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Current Developments in the Commercial Divisions of the
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Posted: January 8, 2016

Aiding and Abetting Fraud Requires Allegations of Substantial Assistance to a Fraudulent Scheme

On January 7, 2016, the First Department issued a decision in Chambers v. Weinstein, 2016 NY Slip Op. 00051, sustaining allegations of aiding and abetting fraud, explaining:

To state a claim for aiding and abetting fraud, a plaintiff must allege the existence of the underlying fraud, actual knowledge, and substantial assistance. Here, the existence of an underlying fraud is sufficiently stated in the complaint, which alleges, among other things, that defendants aided and abetted a fraudulent Ponzi scheme involving the purchase of Facebook shares. Plaintiffs have sufficiently stated substantial assistance, because the complaint alleges that defendants assisted in the fraud by assigning property to codefendants and by placing the proceeds of the fraud beyond the reach of plaintiffs, thereby causing plaintiffs harm. Plaintiffs have sufficiently pleaded actual knowledge of the underlying fraud, which need only be pleaded generally.

(Internal quotations and citations omitted) (emphasis added).

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