17‐648 Choi v. Tower Research Capital LLC

1

2 In the 3 United States Court of Appeals 4 For the Second Circuit 5 ________ 6 7 AUGUST TERM, 2017 8 9 ARGUED: SEPTEMBER 20, 2017 10 DECIDED: MARCH 29, 2018 11 12 No. 17‐648‐cv 13 14 MYUN‐UK CHOI, JIN‐HO JUNG, SUNG‐HUN JUNG, SUNG‐HEE LEE, 15 KYUNG‐SUB LEE, individually and on behalf of all others similarly 16 situated, 17 Plaintiffs‐Appellants, 18 19 v. 20 21 TOWER RESEARCH CAPITAL LLC, MARK GORTON, 22 Defendants‐Appellees. 23 ________ 24 25 Appeal from the United States District Court 26 for the Southern District of New York. 27 No. 14‐cv‐09912 – Kimba M. Wood, Judge. 28 ________ 29 30 Before: WALKER, POOLER, and LOHIER, Circuit Judges. 31 ________ 32 33 Plaintiffs, five Korean citizens, transacted on a “night market”

34 of Korea Exchange (“KRX”) futures contracts. The KRX is a 2 No. 17‐648

1 derivatives and securities exchange headquartered in Busan, South

2 Korea. On the KRX night market, traders enter orders in Korea when

3 the KRX is closed for business, whereupon their orders are quickly

4 matched with a counterparty by an electronic trading platform

5 (“CME Globex”) located in Aurora, Illinois. The trades are then

6 cleared and settled on the KRX when it opens for business the

7 following morning.

8 Plaintiffs allege that Defendants Tower Research Capital LLC,

9 a New York based high‐frequency trading firm, and its founder, Mark

10 Gorton, injured them and others by engaging in manipulative

11 “spoofing” transactions on the KRX night market in violation of the

12 Commodity Exchange Act (“CEA”),

et seq., and New

13 York law. The district court dismissed the action principally on the

14 ground that the CEA does not apply extraterritorially as would be

15 required for it to reach Defendants’ alleged conduct. Because we

16 conclude Plaintiffs’ allegations make it plausible that the trades at

17 issue were “domestic transactions” under our precedent, we do not

18 agree that application of the CEA to Defendants’ alleged conduct

19 would be an impermissible extraterritorial application of the act. We

20 also disagree with the district court’s conclusion that Plaintiffs failed

21 to state a claim for unjust enrichment. Accordingly, we VACATE and

22 REMAND for further proceedings.

23 ________ 3 No. 17‐648

1 2 MICHAEL EISENKRAFT, Cohen Milstein Sellers & 3 Toll PLLC, New York, NY (J. Douglas Richards, 4 Richard Speirs, Cohen Milstein Sellers & Toll 5 PLLC, New York, NY; Times Wang, Cohen 6 Milstein Sellers & Toll PLLC, Washington, DC, on 7 the brief), for Plaintiffs‐Appellants.

8 NOAH A. LEVINE, Wilmer Cutler Pickering Hale 9 and Dorr LLP, New York, NY (Matthew T. 10 Martens, Albinas J. Prizgintas, Wilmer Cutler 11 Pickering Hale and Dorr LLP, Washington DC, on 12 the brief), for Defendants‐Appellees.

13 ________ 14 15 JOHN M. WALKER, JR., Circuit Judge:

16 Plaintiffs, five Korean citizens, transacted on a “night market”

17 of Korea Exchange (“KRX”) futures contracts. The KRX is a

18 derivatives and securities exchange headquartered in Busan, South

19 Korea. On the KRX night market, traders enter orders in Korea, when

20 the KRX is closed for business, whereupon their orders are quickly

21 matched with a counterparty by an electronic trading platform

22 (“CME Globex”) located in Aurora, Illinois. The trades are then

23 cleared and settled on the KRX when it opens for business the

24 following morning.

25 Plaintiffs allege that Defendants Tower Research Capital LLC

26 (“Tower”), a New York based high‐frequency trading firm, and its

27 founder, Mark Gorton, injured them and others by engaging in 4 No. 17‐648

1 manipulative “spoofing” transactions on the KRX night market in

2 violation of the Commodity Exchange Act (“CEA”),

et

3 seq., and New York law. The district court dismissed the action

4 principally on the ground that the CEA does not apply

5 extraterritorially as would be required for it to reach Defendants’

6 alleged conduct. Because we conclude Plaintiffs’ allegations make it

7 plausible that the trades at issue were “domestic transactions” under

8 our precedent, we do not agree that application of the CEA to

9 Defendants’ alleged conduct would be an impermissible

10 extraterritorial application of the act. We also disagree with the

11 district court’s conclusion that Plaintiffs failed to state a claim for

12 unjust enrichment under New York law. Accordingly, we VACATE

13 and REMAND for further proceedings.

14 BACKGROUND1

15 The KOSPI 200, a stock index akin to the S&P 500 or the Dow

16 Jones, consists of the weighted averaged of two hundred Korean

17 stocks traded on the KRX. The KRX also includes a KOSPI 200 futures

18 contract in its daytime trading, which allows traders to speculate on

19 the value of the KOSPI 200 index at various future dates. To facilitate

20 after‐hours trading of KOSPI 200 futures, the KRX contracted with

21 CME Group, the product of a merger of the Chicago Mercantile

These facts derive from the amended complaint, and we accept them 1

as true. See Bell Atl. Corp. v. Twombly,

(2007). 5 No. 17‐648

1 Exchange (“CME”) and the Chicago Board of Trade, to establish an

2 overnight market for futures trading. Pursuant to that agreement,

3 futures contracts on KRX’s “night market” are listed and traded on

4 “CME Globex, an electronic CME platform located in Aurora,

5 Illinois.” Amended Complaint (“AC”) ¶ 18. CME Globex “is the

6 same platform which CME [Group] utilizes to trade derivatives [of a

7 wholly domestic character] based on U.S. Treasury bonds, the S&P

8 500, the NASDAQ 100, the Dow Jones Industrial Average, grains,

9 livestock, weather and real estate.” AC ¶ 18. In 2012, the year

10 relevant to this action, approximately 7,000,000 trades of futures

11 contracts took place on the KRX night market. AC ¶ 20 n.8.

12 A KRX night market trade begins with the placement of a “limit

13 order” on the KRX system in Korea. Within seconds, the trader’s

14 order is matched with an anonymous counterparty on CME Globex

15 “using the multiple price a[u]ction method through which successful

16 bidders are required to pay for the allotted quantity of securities at

17 the respect price/yield at which they have bid.” AC ¶ 21 (internal

18 quotation marks omitted). Following matching, “settlement of all

19 trades occurs the day after on the KRX.” AC ¶ 22.

20 In 1998, Gorton founded Tower, a high‐frequency trading firm.

21 “High frequency trading firms use computers to create and operate

22 algorithms and, by using those algorithms and technology, execute

23 trades faster than anyone else—making pennies on millions and 6 No. 17‐648

1 millions of trades executed in milliseconds.” AC ¶ 27. In 2012, Tower

2 aggressively brought its algorithm and technology to bear on the KRX

3 night market, executing nearly 4,000,000 trades of futures contracts,

4 approximately 53.8% of all KRX night market trades that year.

5 AC ¶ 31.

6 Plaintiffs allege that a significant number of these trades were

7 manipulative, in that Defendants “utilized their algorithmic flash

8 trading abilities to artificially and illegally manipulate prices of the

9 KOSPI 200 Futures during Night Market trading on the CME for their

10 own profit.” AC ¶ 31. Specifically, Plaintiffs allege that Tower’s

11 traders “created hundreds and hundreds of fictitious buys and sells

12 to artificially manipulate the price of the KOSPI 200 futures contracts

13 they were trading on the CME Globex.” AC ¶ 32.

14 The alleged scheme—which Plaintiffs describe as “spoofing”—

15 operated as follows. Tower’s traders would enter large volume buy

16 or sell orders on the KRX night market and then would use Tower’s

17 high‐frequency technology to immediately cancel their orders or

18 ensure that they themselves were the counterparties on the trades.

19 They would do so because the intent was not to execute the trades but

20 to create a false impression about supply and demand and thereby

21 drive the market price either up or down. Once that was

22 accomplished, the traders would sell contracts at the artificially

23 inflated price or buy contracts at the artificially deflated price, 7 No. 17‐648

1 eventually reaping substantial profits either way. In 2012, Plaintiffs

2 allege, Tower’s traders used this spoofing practice hundreds of times,

3 earning more than $14,000,000 in illicit profits. AC ¶ 35.

4 Plaintiffs, for their part, executed more than 1,000 KRX night

5 market trades in 2012. AC ¶ 24. Given the anonymity of CME Globex,

6 Plaintiffs cannot at the moment identify with precision whether they

7 were a counterparty on any of the allegedly manipulative Tower

8 trades, but they allege it to be a near statistical certainty that at least

9 one Tower trader was a direct counterparty with at least one Plaintiff

10 in a KRX night market trade in 2012. AC ¶ 31 n.13. In any event,

11 Plaintiffs allege that they traded at artificial prices during and due to

12 Defendants’ spoofing waves.

13 In May 2014, a Korean government regulator, the Financial

14 Services Commission (“FSC”), uncovered Defendants’ scheme and

15 referred Tower to Korean prosecutors. FSC publicly stated that

16 “traders of a U.S. based algorithmic trading specialty company

17 accessed the KOSPI 200 Overnight Futures Market and traded with

18 the use of the [sic] proprietary algorithmic trading technique, which

19 manipulated prices to build their buy and sell positions by creating

20 automatically and repeatedly fictitious trades.” AC ¶ 36. Several

21 media outlets also reported on the scheme and identified Tower as

22 the responsible entity. AC ¶¶ 37–40. 8 No. 17‐648

1 In December 2014, Plaintiffs filed a class complaint on behalf of

2 themselves and other individuals or entities that were allegedly

3 harmed by Defendants’ spoofing scheme when they traded in futures

4 on the KRX night market in 2012. Plaintiffs alleged that Defendants’

5 conduct violated several sections of the CEA and New York’s

6 prohibition on unjust enrichment.

7 Defendants moved to dismiss and the district court (Kimba M.

8 Wood, J.) granted the motion. Relying on Morrison v. National

9 Australia Bank Ltd.,

(2010), the district court concluded

10 that application of the CEA to Defendants’ conduct would be an

11 impermissible extraterritorial application of the act. Myun‐Uk Choi v.

12 Tower Research Capital LLC,

(S.D.N.Y. 2016). The

13 district court reasoned that, under Morrison, Defendants’ alleged

14 conduct was within the territorial reach of the CEA only if the

15 contracts at issue were (i) purchased or sold in the United States or

16 (ii) listed on a domestic exchange.

. The district court

17 determined that the contracts were not purchased or sold in the

18 United States because the orders needed to “first be placed through

19 the KRX trading system [in Korea],” and because any trades matched

20 on CME Globex in Illinois were final only when settled the following

21 morning in Busan.

. The district court then concluded that

22 although CME might be a “domestic exchange,” Plaintiffs did not

23 sufficiently plead that the same was true for CME Globex.

at 49–50. 9 No. 17‐648

1 Finally, the district court dismissed Plaintiffs’ unjust enrichment

2 claim on the ground that Plaintiffs did not allege “any direct dealing

3 or actual, substantive relationship with the Defendants.”

.

4 Plaintiffs amended their complaint to add allegations about the

5 domesticity of KRX night market transactions, the nature of CME

6 Globex, and the likelihood that they were counterparties with

7 Defendants during the relevant period.

8 Defendants filed another motion to dismiss, which the district

9 court again granted. Myun‐Uk Choi v. Tower Research Capital LLC, 232

(S.D.N.Y. 2017).2 The district court concluded that

11 Plaintiffs still failed to sufficiently allege that CME Globex is a

12 “domestic exchange” under Morrison because it is not structured like

13 other exchanges, is not registered as an exchange with the

14 Commodity Futures Trading Commission, and is not subject to the

15 rules of a registered exchange.

at 341–42. The district court also

16 held that the amended allegations did not plausibly show that trades

17 on the KRX night market were “domestic transactions” because, in its

The district court’s first decision rejected Defendants’ argument that 2

Plaintiffs’ allegations are subject to Fed. R. Civ. P. 9(b)’s heightened pleading standard. 165 F. Supp. 3d at 46–48. Although Defendants raised the argument again in their subsequent motion to dismiss, the district court did not address it or Defendants’ argument that, apart from Morrison, Plaintiffs failed to state a CEA claim. Defendants do not press either of these arguments on appeal and we do not address them. Nor do we address whether the specific allegations in the complaint constitute “spoofing” in violation of the CEA. 10 No. 17‐648

1 view, KRX rules suggest that transactions become final only when

2 they settle on the KRX, not when they match on CME Globex.

at

3 342. Finally, the district court again dismissed Plaintiffs’ unjust

4 enrichment claim on the ground that Plaintiffs needed “definitive

5 evidence of a direct relationship,” yet they “failed to prove that

6 buyers and sellers were direct counterparties under KRX rules.”

7 at 343. Plaintiffs appealed.

8 DISCUSSION

9 “We review de novo the dismissal of a complaint for failure to

10 state a claim upon which relief can be granted.” Reich v. Lopez, 858

(2d Cir. 2017). “To survive a motion to dismiss, a

12 complaint must contain sufficient factual matter, accepted as true, to

13 ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,

14

(2009) (quoting Twombly,

).

15 Plaintiffs contend that the district court erred in dismissing

16 their CEA and unjust enrichment claims. Because we conclude

17 Plaintiffs sufficiently alleged that applying the CEA to Defendants’

18 conduct would not be an extraterritorial application of the act, and

19 that Plaintiffs’ losses were sufficiently related to Defendants’ gains for

20 purposes of their unjust enrichment claim, we agree.

21 I. Commodity Exchange Act

22 “The CEA is a remedial statute that serves the crucial purpose

23 of protecting the innocent individual investor—who may know little 11 No. 17‐648

1 about the intricacies and complexities of the commodities market—

2 from being misled or deceived.” Loginovskaya v. Batratchenko,

266, 270 (2d Cir. 2014) (internal quotation marks omitted). As relevant

4 to Plaintiffs’ amended complaint, the CEA proscribes the use of “any

5 manipulative or deceptive device or contrivance” in connection with

6 a futures contract and prohibits the manipulation of the price of a

7 futures contract.

(1), (3).

8 Defendants’ argument is that, under Morrison, KRX night

9 market trades occur outside of the United States and are therefore

10 beyond the CEA’s reach.

11 In Morrison, the Supreme Court set out to define the territorial

12 reach of § 10(b) of the Securities Exchange Act, 15 U.S.C. § 78j(b).

13 After discussing the presumption against extraterritoriality,

at 255, the Court concluded that, given its text, § 10(b) (and Rule 10b‐

15 5, promulgated thereunder) has only a domestic reach, and therefore

16 applies only to one of two types of transactions: (i) “transactions in

17 securities listed on domestic exchanges;” and (ii) “domestic

18 transactions in other securities,” id. at 267.

19 Morrison said nothing about the CEA, and we have only once,

20 in Loginovskaya, addressed Morrison’s effect on that act. There, we

21 concluded that Morrison’s “domestic transactions” test applies to the

22 CEA, but, because the plaintiff in Loginovskaya did not purchase

23 commodities on an exchange, we had no occasion to address the 12 No. 17‐648

1 “domestic exchange” prong. See Loginovskaya, 764 F.3d at 272–75. In

2 concluding that Morrison’s “domestic transactions” test applies to the

3 CEA, we adopted a rule established in the § 10(b) case of Absolute

4 Activist Value Master Fund Ltd. v. Ficeto,

(2d Cir. 2012).

5 Loginovskaya, 764 F.3d at 274. In Absolute Activist, we concluded that

6 a transaction involving securities is a “domestic transaction” under

7 Morrison if “irrevocable liability is incurred or title passes within the

8 United States.”

. “[I]rrevocable liability” attaches

9 “when the parties to the transaction are committed to one another,”

10 or, “in the classic contractual sense, there was a meeting of the minds

11 of the parties.”

(internal quotation marks omitted); see also

12 Vacold LLC v. Cerami,

, 121–22 (2d Cir. 2008) (citing

13 Radiation Dynamics, Inc. v. Goldmuntz,

, 890–91 (2d Cir.

14 1972)).

15 Consequently, plausible allegations that parties to a transaction

16 subject to the CEA incurred irrevocable liability in the United States

17 suffice to overcome a motion to dismiss CEA claims on territoriality

18 grounds. We believe in this case that Plaintiffs’ allegations make it

19 plausible that parties trading on the KRX night market incur

20 irrevocable liability in the United States. This being a sufficient basis

21 to resolve the extraterritoriality question at this stage, there is no need

22 for us to address whether the CEA has a territorial reach on the basis

23 that the CME Globex is a “domestic exchange.” 13 No. 17‐648

1 In Loginovskaya, we took pains to heed Morrison’s mandate that

2 an extraterritorial analysis assess “the particular statutory provision”

3 at issue. Loginovskaya, 764 F.3d at 271 (citing Morrison, 561 U.S. at 266–

4 67); see also Morrison,

n.5. We have never concluded

5 however, as the district court and the parties seemed to assume, that

6 Morrison’s “domestic exchange” prong applies to the CEA either to

7 broaden or to narrow its extraterritorial reach. The section of the CEA

8 relevant to a territoriality analysis, see Loginovskaya, 764 F.3d at 272–

9 73, does not contain the language similar to the language in § 10(b)

10 that led Morrison to craft the “domestic exchange” prong: the

11 “purchase or sale of any security registered on a national securities

12 exchange.” 15 U.S.C. § 78j(b) (emphasis added). Rather, the CEA

13 speaks only of “registered entit[ies].”

(a)(1)(D)(i).

14 * * *

15 We quickly dispatch Defendants’ contention that, under

16 Morrison, the CEA cannot apply to a commodity traded on a foreign

17 exchange. Leaving aside whether Morrison’s discussion of exchanges

18 is applicable to the CEA, Morrison itself refutes Defendants’

19 argument. Morrison clearly provided that the “domestic transaction”

20 prong is an independent and sufficient basis for application of the

21 Securities Exchange Act to purportedly foreign conduct. Morrison

22 summarized the standard in the disjunctive: “[W]hether the purchase

23 or sale is made in the United States, or involves a security listed on a 14 No. 17‐648

1 domestic exchange.” 561 U.S. at 269–70 (emphasis added). In

2 applying this standard, Morrison assessed the domestic nature of a

3 transaction of securities that were listed on an Australian exchange,

4 see

, which would have been an unnecessary endeavor under

5 Defendants’ view. Similarly, when we applied Morrison in City of

6 Pontiac Policemen’s & Firemen’s Retirement System v. UBS AG,

(2d Cir. 2014), we specifically assessed, for trades made on foreign

8 exchanges, whether irrevocable liability attached.

at 181–82.

9 Plainly the reasoning of Morrison does not preclude the application of

10 the CEA to trades made on a foreign exchange when irrevocable

11 liability is incurred in the United States. We therefore turn to whether

12 Plaintiffs sufficiently alleged that the parties incurred irrevocable

13 liability for KRX night market trades in the United States.

14 The parties do not dispute that the trades at issue were

15 “matched” in the United States on CME Globex and were “cleared

16 and settled” in Korea. The issue is therefore whether the allegations

17 make it plausible that the parties incurred “irrevocable liability” upon

18 matching. Plaintiffs’ amended complaint alleges not only that KRX

19 night market trades bind the parties on matching, it also alleges that

20 the express view of CME Group is that “matches [on CME Globex]

21 are essentially binding contracts” and “[m]embers are required to

22 honor all bids or offers which have not been withdrawn from the

23 market.” AC ¶¶ 21–22. Nothing in the amended complaint or 15 No. 17‐648

1 elsewhere suggests that a trading party may unilaterally revoke

2 acceptance following matching on CME Globex. It follows from these

3 allegations that, in the “classic contractual sense,” Absolute Activist,

4

, parties incur irrevocable liability on KRX night market

5 trades at the moment of matching.

6 Defendants’ arguments to the contrary are unavailing.

7 Defendants contend that irrevocable liability attaches only at

8 settlement on the KRX the morning after matching on CME Globex.

9 For this contention, they rely on the KRX rules, which, they assert,

10 “provide that KOSPI 200 futures trades become irrevocable only after

11 clearing and settlement.” Br. of Appellees at 47 (emphasis added).

12 We are not convinced. The KRX rules on which Defendants rely state,

13 in Defendants’ words, that “executions may be cancel[l]ed or restated

14 after matching due to errors by the exchange or by a market

15 participant.” Br. of Appellees at 47. Whether the exchange can cancel

16 or modify trades due to errors, by the exchange or by a market

17 participant, however, says nothing about whether either trading

18 party is free to revoke its error‐free acceptance of a trade after

19 matching. Stated differently, that the exchange has the power to

20 rectify errors in the parties’ contracts does not render those contracts

21 “revocable” in any meaningful sense.

22 Defendants next point to a KRX website that, they assert,

23 provides that “‘assumption of liability’ occurs only during the 16 No. 17‐648

1 clearing process,” Br. of Appellee at 48 (alteration omitted), implying,

2 in Defendants’ view, that clearing is the first point at which any

3 liability attaches. Defendants expressed a similar view at oral

4 argument, where counsel contended that liability does not attach at

5 all between the buyer and seller of the futures contract, but, rather,

6 between each and the KRX. This view evinces a fundamental

7 misunderstanding of Plaintiffs’ allegations and exchange trading

8 generally. Although liability might ultimately attach between the

9 buyer/seller and the KRX upon clearing, that does not mean liability

10 does not also attach between the buyer and seller at matching prior to

11 clearing. The mechanics of the transaction support both: (i) the buyer

12 and seller enter a binding irrevocable agreement through matching

13 on CME Globex; and then, subsequently, (ii) through the KRX’s

14 clearing process, the buyer and seller each transfer that liability from

15 each other to the exchange. Before this subsequent transfer of liability

16 takes place in Korea the next morning, trading counterparties are

17 bound to each other, and not to the exchange. This is analogous to

18 the traditional practice, prior to the advent of remote algorithmic

19 high‐speed trading, in which buyers and sellers of commodities

20 futures would “reach[] an agreement on the floor of the exchange”

21 and then subsequently submit their trade to a clearinghouse for

22 clearing and settling. Leist v. Simplot,

(2d Cir. 1980);

23 see also Ryder Energy Distribution Corp. v. Merrill Lynch Commodities 17 No. 17‐648

1 Inc.,

(2d Cir. 1984). Just as the meeting of the minds

2 previously occurred on the exchange floor, Plaintiffs plausibly allege

3 that there is a similar meeting of the minds when the minds of the

4 KRX night market parties meet on CME Globex.

5 The KRX rules themselves acknowledge a pre‐existing liability

6 between trading counterparties prior to the exchange’s assumption of

7 liability. Specifically, the rules provide that after the KRX verifies a

8 trade, “the Exchange shall assume the liability that the member has to the

9 member who is the counterparty of [the] trade and the relevant

10 member bears the liability that the Exchange assumed for it.” App’x

11 441 (emphasis added). This is consistent with the alleged view of

12 CME Group, which indicates in several sources identified in

13 Plaintiffs’ amended complaint that matching on CME Globex creates

14 irrevocable liability (which later is assumed by the exchange).

15 At the least, Plaintiffs’ allegations make it plausible that the

16 parties incurred irrevocable liability for their KRX night market trades

17 on CME Globex in Illinois, which is all that is required at this stage of

18 the litigation. Plaintiffs’ CEA claims should not have been dismissed

19 on extraterritoriality grounds.

20 II. Unjust Enrichment

21 Plaintiffs brought a claim for unjust enrichment, a New York

22 common law quasi‐contract cause of action requiring the plaintiff to

23 establish: “(1) that the defendant benefitted; (2) at the plaintiff’s 18 No. 17‐648

1 expense; and (3) that equity and good conscience require restitution.”

2 Kaye v. Grossman,

(2d Cir. 2000).3 The district court

3 dismissed the claim, concluding that Plaintiffs failed to prove a

4 required “direct relationship” between themselves and the

5 Defendants to support their claim. Myun‐uk Choi, 232 F. Supp. 3d at

6 343. We disagree.

7 Contrary to the district court’s view, a New York unjust

8 enrichment claim requires no “direct relationship” between plaintiff

9 and defendant. In Cox v. Microsoft Corp., the Appellate Division

10 sustained an unjust enrichment claim brought against Microsoft by

11 “indirect purchasers of Microsoft’s software products,” i.e., plaintiffs

12 who had no direct relationship with Microsoft.

, 40–41

13 (1st Dep’t 2004). The court stated “‘[i]t does not matter whether the

14 benefit is directly or indirectly conveyed.’”

at 47 (quoting Mfrs.

15 Hanover Tr. Co. v. Chem. Bank,

, 117–18 (1st Dep’t 1990));

16 see also Grund v. Del. Charter Guarantee & Tr. Co.,

,

17 251 (S.D.N.Y. 2011) (“Unjust enrichment does not require a direct

18 relationship between the parties.”).

19 Rather, the requirement of a connection between plaintiff and

20 defendant is a modest one: “[A] claim will not be supported if the

Applying New York’s conflict of laws principles, the district court 3

concluded that, because there is no conflict between New York and Illinois law, New York law applies. See Myun‐Uk Choi,

. Neither party contests this finding on appeal. 19 No. 17‐648

1 connection between the parties is too attenuated.” Mandarin Trading

2 Ltd. v. Wildenstein,

(2011) (concluding a

3 relationship was too attenuated where there was a complete “lack of

4 allegations that would indicate a relationship between the parties, or

5 at least an awareness by [defendant] of [plaintiff’s] existence”).

6 Plaintiffs’ allegations easily establish a connection sufficient for

7 the unjust enrichment claim to proceed. Plaintiffs alleged it to be a

8 near statistical certainty that they directly traded with Defendants on

9 the KRX night market during the relevant period, in which

10 Defendants continually manipulated the market on which the trades

11 occurred. AC ¶ 31 n.13. Moreover, even if none of Plaintiffs’ trades

12 were executed directly with Defendants, that would not necessarily

13 defeat Plaintiffs’ claim at this stage because Plaintiffs plausibly allege

14 that Defendants’ spoofing strategy artificially moved market prices in

15 a way that directly harmed Plaintiffs while benefitting Defendants. If

16 Plaintiffs bought higher or sold lower than they would have absent

17 Defendants’ manipulation, Defendants would have caused Plaintiffs

18 harm and enriched themselves at Plaintiffs’ expense and “under such

19 circumstances that in equity and good conscience [they] ought not to

20 retain [the funds].” Simonds v. Simonds,

(1978)

21 (internal quotation marks omitted). In our view, the connection

22 between the parties in that situation would not be “too attenuated.” 20 No. 17‐648

1 Consequently, we vacate the district court’s dismissal of Plaintiffs’

2 unjust enrichment claim.4

3 CONCLUSION

4 For the reasons stated above, we VACATE the judgment of the

5 district court and REMAND for further proceedings.

Defendants also assert that Plaintiffs’ unjust enrichment claim must be 4

dismissed as duplicative of Plaintiffs’ CEA claims. Br. of Appellees at 55– 56. Defendants did not raise this argument in their motion to dismiss the amended complaint and it is therefore waived. See Medforms, Inc. v. Healthcare Mgmt. Sols., Inc.,

, 109 (2d Cir. 2002). In any event, it appears to us that the elements of an unjust enrichment claim are distinct from the elements of a CEA manipulation claim. Compare Mobarak v. Mowad,

(2d Dep’t 2014), with In re Amaranth Nat. Gas Commodities Litig.,

(2d Cir. 2013). For example, Plaintiffs’ CEA claim requires a showing that it was Defendants’ intent to create artificial market prices, see In re Amaranth,

, an element Plaintiffs need not establish for their unjust enrichment claim, see Mobarak,

.