Chichen Wang v. Hu Qing Yu Tang USA, Inc., et al.

DEMURRER TO COMPLAINT

 

MOVING PARTY: Defendant Hu Qing Yu Tang USA, Inc.

RESPONDING PARTY(S): Plaintiff Chichen Wang

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

Plaintiff Chichen Wang alleges Defendants defrauded him out of more than $8 million in cash and cryptocurrency assets by creating a fake cryptocurrency trading platform disguised as the legitimate platform “BitYard.” Plaintiff brings causes of action for (1) intentional misrepresentation, (2) aiding and abetting fraud, (3) civil penalties, (4) conversion, (5) aiding and abetting conversion, and (6) common count.

Defendant Hu Qing Tang USA, Inc., now demurrers to each cause of action in the Complaint. Plaintiff opposed.

TENTATIVE RULING:

Defendant’s Demurrer to the Complaint is OVERRULED in its entirety.

Defendant is ordered to file an answer to the Complaint within 14-days of this ruling.

Plaintiff is ordered to give notice, unless waived.

DISCUSSION:

Demurrer

I. Meet and Confer

II. Legal Standard

A demurrer for sufficiency tests whether the complaint states a cause of action.  (Hahn v. Mirda (2007) 147 Cal. App. 4th 740, 747.)  When considering demurrers, courts read the allegations liberally and in context.  (Taylor v. City of Los Angeles Dept. of Water and Power (2006) 144 Cal. App. 4th 1216, 1228.)  In a demurrer proceeding, the defects must be apparent on the face of the pleading or by proper judicial notice.  (CCP § 430.30(a).)  A demurrer tests the pleadings alone and not the evidence or other extrinsic matters.  (SKF Farms v. Superior Court (1984) 153 Cal. App. 3d 902, 905.)  Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed.  (Id.)  The only issue involved in a demurrer hearing is whether the complaint, as it stands, unconnected with extraneous matters, states a cause of action.  (Hahn, 147 Cal.App.4th at 747.)

III. Analysis 

A. Allegations in the Complaint

Defendant Hu Qing Yu Tang USA, Inc., demurrers to each cause of action in the Complaint. Each is addressed in turn.

The allegations in the Complaint underlying each cause of action are as follows. Plaintiff alleges he received a friend request on Facebook from a woman named “Bingbing Lee” on October 19, 2022, who “introduced herself to Plaintiff via direct messages and purported to be an IT professional who resided in Santa Monica and employed at a software design and engineering firm.” (Compl. ¶ 9.) The two began communicating through the social media app “LINE,” where Lee “told Plaintiff she could apparently trade cryptocurrencies with near certainty of profit.” (Id. ¶ 10.) Lee showed Plaintiff her purported cryptocurrency profits on the Singapore-based cryptocurrency trading platform, BitYard. (Id. ¶ 11.) The two communicated in Chinese, and “began affectionately addressing each other as ‘older brother’ and ‘younger sister.’” (Id. ¶ 11.) 

Lee then persuaded Plaintiff to open his own trading account. (Id. ¶ 12.) On or about November 19, 2022, Lee messaged Plaintiff a fake URL that resembled the legitimate BitYard site. (Id. ¶ 13.) After creating an account, Lee purported to deposit $200,000 of cryptocurrency into Plaintiff’s account. (Id. ¶ 15.) Under the impression that Lee had made the deposit with her own funds, Plaintiff attempted to “reimburse” Lee by transferring nearly $200,000 into a virtual wallet address provided by Lee. (Id. ¶ 16.) From that point, Plaintiff began to execute trades in accordance with Lee’s instructions, mislead by the fake increasing balance in his fake “BitYard” account. (Id. ¶ 17.) 

Plaintiff was also persuaded by fake messages supposedly from BitYard and Lee encouraging him to make additional deposits with the promise of continued returns. (Id. ¶ 18.) In one instance, a “customer service” representative instructed Plaintiff to wire funds to a “service provider,” Defendant Hu Qing Yu Tang USA Inc., who would deposit the wired funds into Plaintiff’s account. (Id.) On or about November 25, 2022, Plaintiff wired $200,000 to Defendant Hu Qing Yu Tang USA Inc. at JP Morgan Chase Account No. 112958001. (Id. ¶ 20.) Over the coming weeks, Plaintiff made numerous deposits to various “service providers.” (Id. ¶¶ 20-23.) 

Appearing to Plaintiff based on the fake BitYard account that he was making handsome profits on the trades, Plaintiff attempted to cash out funds from the account. (Id. ¶ 25.) However, customer service representatives made repeated excuses preventing Plaintiff from cashing out his money, and instead, informed him that further deposits were necessary to remedy issues with his account. (Id. ¶¶ 27-46.) 

Plaintiff retained a Singaporean law firm in early to mid-May 2023 to pursue BitYard, still believing he was dealing with the legitimate BitYard cryptocurrency exchange. (Id. ¶ 47.) After an investigation, the firm discovered the scam. (Id. ¶¶ 48, 49.) In total, Plaintiff transferred nearly $8 million USD to various bank accounts. (Id. ¶ 50.) To date, Plaintiff has not recovered any of the funds. (Id.)

B. Demurrer to First Cause of Action for Intentional Misrepresentation

First, Defendant argues the first cause of action for intentional misrepresentation fails because Plaintiff has failed to allege sufficient facts to support the claim, or, that the claim is uncertain. 

The essential elements of a count for intentional misrepresentation are (1) a misrepresentation, (2) knowledge of falsity, (3) intent to induce reliance, (4) actual and justifiable reliance, and (5) resulting damage. (Lazar v. Superior Court (1996) 12 Cal.4th 631, 638. Generally, “[i]n California, fraud must be pled specifically; general and conclusory allegations do not suffice.” (Alfaro v. Community Housing Improvement System & Planning Assn., Inc.¿(2009) 171 Cal.App.4th 1356, 1384, internal quotations omitted.) “The normal policy of liberally construing pleadings against a demurrer will not be invoked to sustain a fraud cause of action that fails to set forth such specific allegations. (Id.)” The heightened pleading standard for fraud requires “pleading facts which show how, when, where, to whom, and by what means the representations were tendered.” (Id.) 

Here, although the allegations pertaining to the moving Defendant are limited, when read in context with the other allegations, Defendant’s alleged role in the scheme is apparent. Plaintiff has alleged in detail an elaborate scheme by the Defendants to defraud Plaintiff of millions of dollars under the guise of a legitimate cryptocurrency trading platform. As part of the scheme, a customer service representative instructed Plaintiff to wire funds to a bank account belonging to Defendant Hu Qing Yu Tang USA Inc. (Compl. ¶ 20.) On or about November 25, 2022, Plaintiff wired $200,000 to Defendant Hu Qing Yu Tang USA Inc. at JP Morgan Chase Account No. 112958001. (Id.) Plaintiff alleges that Lee and the CSO are Defendants’ agents. (Id. ¶ 52.) Plaintiff has not been reimbursed for these funds. (Id. ¶ 20.) 

Considering these allegations, Plaintiff has adequately alleged a claim against Defendant for intentional misrepresentation. (See Comm. On Children's Television, Inc. v. Gen. Foods Corp. (1983) 35 Cal. 3d 197, 217 [“Less specificity is required when ‘it appears from the nature of the allegations that the defendant must necessarily possess full information concerning the facts of the controversy.’”].)

Finally, the cause of action is not uncertain. “[D]emurrers for uncertainty are disfavored,” and are strictly construed “because ambiguities can reasonably be clarified under modern rules of discovery.”  (Lickiss v. Fin. Indus. Regul. Auth., (2012) 208 Cal. App. 4th 1125, 1135.) Plaintiff has alleged the ultimate facts to support his claim.

Accordingly, Defendant’s Demurrer to the First Cause of Action is OVERRULED.

C. Demurrer to Second Cause of Action for Aiding and Abetting Fraud

Next, Defendant argues the “aiding and abetting fraud” claim fails because the allegations are conclusory. Defendant contends that “[t]here are no factual allegations that Defendant had knowledge of CSO’s fraud against Plaintiff, displayed any intent to substantially assist CSO in perpetrating a fraud, or engaged in any acts whatsoever to assist with committing fraud.” (Id.)

As discussed in the first cause of action, however, the allegations speak for themselves. As part of the broader scheme, a person or entity posing as a “customer service officer” instructed Plaintiff to wire $200,000 to Defendant with promises of increased gains. (Compl. ¶ 20.) Plaintiff alleges that Lee and the CSO are Defendants’ agents. (Id. ¶ 52.) Plaintiff wired the sum to a JP Morgan Chase Account belong to Defendant. (Id. ¶ 20.) Plaintiff has never received a refund or any other “returns” for this “investment.” (Id.) On these allegations, Plaintiff has alleged a claim for aiding and abetting fraud.

Accordingly, Defendant’s Demurrer to the Second Cause of Action is OVERRULED.

D. Demurrer to Fourth Cause of Action for Conversion; Fifth Cause of Action for Aiding and Abetting Conversion; and Third Cause of Action for Civil Penalties

Defendant argues the conversion claim fails because there are no allegations that Defendant intended to convert the property. “Conversion is generally described as the wrongful exercise of dominion over the personal property of another. [Citation.] The basic elements of the tort are (1) the plaintiff's ownership or right to possession of personal property; (2) the defendant's disposition of the property in a manner that is inconsistent with the plaintiff's property rights; and (3) resulting damages. [Citation.]” (Fremont Indemnity Co. v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.)

Here, Plaintiff alleges that Defendant “knowingly and intentionally [took] possession of the funds wired to them with knowledge that the funds were sent in reliance on intentional misrepresentations and that the funds would not be credited to Plaintiff or used for his benefit.” (Id. ¶ 69.) Therefore, Plaintiff has alleged the necessary intent. 

Defendant also demurrers to the aiding and abetting conversion claim, arguing it fails with the underlying conversion claim. Because the conversion claim is sufficiently pled, so is the aiding and abetting claim. 

Finally, Defendant argues the cause of action for civil penalties under Penal Code section 496(c) is insufficiently pled with the others. Based on the same facts, Plaintiff has alleged a claim for civil penalties. 

Accordingly, Defendant’s Demurrer to the Third, Fourth, and Fifth Causes of Action is OVERRULED.

E. Demurrer to Sixth Cause of Action for Common Count: Money Had and Received

Finally, Defendant argues the common count fails with the underlying claims. “A cause of action is stated for money had and received if the defendant is indebted to the plaintiff in a certain sum ‘for money had and received by the defendant for the use of the plaintiff.’”  (Gutierrez v. Girardi (2011) 194 Cal. App. 4th 925, 937).  “This common count is available in a great variety of situations [citation] and ‘lies wherever one person has received money which belongs to another, and which in equity and good conscience should be paid over to the latter.’” [Citation.] (Id.)

Here, Plaintiff alleges through sufficient facts that he transferred money to Defendant for cryptocurrency trades. In reality, the purported investments were allegedly nonexistent, and Defendants absconded with Plaintiff’s money. 

Accordingly, Defendant’s Demurrer to the Sixth Cause of Action is OVERRULED.

Defendant’s Demurrer to the Complaint is OVERRULED in its entirety.

IT IS SO ORDERED.

Dated:   December 29, 2023 ___________________________________