising identified in the SAC did not discuss OTC fees.” Mot. at 26:4–
10; Reply at 7:13–18. As discussed, Cress’s allegations regarding Nexo’s misrepresentations
about its OTC fees comply with Rule 9(b). See supra, Part IV.B.2; Opp at 11:8–12. Thus, Cress’s
civil theft claim complies with Rule 9(b).
Accordingly, the Court DENIES Nexo’s motion to dismiss Cress’s Civil Theft Claim
(Claim 6).
E. RICO Claim (Claim 7)
Cress alleges that Nexo and the Related Persons committed acts of mail and wire fraud by
collectively operating a “systematic scheme to fraudulently charge and conceal substantial fees.”
SAC ¶¶ 203–34. Nexo argues that Cress’s RICO claim (Claim 7) fails because (1) it is statutorily
barred; and (2) Cress fails to plead the required elements with the requisite specificity. Mot. at
15:4–24:9.
The Racketeer Influenced and Corrupt Organizations Act (RICO) “provides a private civil
action to recover treble damages for injury by reason of a violation of its substantive provisions.”
Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 481 (1985) (citing 18 U.S.C. § 1964(c)) (cleaned up).
Overall, “RICO’s § 1962 sets forth four specific prohibitions aimed at different ways in which a
pattern of racketeering activity may be used to infiltrate, control, or operate ‘a[n] enterprise which
is engaged in, or the activities of which affect, interstate or foreign commerce.’” RJR Nabisco v.
Eur. Cmty., 579 U.S. 325, 330 (2016) (citing 18 U.S.C. § 1962).
Section 1962(c), RICO’s “conduct” prong, states:
It shall be unlawful for any person employed by or associated with
any enterprise engaged in, or the activities of which affect, interstate
or foreign commerce, to conduct or participate, directly or indirectly,
in the conduct of such enterprise’s affairs through a pattern of
racketeering activity or collection of unlawful debt.
18 U.S.C. § 1962(c). A plaintiff must plausibly allege four elements to state a cognizable claim
under section 1962(c): “(1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering
activity.” Sedima, 473 U.S. at 496. “[A] RICO enterprise must engage in, or affect in some
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significant way, commerce directly involving the United States.” RJR Nabisco, 579 U.S. at 334.
“In addition, the plaintiff only has standing if, and can only recover to the extent that, he has been
injured in his business or property by the conduct constituting the violation.” Sedima, 473 U.S. at
496.
Here, the Court concludes that Cress alleges a cognizable RICO claim against Nexo.
Accordingly, the Court DENIES Nexo’s motion to dismiss Cress’s RICO Claim (Claim 7).
1. RICO And Securities Fraud
Nexo argues that “Cress’s RICO claims are founded upon allegations of securities fraud
and thus, expressly barred under the Private Securities Litigation Reform Act (‘PSLRA’) and 18
U.S.C. § 1964(c).” Mot. at 15:17–17:12. Cress contends that the RICO claim is not statutorily
barred because it “does not depend on Nexo’s alleged misrepresentations concerning the NEXO
Token” but instead “targets a separate scheme: Nexo’s systematic extraction of undisclosed fees
through its OTC trading desk and liquidation fees.” Opp. at 16:19–18:27.
Section 1964(c) of RICO states, in relevant part:
Any person injured in his business or property by reason of a violation
of section 1962 of this chapter may sue therefor in any appropriate
United States district court and shall recover threefold the damages
he sustains and the cost of the suit, including a reasonable attorney’s
fee, except that no person may rely upon any conduct that would have
been actionable as fraud in the purchase or sale of securities to
establish a violation of section 1962.
18 U.S.C. § 1964(c). The PSLRA “amended RICO so that ‘no person may rely upon any conduct
that would have been actionable as fraud in the purchase or sale of securities to establish a
violation of section 1962.’” Howard v. Am. Online Inc., 208 F.3d 741, 749 (9th Cir. 2000)
(quoting 18 U.S.C. § 1964(c)). Thus, securities fraud cannot serve as a predicate act for RICO
liability. Id. However, where a complaint alleges fraud in connection with the sale of securities,
and the sale of securities is “incidental” to alleged wire fraud, the PSLRA does not bar a RICO
claim predicated on wire fraud. Swartz v. KPMG LLP, 476 F.3d 756, 761 (9th Cir. 2007).
Here, the Court concludes that Cress’s RICO claim is not statutorily barred. Nexo argues
that because “Cress’s RICO allegations are that Nexo charged undisclosed fees on OTC purchases
and liquidations,” they cannot be separated from his securities claims because they involve
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transactions that include the NEXO Token. Mot. at 16:1–17:6. Cress counters that in the SAC, he
“alleges two different wrongs: a securities misrepresentation concerning the NEXO Token, and a
racketeering scheme built on concealed fees and predatory liquidation practices involving all
assets on the Nexo platform[.]” Opp. at 17:15–19:3. The key question is whether securities fraud
forms the basis of all the mail and wire fraud predicate acts alleged by Cress. It does not. As
discussed more fully below, Cress need only plausibly allege two predicate acts to survive
dismissal. 18 U.S.C. § 1961(5). Contrary to Nexo’s assertion, “the sale of alleged securities” is
not the gravamen of at least some of Cress’s alleged predicate acts. Reply at 11:26–13:4. Cress
plausibly alleges that Nexo engaged in multiple acts of fraudulent inducement by using false
statements to induce Cress to transact with Nexo. See supra, Part IV.B.1. The alleged false
statements concerned Nexo’s assertion that it did not charge fees on OTC transactions and
liquidations, which are unrelated to whether the NEXO Token was registered with the SEC. Opp.
at 17:15–20. Cress further alleges—and Nexo does not dispute—that the “alleged liquidations
were limited to BTC, ETC, and stablecoins,” which are “undisputably not securities.” Id. at 18:2–
6, 23–27. Nexo asserts that because Cress alleges in other claims that “his liquidation losses were
caused by the NEXO Token,” the acts based on liquidation are barred by the PSLRA—this is
unavailing. Mot. at 16:27–17:6. Cress’s alleged predicate acts for RICO purposes are that Nexo
misrepresented its liquidation fees and then took undisclosed fees on Cress’s liquidations—not
merely that he lost money on the liquidations. Therefore, at the pleadings stage, because Cress
alleges at least two predicate acts that have nothing to do with the NEXO Token, his RICO claim
is not statutorily barred. The Court need not decide at this juncture whether any of Cress’s
predicate acts involve securities fraud.
2. Enterprise
Nexo argues that Cress fails to allege the existence of a RICO enterprise because “the SAC
does not specify the members of the alleged ‘enterprise,’ their actions, or the details of their
involvement necessary to make the existence of the enterprise plausible or to meet Rule 9(b)’s
heightened pleading standard.” Mot. at 9:22–10:8, 17:13–21:21. Cress contends that he “pleads a
RICO enterprise: an association-in-fact made up of multiple, separately identifiable actors who
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operated together over time for a common fraudulent purpose.” Opp. at 19:1–20:23.
“[T]o establish liability under § 1962(c) one must allege and prove the existence of two
distinct entities: (1) a ‘person’; and (2) an ‘enterprise’ that is not simply the same ‘person’
referred to by a different name.” Cedric Kushner Promotions, Ltd. v. King, 533 U.S. 158, 161
(2001). A “person” is defined as “any individual or entity capable of holding a legal or beneficial
interest in property.” 18 U.S.C. § 1961(3). The definition of a RICO “‘enterprise’ includes any
individual, partnership, corporation, association, or other legal entity, and any union or group of
individuals associated in fact although not a legal entity.” Id. at § 1961(4). “[T]his definition is
not very demanding.” Odom v. Microsoft Corp., 486 F.3d 541, 548 (9th Cir. 2007).
“[A]n association-in-fact enterprise is a group of persons associated together for a common
purpose of engaging in a course of conduct.” Boyle v. United States, 556 U.S. 938, 946 (2009)
(cleaned up). To plead an association-in-fact enterprise, a plaintiff “must plausibly allege the
following three elements: (1) a common purpose, (2) a structure or organization, and (3) longevity
necessary to accomplish the purpose.” In re JUUL Labs, Inc., Mktg., Sales Pracs., & Prod. Liab.
Litig., 497 F. Supp. 3d 552, 594 (N.D. Cal. 2020) (citing Boyle, 556 U.S. at 946). Such an
enterprise will be proven “by evidence of an ongoing organization, formal or informal, and by
evidence that the various associates function as a continuing unit.” United States v. Turkette, 452
U.S. 576, 583 (1981).
Here, the Court finds that Cress pleads sufficient facts to plausibly allege that Nexo and the
Related Persons comprise a RICO enterprise. First, Nexo argues that Cress “fails to plead a RICO
defendant distinct from the enterprise.” Mot. at 17:23–18:17. Cress alleges that Nexo (the RICO
“person”), along with the Related Persons, conducted the affairs of an associated-in-fact
enterprise, the Nexo Enterprise (the RICO “enterprise”). SAC ¶¶ 206–07. Cress contends that he
satisfies the distinctiveness requirement because the SAC expressly identifies enterprise members
that are legally distinct from Nexo and from one another. Opp. at 19:27–20:12. The Court agrees.
In analyzing distinctiveness, “the only important thing is that the enterprise be either formally (as
when there is a corporation) or practically (as when there are other people beside the proprietor
working in the organization) separable from the individual.” United States v. Benny, 786 F.2d
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1410, 1416 (9th Cir. 1986) (cleaned up). Cress alleges the members of the Nexo Enterprise
include Credissimo (a European FinTech group based in Bulgaria), Trenchev (a Nexo owner and
corporate officer), and NDS EOOD (a separate business entity). Opp. at 19:4–13 (citing SAC ¶¶
207–14). Because Cress plausibly alleges that the members of the Nexo Enterprise are legally and
practically distinct from Nexo, he satisfies distinctiveness at the pleadings stage.
Second, Nexo argues that “Cress fails to plead the members’ involvement in the
enterprise.” Mot. at 18:18–20:23; see Reply at 13:5–14:4. Cress counters that he “identifies
specific enterprise members and their roles beyond Nexo.” Opp. at 19:4–26. At the outset,
Nexo’s assertion that “plaintiffs must meet a rigorous standard to successfully plead [RICO]
claims” misstates the law. Mot. at 15:6–7. Indeed, the Supreme Court has rejected calls for
heightened burdens of proof. See Sedima, 473 U.S. at 492 (“As for stigma, a civil RICO
proceeding leaves no greater stain than do a number of other civil proceedings.”). And Nexo
points to no authority for its proposition that Rule 9(b) requires that Cress “particulariz[e] the roles
of each entity or individual” in the Nexo Enterprise. Mot. at 18:19–20, 19:25–28. Cress alleges
that the Nexo Enterprise acts for the common purpose of maximizing profits by fraudulently
concealing fees from customers—the corporate affiliates work with Nexo to operate the platform,
NDS EOOD supplies personnel who carry out the fraud by interacting with customers, and the
Nexo owners direct the scheme’s execution. Opp. at 19:4–19 (citing SAC ¶¶ 207–14). Moreover,
Cress details specific events that illustrate how the Nexo Enterprise operates: Hristov, who was
supplied to Nexo by NDS EOOD, emailed false OTC transaction statements to Cress on at least
three separate occasions, and Nexo liquidated Cress’s assets on at least two separate occasions
where it took undisclosed fees on the transactions. SAC ¶¶ 62–79, 84–93, 212. Collectively,
these allegations sufficiently describe the Nexo Enterprise’s structure and coordination for a
common purpose.
Finally, Nexo argues that “Cress’s enterprise allegations boil down to a corporation
engaging in its own business and acting through its workers.” Mot. at 20:24–21:21. As discussed,
Cress alleges that members of the Nexo Enterprise are more than Nexo’s workers. As alleged, the
Nexo Enterprise is analogous to that in Living Designs, Inc. v. E.I. Dupont de Nemours & Co. 431
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F.3d 353 (9th Cir. 2005). In Living Designs, the Ninth Circuit held that a plausible associated-in-
fact enterprise existed where the plaintiff “alleged that the ‘person’ was DuPont and the
‘enterprise’ consisted of DuPont, the law firms employed by DuPont, and expert witnesses
retained by the law firms.” Id. at 361. The Ninth Circuit reasoned that “there is no question that
law firms retained by DuPont are distinctive entities” and “[t]his is not a situation where the
enterprise cannot be either formally or practically separable from the person.” Id. at 361–62.
Similarly, as alleged, the Nexo Enterprise consists of Nexo (a corporation akin to DuPont), NDS
EOOD (a separate entity that Nexo contracts with akin to the law firms), and the employees
retained by NDS EOOD and supplied to Nexo (akin to the expert witnesses). SAC ¶¶ 207–14. As
such, Cress plausibly alleges that the Nexo Enterprise is more than Nexo and its workers. Further,
Nexo’s argument that Nexo cannot be a distinct entity because Nexo’s conduct within the Nexo
Enterprise amounts to “operating its cryptocurrency platform” falls flat. Mot. at 21:12–21. Cress
does not merely allege that Nexo charged fees and performed liquidations consistent with its
“primary business purpose”—he alleges that Nexo worked with the Related Persons to steal
money from customers by operating a fraudulent scheme. Id. That conduct is not tantamount to
primary business activity. Therefore, Cress plausibly alleges the existence of an enterprise at the
pleadings stage.
3. Pattern Of Racketeering Activity
Nexo argues that Cress fails to plead a valid pattern of racketeering activity because (1)
“non-disclosure is not a racketeering activity”; (2) he “fails to plead the predicate acts with
specificity”; and (3) he “fails to plead the continuity requirement.” Mot. at 21:22–24:9. Cress
contends that he meets this element because the SAC alleges a pattern of “repeated, related acts of
mail and wire fraud carried out over many years as part of Nexo’s regular course of business.”
Opp. at 20:24–24:5.
Under RICO, a “‘pattern of racketeering activity’ requires at least two acts of racketeering
activity, one of which occurred after [1970] and the last of which occurred within ten years after
the commission of a prior act of racketeering activity.” 18 U.S.C. § 1961(5). Thus, the element
has two parts: conduct constituting racketeering activity, and a pattern of qualifying conduct.
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“Racketeering activity” includes several indictable offenses listed in the RICO statute,
known as predicate acts. Id. at § 1961(1); see Sedima, 473 U.S. at 495 (“‘racketeering activity’
consists of no more and no less than commission of a predicate act, § 1961(1)”). Mail and wire
fraud are both predicate offenses. 18 U.S.C. § 1961(1); see id. at §§ 1341 (Mail Fraud), 1343
(Wire Fraud).
To establish a “pattern” of conduct, the predicate acts must be both “related” and “amount
to or pose a threat of continued criminal activity.” H.J., Inc. v. Nw. Bell Tel. Co., 492 U.S. 229,
239 (1989). Related acts are “criminal acts that have the same or similar purposes, results,
participants, victims, or methods of commission, or otherwise are interrelated by distinguishing
characteristics and are not isolated events.” Id. at 240. “‘Continuity’ is both a closed- and open-
ended concept, referring either to a closed period of repeated conduct, or to past conduct that by its
nature projects into the future with a threat of repetition.” Id. at 241. “A party alleging a RICO
violation may demonstrate continuity over a closed period by proving a series of related predicates
extending over a substantial period of time. . . . Whether the predicates proved establish a threat of
continued racketeering activity depends on the specific facts of each case.” Id. at 242.
Here, the Court finds that Cress pleads sufficient facts to plausibly allege that the Nexo
Enterprise engaged in a pattern of racketeering activity. First, Nexo argues that “Cress fails to
allege wire fraud predicate acts because he identifies no affirmative misrepresentations to him
regarding Nexo’s OTC and liquidation fees specifically, but instead relies on a non-disclosure
theory of liability.” Mot. at 22:2–18; Reply at 14:20–15:2. But as discussed, Cress plausibly
alleges that Nexo made affirmative misrepresentations regarding its fees. See supra, Part IV.B.1.
Second, Nexo argues that Cress fails to comply with Rule 9(b) because he “cannot plead
the precise dates of all the Nexo Enterprise’s uses of the mail and wire.” Mot. at 22 n.8 (quoting
SAC ¶¶ 230–31); see id. at 22:19–23:17. But Cress is only required to plead two predicate acts.
18 U.S.C. § 1961(5). Cress alleges that the Nexo Enterprise committed acts of mail and wire
fraud. SAC ¶ 215. To prove wire fraud, one must show that the defendant “used the wires to
execute a ‘scheme or artifice to defraud, or for obtaining money or property by means of false or
fraudulent pretenses, representations, or promises.’” Kousisis v. United States, 605 U.S. 114, 121
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(2025) (quoting 18 U.S.C. § 1343). “The prototypical fraudulent-inducement scheme plainly
satisfies each of these statutory elements.” Id. at 123. As discussed, Cress plausibly alleges that
Nexo engaged in multiple acts of fraudulent inducement by using false statements to induce Cress
to transact with Nexo. See supra, Part IV.B.1. Cress further alleges that the Nexo Enterprise
concealed its fraud by sending customers fraudulent trade confirmations which omitted any
reference to the profits Nexo secretly took. SAC ¶¶ 113–14, 218–21, 242–44. And Cress alleges
that the Nexo Enterprise used wires to conduct its scheme when it used emails and the Internet to
communicate false statements to customers regarding fees, transmit false trade confirmations, and
circulate internal documents that directed how to conceal the fees from customers. Opp. at 21:11–
22 (citing SAC ¶¶ 215–34). Therefore, Cress plausibly alleges that the Nexo Enterprise engaged
in at least two predicate acts of wire fraud. See Kousisis, 605 U.S. at 118 (“Under the fraudulent-
inducement theory, a defendant commits federal fraud whenever he uses a material misstatement
to trick a victim into a contract that requires handing over her money or property[.]”).
Nexo further argues that “Cress’s alleged wire fraud predicate acts also lack the required
specificity” under Rule 9(b) because the “RICO claim improperly groups Nexo and its affiliates
without any particularized detail or identification of each entity or individual’s role.” Mot. at
23:10–17; Reply at 14:19–20. To be sure, alleged predicate acts of wire fraud must meet the
particularity requirement of Rule 9(b). Allwaste, Inc. v. Hecht, 65 F.3d 1523, 1530 (9th Cir.
1995). However, at least two of Cress’s allegations of wire fraud meet this standard as Cress
identifies specific fraudulent communications in the SAC. Opp. at 22:5–7. For example, Cress
alleges that on March 27, 2020, Hristov falsely stated to a customer via email that, “Nexo’s
business model is not generating profits from liquidations”; on March 1, 2021, Hristov sent an
email to a customer falsely stating that, “Nexo is not a participant in the trade, we act as a middle
man of the deal.” SAC ¶¶ 223–24. In addition, Cress alleges that on three specific dates, Hristov
emailed Cress transactions statements that stated false asset acquisition prices in order to conceal
Nexo’s secret profits on the transactions. Id. ¶¶ 62–79. In sum, Cress pleads who made the
statements, what was said, when and where they were said, and how the statements were
misleading—this is all that Rule 9(b) requires. Vess, 317 F.3d at 1106. Therefore, Cress alleges at
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least two predicate acts of wire fraud that comply with Rule 9(b).
Finally, Nexo argues that Cress fails to plead continuity. Mot. at 23:18–24:9. Cress
counters that he adequately pleads both closed-ended and open-ended continuity. Opp. at 23:13–
24:5. Open-ended continuity is “satisfied where it is shown that the predicates are a regular way
of conducting defendant’s ongoing legitimate business (in the sense that it is not a business that
exists for criminal purposes), or of conducting or participating in an ongoing and legitimate RICO
“enterprise.’” H.J., 492 U.S. at 242–43. The Court agrees that Cress satisfies continuity through
this avenue. See Opp. at 23:20–25. Cress alleges that the Nexo Enterprise engaged in a
“systematic scheme to fraudulently charge and conceal substantial fees,” told customers that it did
not charge fees, produced fraudulent transactional records to conceal the fees, circulated internal
documents acknowledging that it lied to customers about fees, and threatens to continue this
conduct unless enjoined. SAC ¶¶ 215–220, 232. This is sufficient to establish continuity because
it shows that fraudulent conduct was part of the Nexo Enterprise’s regular way of conducting
business. See Allwaste, 65 F.3d at 1529 (“The most logical inference to be drawn, therefore, is
that these activities threatened to continue in the future and had become [defendants’] way of
doing business.”). Nexo argues that Cress cannot show open-ended continuity “in light of Nexo’s
withdrawal from the U.S. market in 2023.” Mot. at 23:25–24:1. This allegation is not present in
the SAC; thus, the Court cannot consider it on a motion to dismiss. Therefore, Cress plausibly
alleges a pattern of racketeering activity at the pleadings stage.
F. RICO Conspiracy Claim (Claim 8)
Cress alleges that Nexo “directed and controlled the affairs of the Nexo Enterprise, was
aware of the nature and scope of the Enterprise’s unlawful scheme, and they agreed to participate
in it.” SAC ¶¶ 235–39. Nexo argues that Cress’s RICO Conspiracy claim (Claim 8) fails because
(1) his substantive RICO claim fails; and (2) he “pleads no non-conclusory allegations of a
conspiracy.” Mot. at 24:10–25. Cress contends that the allegations in the SAC “plausibly
establish assent to a common plan and knowing participation by each conspirator.” Opp. at 24:6–
13.
Section 1962(d), RICO’s “conspiracy” prong, states: “It shall be unlawful for any person
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to conspire to violate any of the provisions of subsection (a), (b), or (c) of this section.” 18 U.S.C.
§ 1962(d). To establish a violation of section 1962(d), a plaintiff “must allege either an agreement
that is a substantive violation of RICO or that the defendants agreed to commit, or participated in,
a violation of two predicate offenses.” Howard, 208 F.3d at 751. Thus, a plaintiff “cannot claim
that a conspiracy to violate RICO existed if they do not adequately plead a substantive violation of
RICO.” Id.
Here, the Court concludes that Cress alleges a cognizable RICO conspiracy claim against
Nexo. First, because Cress’s substantive RICO claim survives, his conspiracy claim does not fail
on that account. Second, as discussed, the Court agrees with Cress that he “pleads a coordinated
agreement among Nexo, its specific affiliated entities, and senior executives to implement and
carry out a uniform scheme to conceal OTC and liquidation fees.” Opp. at 24:6–13 (citing SAC ¶¶
237–38); see supra, Part IV.E.2. Therefore, Cress plausibly alleges a RICO conspiracy claim and
the pleadings stage.
Accordingly, the Court DENIES Nexo’s motion to dismiss Cress’s RICO Conspiracy
Claim (Claim 8).
G. Fraudulent Omission Claim (Claim 9)
Cress alleges that “Nexo failed to disclose to [Cress] that it would take substantial fees and
profits (a) on his OTC transactions and (b) for any liquidation of his assets.” SAC ¶¶ 240–49.
Nexo argues that Cress’s Fraudulent Omission claim (Claim 9) fails because he (1) “does not
plausibly allege that Nexo concealed or suppressed any material fact”; (2) does not “establish that
Nexo was under a duty to disclose such information to Cress”; and (3) “has not, and cannot,
articulate how knowledge of [the liquidation] fees would have changed his actions.” Mot. at 28:1–
30:4; Reply at 7:19–24.
Under California law, the “required elements for fraudulent concealment are (1)
concealment or suppression of a material fact; (2) by a defendant with a duty to disclose the fact;
(3) the defendant intended to defraud the plaintiff by intentionally concealing or suppressing the
fact; (4) the plaintiff was unaware of the fact and would have acted differently if the concealed or
suppressed fact was known; and (5) plaintiff sustained damage as a result of the concealment or
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suppression of the material fact.” Rattagan v. Uber Techs., Inc., 17 Cal. 5th 1, 40 (2024).
Here, the Court concludes that Cress alleges a cognizable fraudulent omission claim
against Nexo. Accordingly, the Court DENIES Nexo’s motion to dismiss Cress’s Fraudulent
Omission Claim (Claim 9).
1. Concealment
Nexo argues that Cress does not establish the concealment element because the
advertisements Cress references “all relate to non-OTC transactions or services.” Mot. at 28:16–
25. Cress contends that “Nexo makes no argument that Cress failed to allege a pure omission.”
Opp. at 13:61–1.
“Concealment is a species of fraud or deceit.” Stofer v. Shapell Indus., Inc., 233 Cal. App.
4th 176, 186 (2015). Whether a defendant concealed or suppressed a material fact is a question of
fact. Id. at 188.
Here, the Court finds that Cress pleads sufficient facts to plausibly allege that Nexo
concealed or suppressed a material fact. Nexo’s argument focuses on whether Cress alleges an
affirmative misrepresentation. Mot. at 28:16–25; see Reply at 7:27–8:3 (“Nexo never made a false
representation to Cress about fees on OTC cryptocurrency purchases or forced liquidations.”). But
as Cress points out, Nexo does not dispute that Cress alleges a pure omission. Opp. at 13:61–1.
Cress alleges that Nexo had exclusive knowledge of its fees for OTC transactions and liquidations
and that Nexo actively concealed these fees from Cress “by sending him fraudulent trade
confirmations which omitted any reference to the profits Nexo took at [Cress’s] expense.” SAC
¶¶ 113–14, 242–44. This is sufficient to allege concealment at the pleadings stage.
2. Duty To Disclose
Nexo argues that Cress does not establish the duty to disclose element because (1) Nexo
was not under an obligation to correct statements because it “never made any direct
representations to Cress that there were no fees on his specific OTC transactions or liquidations”;
(2) Nexo was not Cress’s fiduciary; and (3) there is no “other basis to impose a duty to disclose on
Nexo.” Mot. at 28:26–30:4. Cress contends that he adequately pleads “four independent bases for
a duty to disclose.” Opp. at 12:22–13:18.
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“A duty to disclose a material fact can arise if (1) it is imposed by statute; (2) the defendant
is acting as plaintiff’s fiduciary or is in some other confidential relationship with plaintiff that
imposes a disclosure duty under the circumstances; (3) the material facts are known or accessible
only to defendant, and defendant knows those facts are not known or reasonably discoverable by
plaintiff (i.e., exclusive knowledge); (4) the defendant makes representations but fails to disclose
other facts that materially qualify the facts disclosed or render the disclosure misleading (i.e.,
partial concealment); or (5) defendant actively conceals discovery of material fact from plaintiff
(i.e., active concealment).” Rattagan, 17 Cal. 5th at 40. “All of these relationships are created by
transactions between parties from which a duty to disclose facts material to the transaction arises
under certain circumstances. Such a transaction must necessarily arise from direct dealings
between the plaintiff and the defendant; it cannot arise between the defendant and the public at
large.” Id. at 41 (cleaned up).
Here, the Court finds that Cress pleads sufficient facts to plausibly allege that Nexo had a
duty to disclose. Cress asserts that Nexo had a duty to disclose because it actively concealed its
fees from Cress. Opp. at 13:6–11. The Court agrees—“active concealment” is indeed a basis for a
duty to disclose. Rattagan, 17 Cal. 5th at 40. As discussed, Cress alleges that Nexo actively
concealed its fees from Cress “by sending him fraudulent trade confirmations which omitted any
reference to the profits Nexo took at [Cress’s] expense.” SAC ¶¶ 113–14, 242–44. Thus, even if
true, Nexo’s argument that it “was under no obligation to disclose its OTC fees in advance of the
transactions” falls flat. Mot. at 30:2–4. Cress alleges that for several transactions, he received
emails from Nexo after the transactions that incorrectly reflected the price at which Nexo acquired
assets because Nexo secretly took profits on these transactions, as depicted by internal Nexo
emails. SAC ¶¶ 62–83. Cress further alleges that Nexo never disclosed liquidation fees to Cress
and distributed internal documents that instructed, “We should never, under any circumstances
mention there is a liquidation tax.” Id. ¶¶ 84–93 (emphasis omitted). Contrary to Nexo’s
assertion, this is sufficient to allege that Nexo actively concealed its OTC and liquidation fees
from Cress. See Reply at 8:9–11 (“The SAC has a passing reference to alternative theories of
agency, but both the SAC and Cress’s opposition make it clear that the only well-plead basis for
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Cress’s claim is fiduciary duty.”). Therefore, Cress sufficiently alleges that Nexo had a duty to
disclose its fees/profits on Cress’s OTC transactions and liquidations.
3. Reliance
Nexo argues that Cress does not allege how knowledge of the liquidation fees “would have
changed his actions.” Mot. at 28:14–15. Cress contends that he adequately alleges that he would
have acted differently had he been aware of the liquidation fees. Opp. at 13:19–14:4.
For a fraudulent omission claim, “it is not logically impossible to prove reliance on an
omission.” Mirkin v. Wasserman, 5 Cal. 4th 1082, 1093 (1993). However, “[o]ne need only
prove that, had the omitted information been disclosed one would have been aware of it and
behaved differently.” Id.
Here, the Court finds that Cress pleads sufficient facts to plausibly allege reliance
regarding the liquidation fees. Cress alleges that he would not have used Nexo’s services had he
known about Nexo’s “secret profits and fees” because, inter alia, the liquidation fees left Cress’s
“account more susceptible to further liquidations.” SAC ¶¶ 87, 240–44. As such, contrary to
Nexo’s assertion, Cress does explain how knowledge of the liquidation fees would have changed
his actions. Mot. at 28:14–15. Moreover, Cress’s allegation that Nexo’s internal documents state
that customers should never be made aware of the “liquidation tax” creates a reasonable inference
that Nexo concealed its fees because customers would change their behavior if they knew about
the fees. Opp. at 14:2–4 (citing SAC ¶ 92). Therefore, Cress sufficiently alleges reliance
regarding the liquidation fees.
H. Breach of Cryptocurrency Purchase Agreement Claim (Claim 10)
Cress alleges that Nexo breached the Cryptocurrency Purchase Agreement (“CPA”) by (1)
“failing to timely execute [Cress’s] cryptocurrency purchase orders as required”; “charging
[Cress] undisclosed fees in the execution of cryptocurrency purchases”; and (3) “liquidating the
digital assets it sold to Cress despite its promise to deliver them free from ‘any and all Liens.’”
SAC ¶¶ 250–64. Cress further alleges that Nexo “breached the implied covenant of good faith and
fair dealing inherent in the CPA.” Id. Nexo argues that Cress’s Breach of CPA claim (Claim 10)
fails because he “fails to allege any specific terms of the CPA that Nexo has breached.” Mot. at
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30:5–27. Cress contends that the claim “is based on concrete contractual provisions and duties.”
Opp. at 24:14–25:25.
To prevail on a breach of contract claim under California law, a plaintiff must prove “(1)
the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3)
defendant’s breach, and (4) the resulting damages to the plaintiff.” Oasis W. Realty, LLC v.
Goldman, 51 Cal. 4th 811, 821 (2011). “Implicit in the element of damage is that the defendant’s
breach caused the plaintiff’s damage.” Troyk v. Farmers Grp., Inc., 171 Cal. App. 4th 1305, 1352
(2009) (emphasis in original). Whether a party breached a contract is a question of fact. Locke v.
Warner Bros., 57 Cal. App. 4th 354, 365 (1997).
Under California law, “[t]he covenant of good faith and fair dealing, implied by law in
every contract, exists merely to prevent one contracting party from unfairly frustrating the other
party’s right to receive the benefits of the agreement actually made.” Guz v. Bechtel Nat. Inc., 24
Cal. 4th 317, 349 (2000) (emphasis in original). “Just what conduct will meet this criteria must be
determined on a case by case basis and will depend on the contractual purposes and reasonably
justified expectations of the parties.” Careau & Co. v. Sec. Pac. Bus. Credit, Inc., 222 Cal. App.
3d 1371, 1395 (1990). “[A] breach of the covenant of good faith and fair dealing is prompted not
by an honest mistake, bad judgment or negligence but rather by a conscious and deliberate act.”
A.L. v. Pleasanton Unified Sch. Dist., No. 22-cv-03036-CRB, 2023 WL 5209718, at *3 (N.D. Cal.
Aug. 14, 2023) (cleaned up). Whether the covenant has been breached is a question of fact. Hicks
v. E.T. Legg & Assocs., 89 Cal. App. 4th 496, 509 (2001).
To prevail on an implied covenant claim, a plaintiff must show: “(1) the plaintiff and the
defendant entered into a contract; (2) the plaintiff did all or substantially all of the things that the
contract required him to do or that he was excused from having to do; (3) all conditions required
for the defendant’s performance occurred; (4) the defendant unfairly interfered with the plaintiff’s
right to receive the benefits of the contract; and (5) the defendant’s conduct harmed the plaintiff.”
Chou v. Charles Schwab & Co., No. 21-cv-06189-LB, 2022 WL 1127384, at *6 (N.D. Cal. Mar.
22, 2022).
Here, the Court concludes that Cress alleges a cognizable breach of CPA claim against
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Nexo. First, Nexo does not challenge Cress’s claim to the extent that it is based on Nexo’s
promise to liquidate his assets free from liens. SAC ¶ 260; see Mot. at 30:5–27; Opp. at 25:2–25.
Therefore, dismissal of the claim is not warranted to the extent it is predicated on this allegation.
Second, Nexo argues that “[n]othing in the CPA guarantees execution of such manual
purchase orders in a specific amount of time, or at a specific price, and without fees or profit.”
Mot. at 30:6–15; Reply at 15:3–7. This is incorrect—Cress alleges that under the CPA, Nexo had
ten minutes to confirm the order. Opp. at 24:21–25:1 (citing SAC ¶ 57). Nexo next argues that
Cress “does not plead any specifics about the confirmations of his OTC transactions.” Mot. at
30:6–15. This is also incorrect—Cress alleges that his OTC orders were not executed or
confirmed until days after he placed them. Opp. at 24:21–25:1 (citing SAC ¶¶ 57–79). Therefore,
Cress plausibly alleges a breach of the CPA claim based on Nexo’s failure to execute his purchase
orders within ten minutes.
Finally, Nexo argues that “[n]othing in the CPA prevents Nexo from charging fees on its
OTC transactions.” Mot. at 30:16–27; Reply at 15:8–13. Cress contends that by secretly charging
fees, Nexo breached the implied covenant of good faith and fair dealing by violating “the spirit
and reasonable expectations of the contract.” Opp. at 25:2–21. Nexo responds that to invoke the
implied covenant, Cress must identify an express provision of the CPA that precludes Nexo from
charging OTC fees. Reply at 15:8–13. However, as Cress points out, a “breach of a specific
provision of the contract is not necessary to a claim for breach of the implied covenant of good
faith and fair dealing.” Opp. at 25:8–10 (quoting Thrifty Payless, Inc. v. The Americana at Brand,
LLC, 218 Cal. App. 4th 1230, 1244 (2013) (cleaned up)). Cress alleges that Nexo’s secret OTC
fees interfered with his right to receive the benefit of obtaining purchased assets at the price set in
the purchase order, as promised under the CPA. Id. at 25:2–7 (citing SAC ¶¶ 59–61). Under
Cress’s theory, in charging more than the purchase price, Nexo frustrated Cress’s right to obtain
the assets at the prevailing market price. Id. at 25:8–21 (citing SAC ¶¶ 258–59). Therefore, Cress
plausibly alleges a breach of the implied covenant claim based on Nexo’s charging undisclosed
fees on OTC transactions. See Acree v. Gen. Motors Acceptance Corp., 92 Cal. App. 4th 385, 396
(2001) (“overcharging violated the covenant of good faith and fair dealing implied in the sales
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agreement”).
Accordingly, the Court DENIES Nexo’s motion to dismiss Cress’s Breach of CPA Claim
(Claim 10).
V. CONCLUSION
For the reasons stated above, the Court DENIES Nexo’s Motion to Dismiss.
IT IS SO ORDERED.
Dated: February 4, 2026
THOMAS S. HIXSON
United States Magistrate Judge
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