Case: 1:23-cv-03281 Document #: 38 Filed: 11/25/24 Page 1 of 10 PageID #:182
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`UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`No. 1:23-CV-03281
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`Judge Edmond E. Chang
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`MOHAMMED ELSEIDY
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`Plaintiff,
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`v.
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`MOHAMED ELKASSTAWI
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`Defendant.
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`MEMORANDUM OPINION AND ORDER
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`In early 2018, Mohammed ElSeidy became a partner in a cryptocurrency in-
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`vestment fund called zk Capital, which was founded by Mohamed ElKasstawi. R. 1,
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`Compl. ¶¶ 12, 18–19.1 In ElSeidy’s version of the story, a few months after ElSeidy
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`joined, ElKasstawi asked him for a $209,800 loan. Id. ¶¶ 43, 45. ElKasstawi told
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`ElSeidy that he would use the money to invest in a cryptocurrency startup and as-
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`sured ElSeidy that he would repay him in full within two months. Id. ¶¶ 43, 48.
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`ElSeidy agreed and transferred ElKasstawi the money. Id. ¶ 50. Two months came
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`and went, but ElKasstawi did not repay the loan. See id. ¶ 52. And when ElSeidy
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`began asking about repayment, ElKasstawi allegedly made excuses for the delay and
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`repeatedly promised to pay him back soon. Id. ¶¶ 55–56. But ElKasstawi never repaid
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`ElSeidy and instead shuttered zk Capital. Id. ¶¶ 88–89.
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`So ElSeidy brought this suit against ElKasstawi, alleging breach of contract,
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`breach of fiduciary duty, promissory fraud, fraudulent misrepresentation, and unjust
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`1Citations to the record are “R.” followed by the docket entry number and, if needed,
`a page or paragraph number.
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`Case: 1:23-cv-03281 Document #: 38 Filed: 11/25/24 Page 2 of 10 PageID #:183
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`enrichment. Id. at 14–22.2 ElKasstawi now moves to dismiss the Complaint, arguing
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`that the Complaint is unintelligible and vague and that it fails to state any plausible
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`claims for relief. R. 21, Def. Mot. at 3–15. Because none of those arguments succeed,
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`ElKasstawi’s motion is denied.
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`I. Background
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`The Court accepts all well-pleaded factual allegations in the Complaint as true.
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`Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
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`U.S. 544, 570 (2007)). In early 2018, Mohamed ElKasstawi started a cryptocurrency
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`investment fund called zk Capital, which aimed to manage outside investors’ money
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`to create profits for the fund’s equity partners. Compl. ¶¶ 12, 18. He then offered
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`Mohammed ElSeidy, who had expertise in analyzing the computer science technical-
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`ities of the cryptocurrency market, equity and partnership in zk Capital if ElSeidy
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`agreed to provide research and analysis to the fund. Id. ¶¶ 10, 19. ElSeidy accepted
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`the offer, so the two joined forces. Id. ¶ 21.
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`In May 2018, deviating from the fund’s original goal of managing outside in-
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`vestors’ money, ElKasstawi allegedly asked ElSeidy to loan him $209,800 of
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`Ethereum (a form of cryptocurrency) so that ElKasstawi could directly invest in a
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`cryptocurrency venture called Rightmesh. Id. ¶ 43. Though ElSeidy initially hesi-
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`tated to make this loan, ElKasstawi promised that he would repay ElSeidy the entire
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`2The Court has diversity jurisdiction over this case, 28 U.S.C. § 1332(a), because
`ElKasstawi is domiciled in the State of Washington and ElSeidy is domiciled in Canada.
`R. 20, 9/21/2023 Minute Entry.
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`2
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`Case: 1:23-cv-03281 Document #: 38 Filed: 11/25/24 Page 3 of 10 PageID #:184
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`sum within two months. Id. ¶¶ 46, 48. So ElSeidy agreed and transferred the money.
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`Id. ¶ 50.
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`Two months after the transfer, ElKasstawi still had not repaid ElSeidy, so
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`ElSeidy followed up and asked when ElKasstawi would repay the loan. Id. ¶ 52.
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`ElKasstawi gave an excuse for why the payment was delayed and said that he would
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`repay ElSeidy soon. Id. ¶ 55. This back and forth continued through the summer of
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`2018. Id. ElSeidy then became more concerned when he learned that the value of
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`Rightmesh’s product had plummeted. Id. ¶ 53. This prompted him to ask ElKasstawi
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`about the status of their investments in Rightmesh and other ventures, but ElKasst-
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`awi allegedly started dodging his questions. Id. ¶ 56.
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`In October 2018, after another one of the partners in zk Capital asked ElKasst-
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`awi about ElSeidy’s loan, ElKasstawi wrote ElSeidy a personal check for the full
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`amount of the loan. Id. ¶ 61. But ElKasstawi said that ElSeidy could not deposit the
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`check because ElKasstawi’s bank account did not have enough money in it; instead,
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`ElKasstawi said that the check was a sign of good faith and was meant to document
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`ElSeidy’s loan and the outstanding obligation to repay him. Id. ¶¶ 60–63. ElKasstawi
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`said that he would finally repay ElSeidy by no later than the end of the first quarter
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`of 2019. Id. ¶ 63.
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`Soon after this, ElKasstawi met with all of the partners of zk Capital and told
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`them that he could not give them the equity that he had promised in the fund and
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`that instead he was going to wind down the fund’s operations. Id. ¶¶ 81, 84. But
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`ElKasstawi continued promising ElSeidy that he would repay his loan. Id. ¶ 87. In
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`Case: 1:23-cv-03281 Document #: 38 Filed: 11/25/24 Page 4 of 10 PageID #:185
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`August 2019, ElKasstawi asked ElSeidy to meet him in Egypt so that ElKasstawi
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`could repay him. Id. ¶¶ 88–89. ElSeidy travelled to Egypt, but ElKasstawi never
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`showed and never repaid him. Id. Finally, in a table-turning move, ElKasstawi sued
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`ElSeidy in Cook County court, alleging that ElSeidy and others stole zk Capital’s
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`trade secrets and used them to help a competitor. Id. ¶ 90. Eventually, the state court
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`ruled against ElKasstawi, concluding that he provided no evidence that the trade
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`secrets in question ever existed. Id.
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`ElSeidy then filed this federal Complaint against ElKasstawi, claiming breach
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`of contract, breach of fiduciary duty, promissory fraud, fraudulent misrepresentation,
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`and unjust enrichment. Id. at 14–22. ElKasstawi now moves to dismiss the Com-
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`plaint, arguing that dismissal is proper for failure to adequately state a claim, Fed.
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`R. Civ. P. 12(b)(6), failure to satisfy the heightened-pleading standard for fraud, Fed.
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`R. Civ. P. 10(b), and failure to provide fair notice of the claims, Fed. R. Civ. P. 8(a)(2).
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`Def. Mot. at 3–15. ElKasstawi also asserted in his motion that the Court should ab-
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`stain from exercising jurisdiction over this case under the Colorado River doctrine
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`because there was (at the time) a parallel action between the parties pending in state
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`court. Id. at 3–8. But that state court action has since settled, and the settlement does
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`not resolve the federal claims at issue here. R. 37, 11/14/2024 Minute Entry. So
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`ElKasstawi has voluntarily withdrawn his abstention argument. Id.
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`II. Legal Standard
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`Under Federal Rule of Civil Procedure 8(a)(2), a complaint generally need only
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`include “a short and plain statement of the claim showing that the pleader is entitled
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`Case: 1:23-cv-03281 Document #: 38 Filed: 11/25/24 Page 5 of 10 PageID #:186
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`to relief.” Fed. R. Civ. P. 8(a)(2). This short and plain statement must “give the de-
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`fendant fair notice of what the claim is and the grounds upon which it rests.”
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`Twombly, 550 U.S. at 555 (cleaned up).3 The Seventh Circuit has explained that this
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`rule “reflects a liberal notice pleading regime, which is intended to ‘focus litigation on
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`the merits of a claim’ rather than on technicalities that might keep plaintiffs out of
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`court.” Brooks v. Ross, 578 F.3d 574, 580 (7th Cir. 2009) (quoting Swierkiewicz v.
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`Sorema N.A., 534 U.S. 506, 514 (2002)).
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`“A motion under Rule 12(b)(6) challenges the sufficiency of the complaint to
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`state a claim upon which relief may be granted.” Hallinan v. Fraternal Order of Police
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`of Chi. Lodge No. 7, 570 F.3d 811, 820 (7th Cir. 2009). “[A] complaint must contain
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`sufficient factual matter, accepted as true, to state a claim to relief that is plausible
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`on its face.” Iqbal, 556 U.S. at 678 (cleaned up). These allegations “must be enough
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`to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555. The
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`allegations that are entitled to the assumption of truth are those that are factual,
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`rather than mere legal conclusions. Iqbal, 556 U.S. at 678–79.
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`III. Analysis
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`A. Rule 8(a)(2) and Rule 10(b)
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`ElKasstawi first argues that the Complaint is vague and unintelligible. This
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`argument borders on being frivolous. As noted earlier, Civil Rule 8(a)(2) instructs
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`3This opinion uses (cleaned up) to indicate that internal quotation marks, alterations,
`and citations have been omitted from quotations. See Jack Metzler, Cleaning Up Quotations,
`18 Journal of Appellate Practice and Process 143 (2017).
`5
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`Case: 1:23-cv-03281 Document #: 38 Filed: 11/25/24 Page 6 of 10 PageID #:187
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`that a complaint must contain “a short and plain statement of the claim showing that
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`the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). And Rule 10(b) states that a
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`“party must state its claims or defenses in numbered paragraphs, each limited as far
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`as practicable to a single set of circumstances.” Fed. R. Civ. P. 10(b). “The primary
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`purpose of these rules is to give defendants fair notice of the claims against them and
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`the grounds supporting the claims.” Standard v. Nygren, 658 F.3d 792, 797 (7th Cir.
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`2011). “[D]ismissal is an appropriate remedy” if “the lack of organization and basic
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`coherence renders a complaint too confusing to determine the facts that constitute
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`the alleged wrongful conduct.” Id. at 798.
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`The Complaint here is nowhere near the threshold for dismissal. It coherently
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`describes the claims that ElSeidy is bringing against ElKasstawi and properly lays
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`out the grounds supporting those claims. Indeed, as detailed next, the allegations
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`adequately set forth claims on which relief can be granted. So the Complaint provides
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`more than fair notice to ElKasstawi. Dismissal on Rule 8(a)(2) and Rule 10(b) grounds
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`is not warranted.
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`B. Rule 12(b)(6)
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`Next, ElKasstawi argues that ElSeidy’s Complaint fails to state any plausible
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`claim and should be dismissed under Rule 12(b)(6). That fails too; ElSeidy’s claims
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`are all properly stated and supported by concrete factual allegations. First, ElKasst-
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`awi contends that ElSeidy’s breach-of-contract claims fail because ElSeidy’s money
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`transfer was an investment, not a loan, so ElKasstawi had no contractual obligation
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`to repay him. Def. Mot. at 10. This argument essentially asks the Court to accept
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`Case: 1:23-cv-03281 Document #: 38 Filed: 11/25/24 Page 7 of 10 PageID #:188
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`ElKasstawi’s, rather than ElSeidy’s, version of the facts as true. That gets the motion
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`to dismiss standard exactly backwards.
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`Taking ElSeidy’s factual allegations as true, as the Court must at this stage,
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`ElKasstawi “requested that ElSeidy loan him cryptocurrency in the form of Ethereum
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`valued at $209,800.” Compl. ¶ 45 (emphasis added). And ElKasstawi “promised that
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`he would repay the entire … [t]ransfer within two months after … receipt of the
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`funds.” Id. ¶ 47. ElSeidy agreed to give ElKasstawi the money “in exchange for
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`[ElKasstawi’s] promise to repay the entire amount within no later than two months
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`following the loan.” Id. ¶ 48 (emphasis added). And despite repeated promises to re-
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`pay ElSeidy, ElKasstawi never did so. Id. at 13. So the Complaint clearly alleges that
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`ElKasstawi asked ElSeidy to loan him money in exchange for consideration, ElKasst-
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`awi promised to repay that loan, ElSeidy agreed and gave him the loan, and ElKasst-
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`awi never paid him back. Those allegations constitute a properly pleaded breach-of-
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`contract claim. ElKasstawi counters that the document containing the details of the
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`money transfer was entitled “ElSeidy investments.” Def. Mot. at 10. But the docu-
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`ment’s title does not override the fact that the Complaint repeatedly refers to the
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`money transfer as a loan and alleges that ElKasstawi promised to repay the entire
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`sum within two months. The contract claims survive the motion to dismiss.
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`Second, ElKasstawi asserts that ElSeidy’s fiduciary-duty claim fails because
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`there was no fiduciary relationship between them. Def. Mot. at 14. Assuming the
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`truth of the Complaint’s allegations, that is not right. “Fiduciary duties exist as a
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`matter of law in certain relationships including partnerships and joint ventures.”
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`Case: 1:23-cv-03281 Document #: 38 Filed: 11/25/24 Page 8 of 10 PageID #:189
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`Autotech Tech. Ltd. P’ship v. Automationdirect.com, 471 F.3d 745, 748 (7th Cir. 2006).
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`ElKasstawi “offered ElSeidy equity and partnership interest in zk Capital if he joined
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`the fund and provided research and analysis.” Compl. ¶ 19. And “ElSeidy accepted
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`ElKasstawi’s offer.” Id. ¶ 21. So they allegedly were partners and had a fiduciary re-
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`lationship. At the pleading stage, this is enough.
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`Plus, a “fiduciary relationship … may also arise as the result of special circum-
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`stances of the parties’ relationship, where one party places trust in another so that
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`the latter gains superiority and influence over the former.” Prime Leasing, Inc. v.
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`Kendig, 773 N.E.2d 84, 96 (Ill. App. 2002). That test is also met here, at least as the
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`pleading stage. ElSeidy placed trust in ElKasstawi to handle and execute the opera-
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`tions and investments of zk Capital and entrusted ElKasstawi with more than
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`$200,000 of his own money. Compl. ¶¶ 29–31, 50. So ElKasstawi had power and con-
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`trol over ElSeidy’s money and over the fund, further establishing a fiduciary relation-
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`ship between them. The breach-of-fiduciary-duty claim survives the motion to dismiss
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`as well.
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`Lastly, ElKasstawi argues that the fraud claims fail because the Complaint
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`does not allege that ElKasstawi made a false statement of material fact or that
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`ElSeidy reasonably relied on that false statement. Def. Mot. at 12–13. That is incor-
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`rect on both counts. To state a fraud claim, the Complaint must allege that ElKasst-
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`awi “(i) made a false statement of material fact; (ii) knew or believed the statement
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`to be false; (iii) intended to and, in fact, did induce the plaintiff to reasonably rely and
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`act on the statement; and (iv) caused injury to the plaintiff.” Reger Dev., LLC v. Nat’l
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`Case: 1:23-cv-03281 Document #: 38 Filed: 11/25/24 Page 9 of 10 PageID #:190
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`City Bank, 592 F.3d 759, 766 (7th Cir. 2010). As alleged, ElSeidy’s fraud claims meet
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`all of these elements. He alleges that ElKasstawi induced ElSeidy to loan him money
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`by falsely telling him that he intended to use the loan money to invest in a cryptocur-
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`rency venture and that he would repay ElSeidy in full within two months. Compl.
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`¶ 116–20. ElSeidy reasonably relied on those assurances and acted on them by trans-
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`ferring more than $200,000 to ElKasstawi. Id. ¶ 48, 50. And again, ElSeidy was in-
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`jured because ElKasstawi never repaid him. Id. ¶ 123.
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`ElKasstawi argues that telling ElSeidy that he would repay him for the loan
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`was merely a broken promise, not a false representation of fact. But the Complaint
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`specifically states that ElKasstawi never intended to repay ElSeidy and instead in-
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`tended to keep ElSeidy’s Ethereum for his own personal use from the start. Id. ¶ 118.
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`So ElKasstawi made false statements about his own intentions and knew that those
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`statements were false when he made them. That satisfies the pleading standard for
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`fraud claims. ElSeidy’s fraud claims, like his others, may proceed.
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`Case: 1:23-cv-03281 Document #: 38 Filed: 11/25/24 Page 10 of 10 PageID #:191
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`IV. Conclusion
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`ElKasstawi’s motion to dismiss, R. 21, is denied. It is time to get discovery
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`going in the case. On or before December 9, 2024, the parties shall confer and file a
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`joint status report with a proposed discovery schedule.
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`ENTERED:
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`s/Edmond E. Chang
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`Honorable Edmond E. Chang
`United States District Judge
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`DATE: November 25, 2024
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