Court Dismisses Fraud Claim Based On Impermissible Group Pleading

Posted: March 23, 2026 / Written by: Samuel L. Butt, Thomas A. Kissane, Channing J. Turner, Joshua Wurtzel / Categories Commercial, Motion to Dismiss, Fraud/Misrepresentation

Court Dismisses Fraud Claim Based On Impermissible Group Pleading

On February 24, 2026, in A Participations Ltd. v. Velissaris, Index No. 652720/2023, Justice Melissa A. Crane found plaintiffs’ fraud/fraudulent inducement claim lacking in several respects and dismissed it. With respect to impermissible group pleading, the Court explained:

IQCM is also correct to assert that “group pleading” in fraud claims is impermissible (see Principia Partners LLC v Swap Fin. Group, LLC, 194 AD3d 584, 584 [1^st Dept 2021] [failure to distinguish between defendants is improper group pleading]; RKA Film Fin., LLC v Kavanaugh, 171 AD3d 678, 678 [1st Dept 2019] [dismissing fraud claim where plaintiffs “impermissibly lumped those defendants together with the others against whom specific acts had been pleaded”]), and that IQCM cannot be held liable for statements made by undifferentiated “personnel” to plaintiffs. As the court noted elsewhere, the SAC generally describes the fraud claim as including a “years-long ... scheme” in which “Velissaris ... fraudulently manipulat[ed] asset values,” and a “central component [of this scheme] was to claim that IQCM played no role in the valuation of the Hedge Fund's exotic OTC Derivatives,” that resulted in a more than $1 billion overvaluation of the Mutual Fund and Hedge Fund (see NYSCEF Doc No 567 at 23-24, citing SAC, ¶¶ 4 and 183-184). However, the controlling caselaw makes it clear that Velissaris’s guilty plea to securities fraud may not be broadly imputed to all other IQCM “personnel” as well. Because the SAC fails to identify IQCM officers, to impute discrete fraudulent statements to them and/or to allege the time, place and manner in which they made those statements, the court deems that the nineteenth cause of action therein is an impermissible “group pleading” that does not withstand scrutiny under CPLR 3016(b).

Contact the Commercial Division Blog Committee at commercialdivisionblog@schlamstone.com if you or a client have questions concerning fraud.