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Current Developments in the Commercial Divisions of the
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Posted: September 11, 2015

Claim for Aiding and Abetting Fraud Requires Proof of Actual Knowledge of the Fraud

On August 18, 2015, Justice Pines of the Suffolk County Commercial Division issued a decision in Otkonomos, Inc. v. Bahrenberg, 2015 NY Slip Op. 31658(U), granting one of the defendants summary judgment dismissing the plaintiffs’ claim for aiding and abetting fraud against him, explaining:

The elements of a claim for aiding and abetting fraud are (1) the existence of an underlying fraud, (2) knowledge of this fraud on the part of the aiding and abetting party, and (3) substantial assistance by the aiding and abetting party in achieving this fraud. The knowledge element requires a showing of actual knowledge of the fraud, as discerned from the surrounding circumstances. Here, the Plaintiffs have failed to adduce any evidence to support a finding that [the defendant] had actual knowledge of the [alleged] fraud. Evidence that [the moving defendant] permitted [another defendant] to act adversely to former clients and/or allowed the corporate defendants to breach obligations owed to the Plaintiffs does not amount to actual knowledge of fraud.

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

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