De Ford v. Koutoulas

UNITED STATES DISTRICT COURT

MIDDLE DISTRICT OF FLORIDA

ORLANDO DIVISION

ERIC DE FORD, SANDRA

BADER and SHAWN R. KEY,

Plaintiffs,

v. Case No: 6:22-cv-652-PGB-DCI

JAMES KOUTOULAS,

NATIONAL ASSOCIATION FOR

STOCK CAR AUTO RACING,

LLC, LETSGOBRANDON.COM

FOUNDATION, LGBCOIN, LTD

and PATRICK BRIAN

HORSMAN,

Defendants.

/

ORDER

This cause comes before the Court on the following:

1. Defendant National Association for Stock Car Auto Racing, LLC’s

(“Defendant NASCAR”) Motion to Dismiss (Doc. 272 (the

“NASCAR Motion”)) and Plaintiffs Eric De Ford, Sandra Bader, and

Shawn R. Key’s (“Plaintiffs”) response in opposition (Doc. 290);

2. Defendant James Koutoulas’s (“Defendant Koutoulas”) Motion to

Dismiss (Doc. 301 (the “Koutoulas Motion”)) and Plaintiffs’

response in opposition (Doc. 310);

3. Defendants LGBCoin, LTD (“Defendant LGBCoin”) and

Letsgobrandon.com Foundation (“Defendant Foundation”)

(collectively, the “Defendant Entities”) Motion to Dismiss (Doc.

302 (the “LGB Motion”)) and Plaintiffs’ response (Doc. 309); and

4. Defendant Patrick Brian Horsman’s (“Defendant Horsman”)

Motion to Dismiss (Doc. 334 (the “Horsman Motion”)) and

Plaintiffs’ response (Doc. 339);

5. Plaintiffs’ Motion for Judicial Notice (Doc. 337 (the “Motion for

Judicial Notice”)); and

6. Plaintiffs’ Motion for Leave to Conduct Limited Jurisdictional

Discovery (Doc. 346 (the “Motion for Leave to Conduct

Jurisdictional Discovery”)), and Defendant Horsman’s Response

(Doc. 349).

Upon due consideration, the NASCAR Motion is granted, the Koutoulas

Motion and LGB Motion are granted in part, and the Horsman Motion, Motion for

Judicial Notice, and Plaintiffs’ Motion for Leave to Conduct Jurisdictional

Discovery are denied as moot.

I. BACKGROUND1

This putative class action stems from the creation, marketing, and sale of the

LGBCoin, a cryptocurrency. (Doc. 245). The LGBCoin saga began on October 2,

2021, when a reporter incorrectly described attendees at a NASCAR race as

chanting “Let’s go Brandon!” in support of NASCAR driver Brandon Brown

1 This account of the facts comes from the Plaintiffs’ Third Amended Complaint. (Doc. 245).

The Court accepts the well-pled factual allegations therein as true when considering motions

to dismiss. See Williams v. Bd. of Regents, 477 F.3d 1282, 1291 (11th Cir. 2007).

(“Brandon”); in fact, they were chanting a profane pejorative to express

displeasure with President Joe Biden. (Id. ¶¶ 1–3, 75). The reporter’s mistake

birthed a common understanding that the phrase “Let’s Go Brandon!” (and its

shorthand “LGB!”) stood for a euphemistic way to express displeasure with the

Biden administration: the phrase appeared on, for example, t-shirts, trucker hats,

coffee mugs, wrist bands, bumper stickers, and as is relevant here, a

cryptocurrency. (Id.).

A. Cryptocurrency Background

Cryptocurrency, or crypto for short, is a medium of exchange that uses

digital cryptography to secure underlying transactions. (Id. ¶ 68).

Cryptocurrencies use a decentralized system commonly called the blockchain to

record these transactions and issue new digital currency units—i.e., crypto tokens.

(Id. ¶¶ 68, 71). As of March 2022, there are at least thousands of cryptocurrencies

in existence. (Id.).

Anyone can create a new cryptocurrency. (Id. ¶ 69). An internet search will

provide you step-by-step instructions with videos for creating a new one. (Id.).

Once created, the new cryptocurrency can be traded directly on the blockchain or

on certain centralized cryptocurrency exchanges. (Id.).

Cryptocurrency traded directly on the blockchain is stored in crypto wallets,

which are online software used to store the private crypto keys to the owner’s

crypto assets. (Id. ¶ 70). Crypto wallets have unique identifiers called Wallet IDs.

(Id.). There is no limit on the number of crypto wallets a person can control. (Id.).

For example, the Ethereum blockchain source code allows for the creation

of cryptocurrencies that can be traded, spent, or otherwise transacted with. (Id. ¶

71). LGBCoin was primarily traded against Ether, the native cryptocurrency of the

Ethereum blockchain network used on various decentralized crypto exchanges—

where transactions are completed wallet to wallet on the blockchain, not off-chain.

(Id. ¶¶ 74, 384).

Transactions of cryptocurrencies from wallet to wallet are recorded on the

blockchain’s distributed public ledger, which is maintained as a database across

multiple different computers. (Id. ¶¶ 71–72). The amount of cryptocurrency

transacted, the sender’s wallet address, the recipient’s wallet address, the date, and

the time of the transfer between wallets can be viewed by various blockchain

websites. (Id.). Only the Wallet ID, as opposed to the identity of the owner of a

particular wallet, is publicly available when users transact wallet to wallet. (Id.).

The owner or user of a particular wallet may come into public view, however, when

he or she transacts off the blockchain with a non-Wallet for various non-blockchain

assets (goods, services, non-crypto currency, etc.). (Id.). This off-chain transaction

sometimes reveals the identity of a Wallet ID owner, or at least provides data points

from which viewers of the public blockchain can potentially deduce someone’s

identity. (See id.). For example, sometimes a user’s IP address comes into view

during off-chain transactions. (Id.).

The Ethereum blockchain charges “Gas Fees,” which are fees paid in Ether

on the Ethereum network and charged to wallets transacting on the Ethereum

blockchain to compensate for the computing power and energy expended across

the decentralized computer network. (Id. ¶ 94 n.12). This network maintains the

distributed ledger to both process these transactions and to validate them, so they

are then publicly viewable on the Ethereum blockchain. (Id. ¶¶ 71–72).

B. The Creation of LGBCoin

The LGBCoin cryptocurrency began when its founders, hoping to build on

the enthusiasm for the LGB phrase, minted 330 trillion LGBCoins using the

Ethereum blockchain source code on October 28, 2021. (Id. ¶¶ 75–94). Some of

this background discussion occurred on a Telegram chat. (Id. ¶¶ 75–94, 119–20).

At least Defendant Koutoulas and Defendant Horsman are allegedly founders or

closely connected to the founding of the Defendant Entities, which are allegedly

responsible for the LGBCoin. (Id. ¶¶ 75–93). Both of these individual Defendants

at one point held LGBCoin in a wallet they owned, exercised control over the

Defendant Entities, and directed or authorized the sale or solicitations of LGBCoin

to the public. (Id. ¶¶ 23–35).

After being minted originally on October 28, 2021, the 330 trillion LGBCoins

were dispersed to four deployer Wallet IDs controlled by founders of the LGBCoin.

(Id. ¶¶ 94–109). None of these four wallets were locked smart contract wallets—

which if in place, would have ensured that for a period of time during the crypto

currency’s initial sale to the public, insiders could not immediately sell their tokens

acquired at low costs to the public when trading volume increases. (Id. ¶ 96).

Starting on or around October 29, 2021, the four deployer wallets started to

receive gas fee transfers to facilitate the public transfer and sale of LGBCoin upon

public launch. (Id. ¶¶ 103–10). In exchange, LGBCoins flowed to various wallets,

some of which were controlled by Defendants Horsman and Koutoulas. (Id.).

On November 1, 2021, Koutoulas received 1 trillion LGBCoins at a wallet

which he controlled (the “Koutoulas Wallet”). (Id. ¶ 109). That day, a pass-

through hub wallet was set up to facilitate the public sale of LGBCoins. (Id. ¶¶ 109–

10). Defendant Koutoulas sent several thousand dollars of gas fees to one of the

deployer or hub wallets. (Id.). On November 3, 2021, Defendant Horsman received

13.2 trillion LGBCoins at wallets he owned or controlled. (Id. ¶ 114). Another 20

billion LGBCoins were again transferred to a Horsman-controlled wallet. (Id. ¶

116).

On November 2, 2021, the Executive Defendants offered LGBCoin for sale

to the public with a transaction volume of $100 million and an opening price of

$0.000000034. (Id. ¶ 111).

C. LGBCoin After Launch

Upon launch and throughout the relevant time period, the Defendant

Entities, Defendant Koutoulas, and Defendant Horsman launched and promoted

LGBCoin through various mediums, including social media, various websites, and

in-person events. (Id. ¶¶ 118–61). This included various communications to the

public that connected LGBCoins to Brandon in his capacity as a NASCAR driver,

although this partnership never came to fruition. (Id.). Put simply, Plaintiffs allege

that this promotional activity—detailed more specifically below—had an additional

financial purpose despite LGBCoin’s express admonitions that LGBCoin was just

a collectible: to parlay enthusiasm for stockcar racing and a political ethos into

ever-increasing demand through the marketing of LGBCoin so that the relevant

Defendants could benefit at the expense of those purchasing the LGBCoin at

inflated prices. (See id. ¶¶ 118–214).

1. The LGBCoin Rise

After launch, Defendant LGBCoin and at least Defendant Koutoulas and

Defendant Horsman repeatedly promoted LGBCoin by connecting it to Brandon,

Brandonbilt Motorsports, and Defendant NASCAR2 on social media, national

media, and in-person. (Id. ¶¶ 118–57). In addition, Defendant Koutoulas promoted

LGBCoin in conservative-leaning media or social media by connecting it to or

discussing it with prominent conservative politicians or political commentators.

(Id. ¶¶ 158–214). Some of these politicians and commentators publicly supported

LGBCoin on social media as well, including, for example, David J. Harris, Candace

Owens, and former Representative Madison Cawthorn. (Id.). These promotions

included references to LGBCoin’s valuations as an asset. (Id.). LGBCoin valuations

and trading volume demonstrably rose following some of these promotions. (Id. ¶¶

212, 231–32).

2 Defendant NASCAR is a Florida resident with its principal place of business in Florida. (Id. ¶

37).

Amid these public promotions, on November 11, 2021, the Defendant

Entities posted the following message to social media:

Hi everyone want to give a few project updates – we have

about 60 people working on it already on our 10th day in

existence, including some serious crypto OGs. We are working

on implementing a smart contract vesting and locking

mechanism to reduce peoples’ concerns regarding the genesis

wallets. We are also working on decentralizing those tokens

and you’ll see some movements of the genesis tokens in

preparing them for the smart wallet locks and a major

national sponsorship deal. Also, we have several major

national media partnerships in the works as well as 10

influencers engaged. Again, please remember this project is a

digital collectible and a digital way to express your support for

the Let’s Go Brandon movement, so please spend only what

your budget allows (for some that’s a t shirt, for others maybe

it’s a plane that says LGB on the tail), but do rest assured

there’s a ton of experienced, honest, and talented people

working around the clock to make this the best damn

collectible out there with goals of showing America how much

we love her.

(Id. ¶ 141).

Various Defendants continued to post social media teasers in November and

December of 2021 about an impending sponsorship, some of which pictured race

cars and/or Brandon. (Id. ¶¶ 118–43). On December 23, 2021, former Defendant

Mascioli3 posted a grayed picture of Brandon’s NASCAR car with the caption:

“Pumped for the 2022 NASCAR Xfinity season. What will be the new paint scheme

for the season on [Brandon and Brandonbilt Motorsports’] car? You’ll know soon

enough.” (Id. ¶ 147). Some conservative commentators and politicians also

expressly teased an upcoming announcement around this time. (Id. ¶¶ 158–214).

3 Defendant Mascioli was voluntarily dismissed without prejudice from the case. (Docs. 193,

194).

While discussing LGBCoin with some of these commentators, Defendant

Koutoulas touted the cryptocurrency’s massive growth as he stated: “the

[LGBCoin’s] five weeks old, we’ve been trading around $340 million in market

cap” around December 14, 2021. (Id. ¶¶ 164–65). One other promoter similarly

said it had gone from “$0 to $330 million” on December 28, 2021. (Id.). Moreover,

Representative Madison Cawthorn posted “Tomorrow we go to the Moon!” on one

of Defendant Koutoulas’s social media pictures, which Plaintiffs allege indicates

that Representative Cawthorn had insider information so he could sell into the

rising demand before bad news would soon strike. (Id. ¶ 203). Plaintiffs further

allege that the Defendant Entities and/or the Individual Defendants gave

compensation to some of these public figures in exchange for its promotion. (Id.

¶¶ 158–214).

On December 29, 2021, Defendants Brandon and Brandonbilt Motorsports

posted a teaser about an impending announcement the following day. (Id. ¶¶ 149–

50). The news was posted the next day to Defendant LGBCoin, Brandon,

Defendant Koutoulas, and Brandonbilt Motorsports’ social media accounts that

LGBCoin would be Brandon’s sponsor in the upcoming NASCAR season; this

announcement included pictures of Brandon’s car with the LGBCoin logo. (Id. ¶¶

149–58). Defendant Koutoulas informed the media in an article published the next

day on December 31, 2021, that he and the Defendant Entities had “put together

proposed car designs a month or so ago before any of this happened because we

thought [Brandon] was obviously the best guy to naturally do a national

sponsorship with. So we had it ready to go.” (Id. ¶ 156).

In the 24 hours leading up to Brandonbilt Motorsports, Brandon, and

LGBCoin’s sponsorship announcement and the subsequent twenty-four hours, the

value of a single LGBCoin increased 64%—from $0.00000098 on December 29,

2021, to $0.000001646 the morning of December 31, 2021. (Id. ¶ 157). On January

1, 2022, LGBCoin reached a maximum price of $0.000001734, which represents a

510% increase from its initial price of $0.00000034. (Id. ¶ 232). There were also

5,281 unique account holders of LGBCoin the day before the sponsorship

announcement and 10,257 unique account holders of LGBCoin by January 4, 2022.

(Id.). At its height, LGBCoin reached a market value of more than $570 million

with a liquidity pool of $6.5 million. (Id.).

2. The LGBCoin Fall

On January 4, 2022, Defendant NASCAR announced that the sponsorship

was not approved, and by the end of that day, LGBCoin had fallen 63% to a low of

$.0000005992. (Id. ¶ 308). Prior to this point, various discussions had been held

with Defendant NASCAR as to the Defendant Entities’ sponsorship of Brandon and

Brandonbilt Motorsports. (Id. ¶¶ 215–25). Specifically, Defendant NASCAR,

through one of its agents, at least once stated in a December 26, 2021 email that

“the sponsors are approved.” (Id.). Plaintiffs allege Defendant NASCAR negligently

misrepresented that it would approve the sponsorship to the detriment of Plaintiffs

and that Defendant NASCAR should have reasonably expected Plaintiffs to rely on

this statement. (Id. ¶¶ 420–47).

The promotion of LGBCoin—both before and after Defendant NASCAR’s

announcement—allegedly provided sufficient LGBCoin trading volume for

Brandon, Defendant Koutoulas, and Defendant Horsman to sell their LGBCoins at

a significant profit. (Id. ¶¶ 233–94). Defendant Koutoulas allegedly made gains of

about $1.6 million on sales from the wallets, which he owned or controlled between

November 2021 to January 2022. (Id. ¶¶ 233–42). Defendant Horsman allegedly

made gains of about $1.14 million on sales from the wallets, which he owned or

controlled between November 2021 to January 2022. (Id.). These sales by the

relevant Defendants were allegedly followed by low daily trading volume, and the

low price caused LGBCoin to become functionally worthless. (Id. ¶ 318). Indeed,

on January 28, 2022, the individuals controlling the Defendant Entities took a

snapshot of LGBCoin and then drained its remaining liquidity as part of a plan to

remint and relaunch the LGBCoin into a second cryptocurrency playing off the

“LGB!” phenomena; this caused both the price and transaction volume of LGBCoin

to plummet to near $0 by January 30, 2022. (Id. ¶ 331). LGBCoin relaunched in

late February of 2022, but Plaintiffs would completely lose the value of their initial

investment. (Id. ¶¶ 344–47).

During this time, Plaintiff Eric De Ford, a resident and citizen of Missouri,

purchased LGBCoins in several transactions dating December 31, 2021, January 1,

2022, January 11, 2022, January 26, 2022, and January 28, 2022. (Id. ¶ 19).

Plaintiff Sandra Bader, a resident and citizen of Idaho, purchased LGBCoins on

January 1, 2022. (Id. ¶ 20). Plaintiff Shaw R. Key, a resident and citizen of Virginia,

purchased LGBCoins on December 30, 2021. (Id. ¶ 21). All Plaintiffs allege they

suffered investment losses as a result of Defendants’ conduct. (Id. ¶¶ 19–21).

D. Procedural Posture

Plaintiffs filed this putative class action to recover their and the potential

class’s losses. (Doc. 1). After amending the Complaint once as a matter of course

(Doc. 21) and the Court dismissing the Amended Complaint as an impermissible

shotgun pleading (Doc. 63), Plaintiffs filed a Second Amended Complaint. (Doc.

74). After several motions to dismiss, the Court dismissed various claims therein,

some with leave to replead. (Doc. 229). Plaintiffs replead the instant Third

Amended Complaint which contains nine counts against the various Defendants.

(Doc. 245).

Count I alleges a Section 12(a)(1) violation of the Securities Act against

Defendant Koutoulas. (Id. ¶¶ 369–81). Count II alleges a violation of the Florida

Securities and Investment Protection Act against Defendant Koutoulas, Defendant

Horsman, and the Defendant Entities. (Id. ¶¶ 382–94). Count III alleges a civil

conspiracy to violate federal and state securities laws against all Defendants except

Defendant NASCAR. (Id. ¶¶ 395–403). Count IV alleges a Florida common law

claim of unjust enrichment against Defendant Koutoulas. (Id. ¶¶ 404–07). Count

V alleges the same against Defendant Horsman. (Id. ¶¶ 408–11). Count VI alleges

the same against Defendant Foundation. (Id. ¶¶ 412–15). Count VII alleges the

same against Defendant LGBCoin. (Id. ¶¶ 416–19). Count VIII alleges a claim of

negligent misrepresentation against Defendant NASCAR. (Id. ¶¶ 420–35). Count

IX alleges a claim of promissory estoppel under Florida common law against

Defendant NASCAR. (Id. ¶¶ 436–47).

The following Defendants now seek dismissal of various claims against

them: Defendant NASCAR seeks dismissal of Counts VIII and IX both for failure

to state a claim and for lack of subject matter jurisdiction (Doc. 272); Defendant

Koutoulas seeks dismissal of Counts I, II, III, and IV for failure to state a claim

(Doc. 301);4 Defendant Entities seek dismissal of Counts II, III, VI, and VII for

failure to state a claim (Doc. 302); and Defendant Horsman seeks dismissal of

Counts II, III, and V for lack of personal jurisdiction and for failure to state a claim

(Doc. 334). After responsive briefing (Docs. 290, 309, 310, 339), these matters are

now ripe for review.

The Court also addresses Plaintiffs’ Motion for Judicial Notice (Doc. 337)

and Motion for Leave to Conduct Limited Jurisdictional Discovery (Doc. 346).

II. STANDARDS OF REVIEW

A. Subject Matter Jurisdiction

Article III, Section 2 of the United States Constitution limits federal courts’

jurisdiction to actual cases and controversies. Standing is part of this limitation, as

4 Plaintiffs first attempt to parry away this assault on their claims by pointing out that

Defendant Koutoulas failed to raise its Rule 12(b) defenses with its Motion to strike brought

under Rule 12(f). (Doc. 310, p. 3). Assuming without deciding this should have been done, the

Court would nevertheless consider Defendant Koutoulas’s arguments as they could still be

brought through a motion for judgment on the pleadings.

a “threshold jurisdictional question” that must be resolved before a court can turn

to a claim’s merits. Bochese v. Town of Ponce Inlet, 405 F.3d 964, 974 (11th Cir.

2005). Courts determine standing at the time of filing. Id. at 976.

Under Rule 12(b)(1), a party may challenge subject matter jurisdiction on

facial or factual grounds. Carmichael v. Kellogg, Brown & Root Servs., Inc., 572

F.3d 1271, 1279 (11th Cir. 2009). For facial challenges as here, the court looks to

the face of the complaint and determines whether the plaintiff sufficiently alleges

standing. Stalley ex rel. U.S. v. Orlando Reg’l Healthcare Sys. Inc., 524 F.3d 1229,

1232–33 (11th Cir. 2008). In doing so, the court is limited to the complaint’s

allegations and exhibits, which the court must accept as true. Id. at 1232. Factual

challenges, in contrast, allow a court “to consider extrinsic evidence such as

deposition testimony and affidavits.” Carmichael, 572 F.3d at 1279.

B. Failure to State a Claim

A complaint must contain “a short and plain statement of the claim showing

that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). Thus, to survive a

motion to dismiss made pursuant to Federal Rule of Civil Procedure 12(b)(6), the

complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim

to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

(quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).

A claim is plausible on its face when the plaintiff “pleads factual content that

allows the court to draw the reasonable inference that the defendant is liable for

the misconduct alleged.” Id. The court must view the complaint in the light most

favorable to the plaintiff and must resolve any doubts as to the sufficiency of the

complaint in the plaintiff’s favor. Hunnings v. Texaco, Inc., 29 F.3d 1480, 1484

(11th Cir. 1994) (per curiam). However, though a complaint need not contain

detailed factual allegations, pleading mere legal conclusions, or “a formulaic

recitation of the elements of a cause of action,” is not enough to satisfy the

plausibility standard. Twombly, 550 U.S. at 555. “While legal conclusions can

provide the framework of a complaint, they must be supported by factual

allegations,” and the court is “not bound to accept as true a legal conclusion

couched as a factual allegation.” Iqbal, 556 U.S. at 679; Papasan v. Allain, 478 U.S.

265, 286 (1986).

In sum, the court must: reject conclusory allegations, bald legal assertions,

and formulaic recitations of the elements of a claim; accept well-pled factual

allegations as true; and view well-pled allegations in the light most favorable to the

plaintiff. Iqbal, 556 U.S. at 678–79.

C. Pleading Claims of Fraud With Particularity

Claims of fraud in federal court are subject to the Federal Rules of Civil

Procedure’s heightened pleading standard under Rule 9(b) which requires that

plaintiffs plead these claims “with particularity;” this means “identifying the who,

what, when, where, and how of the fraud alleged.” Omnipol, A.S. v. Multinational

Def. Servs., LLC, 32 F.4th 1298, 1307 (11th Cir. 2022) (citing Mizzaro v. Home

Depot, Inc., 544 F.3d 1230, 1237 (11th Cir. 2008)). “Malice intent, knowledge, and

other conditions of a person’s mind,” however, “may be alleged generally.” FED. R.

CIV. P. 9(b). This heightened pleading standard ensures a dual purpose: first, it

“alert[s] defendants to the precise misconduct with which they are charged” and

second, it “protect[s] defendants against spurious charges of immoral and

fraudulent behavior.” Id. (quoting Ziemba v. Cascade Int’l., Inc., 256 F.3d 1194,

1202 (11th Cir. 2001)).

III. DISCUSSION5

The Court preliminarily addresses the impropriety of Defendant Horsman

and Defendant Foundation as newly added parties in the Third Amended

Complaint. The Court next addresses the sufficiency of the securities law violations

and the related civil conspiracy claim. Following this, the Court inspects the four

unjust enrichment claims. Finally, the Court explains why the claims against

Defendant NASCAR both fail.

A. Defendant Horsman & Defendant Foundation

In the Order addressing the pleadings regarding the Second Amended

Complaint (Doc. 74), the Court granted Plaintiffs leave to file a Third Amended

Complaint “consistent with the directives of [the] Order and Rule 11.” (Doc. 229,

pp. 42–43). Therein, the Court granted Plaintiffs leave to replead their claims

against specific Defendants, which did not include Defendant Horsman or

5 Plaintiffs moved for this Court to take judicial notice of (1) several docket entries related to

Florida state court cases involving Defendant Horsman, and (2) documents from the Florida

Division of Corporations and the Illinois Secretary of State. (Doc. 337). To the extent Plaintiffs

request judicial notice of such information in relation to claims and/or parties that this Order

herein dismisses, the Motion for Judicial Notice is denied as moot.

Defendant Foundation. (Doc. 229, pp. 41–43). The Court did not grant Plaintiffs

leave to add new parties. (Id.).

Moreover, the Case Management and Scheduling Order provides a deadline

for motions to add parties or to amend pleadings, which was originally set for

January 27, 2023. (Doc. 85, p. 2). Upon Plaintiffs’ requests, the Court granted two

(2) extensions of time for this deadline. (Docs. 180, 181, 219, 226). Ultimately, the

parties had until April 27, 2023, to file motions to add parties. (Doc. 226). Yet,

Plaintiffs did not file a motion to add Defendant Horsman or Defendant

Foundation. Instead, without leave of court, Plaintiffs filed the Third Amended

Complaint alleging counts against Defendant Horsman and Defendant

Foundation. (Doc. 245).

These additions do not comport with the Court’s Order and consequently,

Defendant Horsman and Defendant Foundation are due to be stricken as parties.

(Doc. 229); see Vibe Micro, Inc. v. Shabanets, 878 F.3d 1291, 1295 (11th Cir. 2018)

(noting that filing a replead complaint that does not comply with a court’s order

gives courts discretion to impose a sanction including striking the same).6 As such,

all respective counts against Defendant Horsman and Defendant Foundation are

dismissed without prejudice.7

6 While the Court undoubtedly has authority to strike the entire pleading, the Court finds that

doing so would be too drastic a remedy. Vibe Micro, 878 F.3d at 1295.

7 Considering the Court’s decision with regard to Defendant Horsman, Plaintiffs’ Motion for

Leave to Conduct Jurisdictional Discovery as to Defendant Horsman (Doc. 346) is denied as

moot. See supra Section III.A.

B. Securities Law Violations

In turn, the Court addresses the sufficiency of Plaintiffs’ federal securities,

Florida securities, and civil conspiracy claims.

1. Count I: Federal Securities Violation Under § 12(a)(1)

Section 12(a)(1) of the Securities Act of 1933 provides a private right of action

against any person who offers or sells a security in violation of § 5 of the Securities

Act. 15 U.S.C. § 77l(a)(1). The following elements must be established to prevail on

a § 5 claim: “(1) absence of an effective registration statement covering the

securities in question; (2) the offer or sale of the securities; and (3) the use of the

mails, or any means or instruments of transportation or communication in

interstate commerce in connection with the sale or offer.” Hodges v. Harrison, 372

F. Supp. 3d 1342, 1347–48 (S.D. Fla. 2019). A threshold issue in federal securities

law is whether the offering in question qualifies as a “security” under § 2(a)(1) of

the Securities Act. 15 U.S.C. § 77b(a)(1). To that end, Plaintiffs allege LGBCoins are

“investment contracts” under § 77b(a)(1). (Doc. 245, ¶ 372). Defendant Koutoulas

yet another time attacks this count by asserting that LGBCoin is not a security.8 9

8 Defendant Koutoulas also argues that Plaintiffs must pierce the corporate veil to proceed

individually against him. (Doc. 301, p. 3). Based as it is on extrinsic considerations beyond the

four corners of the Third Amended Complaint, while nothing raises an inference therein that

this would be necessary, the Court disagrees. Nonetheless, Defendant Koutoulas is welcome

to bring this defense later at a different procedural posture if he can marshal record evidence

to warrant such a conclusion. The Court further rejects Defendant Koutoulas assertions that

the claims are inherently contradictory or that they amount to harassment. (Doc. 20, pp. 6–

9).

9 Additionally, Defendant Koutoulas again raises the argument that the Court should dismiss

Count I because of Plaintiffs’ initial failure to comply with the procedural requirements of the

(Doc. 301, pp. 10–14). The Court previously determined just the opposite at this

procedural stage and finds no occasion to reconsider its prior ruling as the relevant

allegations are substantially similar to those pled previously. (Doc. 229, pp. 34—

37). As such, the law of the case applies. Litman v. Mass. Mut. Life Ins. Co., 825

F.2d 1506, 1511 (11th Cir. 1987) (“The law of the case doctrine, self-imposed by the

courts, operates to create efficiency, finality and obedience within the judicial

system.”); Johnson v. Specialized Loan Servicing, LLC, No. 3:16–cv–178, 2017 WL

4877450, at *2 (M.D. Fla. Oct. 24, 2017) (“The Court already rejected SLS’s

argument in this regard in its prior Order on the first motion to dismiss; therefore,

the Court rejects SLS’s argument for the same reasons here.”). Consequently,

Plaintiffs’ claim against Defendant Koutoulas under federal securities law again

survives.

2. Count II: Florida Securities Fraud

Plaintiffs further alleges a violation of the Florida Securities and Investor

Protection Act (“FSIPA”), FLA. STAT. § 517.211, for the sale of unregistered

securities. (Doc. 245, ¶¶ 382–94). Defendant Koutoulas, Defendant Horsman, and

the Defendant Entities all move to dismiss this claim. (Docs. 301, 302, 334). Before

addressing issues that are individual to each Defendant, the Court addresses

common issues.

Private Securities Litigation Reform Act of 1995. (Doc. 301, pp. 4–7). For the same reasons

already stated, the Court again rejects these arguments. (Docs. 284, 300).

With some exceptions that do not arguably apply here, FLA. STAT. § 517.07

“requires every security sold in Florida to be registered with the [Florida] Office of

Financial Regulation.” Honig v. Kornfeld, 339 F. Supp. 3d 1323 (S.D. Fla. 2018)

(quoting Musolino v. Yeshiva Machzikei Hadas Belz, 137 F. App’x 321, 323 (11th

Cir. 2005)). “Failure to register [a security] results in strict liability for the recission

of the transactions.” Musolino, 137 F. App’x at 323.10 “The definition of ‘security’

under the Florida statute is the same as that under federal law, so [the Court]

look[s] to federal law” to determine whether an instrument is a security. Honig,

339 F. Supp. 3d at 1335 (quoting Phillips v. Kaplus, 764 F.2d 807, 814–15 n.8 (11th

Cir. 1985)) (cleaned up). In short, Plaintiffs must demonstrate that 1) LGBCoins

were securities; 2) LGBCoins were not registered with the appropriate Florida

office; and 3) Defendants sold LGBCoins. Hodges, 372 F. Supp. 3d at 1350. Here,

the Court has already determined that LGBCoin is plausibly a security under

federal law based on substantially similar allegations. (See Doc. 229, pp. 34–37).

Consequently, under Florida state law, LGBCoin is a security pursuant to FLA.

STAT. § 517.07. Furthermore, Plaintiffs plausibly allege LGBCoins were not

registered with the Florida Office of Financial Regulation. (Doc. 245, ¶ 388).

Consequently, the Court turns to remaining issues individual to the relevant

Defendants.

10 “Unpublished opinions are not controlling authority and are persuasive only insofar as their

legal analysis warrants.” Bonilla v. Baker Concrete Const., Inc., 487 F.3d 1340, 1345 (11th Cir.

2007).

a. Defendant Koutoulas

Defendant Koutoulas raises no arguments that undercut the

aforementioned conclusions and fails to proffer other arguments that speak to the

plausibility of whether Plaintiffs’ allegations state a claim under FLA. STAT. §

517.07. (Doc. 301, p. 13). Moreover, Plaintiffs plausibly allege Defendant Koutoulas

sold these unregistered securities. (Doc. 245, ¶¶ 100–214, 233–42, 394). Count II

as to Defendant Koutoulas thus survives.

b. Defendant LGBCoin

Defendant LGBCoin argues that Plaintiffs fail to allege that it or anyone

acting on its behalf ever sold securities. (Doc. 302, p. 7). The Court agrees. After a

thorough review, the Court cannot find any instance where Plaintiffs allege in the

Third Amended Complaint that Defendant LGBCoin or someone acting on its

behalf (rather than in an individual capacity) ever sold LGBCoins—although there

was an alleged donation of LGBCoins. (See Doc. 245). Consequently, Count II must

be dismissed with prejudice as to Defendant LGBCoin.

c. Defendant Horsman & Defendant Foundation

For the reasons discussed in Section III.A, the Court need not address the

merits of such claims as to Defendant Horsman and Defendant Foundation.

3. Count III: Civil Conspiracy

To state a claim for civil conspiracy, a plaintiff must allege: 1) an agreement

between two or more parties; 2) to achieve an illegal objective; 3) an overt act in

furtherance of that illegal objective; and 4) resulting injury. Tucci v. Smoothie King

Franchises, Inc., 215 F. Supp. 2d 1295, 1300 (M.D. Fla. 2002) (citing Bivens

Gardens Off. Bldg., Inc. v. Barnett Banks of Fla., Inc., 140 F.3d 898, 912 (11th Cir.

1998)); Mazer, 556 F.3d at 1271 (quoting Charles v. Fla. Foreclosure Placement

Ctr., LLC, 988 So. 2d 1157, 1159–60 (Fla. 3d DCA 2008)).

The Court previously found Plaintiffs’ fraud based civil conspiracy claim

against Defendant Koutoulas to not satisfy Rule 9(b)’s heightened pleading

requirement as the allegations were “consistent with parallel conduct and

accompanied only by general allegations of conspiracy.” (Doc. 229, p.31). The

Court stated, however, that “[b]ecause Plaintiffs may be able to remedy this

deficiency, the Court will, however, give leave to replead.” (Id. at p. 31). The Court

further stated, as a condition for repleader, that Plaintiffs could only “do so

consistent with directives of [that] Order.” (Id. at pp. 42–43). Plaintiffs have now

scrapped fraud as the basis for the alleged conspiracy and instead, attempt to

proceed with the securities law violations as the basis. (Doc. 245, ¶¶ 395–403).

This repleader does not comport with the Court’s Order and consequently, Count

III against Defendant Koutoulas, Defendant Horsman, and the Defendant Entities

is due to be stricken and dismissed without leave to replead. See Vibe Micro, Inc.

v. Shabanets, 878 F.3d 1291, 1295 (11th Cir. 2018) (noting that filing a replead

complaint that does not comply with a court’s order gives courts discretion to

impose a sanction including striking the same).11

11 Again, while the Court undoubtedly has authority to strike the entire pleading, the Court finds

that doing so would be too drastic a remedy. Vibe Micro, 878 F.3d at 1295.

C. Unjust Enrichment Claims

Defendant Koutoulas, Defendant Horsman, and the Defendant Entities

move to dismiss the unjust enrichment claims against them. (Docs. 301, 302, 334).

“[A] claim for unjust enrichment is an equitable claim based on a legal fiction

which implies a contract as a matter of law even though the parties to such an

implied contract never indicated by deed or word that an agreement existed

between them.” Wilding v. DNC Servs. Corp., 941 F.3d 1116, 1129 (11th Cir. 2019)

(quoting 14th & Heinberg, LLC v. Terhaar & Cronley Gen. Contractors, Inc., 43

So. 3d 877, 880 (Fla. 1st DCA 2010)). Under Florida law, a plaintiff stating a claim

for unjust enrichment must allege (1) the plaintiff has conferred a benefit on the

defendant, (2) the defendant voluntarily accepted and retained that benefit, and

(3) the circumstances are such that it would be inequitable for the defendants to

retain it without paying the value thereof. Virgilio v. Ryland Grp., Inc., 680 F.3d

1329, 1337 (11th Cir. 2012) (citing Fla. Power Corp. v. City of Winter Park, 887 So.

2d 1237, 1241 n.4 (Fla. 2004)).

1. Defendant Koutoulas: Count IV

Defendant Koutoulas again challenges the sufficiency of Count IV against

him, but the Court previously allowed this claim to survive. (Doc. 229, pp. 31–32).

For the same reasons stated in the Court’s previous Order based on substantially

similar allegations, this claim again survives. (See id.).

2. Defendant Horsman & Defendant Foundation: Counts V & VI

For the reasons discussed in Section III.A, the Court need not address the

merits of such claims.

3. Defendant LGBCoin: Count VII

Defendant LGBCoin asserts that it never owned a cryptocurrency wallet and

Plaintiffs did not allege any specific sales by Defendant LGBCoin, and thus, it

would be “impossible for it to have been unjustly enriched.” (Doc. 302, pp. 4–5).

For the same reasons stated in the Court’s previous Order regarding Defendant

Koutoulas’s unjust enrichment count, which is based on substantially similar

allegations, this claim survives. (Doc. 229, pp. 31–32).

D. Defendant NASCAR

1. Subject Matter Jurisdiction

Upon repleader, Plaintiffs dropped their fraud claims against Defendant

NASCAR and now proceed on their negligent misrepresentation and promissory

estoppel claims. (Doc. 245). Defendant NASCAR asserts Plaintiffs have no

standing to bring their promissory estoppel claim by arguing their injuries are not

redressable. (Doc. 272, p. 15). The Court disagrees.

To demonstrate standing, a plaintiff must show that 1) they actually suffered

or will imminently suffer an injury-in-fact that is concrete and particularized, 2)

that the injury is fairly traceable to the defendant’s conduct, and 3) that the injury

is likely, not merely speculatively, to be redressed by a favorable judgment. Harrell

v. Fla. Bar, 608 F.3d 1241, 1253 (11th Cir. 2010); Kelly v. Harris, 331 F.3d 817 (11th

Cir. 2003) (citing Lujan v. Defs. of Wildlife, 504 U.S. 555, 560–61 (1992)).

Defendant NASCAR focuses on what effect, if any, the Court enforcing

Defendant NASCAR’s alleged promise to allow the LGB sponsorship would have

that could flow to Plaintiffs. (Doc. 272, p. 15). This narrow focus on the promise

itself is misplaced. Instead, Plaintiffs’ alleged harms will be redressed assuming a

favorable judgment through damages that could provide recompense for Plaintiffs’

alleged loss. At the very least, Plaintiffs have standing to assert this claim.

Nonetheless, for the following reasons, the Court agrees with Defendant

NASCAR that both the negligent misrepresentation and promissory estoppel

claims against it should be dismissed. (Doc. 272).

2. Negligent Misrepresentation

“Rule 9(b)’s heightened pleading standard applies to negligent

misrepresentation claims asserted under Florida law because such claims sound in

fraud.” Lamm v. State St. Bank & Tr., 749 F.3d 938, 951 (11th Cir. 2014); cf.

Ambrosia Coal & Constr. Co. v. Pages Morales, 482 F.3d 1309, 1316–17 (11th Cir.

2007) (noting under Rule 9(b), a party alleging fraud must “state with particularly

the circumstances constituting fraud” and a complaint must contain facts which

establish (1) the precise statements, documents, or misrepresentations made, (2)

the time and place of, and person responsible for the statement, (3) the content

and manner in which the statements misled the plaintiff, and (4) what the

Defendant gained by the alleged fraud). Such claims require that:

(1) there was a misrepresentation of material fact; (2) the

representer either knew of the misrepresentation, made the

misrepresentation without knowledge of its truth or falsity, or

should have known the representation was false; (3) the

representer intended to induce another to act on the

misrepresentation; and (4) injury resulted to a party acting in

justifiable reliance upon the misrepresentation.

Tiara Condo. Ass’n, Inc. v. Marsh & McLennan Cos., Inc., 607 F.3d 742, 747 (11th

Cir. 2010) (quoting Baggett v. Electricians Local 915 Credit Union, 620 So. 2d

784, 786 (Fla. 2d DCA 1993)).

Among other things, Defendant NASCAR calls the Court’s attention to the

fourth element: justifiable reliance. (Doc. 272, pp. 9–11). The Court finds that third

parties such as Plaintiffs were not justified in relying upon the misrepresentation

(assuming one was made). While firsthand knowledge is not necessary, the

attenuated game of telephone through which Plaintiffs claim they are entitled to

justifiably rely upon is too diffuse. Here, Plaintiffs make much of the

communications Defendant NASCAR employee Dale Howell had with

representatives of the Defendant Entities and Brandonbilt Motorsports, who

stated that the sponsorship was approved. (Doc. 245, ¶¶ 226, 298, 301). Defendant

NASCAR, however, never communicated this approval itself to the public. (See id.).

Instead, Plaintiffs emphasize that “NASCAR did not deny it had given its approval

or publicly issue a withdrawal of that approval until seven days later on January 5,

2023.” (Id. ¶ 230). At the same time, Plaintiffs acknowledge in the Third Amended

Complaint that this approval was not iron-clad as reporters checked with

Defendant NASCAR itself to confirm. (Id. ¶ 296). Full confirmation was not given.

(Id. ¶ 297). Instead, internal communications show the topic was not settled at

Defendant NASCAR, and this was known to the public at the very least by

December 30, 2021. (Id. ¶ 301). Indeed, Defendant NASCAR took actions to

correct this public misperception, which led a representative for Brandonbilt

Motorsports to request that Defendant NASCAR “correct the misleading narrative

that [Defendant] NASCAR had leaked to the media.” (Id. ¶ 302).

In short, Plaintiffs’ conclusory allegations to the contrary, it was not

reasonable nor justifiable for third parties such as Plaintiffs to rely on

intermediaries’ representations that Defendant NASCAR had approved the

sponsorship when Defendant NASCAR was working to at least quell this

misperception. (Id. ¶¶ 301–03). Defendant NASCAR finally corrected the public

record days later. (Id. ¶ 230). This makes the idea that Defendant NASCAR sought

tangible gain from its employee’s misrepresentation through “exposure and

marketing advantages” flatly contradictory—if anything, Defendant NASCAR

harmed its reputation through this equivocal episode. (Id. ¶¶ 216–17); Ambrosia,

482 F.3d at 1316–17. Contradictory allegations are not plausible. Plaintiffs’

negligent misrepresentation claim thus fails.

3. Promissory Estoppel

To establish liability for promissory estoppel under Florida law requires “(1)

a promise made by the promisor, (2) ‘which the promisor should reasonably expect

to induce action or forbearance on the part of the promisee’ (or third-person), (3)

that in fact induced such action or forbearance, and that (4) ‘injustice can be

avoided only by enforcement of the promise.’” White Holding Co., LLC v. Martin

Marietta Materials, Inc., 423 F. App’x 943, 947 (11th Cir. 2011) (quoting W.R.

Grace & Co. v. Geodata Servs., Inc., 547 So. 2d 919, 924 (Fla. 1989)); W.R.

Townsend Contracting, Inc. v. Jensen Civil Constr., Inc., 728 So. 2d 297, 302 (Fla.

1st DCA 1999). Similar to Plaintiffs’ negligent misrepresentation claim, the Court

agrees that, even when viewed in the light most favorable to Plaintiffs, Plaintiffs

fail to plausibly establish it was reasonable for Defendant NASCAR to expect the

Plaintiffs to rely on any statements it or its agents may have made. For one,

Defendant NASCAR never made any public pronouncements in the Third

Amended Complaint that reasonably would have created such an expectation as

the statements allegedly made were all part of the internal process between

Defendant NASCAR, the individuals associated with LGBCoin, and Brandonbilt

Motorsports. (See Doc. 245). Normally, it is not reasonable for the general public,

including Plaintiffs, to rely on statements made by a promisee who is simply

passing on their interpretations of the alleged promisor’s statements. Perhaps the

promisees have such a claim for promissory estoppel, but third parties, such as

Plaintiffs, do not, unless there is some other more reasonable basis to support the

claim. Count IX is due for dismissal with prejudice.

IV. CONCLUSION

Accordingly, it is ORDERED AND ADJUDGED as follows:

1. The NASCAR Motion (Doc. 272) is GRANTED;

a. Counts VIII and IX are DISMISSED WITH PREJUDICE;

2. The Koutoulas Motion (Doc. 301) is GRANTED IN PART AND

DENIED IN PART;

a. Count III is DISMISSED WITH PREJUDICE;

b. The Koutoulas Motion is otherwise DENIED;

3. The LGB Motion (Doc. 302) is GRANTED IN PART AND DENIED

IN PART;

a. Count II as to Defendant LGBCoin is DISMISSED WITH

PREJUDICE;

b. Count II as to Defendant Foundation is DISMISSED

WITHOUT PREJUDICE;

c. Count III is DISMISSED WITH PREJUDICE;

d. Count VI is DISMISSED WITHOUT PREJUDICE;

e. The LGB Motion is otherwise DENIED;

4. The Horsman Motion (Doc. 334) is DENIED AS MOOT;

a. Counts II and V are DISMISSED WITHOUT PREJUDICE;

b. Count III is DISMISSED WITH PREJUDICE;

5. Plaintiffs’ Motion for Judicial Notice (Doc. 337) is DENIED AS

MOOT;

6. Plaintiffs’ Motion for Leave to Conduct Limited Jurisdictional

Discovery (Doc. 346) is DENIED AS MOOT; and

7. The Clerk of Court is DIRECTED to terminate Defendants Patrick

Horsman, Letsgobrandon.com Foundation, and National Association

for Stock Car Auto Racing, LLC from the file.

DONE AND ORDERED in Orlando, Florida on March 29, 2024.

PAUL G. Se Z

UNITED STATES®ISTRICT JUDGE

Copies furnished to:

Counsel of Record

Unrepresented Parties