Loginovskaya v. Batratchenko

Between 2006 and 2007, Ludmila Loginovskaya (plaintiff), a Russian citizen residing in Russia, invested $720,000 with two investment programs, known as the Thor programs, controlled by Oleg Batratchenko (defendant). Batratchenko solicited the investment using various brochures and other materials written in Russian. Over the ensuing years, Loginovskaya’s account statements showed positive returns. Consequently, in May 2009, Loginovskaya sought to withdraw some of the profits from her account funds. No funds were disbursed, and Loginovskaya ceased to receive any further account statements until November. At that time, the account statement indicated that her investments had lost more than half of their value since May. Batratchenko claimed that the inability to distribute funds was due to onerous financial regulations. Eventually, though, Loginovskaya learned that the funds were invested in unsecured loans to Atlant Capital Holdings, LLC (Atlant), a real estate investment firm in which Batratchenko had a personal financial interest. Atlant defaulted on the loans, thus losing the investment. In January 2012, Loginovskaya filed a complaint in federal district court, alleging fraudulent conduct in violation of § 4o of the Commodity Exchange Act (CEA). The district court dismissed Loginovskaya’s claims under the CEA, holding that her complaint failed to allege a domestic transaction and, therefore, the CEA did not apply pursuant to United States Supreme Court’s holding in Morrison v. National Australian Bank. Loginovskaya appealed, arguing that the underlying transactions were domestic for the purposes of Morrison because certain Thor companies were incorporated in the United States and because she wired funds to a bank account in the United States. Loginovskaya also argued more generally that Morrison’s domestic-transaction test should not apply to § 4o of the CEA on the theory that Congress intended § 4o to have a broader reach.