CF LLC v. BOOMERS TOWNHOMES LLC BOOMERS OAKS LLC BOOMERS PARK LLC RH 62 REALTY LLC NUSSBAUM LOWINGER LLP MARK NUSSBAUM JAMES WU BEAR VENTURES GROUP LLC THOMAS VENTURES LLC ISIDORE BLEIER JOSHUA JACOBS MARCUS MILLICHAP REAL ESTATE INVESTMENT SERVICES INC GBM EQUITIES LLC YAKOV BANASH CENSOR LAW LLC SCHMUEL CENSOR OLD REPUBLIC NATIONAL TITLE INSURANCE COMPANY CROSS BRIDGE TITLE LLC (2026)

This action arises from an alleged scheme to inflate the purchase price of a multi-family residential complex in Montgomery County, Alabama, and to use the inflated valuation to induce a $30.2 million commercial mortgage loan that later defaulted. (See NYSCEF No. 65 at ¶ 1.) Plaintiff CF Encore Purchaser LLC is the assignee of the Original Lender, Encore SFR Finance, LLC ("Original Lender"), and holder of the defaulted loan. (Id. at ¶¶ 3, 66-67, 152.)

According to the allegations of the first amended complaint (FAC), the property consists of three parcels located at 4930 Park Towne Way, 4700 Park Towne Way, and 4900 Plaza Drive, Montgomery, Alabama. (Id. at ¶ 4.) Defendants Boomers Townhomes I LLC, Boomers Oaks I LLC, and Boomers Park I LLC (collectively, the borrower) are the borrower entities, each partially owned by defendant Aron Goldklang, who also executed a personal guarantee. (See NYSCEF No. 5; see also NYSCEF No. 65 at ¶¶ 3, 5, 11, 41.) Defendant Isidore Bleier co-owned the borrower at the time of closing. (See NYSCEF No. 65 at ¶ 6.)

Defendants James Wu, Bear Ventures Group LLC, and Thomas Ventures LLC (collectively, Seller Defendants) are the seller parties. (Id. at ¶¶ 6 [a], 18-20.) Wu and his relatives had originally purchased the property in 2020 for a combined $16,009,000 across the three parcels. (Id. at ¶ 68.) Defendants Joshua R. Jacobs and Marcus & Millichap Real Estate Investment Services, Inc. (Marcus & Millichap) served as listing brokers. (Id. at ¶¶ 6 [b], 22-23.)

Defendants Yakov Banash and GBM Equities, LLC, are alleged to have negotiated the transaction on the buyer side before Goldklang's entities were substituted as the purchaser. (Id. at ¶¶ 6 [c], 24-25, 79, 89.) Defendants Schmuel Censor and Censor Law LLC represented Banash and GBM Equities throughout. (Id. at ¶¶ 6 [d], 26-27.) Defendants Mark J. Nussbaum and Nussbaum Lowinger LLP facilitated the movement of funds at closing. (Id. at ¶¶ 6 [e], 16-17, 100.) Defendant RH 62 Realty LLC, controlled by Bleier, received approximately $12.4 million in loan proceeds at closing. (Id. at ¶¶ 6 [f], 15, 21, 101-102.) The corporate documents of RH 62 were amended to reflect Bleier's ownership after closing. (Id. at ¶ 21.) Defendant Cross Bridge Title LLC participated in the closing as escrow intermediary on behalf of the buyer. (Id. at ¶¶ 6 [g], 29, 88-89, 99.) Defendant Old Republic National Title Insurance Company served as escrow agent and title insurer for the transaction. (Id. at ¶¶ 6 [h], 28.)

Beginning at least in 2023, Wu, Jacobs, and Marcus & Millichap began negotiating the property's sale to various potential buyers. (Id. at ¶¶ 24-25, 69-71.) Those negotiations consistently reflected a market value of approximately $23-24 million. (Id. at ¶¶ 70, 73.) A near-final transaction with M&CF Capital LLC in mid-2023, in which M&CF Capital was represented by Nussbaum Lowinger, proceeded at a negotiated price of approximately $23,790,000. (Id. at ¶¶ 71-73.) That sale was not completed. (Id. at ¶ 74.)

In August 2023, Jacobs, Marcus & Millichap, and Wu began negotiating the sale to GBM Equities, represented by Banash and Censor. (Id. at ¶¶ 75-76.) Between August and October 2023, Wu, Jacobs, Marcus & Millichap, Censor, and Banash executed a purchase and sale agreement and six successive amendments, each maintaining the total purchase price at $24,832,000. (Id. at ¶¶ 76-77.) On October 24, 2023, a seventh amendment reduced the price to $23,107,000. The FAC alleges that this figure reflected the deal's actual economic substance, and that the figure would continue to be used in later amendments to the GBM Equities agreement. (Id. at ¶ 78.)

Two days later, on October 26, 2023, a separate purchase and sale agreement (the October 26 PSA) was executed between the Seller Defendants and Boomers Oaks I LLC, a Goldklang-managed entity, with a purchase price of $43,520,000. (Id. at ¶¶ 79-80.) The FAC alleges that the October 26 PSA is fictitious—that its purpose was to present lenders with a fabricated valuation approximately $20 million above the actual market price, thereby justifying a substantially larger loan. (Id. at ¶¶ 80-81, 85.) The FAC alleges that the GBM Equities agreement was never disclosed to potential lenders, whereas the October 26 PSA was provided exclusively to the lenders, including Original Lender. (Id. at ¶¶ 84, 90.)

Despite executing the October 26 PSA at $43.5 million, the buyer and seller parties continued to negotiate and amend the GBM Equities agreement through an eighth amendment on February 20, 2024, and a ninth amendment on March 21, 2024, still at a sale price of $23,107,000. (Id. at ¶¶ 84, 90.) The FAC alleges this parallel structure was intentional: the lower-priced GBM Equities agreement bound the sellers to the actual economic terms of the deal and permitted them to report the true sale price for tax purposes, and the inflated October 26 PSA was used to induce lender financing. (Id. at ¶¶ 90-91.)

Wu confirmed the structure in correspondence with IPX 1031, the company handling his 26 USC § 1031 exchange, representing that the buyer had obtained financing at $43,520,000 but that the sellers would return approximately $19,670,000 as purported "maintenance and capital improvement expense"—funds, the FAC alleges, that would never actually be applied to the property. (Id. at ¶¶ 78, 91, 97.)

To close the $30.2 million loan, the borrower was contractually required to bring $17 million in equity to the closing. (Id. at ¶ 99.) The FAC alleges that this obligation was met through a round-trip of funds: Nussbaum Lowinger allegedly wired $7,001,000 to an intermediary trust account, and the funds were then forwarded to Old Republic as supposed buyer equity, obscuring the true source of those funds. (Id. at ¶¶ 6 [g], 99-100.) The FAC alleges that Cross Bridge caused an additional $10,350,000 to be wired to Old Republic on the same basis. (Id. at ¶¶ 6 [g], 99.) Following the closing, those same funds, plus substantial additional loan proceeds, were allegedly returned: Nussbaum Lowinger received $7,105,000, and RH 62 received $12,415,000, with both disbursements characterized on the final settlement statement as a "reduction in consideration of proceeds." (Id. at ¶¶ 100-102, 113.) The total amount diverted to these entities, neither of which had any disclosed connection to the transaction, was $19,520,000. (Id. at ¶¶ 101, 113.)

The FAC alleges that throughout the closing, Old Republic's own employees identified multiple warning signs of fraud. (Id. at ¶¶ 104-106.) Internal emails allegedly reflect that an Old Republic representative sought guidance on the $12,415,000 disbursement to RH 62, noting that the sellers had provided three different sets of wire instructions, that the contact number was invalid, that the physical address could not be verified, and that a Google search of the address returned "a shady business district." (Id. at ¶ 104.) The same representative stated that her "fraud radar is going off" and that she was "not at all comfortable" with the disbursement. (Id. at ¶ 105.) Despite these concerns, Old Republic completed the wire. (Id. at ¶ 106.) The Sellers' attorney had withdrawn from the transaction the evening before closing. Old Republic learned of that withdrawal only after closing, noted it as a cause for concern in internal communication, but nonetheless wired the $12,415,000 to RH 62 without investigation. (Id. at ¶¶ 96, 105.)

The loan closed on June 11, 2024. (Id. at ¶¶ 38, 102.) No payment was made after the first month, and the loan entered monetary default in August 2024. (Id. at ¶¶ 107, 117.) Lender subsequently discovered that the borrower failed to deposit rents into the required trust account, allowed utility bills to go unpaid (leaving tenants without heat or hot water for extended periods), and canceled the property's insurance policies without notice to lender, apparently retaining partial premium refunds. (Id. at ¶¶ 116, 121, 130-131.) On February 27, 2025, a fire broke out at the property, resulting in extensive damage and the deaths of two individuals. (Id. at ¶ 129.) The insurance the borrower had been contractually obligated to maintain had been canceled months earlier. (Id. at ¶¶ 130-132.) On December 19, 2024, the Alabama court appointed a receiver over the property. (Id. at ¶ 125.)

Plaintiff commenced this action on April 4, 2025. (Id. at 1.) The first amended complaint was filed on October 20, 2025, asserting seven causes of action: (1) breach of guaranty against Goldklang; (2) costs and attorney fees against Goldklang; (3) fraud and fraudulent inducement against the defendants the FAC labels the "fraud defendants"; (4) aiding and abetting fraud against those defendants other than Goldklang and the borrower; (5) unjust enrichment against the same defendants; (6) negligence against Old Republic; and (7) money had and received by Nussbaum Lowinger and RH 62. (Id. at ¶¶ 133-195.)

Two motions are now before the court.

On motion sequence 005, Seller Defendants James Wu, Bear Ventures Group, and Thomas Ventures move pursuant to CPLR 3211 to dismiss the third, fourth, and fifth causes of action as asserted against them.

On motion sequence 006, defendants RH 62 and Bleier move under CPLR 2304 to quash non-party subpoenas duces tecum issued by plaintiff to JPMorgan Chase Bank, N.A. (the Chase subpoena), and to J.P. Morgan Securities LLC (the J.P. Morgan subpoena). In the alternative, defendants seek a blanket protective order under CPLR 3103 requiring complete confidentiality of any documents produced.

Both motions are denied.

DISCUSSION

I. The Seller Defendants' Motion to Dismiss the Third, Fourth, and Fifth Causes of Action (Mot Seq 005)

A. Fraud and Fraudulent Inducement (Third Cause of Action)

To state a claim for fraud and fraudulent inducement under New York law, plaintiff must allege (1) misrepresentation or omission of material fact; (2) which was false and known to be false by the defendant; (3) made for the purpose of inducing reliance; (4) upon which plaintiff justifiably relied; and (5) which caused injury. (Lama Holding Co. v Smith Barney Inc., 88 NY2d 413, 421 [1996].) Each element must be alleged in the detail required by CPLR 3016. But that standard does not demand "unassailable proof of fraud" at the pleading stage—only facts sufficient to permit a reasonable inference of the alleged misconduct. (Pludeman v Northern Leasing Sys. Inc., 10 NY3d 486, 492 [2008].) The Seller Defendants' motion challenges each element.

1. Misrepresentation of Material Fact

The Seller Defendants contend that the FAC fails to plead any false representation attributable to them specifically. Movants point out that the paragraph alleging the October 26 PSA's execution (FAC ¶ 80) names "Jacobs, MM, Banash, and others," not the Sellers, and that the FAC's key allegations are pleaded on information and belief without any direct representation from Sellers to the lender. (NYSCEF No. 91 at 5-6; NYSCEF No. 146 at 6-7.)

In opposition, plaintiff points to documentary evidence, including the June 11, 2024, final settlement statement. (See NYSCEF No. 39 at 1.) That statement, which bears Wu's signature, represents the purchase price to be $43,520,000. (See NYSCEF No. 118 at 4-5.) This document is not an allegation pleaded on information and belief; it is a signed instrument that undermines the Seller Defendants' argument that the Seller Defendants made no attributable representation of the purchase price.

The Seller Defendants' broader argument that no misrepresentations can be attributed to them because they made no direct statements to the lender also misreads the applicable standard. Under New York law, it is sufficient that defendant made the representation to a third party, intending or knowing that the plaintiff would receive and rely on it. (See Parrott v Coopers & Lybrand, 95 NY2d 479, 484 [2000].) The FAC alleges that the Seller Defendants participated in a closing process that presented the $43.5 million purchase price to escrow agents, brokers, and other parties, including through representations about the rent rolls and physical condition of the property, with the intent and knowledge that this information would be conveyed to Original Lender to induce the loan. (NYSCEF No. 65 at ¶ 153.) That alleged conduct, pleaded with the necessary specificity, would be a sufficient misrepresentation of material fact to satisfy this element of a fraud claim.

2. Duty to Disclose

The Seller Defendants advance two arguments against a duty to disclose. First, they invoke Stambovsky v Ackley (169 AD2d 254, 259 [1st Dept 1991]) and Kendle v Town of Amsterdam (36 AD3d 985, 986 [3d Dept 2007]) for the proposition that a seller's disclosure duties run only to the purchaser, not to third parties, such as lenders. (NYSCEF No. 146 at 9-10.) Second, they argue that because Original Lender retained its own independent appraiser, the Seller Defendants did not possess superior knowledge of the property's value that was unavailable to the lender through ordinary diligence. (NYSCEF No. 146 at 9-10.) Neither argument warrants dismissal at the pleading stage.

Stambovsky concerned a residential seller's duty to disclose alleged paranormal activity to a home buyer, a property-condition claim. (See 169 AD2d at 259.) Kendle involved a pre-closing buyer's claim against a municipality whose fire department damaged property before the sale closed. (See 36 AD3d at 986-987.) In Kendle, the Third Department held that the buyer, as a mere equitable title holder without possession on the date of the damage, had no claim against the third-party tortfeasors. (Id.) These cases address a seller's duty to disclose hidden property conditions. Neither addresses the obligations of a seller who knowingly presents a fictitious purchase price to a third-party financing institution to induce a loan. The FAC does not allege that the Seller Defendants failed to disclose a latent defect or easement. It alleges that they were parties to a scheme that fabricated the financial basis of the transaction presented to the lender.

The applicable doctrine is, instead, the "special facts" doctrine, under which a duty to disclose arises "where one party's superior knowledge of essential facts renders a transaction without disclosure inherently unfair." (P.T. Bank Cent. Asia v ABN AMRO Bank N.V., 301 AD2d 373, 378 [1st Dept 2003].) The doctrine has two requirements: Plaintiff must show that (1) the material fact was information peculiarly within defendant's knowledge, and (2) the plaintiff could not discover the information through the exercise of ordinary intelligence. (Jana L. v W. 129th St. Realty Corp., 22 AD3d 274, 278 [1st Dept 2005].) In addition, a duty to disclose may arise when a party makes a misleading partial disclosure while withholding material facts, if the plaintiff wholly depends on defendant for relevant facts. (Juman v Louise Wise Servs., 254 AD2d 72, 73-74 [1st Dept 1998].)

The FAC adequately alleges facts supporting both elements of this test. On the special-facts prong, the critical, concealed information was the existence of the GBM Equities agreement, a parallel purchase agreement reflecting an actual sale price of $23,107,000, negotiated through nine successive amendments and never disclosed to Original Lender. That agreement was not information discoverable through the exercise of ordinary intelligence. It was information peculiar to the parties that negotiated and executed it, the Seller Defendants among them. An appraiser retained by the lender evaluates the property's market value based on available data; an appraiser is not expected to have access to undisclosed private agreements between seller and other buyers. This is precisely the scenario addressed in P.T. Bank Central Asia, in which the First Department sustained a duty-to-disclose claim by a participant lender that had retained its own appraisal, on the ground that defendant's superior knowledge that the appraisal was overstated, information not available to the lender, rendered the absence of disclosure inherently unfair. (See 301 AD2d at 378.) The same logic applies here with equal or greater force: No appraisal could have surfaced a side agreement that the Sellers negotiated in private, never recorded, and never disclosed. The FAC alleges that the GBM Equities agreement was information concealed by the parties who held it. Ordinary diligence could not have revealed it.

The misleading-partial-disclosure doctrine provides an independent basis for a duty to disclose. The Seller Defendants did not simply remain silent. The FAC alleges that through Wu, they executed and approved transaction documents, including the October 26 PSA, multiple revised settlement statements, and the June 11, 2024, final settlement statement, each of which affirmatively represented the purchase price as $43,520,000. That representation was a partial disclosure that conveyed the stated sale price while concealing the existence of a parallel agreement at $23,107,000. Once a party has made an affirmative statement on a material fact, it cannot give only half the truth; the duty to complete that disclosure with whatever information is necessary to render it accurate and non-misleading is triggered. (See Junius Construction Corp. v Cohen, 257 NY 393, 400 [1931].) Here, representing the purchase price as $43.5 million while withholding the existence of a parallel agreement at $23.1 million is the kind of misleading half-truth Junius addresses. The FAC adequately alleges a duty to disclose under both the special-facts doctrine and the misleading-partial-disclosure doctrine.

3. Scienter

Scienter may be established through "a particularized factual assertion which supports the inference of scienter," including circumstantial evidence from which fraudulent intent may reasonably be inferred. (Houbigant, Inc. v Deloitte & Touche LLP, 303 AD2d 92, 97 [1st Dept 2003]; accord Oster v Kirschner, 77 AD3d 51, 55-56 [1st Dept 2010].) The Seller Defendants challenge scienter on two grounds: that the FAC's allegations target other defendants rather than Wu, Bear Ventures, and Thomas Ventures specifically; and that where allegations do concern the Sellers, they are pleaded on information and belief without an identified source. Sellers argue these scienter allegations are insufficient to satisfy CPLR 3016. (NYSCEF No. 146 at 7-8.) This court disagrees.

The FAC defines "Sellers" as Wu, Bear Ventures Group, and Thomas Ventures collectively, and expressly alleges that Wu "had an ownership interest" in both entities and "made decisions and acted on behalf of himself and Sellers." (NYSCEF No. 65 at ¶ 18.) Bear Ventures and Thomas Ventures were co-owners of the property and parties to the sale transaction; Wu acted on behalf of all three in negotiating and executing the transaction documents at issue, including the GBM Equities purchase and sale agreements and the October 26 PSA. (Id. at ¶¶ 18, 76-80.) Wu's knowledge and intent in executing those documents are properly attributed to the entities he controlled, and the scienter analysis applies to all three Seller Defendants accordingly. (See Kirschner v KPMG, 15 NY3d 446, 465 [2010] ["[T]he acts of agents, and the knowledge they acquire while acting within the scope of their authority are presumptively imputed to their principals."].)

On the pleading-sufficiency point, the FAC alleges scienter based on four independent, document-based grounds, none of which requires an inference from bare characterization alone.

First, the Seller Defendants participated in negotiating the GBM Equities agreement through nine successive amendments over multiple months, consistently maintaining a purchase price of approximately $23 million. (NYSCEF No. 65 at ¶¶ 76-78, 84, 90.) The amendments are specific, datable instruments directly inconsistent with the $43.5 million figure presented to lenders. These allegations support a strong inference that defendants knew that the $43.5 million figure did not reflect the transaction's true financial terms.

Second, Wu's own IPX 1031 correspondence states that the sellers would "return" approximately $19,670,000 of the stated price as a "maintenance and capital improvement expense" and would "not be holding or ever receiving" those funds. (NYSCEF No. 65 at ¶ 91.) That Wu allegedly understood that the $43.5 million figure did not reflect the sellers' actual financial position supports a strong inference of scienter.

Third, on May 9, 2024, more than six months after executing the October 26 PSA at $43.5 million, Wu allegedly confirmed to Jacobs and Marcus & Millichap that the actual purchase price remained at $23,107,000, a specific attributed statement on a specific date that contradicts the figure being simultaneously presented to the lender. (NYSCEF No. 65 at ¶ 93.)

Fourth, the FAC alleges that the GBM Equities agreement was structured to enable Sellers to report the true $23.1 million sale price to tax authorities rather than the fictitious $43.5 million figure. (NYSCEF No. 65 at ¶¶ 90-91.) Wu's communications with IPX 1031 confirm his understanding that the sellers' actual financial proceeds would reflect the lower figure. (Id.) Sellers who structured the transaction to report one price to tax authorities while presenting a nearly double price to their lender cannot plausibly argue that they believed the higher figure reflected the property's true value.

Although some allegations of the complaint are pleaded on information and belief, dismissal is not warranted where, as here, the complaint sets forth concrete surrounding facts from which scienter may reasonably be inferred. (DDJ Mgt., LLC v Rhone Grp. L.L.C., 78 AD3d 442, 443 [1st Dept 2010].) Scienter is adequately pleaded as to all three Seller Defendants.

4. Justifiable Reliance

The Seller Defendants' principal argument on reliance is that because Original Lender retained its own independent appraiser, it had the means to discover the property's true value through that appraisal, rendering any reliance on the Sellers' representations unjustifiable as a matter of law. (NYSCEF No. 91 at 8-9; NYSCEF No. 146 at 9.)

New York courts impose meaningful constraints on reliance, particularly for sophisticated parties. When a plaintiff has failed to make use of the "means available to [it] of knowing, by the exercise of ordinary intelligence, the truth or the real quality of the subject of the representation, [the plaintiff] must make use of those means, or [it] will not be heard to complain that [it] was induced to enter into the transaction by misrepresentations." (ACA Fin. Guar. Corp. v Goldman, Sachs & Co., 25 NY3d 1043, 1044 [2015].) Sophisticated parties, in particular, must show they took affirmative steps to protect themselves from misrepresentations, employing the "means of verification" available at the time. (VisionChina Media Inc. v Shareholder Representative Servs., LLC, 109 AD3d 49, 57 [1st Dept 2013].) Courts applying these principles have dismissed fraud claims when plaintiffs conducted no pre-transaction inquiry and were not prevented from doing so. (See e.g., Unique Goals Intl., Ltd. v Finskiy, 178 AD3d 626, 627 [1st Dept 2019].)

These lines of cases, however, do not apply if the alleged fraud was designed to be undetectable through available means of inquiry. In particular, "where a plaintiff has gone to the trouble to insist on a written representation that certain facts are true, it will often be justified in accepting that representation rather than making its own inquiry." (DDJ Mgt., LLC v Rhone Grp. L.L.C., 15 NY3d 147, 154 [2010].) In DDJ, the Court sustained a fraud claim in which the plaintiff had obtained explicit contractual representations from the party on whose truthfulness it relied, reasoning that, in those circumstances, a party is entitled to rely on those representations without being penalized for failing independently to verify them. In VXI Lux Holdco, S.A.R.L., the First Department reversed the dismissal of a fraud claim when the alleged fraud was undetectable because it turned on falsified personal records and a bribed auditing firm, none of which plaintiff's accounting firm could have discovered. (VXI Lux Holdco, S.A.R.L. v SIC Holdings, LLC, 194 AD3d 628, 629 [1st Dept 2021].) Therefore, while sophistication is relevant, so is the specific structure of the alleged fraud and whether plaintiff could realistically have uncovered it through available means of inquiry.

Here, allegations of the FAC place this case in the DDJ-VXI Lux line. The loan agreement required the borrower to deliver written representations and warranties that the purchase price was accurate, that financial statements were true and complete, and that no material facts had been omitted. (NYSCEF No. 65 at ¶¶ 51-57.) Under DDJ, obtaining those contractual representations is precisely the kind of protective step that supports a finding of justifiable reliance. Having insisted on written warranties that the purchase price and financial data were accurate, Original Lender was entitled to rely on them.

More fundamentally, the fraud alleged here was not detectable through an appraisal because the core misrepresentation was not a property condition but the existence of a secret parallel purchase agreement at $23 million. The Seller Defendants' argument assumes that the relevant inquiry was "what is this property worth?" a question an appraiser can answer. But the actual concealed fact was "does the seller have a binding agreement to sell this property for $20 million less than what is being represented to us?" a question no appraiser can answer. The GBM Equities agreement was a private contract between the Seller Defendants and other parties. It was allegedly withheld from the lender, never recorded, and actively concealed through nine rounds of amendments that continued in parallel with the inflated transaction. (NYSCEF No. 65 at ¶¶ 76-78, 84-85, 90.) This is the same structural feature that drove the result in VXI Lux, in which the fraud turned on falsified records and a bribed auditing firm that the plaintiff's own accounting firm reviewed and could not detect. (See 194 AD3d at 628-629.) Here, the fraud turned on an undisclosed agreement that no due diligence tool would have revealed.

The FAC further alleges that the Seller Defendants took affirmative steps to ensure that the fraud would not be discovered. The GBM Equities agreement was never provided to the lender. (NYSCEF No. 65 at ¶ 85.) The diversion of over $19.5 million to RH 62 and Nussbaum Lowinger first appeared in a settlement statement circulated on June 11, 2024, the day of closing, and the final settlement statement reflecting those disbursements was not provided to Lender until after the closing had already occurred. (Id. at ¶¶ 101, 113.) The FAC also alleges Wu's counsel withdrew from the transaction on the eve of closing and that Old Republic noted this as a cause for concern but neither acted upon nor disclosed to the lender. (Id. at ¶ 96.) And the diverted funds were labeled on the settlement statement as a vague "reduction in consideration of proceeds" rather than disclosed for what the FAC alleges they actually were. (Id. at ¶¶ 101, 113.) Where a defendant has taken deliberate steps to ensure that a fraud will not be discovered before closing, it cannot then argue that plaintiff's reliance was unreasonable for failing to discover it.

The remaining reliance arguments—that the Sellers made no direct representations to the lender and that the financing amount was beyond their control—are disposed of by the above analysis. Under Parrott, reliance on representations transmitted through intermediaries who know of the intended third-party reliance is sufficient. (See 95 NY2d 479, 484.) And the argument that the loan amount was beyond Sellers' control conflates the ability to dictate the final figure with participation in the scheme that fabricated the price on which that figure was based. Whether reliance was reasonable under all the circumstances presents a question of fact that cannot be resolved at the pleading stage. (Remediation Capital Funding LLC v Noto, 147 AD3d 469, 471 [1st Dept 2017].)

5. Causation

Fraud requires both transaction causation, that the misrepresentations induced the plaintiff to enter the transaction, and loss causation, that the misrepresentations foreseeably resulted in plaintiff's damages. (Vandashield Ltd. v Isaacson, 146 AD3d 552, 553 [1st Dept 2017].) The Seller Defendants argue that because they had no contact with the lender, neither form of causation can be established. (NYSCEF No. 91 at 10-11.)

That argument is not persuasive for the same reasons set out above: The law does not require direct communications between the Sellers and lender to establish that the Sellers' participation in the scheme caused the lender's harm. The FAC alleges that Original Lender issued the $30.2 million loan in direct reliance on the fictitious $43.5 million purchase price and that it would not have done so had it known the true price was approximately $23 million. (NYSCEF No. 65 at ¶¶ 158-159.) These facts are sufficient to plead transaction causation.

On loss causation, the FAC alleges that the fraudulent overvaluation produced a grossly undercollateralized loan, which defendants defaulted on, leaving plaintiff holding collateral worth substantially less than half the loan amount, a foreseeable consequence of financing a transaction at a price nearly double the property's market value. (NYSCEF No. 65 at ¶¶ 168, 176.)

These allegations suffice to establish causation for pleading purposes.

B. Aiding and Abetting Fraud (Fourth Cause of Action)

To state a claim for aiding and abetting fraud, a plaintiff must allege (1) the existence of an underlying fraud; (2) defendant's actual knowledge of that fraud; and (3) defendant's substantial assistance in its achievement. (Fox Paine & Co., LLC v Houston Cas. Co., 153 AD3d 678, 679 [2d Dept 2017].) Substantial assistance requires affirmative conduct that enabled or concealed the fraud and which proximately caused plaintiff's harm. (Stanfield Offshore Leveraged Assets, Ltd. v Metropolitan Life Ins. Co., 64 AD3d 472, 476 [1st Dept 2009].) Mere inaction constitutes substantial assistance only when defendant owed an independent duty to disclose. (King v George Schonberg & Co., 233 AD2d 242, 243 [1st Dept 1996].)

The Seller Defendants argue that the FAC relies on conclusory allegations and fails to identify specifically any affirmative acts by them. (NYSCEF No. 91 at 11-12.) This argument is not persuasive.

The FAC alleges specific affirmative conduct by the Seller Defendants that, if proven, would constitute substantial assistance. Wu signed the June 11, 2024, final settlement statement, which is alleged to have falsely reflected the $43.5 million purchase price, an affirmative act made in furtherance of the misrepresentation to the Original Lender. (NYSCEF No. 39 at 1.) The Seller Defendants also allegedly executed a letter agreement, drafted within 24 hours of closing, misrepresenting that approximately $19,670,000 of the stated purchase price would be applied to capital improvements, in an apparent attempt to fabricate a facially legitimate justification for the diversion of proceeds. (NYSCEF No. 65 at ¶¶ 94, 97.) And throughout the closing process, the Seller Defendants allegedly participated in executing transaction documents reflecting the inflated price while concealing the GBM Equities agreements. (Id. at ¶¶ 85, 98, 166 [c].)

These allegations go beyond inaction or silence. They describe a pattern of affirmative conduct that, taken as true, would constitute the substantial assistance the claim requires. Because the court has found the underlying fraud adequately pleaded and because the FAC alleges both actual knowledge and affirmative assistance by the Seller Defendants, the aiding-and-abetting claim survives.

C. Unjust Enrichment (Fifth Cause of Action)

To prevail on a claim of unjust enrichment, a plaintiff must show that (1) defendant was enriched at (2) plaintiff's expense, and that (3) it is against equity and good conscience to permit defendant to retain what is sought to be recovered. (See Mandarin Trading Ltd. v Wildenstein, 16 NY3d 173, 182 [2011].) Although privity is not required, an unjust-enrichment claim will not be sustained if the connection between the parties is too attenuated. (See id.; Georgia Malone & Co. v Rieder, 19 NY3d 511, 516 [2012].)

The Seller Defendants challenge the claim on two grounds. They contend that no sufficient relationship exists between them and plaintiff to support unjust enrichment because the Seller Defendants made no representations directly to plaintiff or Original Lender and did not induce plaintiff to act. (NYSCEF No. 91 at 13-15.) In addition, they argue that the FAC fails to allege sufficiently that the Sellers received anything other than the $23 million purchase price, and that receipt of funds alone is not enough to establish unjust enrichment. (Id.)

Mandarin Trading and Georgia Malone establish that a unjust-enrichment claim is unavailable if the parties had no dealings with each other at all. In Mandarin Trading, the unjust-enrichment claim failed for two reasons. The pleadings contained no allegations indicating a relationship between the parties or even Wildenstein's awareness of Mandarin's existence. (Mandarin Trading, 16 NY3d at 182-183.) And absent such a relationship, there was no evidence that any enrichment was unjust; the mere existence of an appraisal letter that reached a prospective purchaser, without more, was not an equitable injustice. (Id.) In Georgia Malone, the Court of Appeals clarified that Mandarin's reference to "awareness" was not a substantive rule, but was meant to underscore the complete lack of a relationship between the parties in that case—mere knowledge that another party exists is insufficient without more. (Georgia Malone, 19 NY3d at 517.)

Unlike Mandarin Trading, where the defendant was not even aware of the plaintiff, or Georgia Malone, where the defendant's awareness of the plaintiff was still too attenuated a connection to support recovery, the Seller Defendants here were not strangers to the transaction who happened to receive proceeds through an intermediary. They were the sellers of the property the lender was financing, and they participated directly in the closing process that induced the loan. Wu signed the June 11, 2024, final settlement statement, the operative closing document circulated to Original Lender, representing the purchase price as $43,520,000. (NYSCEF No. 39 at 1.) The Seller Defendants, as parties to the October 26 PSA, participated in the transaction that is alleged to have falsely represented the purchase price. (NYSCEF No. 65 at ¶¶ 79-80.) Wu allegedly negotiated nine rounds of amendments to the parallel GBM Equities agreement on behalf of Sellers while concealing that agreement from the lender. (Id. at ¶¶ 76-78, 84, 90.) Wu also allegedly changed the wire instructions for the disbursement of loan proceeds three times in the days surrounding closing, which the FAC contends he did to conceal the funds' destination. (Id. at ¶¶ 104-105.) And Wu executed a letter agreement attempting to justify the diversion of $19,670,000 to unrelated parties. (Id. at ¶ 97.) This is not a case in which the Seller Defendants merely knew that plaintiff existed. It is a case where they actively participated in structuring the documents on which plaintiff relied to fund $30.2 million. The connection is direct enough to satisfy the standards of Mandarin Trading and Georgia Malone at the pleading stage of the action.

Turning to enrichment at plaintiff's expense, the Seller Defendants argue they received only the legitimate $23 million purchase price for their property. (NYSCEF No. 91 at 14-15.) However, the relevant question is not whether the $23 million was the agreed sale price between sellers and GBM Equities, but whether the Seller Defendants received that money as a result of the fraudulent scheme that induced Original Lender to fund the transaction. According to the FAC, they did, and they could not have obtained it otherwise.

The FAC alleges that the Seller Defendants had tried and failed in multiple prior attempts to sell the property at or near $23 million—first to M&CF Capital at approximately $23.79 million in 2023, and then through nine rounds of GBM Equities amendments over approximately seven months. (NYSCEF No. 65 at ¶¶ 71-74, 76-78, 84, 90.) Neither sale closed. (Id.) The FAC further alleges that the transaction that did close occurred only because Original Lender was fraudulently induced to extend $30.2 million based on a fictitious $43.5 million purchase price; and that without that loan, there was no buyer, no closing, and no sale proceeds to receive. (Id. at ¶ 79.) The loan was the but-for cause of both the loss and the benefit.

The Seller Defendants' characterization of the $23 million as a "legitimate" transaction is also incomplete in another respect. The FAC alleges that Wu and Sellers authorized Old Republic to wire $19,670,000 to entities unrelated to the transaction, purportedly as a maintenance and capital improvement expense that was never applied to the property. (NYSCEF No. 65 at ¶¶ 91, 97.) Although the final settlement statement reflects that the Seller Defendants received approximately $23 million, the FAC's allegations about the letter agreement Wu executed, the wire instructions he provided, and his communications with IPX 1031 raise the question whether the Sellers received or directed additional benefits beyond the nominal $23 million sale proceeds. (Id. at ¶¶ 91, 97, 104-105.) That question cannot be determined at the pleading stage.

Whether the Seller Defendants could have obtained the same proceeds through a legitimate transaction presents a factual dispute that cannot be resolved on this motion. Accepting the FAC's allegations as true and affording plaintiff every favorable inference, the claim satisfies all three elements of unjust enrichment. The Seller Defendants were enriched by $23 million in sale proceeds they could not otherwise have obtained, at plaintiff's expense, when plaintiff extended a $30.2 million loan it would not have made absent the fraud. (Id. at ¶¶ 173-176.) Finally, plaintiff has stated a claim that it would be against equity and good conscience to permit the Seller Defendants to retain those proceeds, given the FAC's allegations that their participation in the scheme was knowing and purposeful. (Id. at ¶ 177; see also Goel v Ramachandran, 111 AD3d 783, 791 [2d Dep't 2013] [considering whether defendant's conduct was tortious or fraudulent in evaluating the equity of retaining the benefit].)

II. RH 62 and Bleier's Motion to Quash (Mot Seq 006)

Defendants RH 62 and Bleier move to quash two non-party document subpoenas issued by plaintiff to JPMorgan Chase Bank, N.A., and J.P. Morgan Securities LLC; or, in the alternative, movants seek a blanket protective order requiring complete confidentiality of any document produced.

A. Standing

Defendants argue that they have standing to challenge the subpoenas because they have a privacy interest in the matter: defendants' own bank accounts and private financial information have been subpoenaed. (NYSCEF No. 145 at 3.) Moreover, defendants argue that because the subpoenas are overly broad and burdensome, they have standing to bring a motion to quash. (NYSCEF No. 145 at 3.)

As a threshold matter, bank records are generally the bank's property, and a depositor has no proprietary or possessory interest in such records. (People v Doe, 96 AD2d 1018, 1019 [1st Dept 1983]; Shapiro v Chase Manhattan Bank, 53 AD2d 542, 543 [1st Dept 1976].) Accordingly, a bank customer ordinarily lacks standing to challenge a subpoena directed to its bank. (Norkin v Hoey, 181 AD2d 248, 253 [1st Dept 1992].)

Defendants assert standing based on a claimed privacy interest in their financial records. That argument is unavailing. The First Department has expressly held that "a depositor has no ownership or other interest in a bank's records of his accounts" and thus "has no standing to object to a subpoena directed at them." (AQ Asset Mgt. LLC v Levine, 111 AD3d 245, 260 [1st Dept 2013].) Even assuming that the defendants' claimed privacy interest or that the breadth of the subpoenas is sufficient to confer standing, the motion fails on the merits for the reasons set forth below.

B. Discovery Stay

Defendants contend that the automatic discovery stay triggered by the Seller Defendants' December 8, 2025, CPLR 3214 motion to dismiss requires the subpoenas to be quashed. That contention is unpersuasive.

CPLR 3214 stays disclosure pending the determination of a motion to dismiss. The statute "stays disclosure"; it does not retroactively invalidate a process properly issued before the stay took effect. The appropriate effect of the stay is to defer the obligation to comply with the subpoenas until the motion to dismiss is resolved, not to extinguish the subpoenas themselves.

Plaintiff also argues that the Chase subpoena is not subject to a stay at all, because Chase's compliance deadline, December 5, 2025, preceded the filing of the motion to dismiss on December 8, 2025. (NYSCEF No. 129 at 21.) Given this court's denial of the motion to dismiss on motion sequence 005—and the resulting termination of any CPLR 3214 stay—this court need not resolve that question.

C. Relevance and Overbreadth

A motion to quash a non-party subpoena should be granted only where the "futility of the process to uncover anything legitimate is inevitable or obvious," or where the information sought is "utterly irrelevant to any proper inquiry." (Kapon v Koch, 23 NY3d 32, 38 [2014].) Under CPLR 3101, disclosure from a non-party is permitted upon adequate notice, and the standard of "material and necessary" is to be construed liberally. (Id. at 38-39.) Defendants bear the burden of establishing that the subpoenas are improper. (Id. at 39.)

1. The Chase Subpoena

The Chase subpoena is directed to a specific, identified bank account, the RH 62 Chase account, which allegedly received a $12,425,000 wire transfer on June 18, 2024. (NYSCEF No. 98 at 7.) Each of the eight categories of documents sought is tied to the central factual dispute in this case.

Requests 1, 5, and 6, which seek documents and communications about the June 18, 2024, wire transfer and the June 11, 2024, settlement statement are directly material to plaintiff's cause of action against RH 62 and to its fraud claims broadly. Request 2, which seeks outgoing wires from the account during the three-month window following closing (June 17 through September 18, 2024), is relevant to plaintiff's theory that the loan proceeds were rapidly dispersed from the account following closing. Request 7, covering wire and funding transactions made to the account between January 1, 2024, and September 30, 2024, is material to plaintiff's theory that Bleier used RH 62 as a vehicle to temporarily advance and then recapture funds to fabricate the appearance of the borrower's liquidity at closing. Requests 3 and 4, seeking account holder and authorized signatory information, bear on who controlled RH 62 during the relevant period, a matter directly relevant to the fraud and conspiracy allegations. Request 8, seeking currency-transaction reports, is relevant to tracing the flow of loan proceeds and identifying individuals involved in significant cash activity on the account.

Although the general scope of the Chase subpoena extends to January 1, 2023, the individual requests are substantially narrower, with key categories limited to defined transactions and periods surrounding the June 2024 closing. The subpoena as a whole is sufficiently tailored to a specific account and a specific fraudulent transaction. Defendants have not demonstrated that any individual request seeks information that is "utterly irrelevant" to the claims at issue.

2. The J.P. Morgan Subpoena

The J.P. Morgan subpoena is directed to accounts held by Bleier and RH 62 at J.P. Morgan Securities and is limited to three categories: communications and documents concerning the account as of June 2024; communications with Summer Street Advisors concerning the account; and communications between the J.P. Morgan representative, Mordechai Worch, who signed the account's liquidity letter, and identified third parties, including Goldklang, Shulem Capital, Crossbridge Capital, and Walker & Dunlop, concerning the account. (NYSCEF No. 99 at 7; NYSCEF No. 129 at 15.) The subpoena seeks these categories of documents for the period of January 1, 2023, through the present.

The FAC alleges that Bleier submitted a J.P. Morgan liquidity letter during loan underwriting to represent that he had substantial available funds to support the transaction, and that this representation was used to satisfy underwriting requirements for the borrower's available equity. (NYSCEF No. 129 at 1-3, 6-8, 15.) Plaintiff's theory is that this liquidity was illusory: The FAC alleges that funds were temporarily advanced by Bleier or RH 62 before closing and then recaptured through the $12,415,000 disbursement to RH 62 after closing. (NYSCEF No. 129 at 2.) All three request categories are directly relevant to whether the liquidity letter accurately reflected Bleier's financial position and to the knowledge and intent of the parties involved in the underwriting process.

The subpoena's temporal scope of is reasonable in light of plaintiff's allegations that the scheme required advanced planning and that underwriting began in early 2024. The requests are limited in number, targeted to a defined account relationship, and tied to the specific alleged misrepresentation in the underwriting process. And to the extent that movants contend that the subpoena's temporal scope would encompass documents generated after the alleged fraud occurred, movants have not made a specific showing that any request sweeps in material wholly unrelated to the claims at issue.

D. Protective Order

As an alternative to quashing, defendants seek a blanket protective order pursuant to CPLR 3103, requiring complete confidentiality of all documents produced in response to the subpoenas. CPLR 3103 authorizes a protective order to prevent "unreasonable annoyance, expense, embarrassment, disadvantage, or other prejudice." A party seeking such relief bears the burden of demonstrating a specific prejudice or harm beyond conclusory allegations. (Gonzalo v Fragomeni, 221 AD3d 586, 587 [2d Dept 2023].)

Defendants assert that the subpoenas seek highly sensitive and personal information but offer no specific showing of harm beyond this generalized characterization. That is insufficient to justify a blanket protective order. Moreover, plaintiff asserts that defendant does not dispute that plaintiff offered to negotiate a confidentiality agreement, which defendant rejected. (NYSCEF No. 129 at 4.)

To the extent any producing party or defendant believes that particular categories of produced documents warrant confidential treatment, the appropriate mechanism is a tailored confidentiality agreement, not a blanket order shielding all produced materials from disclosure.

The parties are directed to meet and confer regarding the terms of a confidentiality agreement to govern documents produced in response to the subpoenas and to submit either a joint proposed confidentiality order or, if they are unable to agree, competing proposed confidentiality orders for the court's review, within 14 days of entry of this order.

Accordingly, it is

ORDERED that the Seller Defendants' CPLR 3211 motion to dismiss plaintiff's third, fourth, and fifth causes of action as asserted against them (mot seq 005) is denied; and it is further

ORDERED that Seller Defendants are directed to serve and file their answer to the first amended verified complaint within 30 days of service of a copy of this order with notice of its entry; and it is further

ORDERED that defendants RH 62 Realty LLC and Isidore Bleier's motion to quash the Chase subpoena and the J.P. Morgan subpoena or for a protective order (mot seq 006) is denied;

ORDERED that the parties meet and confer regarding the terms of a confidentiality agreement governing documents produced in response to the subpoenas and submit (by e-filing on NYSCEF and email to SFC-Part7-Clerk@nycourts.gov) either a joint proposed confidentiality stipulation, or, if they are unable to agree, competing proposed confidentiality orders for the court's review, within 14 days of entry of this order.

DATE 6/9/2026

Gerald Lebovits, J.