Securities Regulation Daily Wrap Up, EXCHANGES AND MARKET REGULATION—S.D. Fla.: Plaintiffs fail to connect fraud claim to federal or Georgia securities law, (Jul 8, 2026)

By Jay Fishman, J.D.

The transaction was deemed “extraterritorial”: the relevant nexus occurred outside the United States, and no domestic stock exchange was involved.

Florida’s Southern District Court granted the defendant companies’ and their respective officer-directors’ motion for summary judgment, finding the plaintiffs’ federal Exchange Act Section 10(b)/Rule 10b-5, Section 20(a), and Georgia Blue Sky Law claims unsustainable given the security transaction’s extraterritorial nature. There were no genuine issues of material fact since no domestic stock exchange was involved and the transaction’s relevant nexus involved events occurring outside the United States (TradeInvest v. Wrigley, Jr., No. 9:22-cv-80360 (S.D. Fla. July 6, 2026)).

The plaintiffs and defendants. The plaintiffs are two sophisticated offshore investment funds registered in the British Virgin Island whose CEOs reside in the Bahamas and Greece, respectively. The defendant was a privately-owned, multi-state cannabis corporation formed in Delaware. The CEO’s principal place of business was located in Atlanta, Georgia.

SAFE investment. During the relevant period, from early 2021 through mid-2022, the plaintiffs signed a subscription agreement to invest $60 million in the defendant company following a merger with another company. When the merger fell through, however, due to downward demand for cannabis during the COVID19 pandemic, the defendants sought to reroute the transaction into a Simple Agreement for Future Equity (SAFE), a type of investment that converts to the defendant company’s equity (here, preferred stock) but only upon the occurrence of certain triggering events the SAFE set forth. After establishing the SAFE, the defendants sent the plaintiffs a deck (like a Power Point presentation) of the SAFE, along with the SAFE agreement and the risk factors, none of which mentioned the state of Georgia.

The plaintiffs then approved and executed the SAFE agreement in the fall of 2021, investing $20 million in the SAFE; two important points in the case—(1) the agreement contained an unexecuted signature block by the defendant CEO with a Bahamas mailing address; and (2) the preferred shares were to be listed on the Canadian Stock Exchange. But when the defendant, in February 2022, sent the plaintiffs a follow-up letter demanding certain organization documents, operating agreements, by-laws and information on who will own interests in the preferred stock following conversion, the plaintiffs, in writing, refused to comply. The plaintiffs rescinded the SAFE agreement having grown tired of the defendant company’s management, among other issues, and demanded their $20 million be returned. Hence, the SAFE agreement was rescinded, the stock never converted to preferred shares, and the plaintiffs filed suit in Florida’s Southern District Court for violations of federal securities law and Georgia blue sky law.

FEDERAL SECURITIES LAW: Morrison, Quail cases and the triggering events. To overcome the defendants’ summary judgment motion on federal grounds, the court began, the plaintiffs needed to show that the SAFE investments were domestic transactions as contemplated in the 2010 U.S. Supreme Court Morrison v. Nat’l Australia Bank Ltd case that the 2011 11th Circuit Quail Cruises Ship Mgmt. Ltd. v. Viagens case further refined. The Morrison events that would trigger a SAFE stock conversion are: (1) equity financing; (2) liquidity event; (3) dissolution event; and/or (4) time conversion event. In this case, the SAFE agreement conditioned the conversion on the plaintiffs executing and delivering to the defendant company “all requested documents relevant to the conversion,” which the plaintiffs refused to do. Moreover, Morrison’s majority opinion writer Justice Antonin Scalia wrote that the transaction must be domestic for U.S. federal securities law to apply; namely, “Section 10(b) of the Exchange Act and Rule 10b-5 do not apply extraterritorially to securities transactions that occur outside the United States…only transactions in securities listed on domestic exchanges and domestic transactions in other securities fall under Section 10(b).” Quail noted it is sufficient to allege that the transaction was closed, such that “title to the shares were transferred” domestically. And the Second Circuit, referencing Quail, stated that “a securities transaction is domestic when the parties incur irrevocable liability to carry out the transaction within the United States or when title is passed within the United States.

Yet the plaintiffs never argued or offered any record evidence showing the SAFE investments were listed on a domestic stock exchange. And because the plaintiffs rescinded the SAFE agreement, the court did not need to carry out in-depth analysis. Applying the Morrison,Quail and Second Circuit analysis to the above facts, the court concluded the SAFE investments were foreign transactions that, therefore, fell outside U.S. federal securities laws. The court granted the defendants summary judgment motion on federal grounds.

GEORGIA BLUE SKY LAW: Nexus. To next defeat the motion on state grounds, the plaintiffs had to show a nexus between the SAFE transactions and Georgia, specifically “whether there is a sufficient territorial nexus between the state and the transaction.” Under Georgia Code Section 10-5-79(a), Section 10-5-58 (asserted by the plaintiffs) does not apply to a person that sells, offers to sell, buys, or offers to buy a security unless the offer, sale, or purchase is made (or accepted in the case of an offer) in this state [Georgia]. Section 10-5-79(c) goes on to say that “an offer to sell or purchase a security is made in this state, whether or not either party is then present in this state, if the offer: (1) originates from within this state; or (2) is directed by the offeror to a place in this state and received at the place to which it is directed.

The court rejected the plaintiffs’ contention that the defendant CEO’s principal place of business being in Georgia and his signature block on the agreement was enough of a nexus between Georgia and the SAFE transaction. Instead, the court favored the defendants’ arguments that: (a) the company’s “mailing address, standing alone…does not establish that the offer to sell the SAFE originated in Georgia; and (b) the record reflects the SAFE transactions actually originating in Florida, not Georgia, and that the defendants “transacted business relating to the causes of action alleged herein within the state of Florida, and/or committed tortious acts alleged in the State of Florida. Additionally, said the court, neither the deck nor the SAFE agreements and risk factor documents ever mentioned the state of Georgia. The court concluded from the record that the nexus between the SAFE transactions and the state of Georgia was tenuous and granted the defendants summary judgment motion on state grounds.

The case is No. 9:22-cv-80360.

Judge: Leibowitz, D.

Attorneys: Amy Elizabeth Shehan (Quinn Emanuel Urquhart & Sullivan, LLP) for TradeInvest Asset Management Co. [BVI] Ltd. Jeffrey Eldridge Marcus (Marcus Rashbaum Pineiro & Meyers, LLP) for James Holmes.

Companies: TradeInvest Asset Management Co. (BVI) Ltd.

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