Antitrust Law Daily Wrap Up, RICO—S.D.N.Y.: Court tosses EminiFX Ponzi suit, citing PSLRA RICO bar, (Mar 13, 2026)

By Rebecca Mayo, J.D.

The court dismissed the claims, holding that the alleged Ponzi scheme involved investment contracts, triggering the PSLRA’s RICO bar.

The federal district court in New York City dismissed putative class action claims by investors against individual pastors of the Seventh Day Adventist church and related organizations accused of enabling the pastors’ fraudulent scheme, seeking to recoup money alleged to have been stolen from them. According to the investors, the pastors used their positions in the Church to endorse, promote, and coerce investments by Church members into an enterprise called EminiFX, which was touted by the pastors as “capable of delivering divine wealth to investors” but ultimately turned out to be a Ponzi scheme. The court held that the investments in the EminiFX scheme constituted investment contracts and that a RICO claim predicated on those investments was therefore barred under the RICO Amendment. Further, because the only basis for the court to assert jurisdiction over the action arose from the RICO statute, the court dismissed the action in its entirety (Chelder v. General Conference Corp., No. 1:25-cv-04313-RA-JW (S.D.N.Y. Mar. 12, 2026)).

In 2023 a pastor pled guilty to commodities fraud in connection to a Ponzi scheme perpetrated by a number of individual pastors of the Seventh Day Adventist church. The pastors allegedly encouraged church members to invest in an enterprise called EminiFX. Investors were told that EminiFX had “dedicated trading desks” and proprietary, automated cryptocurrency trading strategies which would earn them an up to 9.8 percent weekly return on their investment, with a guaranteed five percent weekly return. Some pastors represented that the Seventh Day Adventist Church would “guarantee their investment” and insure against any losses they may sustain. Some pastors went as far as to say that the cryptocurrency trading strategy had been “blessed and vetted by church leaders.” Investors were also promised a percentage of the funds invested by individuals they personally recruited, as well as a share of funds invested by subsequent recruits in their downline. However, no cryptocurrency trading strategy actually existed and 62,000 investors lost over two hundred million dollars, much of which was stolen by the pastors for their own personal use.

In 2025, the investors filed a putative class action against the pastors as well as corporate entities and executives affiliated with the Seventh Day Adventist Church who allegedly enabled and facilitated the scheme. The complaint contained civil RICO claims, claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, conversion, fraud, intentional misrepresentation, civil conspiracy, negligent hiring, training and supervision, intentional infliction of emotional distress, negligent infliction of emotional distress, and fraudulent conveyance. The investors sought compensatory damages of over $500,000,000, punitive damages of $150,000,000, a treble damages award under RICO, an equitable accounting, injunctive relief, and fees and costs.

A subset of the organizations, including General Conference Corporation of Seventh-Day Adventists, North American Division Corporation of Seventh-Day Adventists, and Theodore Norman Clair Wilson, filed a motion to dismiss arguing that the claims failed under Federal Rule of Civil Procedure 8(a)(2), the civil RICO claims were barred because they were based on predicate acts of securities fraud, and that the remaining state-law claims were insufficiently pled or otherwise did not state a cause of action.

RICO Amendment. Section 1964(c) of the Private Securities Litigation Reform Act (PSLRA) bars civil RICO claims, which allege “predicate acts of securities fraud.” To determine what conduct is actionable as securities fraud for the purposes of the RICO Amendment, courts look to Section 10(b) of the Securities Exchange Act of 1934 and have interpreted it to say that any fraudulent conduct “in connection with the purchase or sale of any security” may not be the subject of a RICO claim. Courts have found that the “in connection with” element is generally met when “the fraud alleged is that the plaintiff bought or sold a security in reliance or misrepresentations as to its value.”

Additionally, courts have found that conduct keeping securities fraud Ponzi schemes “alive,” such as “attracting investors to the Ponzi scheme or aiding the scheme with market-making to facilitate the sale of securities,” to fall within the RICO Amendment. The Second and Third Circuits, as well as other courts in the Southern District of New York, have similarly barred RICO claims based on conduct that perpetuates a Ponzi scheme. Ponzi schemes can trigger the RICO Amendment where the sponsors of the scheme itself could use investor money to actually invest in securities, or alternatively, where the relationships between investors and scheme sponsors could constitute “investment contracts,” which themselves constitute securities.

Howey test. The court here concluded that the implied contracts between the putative class and the promotors of EminiFX were securities. In S.E.C. v. W.J. Howey Co., 328 U.S. at 298-99, the Supreme Court articulated three criteria for determining whether an unconventional scheme or contract constitutes a “security.” First there must be an investment of money, second it must be in a common enterprise, and third there must be an expectation of profit to be derived solely from the efforts of the promoter or third parties. The Second Circuit has interpreted the term “solely” to mean schemes which “seek the passive investor” which constitute securities verses schemes in which “there is a reasonable expectation of significant investor control,” which do not.

The Plaintiffs asserted that each of the investors’ own efforts played a primary role in his or her own anticipated success and profitability because money was earned through an investor’s individualized efforts to recruit new victims, and therefore the scheme fell outside of the third prong of the Howey test. The court disagreed, noting that the Fifth, Eight, Ninth, and D.C. Circuits have all applied a similarly broad understanding of Howey’s third prong as the Second Circuit, and have held that investments in schemes in which an individual investor may increase their return by recruiting new investors may properly be considered investment contracts. The court found that profits for EminiFX investors were expected to accrue “at least predominantly from the efforts of other, namely the downline members” who contributed new money to the scheme, and from the Individual Defendants alleged to have “created, promoted and operated” the EminiFX scheme. Therefore, the court held that the implied contracts between investors in and promoters of EminiFX constituted securities, whose sale was procured through fraudulent misrepresentations, which was sufficient to trigger the RICO Amendment’s bar.

Conviction exception. Section 1964(c)’s securities fraud bar contains a “conviction exception,” permitting civil RICO claims predicated on securities fraud “against those who are ‘criminally convicted in connection with’ that fraud.” However, courts have held that to avail themselves of this exception, plaintiffs must be “specifically named in the plea allocution if there is one,” if a defendant pled guilty to fraud, or specifically named in a defendant’s charging documents if he or she was convicted at trial. Here the plaintiffs did not allege that any of the defendants were “in fact found guilty of specifically defrauding them” or each of the putative class members. Therefore, the court held that they may not avail themselves of the conviction exception.

Personal jurisdiction. Nationwide personal jurisdiction in RICO cases is conferred under 18 U.S.C. § 1965(b). However, the court noted that since the RICO claims were dismissed and the complaint lacked any other allegations that a basis for personal jurisdiction existed, that personal jurisdiction over all defendants was necessarily lacking and all claims against them must be dismissed.

The Case is No. 1:25-cv-04313-RA-JW.

Judge: Abrams, R.

Attorneys: Jolyon W. Morris (Morris Legal, LLC) for Jacques Chelder. Ashley Nicole Genoese (Grayrobinson, P.A.) for General Conference Corp.

Companies: General Conference Corp.

Cases: RICO NewYorkNews