Brief in Support of Motion to Dismiss — Wax v. Cross River Bank

Record facts

U.S. District Court for the District of New Jersey · No. 2:24-cv-09510-ES-JRA · Doc. 39-1 · 2025-04-09 · Docket on CourtListener

Full text

UNITED STATES DISTRICT COURT 
DISTRICT OF NEW JERSEY 
MITCHELL WAX, Individually and on Behalf of 
All Other Similarly Situated, 
Plaintiff, 
v. 
CROSS RIVER BANK, 
Defendant. 
Case No. 2:24-cv-09510 (BRM) (JRA)
Document Electronically Filed 
Motion Day:  July 7, 2025 
Oral Argument Requested
BRIEF IN SUPPORT OF MOTION TO DISMISS FOR FAILURE TO STATE  
A CLAIM BY DEFENDANT CROSS RIVER BANK  
Of Counsel: 
John J. Clarke, Jr.* 
john.clarke@us.dlapiper.com
1251 Avenue of the Americas 
New York, New York 10020
(212) 335-4500 
Richard Zelichov* 
richard.zelichov@us.dlapiper.com  
2000 Avenue of the Stars 
Suite 400 North Tower 
Los Angeles, California 90067 
(310) 595-3000 
*Admitted pro hac vice
Dated:  April 9, 2025
DLA PIPER LLP (US) 
Steven M. Rosato 
steven.rosato@us.dlapiper.com  
1251 Avenue of the Americas 
New York, New York 10020
(212) 335-4500 
Attorneys for Defendant 
  Cross River Bank 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 1 of 33 PageID:
837

Table of Contents 
Page 
PRELIMINARY STATEMENT .................................................................................................... 1
BACKGROUND ............................................................................................................................ 4
A.
The Parties .............................................................................................................. 4
B.
Sunlight’s Description of Its Business .................................................................... 5
C.
The Alleged “Scheme to Deceive Sunlight Investors” ........................................... 6
D.
Sunlight’s Financial Condition Deteriorates ........................................................... 7
E.
Sunlight’s Bankruptcy and Settlement of Its Securities Class Action .................... 9
F.
Procedural History ................................................................................................ 10
LEGAL STANDARD ................................................................................................................... 11
ARGUMENT ................................................................................................................................ 12
I.
THE COMPLAINT SHOULD BE DISMISSED FOR FAILURE TO 
STATE A CLAIM UPON WHICH RELIEF CAN BE GRANTED. ............................... 12
A.
The Complaint Impermissibly Asserts a Claim for Aiding and 
Abetting Securities Fraud. .................................................................................... 12
B.
Plaintiff Cannot Avoid Dismissal by Relying on a “Scheme Liability” 
Theory Under Rules 10b-5(a) and (c). .................................................................. 15
1.
Plaintiff Cannot Plead Reliance as a Matter of Law. ................................ 15
2.
The Alleged Purpose of the “Scheme” Was to Make Public 
Misrepresentations or Omissions. ............................................................. 18
3.
Plaintiff Does Not Allege Facts Supporting a 
“Strong Inference” of Scienter. ................................................................. 19
4.
The Complaint Does Not Plead Any 
“Inherently Deceptive” Conduct. .............................................................. 21
5.
The Complaint Also Should Be Dismissed for Lack of 
Standing and Loss Causation. ................................................................... 22
6.
Plaintiff Has Not Alleged Fraud with Particularity. ................................. 23
II.
THE COMPLAINT IS BARRED BY THE SUNLIGHT BANKRUPTCY PLAN 
INJUNCTION AND SECURITIES CLASS ACTION RELEASE. ................................ 24
A.
The Sunlight Bankruptcy Plan Injunction Bars Plaintiff’s Claims. ...................... 24
B.
The Class-Wide Release in the Sunlight Securities Class Action 
Effectively Bars Plaintiff’s Claim. ........................................................................ 25
CONCLUSION ............................................................................................................................. 26
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 2 of 33 PageID:
838

ii 
Table of Authorities 
Page(s) 
Cases 
In re Alstom SA, 
406 F. Supp. 2d 433 (S.D.N.Y. 2005)......................................................................................18 
In re Amarin Corp. PLC., 
2015 WL 3954190 (D.N.J. June 29, 2015) ..............................................................................20 
Ashcroft v. Iqbal, 
556 U.S. 662 (2009) ...........................................................................................................11, 21 
Bell Atl. Corp. v. Twombly, 
550 U.S. 544 (2007) .................................................................................................................11 
In re Bio-Technology Gen. Corp. Sec. Litig., 
380 F. Supp. 2d 574 (D.N.J. 2005) ..........................................................................................21 
In re BioLineRx Ltd. Sec. Litig., 
2024 WL 3409800 (D.N.J. July 15, 2024) ...................................................................11, 23, 24 
Born v. Quad/Graphics, Inc., 
521 F. Supp. 3d 469 (S.D.N.Y. 2021)................................................................................22, 23 
Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 
511 U.S. 164 (1994) ......................................................................................................... passim
Copland v. Grumet, 
88 F. Supp. 2d 326 (D.N.J. 1999) ........................................................................................1, 14 
In re Dr. Reddy’s Lab. Ltd. Sec. Litig., 
2019 WL 1299673 (D.N.J. Mar. 21, 2019) ..............................................................................22 
ECA, Loc. 134 IBEW Joint Pension Tr. of Chicago v. JP Morgan Chase Co., 
553 F.3d 187 (2d Cir. 2009).....................................................................................................21 
In re Essar Steel Minnesota, LLC, 
652 B.R. 709 (Bankr. D. Del. 2023) ........................................................................................24 
Fulton Fin. Advisors, Nat’l Ass’n v. NatCity Invs., Inc., 
2013 WL 5635977 (E.D. Pa. Oct. 15, 2013)............................................................................20 
GSC Partners CDO Fund v. Washington, 
368 F.3d 228 (3d Cir. 2004).....................................................................................................20 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 3 of 33 PageID:
839

iii 
Page(s) 
Henry v. Futu Holdings Ltd., 
2024 WL 4285129 (D.N.J. Sept. 25, 2024) ...........................................................11, 12, 21, 23 
In re Hertz Glob. Holdings Inc., 
905 F.3d 106 (3d Cir. 2018)...............................................................................................11, 19 
Institutional Inv’rs Grp. v. Avaya, Inc., 
564 F.3d 242 (3d Cir. 2009)...............................................................................................11, 20 
Janus Cap. Grp., Inc. v. First Deriv. Traders, 
564 U.S. 135 (2011) .........................................................................................................1, 2, 13 
Kalnit v. Eichler, 
246 F.3d 131 (2d Cir. 2001).....................................................................................................20 
Lentell v. Merrill, Lynch & Co., 
396 F.3d 161 (2d Cir. 2005).....................................................................................................22 
Lewakowski v. Aquestive Therapeutics, Inc., 
2023 WL 2496504 (D.N.J. Mar. 14, 2023) ..............................................................................20 
McCabe v. Ernst & Young, LLP, 
494 F.3d 418 (3d Cir. 2007).....................................................................................................22 
In re Mindbody, Inc. Sec. Litig., 
489 F. Supp. 3d 188 (S.D.N.Y. 2020)......................................................................................18 
United States ex rel. Moore & Co, P.A. v. Majestic Blue Fisheries, LLC, 
812 F.3d 294 (3d Cir. 2016).....................................................................................................23 
In re N. Telecom Sec. Litig., 
116 F. Supp. 2d 446 (S.D.N.Y. 2000)......................................................................................20 
In re Nanthealth, Inc. Stockholder Deriv. Litig., 
2021 WL 1909885 (D. Del. May 12, 2021) .............................................................................25 
Nat’l Junior Baseball League v. Pharmanet Dev. Grp. Inc., 
720 F. Supp. 2d 517 (D.N.J. 2010) ....................................................................................20, 23 
Pac. Inv. Mgmt. Co. v. Mayer Brown LLP, 
603 F.3d 144 (2d Cir. 2010).....................................................................................................17 
In re Prudential Ins. Co. of Am. Sales. Prac. Litig., 
261 F.3d 355 (3d Cir. 2001).....................................................................................................25 
Rahman v. Kid Brands, Inc., 
736 F.3d 237 (3d Cir. 2013)...............................................................................................19, 21 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 4 of 33 PageID:
840

iv 
Page(s) 
In re RenovaCare, Inc. Sec. Litig., 
2024 WL 2815034 (D.N.J. June 3, 2024) ....................................................................14, 15, 22 
S.E.C. v. Lucent Techs., Inc., 
610 F. Supp. 2d 342 (D.N.J. 2009) ....................................................................................19, 22 
Sbarra v. Horizontal Expl., LLC, 
2015 WL 1201329 (W.D. Pa. Mar. 16, 2015) .........................................................................14 
SEC v. Kelly, 
817 F. Supp. 2d 340 (S.D.N.Y. 2011)..................................................................................4, 18 
Shapiro v. Cantor, 
123 F.3d 717 (2d Cir. 1997).....................................................................................................14 
Sprauve v. W. Indian Co., 
799 F.3d 226 (3d Cir. 2015).......................................................................................................4 
Stichting Pensioenfonds ABP v. Merck & Co., 
2012 WL 3235783 (D.N.J. Aug. 1, 2012) ...................................................................15, 18, 19 
Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 
552 U.S. 148 (2008) .......................................................................................................2, 16, 17 
Takata v. Riot Blockchain, Inc., 
2020 WL 2079375 (D.N.J. Apr. 30, 2020) ..............................................................................23 
Takata v. Riot Blockchain, Inc., 
2023 WL 7133219 (D.N.J. Aug. 25, 2023) .............................................................................18 
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 
551 U.S. 308 (2007) .................................................................................................4, 12, 19, 21 
Trustcash Holdings, Inc. v. Moss, 
668 F. Supp. 2d 650 (D.N.J. 2009) ....................................................................................15, 22 
In re Turquoise Hill Res. Ltd. Sec. Litig., 
625 F. Supp. 3d 164 (S.D.N.Y. 2022)................................................................................18, 22 
United States v. Schiff, 
602 F.3d 152 (3d Cir. 2010).....................................................................................................14 
Winer Family Tr. v. Queen, 
503 F.3d 319 (3d Cir. 2007).................................................................................................4, 22 
Wright v. Ernst & Young LLP, 
152 F.3d 169 (2d Cir. 1998)...............................................................................................13, 14 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 5 of 33 PageID:
841

v 
Page(s) 
Statutes, Regulations, and Rules 
11 U.S.C. § 1124 ..............................................................................................................................9 
15 U.S.C. § 78j(b) ................................................................................................................1, 10, 16 
15 U.S.C. § 78u-4(b)(2) .....................................................................................................11, 15, 19 
15 U.S.C. § 78u-4(b)(4) .................................................................................................................22 
17 C.F.R.. § 240.10b-5 ........................................................................................................... passim 
17 C.F.R. § 240.10b-5(a) .....................................................................................................1, 10, 15 
17 C.F.R. § 240.10b-5(b) ...............................................................................................1, 10, 18, 19 
17 C.F.R. § 240.10b-5(c) .....................................................................................................1, 10, 15 
Fed. R. Civ. P. 12(b)(6)..........................................................................................................1, 4, 11 
Fed. R. Civ. P. 9(b) ......................................................................................................11, 12, 15, 23 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 6 of 33 PageID:
842

Cross River Bank (“CRB”), the only defendant in this action, respectfully submits this brief 
in support of its motion to dismiss the complaint for failure to state a claim under Federal Rule of 
Civil Procedure 12(b)(6).   
PRELIMINARY STATEMENT 
This is a securities action in which the plaintiff asserts a single claim, under section 10(b) 
of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, on behalf of a putative class 
of purchasers of stock issued by Sunlight Financial Holdings, Inc.  His claim has not been asserted 
against Sunlight – or any director or officer of Sunlight.  Instead, the only defendant is CRB, 
a New Jersey bank that has no publicly registered securities.  The complaint does not allege that 
CRB made any actionable statement.  See Compl. ¶ 91.  The only challenged statements were 
made by Sunlight, and plaintiff does not allege that CRB played any role in making them.   
Instead, plaintiff’s claim against CRB is predicated on the entirely conclusory assertion 
that CRB was a participant in a “scheme” with Sunlight purportedly intended to deceive Sunlight 
investors.  Compl. ¶¶ 1, 7, 9-10, 73, 75.  That is no more than a claim for “aiding and abetting 
liability,” for which there is no private right of action under Rule 10b-5.  Central Bank of Denver, 
N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 185, 191 (1994).  Given the dispositive 
holding in Central Bank, plaintiff strains to suggest he is asserting some claim other than one for 
“aiding and abetting” liability.  But a plaintiff cannot avoid the “prohibitive bar” articulated in 
Central Bank through semantics or the use of “synonyms.”  Copland v. Grumet, 88 F. Supp. 2d 
326, 334 (D.N.J. 1999).  It is undisputed that CRB was not a “maker” of any alleged challenged 
statement, and that means CRB cannot be liable under Rule 10b-5 as a “primary violator.”  Janus 
Cap. Grp., Inc. v. First Deriv. Traders, 564 U.S. 135, 143-44 (2011).   
Nor can a securities plaintiff avoid limitations on misstatement claims under Rule 10b-5(b) 
by portraying his claim as one for “scheme liability” under Rules 10b-5(a) or 10b-5(c).  That is 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 7 of 33 PageID:
843

2 
another tactic the Supreme Court has considered and prohibited.  Allegations of undisclosed 
conduct by an issuer’s business partners cannot be a basis for “scheme liability” because the 
conduct “is too remote” from any investor’s decision to purchase or sell securities “to satisfy the 
requirement of reliance.”  Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, 552 U.S. 148, 161 
(2008).  The holdings in Central Bank, Stoneridge, and Janus prohibit plaintiff’s claims against 
CRB here, and that alone is sufficient to require dismissal of the complaint with prejudice.   
But even if those Supreme Court decisions were not dispositive, the complaint does not 
plausibly allege an actionable “scheme liability” claim.  For one thing, plaintiff has not alleged 
any coherent theory of scienter, much less facts that could give rise to the required “strong 
inference” that CRB acted with fraudulent intent.  Plaintiff’s allegations that CRB made financial 
concessions and loaned additional money to Sunlight as Sunlight faced financial headwinds due 
to rising interest rates demonstrate that CRB was acting with the opposite of fraudulent intent.  See
Compl. ¶¶ 49-70.  Under plaintiffs’ theory that CRB knew that Sunlight was inevitably going to 
fail, CRB would have been knowingly throwing good money after bad in making those 
accommodations to Sunlight.  One can only speculate what plaintiff would have claimed if CRB 
had not done so – undoubtedly leading to its bankruptcy even earlier. 
The complaint also fails to allege that CRB engaged in any inherently deceptive conduct, 
the sine qua non of a fraudulent “scheme.”  To the contrary, plaintiff alleges that CRB was a 
Sunlight counterparty in arm’s-length, legitimate business transactions having no plausible 
connection to the purchase or sale of Sunlight securities by plaintiff or anyone else.  There is no 
allegation of market manipulation, “pumping and dumping,” or similar types of misconduct in the 
securities markets.  Separately, all of plaintiff’s alleged purchases of Sunlight stock occurred 
before CRB even engaged in any of the alleged conduct that the complaint asserts was part of a 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 8 of 33 PageID:
844

3 
“scheme,” which means plaintiff would have no standing to assert his claim for a securities 
violation even if he had one.  Nor does the complaint plausibly allege that conduct by CRB was 
the cause of his claimed loss.   
In addition to its many incurable pleading defects, plaintiff’s securities claim against CRB 
also violates an injunction in the bankruptcy court order approving Sunlight’s chapter 11 plan of 
reorganization.  The injunction bars any suit that affects the assets of reorganized Sunlight, whether 
“directly or indirectly,” and this action plainly does.  CRB has broad indemnification rights under 
its agreements with Sunlight, including for the claims asserted here, meaning that plaintiff’s claims 
directly implicate the assets of reorganized Sunlight.  Separately, plaintiff’s claim was released in 
the settlement of an earlier securities class action against Sunlight, which was approved in 
December 2024 by a judge in the Southern District of New York – over plaintiff’s objection.  Even 
if plaintiff had pleaded a securities claim against CRB – and he has not done so – these additional 
issues also would require his claim to be dismissed. 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 9 of 33 PageID:
845

4 
BACKGROUND1
A. 
The Parties 
Plaintiff alleges he purchased shares of Sunlight common stock between January 2021 and 
September 2022 and “suffered damages.”  Compl. ¶ 27 & Exh. A at Sched. A.  Sunlight is not a 
party.  Compl. ¶ 29.2  Formed in 2020, Sunlight was a “technology-enabled point-of-sale financing 
platform” for residential solar installations.  Id.¶¶ 29-30.  Sunlight allegedly financed residential 
solar installations through loans that “were funded by Sunlight’s capital providers,” id. ¶ 29, one 
of which was CRB, id. ¶ 35.  Sunlight’s common stock began trading on the New York Stock 
Exchange in July 2021.  Id.¶¶ 31-32.  The NYSE delisted Sunlight’s stock on September 25, 2023, 
and Sunlight filed for bankruptcy around a month later.  Id. ¶¶ 69-70.  
CRB is a privately held, New Jersey-chartered bank, id. ¶ 28, that does not have registered 
securities and does not make periodic filings with the U.S. Securities and Exchange Commission 
(“SEC”).  The complaint alleges that Sunlight’s SEC filings referred to CRB as Sunlight’s “Bank 
Partner.”  Id. ¶ 1.  CRB allegedly provided funding for Sunlight “Indirect Channel Loans” 
beginning in 2018.  Id. ¶¶ 34, 46.   
There is no allegation that CRB made any challenged public statement or participated in 
any way in the preparation or dissemination of any of Sunlight’s public disclosures.  The complaint 
does not allege that CRB purchased or sold Sunlight securities at any relevant time.   
1 Well-pleaded factual allegations are assumed to be true solely for the purpose of this 
motion to dismiss under Rule 12(b)(6).  Sprauve v. W. Indian Co., 799 F.3d 226, 227 (3d Cir. 
2015).  In considering the motion, the Court also may consider “documents incorporated into the 
complaint by reference, and matters of which a court may take judicial notice.”  Winer Family Tr. 
v. Queen, 503 F.3d 319, 327 (3d Cir. 2007) (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., 
551 U.S. 308, 322 (2007)).  Citations to “Exh. __” refer to exhibits to the accompanying 
Declaration of Steven M. Rosato dated April 9, 2025.   
2 At the time of its initial public offering, Sunlight was known as Spartan Acquisition 
Corp. II, a special purpose acquisition company.  Id. ¶¶ 30-32. 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 10 of 33 PageID:
846

5 
B. 
Sunlight’s Description of Its Business 
Sunlight’s disclosures described its business as a financing platform through which 
residential solar and home improvement contractors could provide “point-of-sale (POS) financing 
to customers[.]”  Id. ¶ 33.  Sunlight allegedly “differentiated itself” from others “by offering 
generous cash advances to contractors[.]”  Id.
Plaintiff alleges Sunlight facilitated the origination of loans through “third-party lenders in 
two distinct ways.”  First, through “Direct Channel Loans,” which were originated by third-party 
lenders “directly using their own credit criteria[,]” with funds remitted to Sunlight, who would 
then pay the contractors and retain the balance after those payments.  Compl. ¶ 34.  Second, 
through “Indirect Channel Loans,” which were funded by an “intermediary bank partner[]” and 
later “sold to indirect channel capital providers that [could not], or [did] not wish to, directly 
originate solar loans.”  Id. ¶¶ 34, 36.3
For indirect channel loans, Sunlight allegedly would pay its “bank partner” a fee for 
originating the loans, which would remain on the balance of sheet of the bank partner until sold to 
third-party capital providers.  Compl. ¶¶ 34, 36-37, 40-41.  If Sunlight sold the loans at a price 
higher than the bank’s cost basis, Sunlight would retain the difference.  Id. ¶ 41.  Sunlight also 
generated revenue from loan portfolio and management services after the loans were sold.  Id.
¶ 36.  Sunlight warned investors that it could incur losses if the indirect loans were sold at a price 
lower than the bank’s cost basis.  Id. ¶¶ 39, 41.  Sunlight also warned that its agreements with its 
“bank partner” required Sunlight to sell indirect loans within a certain period and, upon expiration 
3 The disclosures alleged in paragraphs 33-44 of the complaint were included in an 
amended quarterly report dated November 19, 2021 filed by Sunlight on Form 10-Q/A.  
Compl. ¶ 34 n.1; see Exh. 1 (copy of Form 10Q/A).  
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 11 of 33 PageID:
847

6 
of that period, the bank partner could require Sunlight to purchase the loans and hold them directly 
on Sunlight’s balance sheet.  Id.
Plaintiff alleges that Sunlight did not accurately disclose the accounting method it 
employed to record the value of certain loans.  Id. ¶ 44.  According to plaintiff, that “meant that 
any fair value changes in” those loans “would go unaccounted for on Sunlight’s financial 
statements and concealed from Sunlight’s stockholders.”  Id.  The complaint does not allege that 
CRB had any role in either the preparation of Sunlight’s financial statements or decision-making 
with respect to Sunlight accounting methods.  CRB is not specifically identified in Sunlight’s 
amended quarterly report filed on November 19, 2021, which is the apparent basis for these 
allegations.  See Exh. 1.   
C. 
The Alleged “Scheme to Deceive Sunlight Investors”  
In four conclusory paragraphs, the complaint describes an alleged “scheme” from January 
2021 until October 2023 by which CRB allegedly undertook “to deceive Sunlight investors which 
artificially inflated the price of Sunlight stock . . . .”  Compl. ¶¶ 45-48.  Plaintiff alleges “CRB 
knowingly facilitated loans to disreputable solar contractors of dubious credit quality” and made 
“Indirect Channel Loans” that were retained “on CRB’s balance sheet but for which Sunlight 
retained the risk of loss[,]” id. ¶ 45, just as Sunlight explained in its periodic filings, id. ¶¶ 36-37.  
The complaint describes investigations and lawsuits involving two allegedly “disreputable solar 
contractors,” id. ¶¶ 46-47, but there are no allegations connecting CRB to any investigation or 
lawsuit concerning them.  The complaint asserts that “CRB, as Sunlight’s Bank Partner, knowingly 
granted ever-increasing amounts of credit to Sunlight and its contractors . . . , repeatedly lifted its 
loan caps, and waived defaults under its agreements with Sunlight, all with knowledge that such 
defaults and Sunlight’s unsustainable debt load were being concealed from Sunlight’s investors.”  
Id. ¶ 48.   
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 12 of 33 PageID:
848

7 
D. 
Sunlight’s Financial Condition Deteriorates 
The remainder of the complaint’s substantive allegations comprise a summary of 
disclosures made by Sunlight about its worsening condition between September 28, 2022, and 
October 31, 2023.  See Compl. ¶¶ 49-70.  On September 28, 2022, Sunlight filed a current report 
on SEC Form 8-K disclosing “that it was taking a non-cash advance receivable impairment” due 
to “liquidity issues” involving one solar installation contractor.  Id. ¶ 49.  The Form 8-K did not 
mention CRB.  See Exh. 2. 
In a quarterly report on Form 10-Q filed on November 14, 2022, Sunlight warned that, due 
to a “rapid and significant increase in interest rates,” “Sunlight expect[ed] to incur significant 
losses relating to its current portfolio of Indirect Channel Loans . . . .”  Id. ¶¶ 50-51.  Sunlight 
further disclosed that it was “currently considering a range of strategic alternatives that may be 
available to Sunlight to maximize stakeholder value, including but not limited to financings, 
strategic alliances, or a possible business combination or sale of the business.”  Id. ¶ 52.   
Next, the complaint summarizes a series of Sunlight disclosures between December 2022 
and September 2023.  Id. ¶¶ 54-69.  On December 13, 2022, Sunlight disclosed that CRB had 
agreed to “more than doubl[e]” its loan capacity to enable Sunlight to continue originating loans 
through the indirect channel.  Id. ¶¶ 54-55; see Exh. 3.  Sunlight also disclosed, however, that it 
was seeking “to sell a material portion of” so-called “Backbook Loans” – unsold loans that CRB 
had funded – by the second quarter of 2023.  Id. ¶ 56.  Sunlight warned that sales of “Backbook 
Loans” could negatively impact Sunlight’s financial position, including by “significantly 
reduc[ing]” its cash balance and resulting in a “losses of platform fee revenue . . . .”  Id.
Consistent with those disclosures, on March 17, 2023, Sunlight reported that “in order to 
comply with agreements with its bank partner, the Company sold a portion of the Backbook Loans 
and recorded losses as negative platform fees.”  Id. ¶ 59.  That Form 8-K also disclosed that “as a 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 13 of 33 PageID:
849

8 
result of the sale of Backbook Loans, the Company expect[ed] to report losses on loan sales that 
significantly exceed such losses for the year ended December 31, 2021.”  Id.  By the time of that 
disclosure, plaintiff alleges, the price of Sunlight’s common stock had fallen to $0.30 per share.  
Id. ¶ 60.   
Then, on April 3, 2023, Sunlight reported that it had entered into an agreement with CRB 
under which CRB would further increase its loan capacity, agreed to “grant[] Sunlight certain 
grace periods,” and “extended Sunlight a $100 million loan facility to be used to repay Sunlight’s 
borrowings from” another lender.  Compl. ¶ 61.  In connection with these arrangements, CRB 
received “Warrants from Sunlight representing 19.9% of the shares outstanding.”  Id.
Sunlight announced its first quarter earnings the next month, id. ¶¶ 63-65, which included 
disclosures that in April 2023 Sunlight had sold a substantial portion of indirect channel loans and 
that CRB’s agreement to increase its loan capacity and extend the maturity of the loans “enable[d] 
Sunlight to continue originating loans in the Indirect Channel.”  Id. ¶ 64.  Sunlight’s chief 
executive officer expressed optimism that Sunlight’s new agreements with CRB “position us to 
resolve our challenges from last year by strengthening our liquidity and enabling us to resume 
Indirect Channel loan sales . . . .”  Id.¶ 65.   
Nevertheless, plaintiff alleges, “Sunlight’s financial picture rapidly spiraled downward[,]” 
with the price of its common stock declining to $0.23 per share by August 10, 2023.  Id. ¶ 66.  
Sunlight announced a 1-for-20 reverse stock split on August 23, 2023.  Id. ¶ 67.  Then, on 
September 13, 2023, Sunlight disclosed that: 
CRB waived certain provisions of its prior loan agreements including 
certain cash payments due on October 31, 2023, waived certain repurchase 
obligations, waived certain consequences of a Sunlight default of the 
agreements, revised requirements of certain loan sales, and revised the 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 14 of 33 PageID:
850

9 
provisions that required Sunlight to maintain certain cash balances in its 
accounts with CRB. 
Id. ¶ 68.  Two weeks later, Sunlight announced that the NYSE had suspended trading in and 
delisted its common stock.  Id. ¶ 69.   
E. 
Sunlight’s Bankruptcy and Settlement of Its Securities Class Action 
On October 31, 2023, Sunlight announced that it had filed a petition under chapter 11 
petition of the Bankruptcy Code.  Compl. ¶ 70.  The complaint asserts that Sunlight’s 
announcement of its bankruptcy filing was the disclosure that revealed “CRB’s fraudulent scheme 
to artificially inflate the price of Sunlight’s shares to its own economic aggrandizement.”  Id.  The 
complaint alleges CRB agreed to “provide exit financing” in the bankruptcy case “in return for 
12.5% of the New Equity in the reorganized company[,]” id. ¶ 70, but plaintiff does not mention 
whether CRB suffered losses as the result of pre-petition loans originated for Sunlight. 
Sunlight’s chapter 11 filing led to a reorganization plan that was approved by the 
bankruptcy court in an order entered on December 5, 2023.  Id. ¶ 22; see Exh. 4 (Sunlight plan).  
Under the plan, CRB was recognized to hold allowed claims against the Sunlight bankruptcy estate 
of more than $114 million.  Sunlight Plan § 4.3(b)(i).  Those claims were deemed “impaired,” 
meaning that CRB’s rights (including the right to full repayment) were adversely affected.  
Id. § 4.3(d); see 11 U.S.C. § 1124.  Under the plan, CRB received equity in reorganized Sunlight 
and a cash payment in exchange for the full and final release of its allowed claims.  Sunlight Plan 
§ 4.3(c)(i).  CRB also agreed to continue to do business with reorganized Sunlight under amended 
lending program agreements.  Id. § 4.3(c)(i)-(ii); see id. §§ 1.7, 1.8, 1.12, 1.81, 1.82, 5.12. 
The bankruptcy court order confirming the plan included an injunction that broadly 
prohibited any person who previously held an interest in Sunlight from pursuing any claim 
“affecting, directly or indirectly” the assets of reorganized Sunlight.  Sunlight Plan § 10.6.  Under 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 15 of 33 PageID:
851

10 
its agreements with reorganized Sunlight (and prior iterations of them in effect prior to Sunlight’s 
bankruptcy), CRB is entitled to indemnification for any losses arising out of the parties’ contractual 
relationship.  See Exh. 5, Loan Program Agmt. § 10.1; Exh. 6, Loan & Sec. Agmt. § 11.3.   
Separately, months before the bankruptcy case, Sunlight was sued for securities fraud 
based on substantially similar allegations to those asserted here.  See Fung v. Sunlight Financial 
Holdings Inc., No. 1:22-cv-10658 (S.D.N.Y.).  The operative complaint in that action asserted 
claims under sections 10(b), 14(a), and 20(a) of the Exchange Act on behalf of a putative class.  
Exh. 6, Sunlight Compl. ¶ 1.  On December 16, 2024, over plaintiff’s objection because he was 
concerned that the release would apply to his claims in this action, the court approved a settlement 
that included a release of all claims arising out of, based upon, or in any way related to the purchase 
and sale of Sunlight common stock from January 25, 2021 through and including September 28, 
2022 against releasees that included Sunlight’s “shareholders” and “partners.”  Exh. 7, Sunlight 
Settlement ¶¶ 1.6, 1.27, 1.28, 1.35, 5.1. 
F. 
Procedural History 
Plaintiff filed his complaint on September 27, 2024 asserting a single claim against CRB 
on behalf of a putative class of purchasers of “Sunlight stock” between January 25, 2021 and 
October 31, 2023, inclusive, under section 10(b) of the Exchange Act, 15 U.S.C. § 78j(b), and 
Rule 10b-5, 17 C.F.R.. § 240.10b-5.  Compl. ¶¶ 81, 87-95.  Plaintiff purports to assert the claim 
“solely and exclusively under the provisions of Rule 10b-5(a) and (c)” and does not allege that 
CRB “made any misrepresentations or omissions of material fact for which it may also be liable 
under Rule 10b-5(b) . . . .”  Id. ¶ 88.   
Plaintiff was the only putative class member who filed an application to be appointed lead 
plaintiff under the Private Securities Litigation Reform Act of 1995 (“PSLRA”).  [ECF No. 9].  In 
an order entered on January 8, 2025, the Court appointed plaintiff the lead plaintiff.  [ECF No. 16].  
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 16 of 33 PageID:
852

11 
On February 6, 2025, plaintiff designated his original complaint to be the operative complaint 
instead of amending that pleading.  [ECF No. 19].   
LEGAL STANDARD 
To avoid dismissal under Rule 12(b)(6), “a 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 facially plausible claim is one that enables the court “to draw the reasonable inference that the 
defendant is liable for the misconduct alleged.”  Id.  The plaintiff must “allege facts showing ‘more 
than a sheer possibility that a defendant has acted unlawfully.’”  In re BioLineRx Ltd. Sec. Litig., 
2024 WL 3409800, at *5 (D.N.J. July 15, 2024) (Martinotti, J.) (quoting Iqbal, 556 U.S. at 678).  
“Conclusory or ‘bare-bones’ allegations” are insufficient; instead, to avoid dismissal, the 
complaint “must set out ‘sufficient factual matter’ to show that the claim is facially plausible[.]”  
Henry v. Futu Holdings Ltd., 2024 WL 4285129, at *10 (D.N.J. Sept. 25, 2024) (Martinotti, J.) 
(quoting Iqbal, 556 U.S. at 678).  Dismissal is required “where the well-pleaded facts do not permit 
the court to infer more than the mere possibility of misconduct.”  Id. (cleaned up) (quoting Iqbal, 
556 U.S. at 679).   
In addition, “because this is a securities fraud case, plaintiff[] must satisfy the heightened 
pleading rules codified in the [PSLRA]” and the heightened pleading requirements in Rule 9(b).  
BioLineRx, 2024 WL 3409800, at *6 (citing Institutional Inv’rs Grp. v. Avaya, Inc., 564 F.3d 242, 
252 (3d Cir. 2009)).  The PSLRA requires a securities fraud complaint to “state with particularity 
facts giving rise to a strong inference that the defendant acted with the required state of mind” – 
scienter, 15 U.S.C. § 78u-4(b)(2), which requires allegations supporting an inference of fraudulent 
intent that is “cogent and at least as compelling as any opposing inference one could draw from 
the facts alleged.”  In re Hertz Glob. Holdings Inc., 905 F.3d 106, 114 (3d Cir. 2018) (quoting 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 17 of 33 PageID:
853

12 
Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 324 (2007)).  Under Rule 9(b), the 
complaint also must “state with particularity the circumstances constituting fraud or mistake,” i.e., 
“the who, what, when, where and how of the events at issue.”  Henry, 2024 WL 4285129, at *11-12 
(cleaned up); see Fed. R. Civ. P. 9(b). 
ARGUMENT 
I. 
THE COMPLAINT SHOULD BE DISMISSED FOR FAILURE TO STATE A 
CLAIM UPON WHICH RELIEF CAN BE GRANTED. 
A. 
The Complaint Impermissibly Asserts a Claim for Aiding and Abetting 
Securities Fraud. 
Plaintiff is not attempting to hold CRB primarily liable under the federal securities laws 
but instead seeks to hold CRB secondarily liable for securities violations allegedly committed by 
Sunlight.  The complaint alleges CRB “enabled,” “helped,” or “allowed” Sunlight to mislead 
investors through its lending program with Sunlight, which plaintiff asserts (mistakenly) that 
Sunlight did not disclose.  Compl. ¶¶ 1, 7, 9-10, 23, 72; see also id. ¶ 73 (alleging that CRB 
“participated in a scheme to defraud”) (emphasis added).  That is just another way of alleging that 
CRB aided and abetted allegedly misleading public statements by Sunlight, and private plaintiffs 
are barred from asserting such “aiding and abetting” claims under Rule 10b-5.  Central Bank of 
Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 185, 191 (1994).   
The complaint admits CRB did not make any “public statements” to Sunlight’s investors.  
Only Sunlight did.  Compl. ¶ 91; see id. ¶ 73 (alleging that “CRB had actual knowledge of the 
misleading nature of the statements made by Sunlight”).  In wholly conclusory terms, plaintiff 
alleges that CRB “furnish[ed]” unspecified “false and misleading statements that were used” by 
Sunlight in its public disclosures.  Id. ¶ 91.  But even if plaintiff had offered any factual basis for 
that allegation (which he has not done), CRB still cannot be liable on a misstatement theory under 
Rule 10b-5 because there is no dispute that CRB was not the “maker” of any statement, meaning 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 18 of 33 PageID:
854

13 
“the entity with authority over the content of the statement and whether and how to communicate 
it.”  Janus Cap. Grp., Inc. v. First Deriv. Traders, 564 U.S. 135, 144 (2011).  Under Janus, even 
a person “contribut[ing] ‘substantial assistance’ to the making of a statement” cannot be held liable 
in a private action under Rule 10b-5 if they do not make the statement themselves.  Id. at 143.   
The Janus limitation on permissible claims under Rule 10b-5 is a logical corollary to the 
holding in Central Bank “that Rule 10b-5’s private right of action does not include suits against 
aiders and abettors.”  Id. (citing Central Bank, 511 U.S. at 180).  As the Court observed in 
Central Bank, if a private plaintiff could proceed under Rule 10b-5 on an aiding-and-abetting 
theory, “the defendant could be liable without any showing that the plaintiff relied upon the aider 
and abettor’s statements or actions[,]” thereby skipping over an essential requirement for any Rule 
10b-5 claim.  Central Bank, 511 U.S. at 180. 
The Janus Court expressly meant its narrow interpretation of who can be a “maker” to 
provide support for the earlier, categorical bar against private claims for aiding-and-abetting 
liability under Rule 10b-5 in Central Bank.  Janus, 564 U.S. at 142-43.  As the Janus Court noted, 
“[i]f persons or entities without control over the content of a statement could be considered primary 
violators who ‘made’ the statement, then aiders and abettors would be almost nonexistent.”  Id. at 
143; see also id. at 143 n.6.  Without some meaningful limitation on the persons who can be a 
“maker,” the line between primary violators and purported “aiders and abettors” would be blurred, 
“substantially undermin[ing] Central Bank.”  Id. at 143.   
Even before Janus, courts were clear that “a defendant must actually make a false or 
misleading statement in order to be held liable under [s]ection 10(b).  Anything short of such 
conduct is merely aiding and abetting, and no matter how substantial that aid may be, it is not 
enough to trigger liability under [s]ection 10(b).”  Wright v. Ernst & Young LLP, 152 F.3d 169, 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 19 of 33 PageID:
855

14 
175 (2d Cir. 1998); see United States v. Schiff, 602 F.3d 152, 167 (3d Cir. 2010) (citing Wright
with approval).   
And courts within the Third Circuit regularly have dismissed Rule 10b-5 claims against 
defendants that only were alleged to have “assisted” an alleged fraud.  In re RenovaCare, Inc. Sec. 
Litig., 2024 WL 2815034, at *27 (D.N.J. June 3, 2024) (Martinotti, J.) (dismissing claims against 
defendants that allegedly received “ill-gotten funds” based on “theory that they are secondarily 
liable”); Sbarra v. Horizontal Expl., LLC, 2015 WL 1201329, at *8-9 (W.D. Pa. Mar. 16, 2015) 
(dismissing claims where complaint did not allege that defendants “participated in the 
communication of any material misrepresentations”); Copland, 88 F. Supp. 2d at 332-34 (alleged 
“participation in” preparation of statements insufficient).  Plaintiff has not alleged anything beyond 
inactionable “assistance” by CRB here.  According to the complaint, CRB violated the federal 
securities laws solely by participating in a supposed “scheme” with Sunlight to “conceal” 
information from Sunlight’s own investors; the alleged “scheme” was effectuated through public 
statements that were “made by Sunlight” and by Sunlight alone.  Compl. ¶ 91.   
To be sure, the complaint studiously avoids the words “aiding and abetting” in portraying 
CRB’s alleged role.  Instead, plaintiff invokes obviously synonymous phrases, alleging that CRB 
“participated in,” “enabled,” “help[ed],” or “allowed” Sunlight to make its alleged 
misrepresentations.  Compl. ¶¶ 1, 7, 9-10, 73, 75.  But such semantic gamesmanship cannot 
provide plaintiff a way around the “prohibitive bar of Central Bank” against aiding and abetting 
claims.  Shapiro v. Cantor, 123 F.3d 717, 720 (2d Cir. 1997); see Copland, 88 F. Supp. 2d at 334 
(same).   
The complaint asserts transparent claims against CRB for secondary liability based on 
statements made by Sunlight.  Because plaintiff “cannot pursue [his] claims against [CRB] under 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 20 of 33 PageID:
856

15 
a theory that [it is] secondarily liable[,]” RenovaCare, 2024 WL 2815034, at *27, the complaint 
should be dismissed in its entirety and with prejudice.  
B. 
Plaintiff Cannot Avoid Dismissal by Relying on a “Scheme Liability” Theory 
Under Rules 10b-5(a) and (c). 
To avoid the dispositive holding in Central Bank, plaintiff styles his claim as one for 
“scheme” liability “under Rule 10b-5(a) and (c).”  Compl. ¶ 88; see Stichting Pensioenfonds ABP 
v. Merck & Co., 2012 WL 3235783, at *7 (D.N.J. Aug. 1, 2012) (claims under subparts (a) and (c) 
commonly referred to as ‘scheme liability’ claims”).  But that approach does not cure the fatal 
defects in his claim. 
To state a claim under Rule 10b-5(a) or (c), “a plaintiff must allege that the defendant 
(1) committed a manipulative or deceptive act, (2) in furtherance of [an] alleged scheme to defraud, 
(3) scienter, (4) and reliance.”  Trustcash Holdings, Inc. v. Moss, 668 F. Supp. 2d 650, 661 
(D.N.J. 2009).  Scheme claims are “subject to the PSLRA, and thus scienter must be pled with 
particularity under 15 U.S.C. § 78u-4(b)(2).”  Stichting, 2012 WL 3235783, at *7.  And because 
the claims sound in fraud, they also “must comply with the heightened pleading requirements of” 
Rule 9(b), requiring a plaintiff to allege “what manipulative acts were performed, which 
defendants performed them, when the manipulative acts were performed and what effect the 
scheme had on the securities at issue.”  Id. (internal quotations omitted).   
There are at least six separate legal flaws that require plaintiff’s “scheme” claim to be 
dismissed. 
1. 
Plaintiff Cannot Plead Reliance as a Matter of Law.   
The Supreme Court resoundingly has rejected “scheme” claims based on supposedly 
undisclosed “deceptive acts” by a third-party business partner of a securities issuer, because 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 21 of 33 PageID:
857

16 
allegations about such undisclosed third-party conduct “are too remote to satisfy the requirement 
of reliance.”  Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 161 (2008)  
The plaintiff in Stoneridge asserted section 10(b) claims against two “suppliers, and later 
customers, of Charter[,]” a publicly traded cable television company that allegedly “issue[d] a 
misleading financial statement affecting [its own] stock price.”  552 U.S. at 152-53.  In common 
with plaintiff’s allegations here, the complaint in Stoneridge alleged that the supplier defendants 
“agreed to arrangements that allowed” Charter to issue the misleading financial statement.  Id.
These business arrangements allegedly “had no economic substance” but instead were intended to 
“enable Charter to fool its auditor into approving a financial statement showing it met projected 
revenue and operating cashflow numbers.”  Id. at 154; see also id. at 155.  Just as with CRB here, 
the supplier defendants were not alleged to have had any “role in preparing or disseminating 
Charter’s financial statements.”  Id. at 155.  The plaintiff nonetheless asserted “scheme” claims on 
the theory that the suppliers knew Charter would falsely inflate revenues based on the transactions 
with the suppliers and also allegedly knew that investors would rely on the financial statements.  
Id.; see id. at 159-60.  
Rule 10b-5 did not permit such a claim, the Stoneridge Court held, because the plaintiff 
could not allege that it “in fact rel[ied] upon [defendants’] own deceptive conduct.”  Id. at 160.  
The plaintiff’s theory rested on the premise that “investors rely not only upon the public statements 
relating to a security but also upon the transactions those statements reflect.”  Id.  If that “concept 
of reliance were to be adopted,” the Court reasoned, the implied private right of action under 
section 10(b) “would reach the whole marketplace in which the issuing company does business; 
and there is no authority for this rule.”  Id.  The allegedly undisclosed “deceptive acts” were “too 
remote to satisfy the requirement of reliance.”  Id. at 161.  After all, “[i]t was Charter, not 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 22 of 33 PageID:
858

17 
[defendants], that misled its auditor and filed fraudulent financial statements; nothing [defendants] 
did made it necessary or inevitable for Charter to record the transactions as it did.”  Id.
The reasoning in Stoneridge squarely applies here.  Just as in Stoneridge, plaintiff alleges 
that CRB, through its business dealings with Sunlight, “enabled Sunlight to originate and conceal 
from its investors a large pool of loans” by structuring loans so that they “were not reflected on 
Sunlight’s balance sheet.”  Compl. ¶ 1 (emphasis added); see id. ¶¶ 9, 12, 23; compare Stoneridge, 
552 U.S. at 152-53 (suppliers allegedly “agreed to arrangements that allowed” misstatements).  
Similarly, just as in Stoneridge, the plaintiff here alleges that Sunlight’s arrangements with CRB 
served “no legitimate purpose.”  Compl. ¶¶ 23, 48, 75; see Stoneridge, 552 U.S. at 154 
(transactions allegedly had “no economic substance”). 
Also in common with Stoneridge, plaintiff in this case does not contend that CRB made 
any “public statement.”  Stoneridge, 552 U.S. at 160; see Compl. ¶ 91.  Indeed, the complaint does 
not allege CRB had any role “in preparing or disseminating” the public statements alleged to be 
misleading.  Stoneridge, 552 U.S. at 155.  That similarity is not altered by plaintiff’s conclusory 
allegation that CRB knew Sunlight was concealing the true state of its financial condition, 
Compl. ¶ 48, because plaintiff does not allege that Sunlight investors relied on any alleged conduct 
by CRB, Stoneridge, 552 U.S. at 160-61.  The premise of plaintiff’s claim is that CRB’s alleged 
conduct was unknown to Sunlight investors.  Compl. ¶¶ 3, 93.   
Even if plaintiff’s claim could be characterized as something other than an impermissible 
aiding-and-abetting claim (and it cannot be), Stoneridge makes clear that plaintiff cannot plausibly 
allege the required element of reliance.  That is a separate and independent reason why the 
complaint should be dismissed with prejudice.  See Pac. Inv. Mgmt. Co. v. Mayer Brown LLP, 
603 F.3d 144, 159-60 (2d Cir. 2010) (affirming dismissal of scheme claim where plaintiffs alleged 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 23 of 33 PageID:
859

18 
only that “ultimate result of” law firm’s alleged “deceptive course of conduct [was] communicated 
to” public through financial statements of the issuer); In re Turquoise Hill Res. Ltd. Sec. Litig., 
625 F. Supp. 3d 164, 254 (S.D.N.Y. 2022) (dismissing scheme claims).   
2. 
The Alleged Purpose of the “Scheme” Was to Make Public 
Misrepresentations or Omissions. 
A “scheme” claim is inactionable when, as here, “the primary purpose and effect” of the 
alleged “scheme [was] to make a public misrepresentation or omission[.]”  Takata v. Riot 
Blockchain, Inc., 2023 WL 7133219, at *11 (D.N.J. Aug. 25, 2023) (quoting In re Mindbody, Inc. 
Sec. Litig., 489 F. Supp. 3d 188, 216 (S.D.N.Y. 2020)).  That rule applies because plaintiff alleges 
the goal of the purported “scheme” in this case was to enable Sunlight to “conceal[]” information 
from Sunlight’s stockholders and make misleading disclosures about the condition of Sunlight’s 
business, in order to “cause[] Sunlight stock to trade at artificially inflated levels . . . .”  
Compl. ¶¶ 1, 9-10, 23, 44-45, 48, 60, 73, 75, 91.   
“[C]ourts have routinely rejected” attempts, such as plaintiff’s claim here, “to bypass the 
elements necessary to impose ‘misstatement’ liability under subsection (b) [of Rule 10b-5] by 
labeling the alleged misconduct a ‘scheme’ rather than a ‘misstatement.’”  Takata, 
2023 WL 7133219, at *11; see, e.g., In re Alstom SA, 406 F. Supp. 2d 433, 475 (S.D.N.Y. 2005) 
(same).  Courts have reached that conclusion to ensure “scheme liability” claims are not “used as 
a back door into liability for those who help others make a false statement or omission in violation 
of subsection (b) of Rule 10b-5.”  Mindbody, 489 F. Supp. 3d at 216 (quoting SEC v. Kelly, 
817 F. Supp. 2d 340, 343 (S.D.N.Y. 2011)); see Stichting, 2012 WL 3235783, at *9 (same).   
The complaint alleges the “scheme” here was designed to “conceal from [Sunlight’s] 
investors that Sunlight’s capital was rapidly eroding and the liabilities warehouse on the CRB 
Backbook were skyrocketing.”  Compl. ¶ 9 (emphasis added).  Therefore, according to plaintiff, 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 24 of 33 PageID:
860

19 
“Sunlight consistently omitted the size of the Backbook from its public filings until it was too 
late.”  Id. (emphasis added); see also id. ¶¶ 1, 10, 44-45, 48.  But a “scheme to withhold the truth 
about” an issuer’s financial condition is just another type of omission claim, and therefore “falls 
under the purview of Rule 10b-5(b).”  Stichting, 2012 WL 3235783, at *10.  As the Stichting court 
explained, in such a case “the complained-of fraud on investors” “stems not from the performance 
of the [acts] themselves . . . but rather from [the issuer’s] ultimate communication of materially 
misleading information . . . to the public.”  Id.  Plaintiff cannot reframe his allegations using words 
designed to “reviv[e] aiding and abetting liability in private actions.”  S.E.C. v. Lucent Techs., Inc., 
610 F. Supp. 2d 342, 359 (D.N.J. 2009) (internal quotations omitted).   
3. 
Plaintiff Does Not Allege Facts Supporting a “Strong Inference” of 
Scienter. 
Even if those issues were not alone fatal (and they are), the complaint also should be 
dismissed because it does not allege facts giving rise to a “strong inference” of scienter, 
15 U.S.C. § 78u-4(b)(2)(A), meaning “the defendant’s intention ‘to deceive, manipulate, or 
defraud.’”  Rahman v. Kid Brands, Inc., 736 F.3d 237, 241-42 (3d Cir. 2013) (quoting Tellabs, 
551 U.S. at 313).  To meet the statutory “strong inference” standard, plaintiff was required to plead 
facts supporting an inference of fraudulent intent that is “cogent and at least as compelling as any 
opposing inference one could draw from the facts alleged.”  Hertz, 905 F.3d at 114.  While scienter 
allegations are analyzed “holistically,” id., courts typically consider whether the defendant 
allegedly had “motive and opportunity” to commit securities fraud and whether there are facts 
supporting an inference that the defendant engaged in “conscious misbehavior or recklessness.”  
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 25 of 33 PageID:
861

20 
In re Amarin Corp. PLC., 2015 WL 3954190, at *10 (D.N.J. June 29, 2015); see Avaya, 564 F.3d 
at 268.  Neither has been alleged here.4
There are no “motive and opportunity” allegations as to CRB.  “[C]atch-all allegations that 
defendants stood to benefit from wrongdoing and had the opportunity to implement a fraudulent 
scheme are [not] sufficient[.]”  GSC Partners CDO Fund v. Washington, 368 F.3d 228, 237 
(3d Cir. 2004) (internal quotations omitted).  The “assertion that one has the motivation to make 
profits is not sufficiently concrete to infer scienter.”  Fulton Fin. Advisors, Nat’l Ass’n v. NatCity 
Invs., Inc., 2013 WL 5635977, at *11 (E.D. Pa. Oct. 15, 2013) (citing Kalnit v. Eichler, 246 F.3d 
131, 140 (2d Cir. 2001)); see, e.g., Nat’l Junior Baseball League v. Pharmanet Dev. Grp. Inc., 
720 F. Supp. 2d 517, 552 (D.N.J. 2010) (no scienter based on “legitimate business motives”).   
But that is all plaintiff offers here.  See Compl. ¶ 73 (alleging CRB “was earning substantial 
profits” and “benefitted financially” from Sunlight relationship); id. ¶ 2 (“CRB had every incentive 
to engage in the fraudulent scheme” because it “earned substantial profits” and “substantial fees”).  
There also is no allegation of any sale of Sunlight stock by CRB, and “[t]he absence of stock sales” 
is itself “inconsistent with an intent to defraud.”  Lewakowski v. Aquestive Therapeutics, Inc., 
2023 WL 2496504, at *12 (D.N.J. Mar. 14, 2023) (quoting In re N. Telecom Sec. Litig., 116 F. 
Supp. 2d 446, 462 (S.D.N.Y. 2000)).   
As for conscious misbehavior or recklessness, the complaint contains only the conclusory 
allegation that “CRB had actual knowledge of the misleading nature of the statements made by 
Sunlight or acted in reckless disregard of the true information known to them at the time.”  
Compl. ¶ 73; see id. ¶¶ 48, 75.  But the complaint does not provide a single allegation of fact to 
4 The Third Circuit has held that “‘motive and opportunity’ may no longer serve as an 
independent route to scienter,” Avaya, 564 F.3d at 277, but plaintiff pleads no cognizable motive 
or opportunity in any event.   
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 26 of 33 PageID:
862

21 
suggest that CRB was even aware of the challenged Sunlight statements.  Plaintiff’s threadbare 
allegations of knowledge fall short of the Iqbal plausibility standard, much less the PSLRA’s 
heightened requirement that a complaint “state with particularity . . . the facts evidencing 
scienter[.]”  Henry, 2024 WL 4285129, at *11; see In re Bio-Technology Gen. Corp. Sec. Litig., 
380 F. Supp. 2d 574, 595 (D.N.J. 2005) (“Conclusory allegations that the defendants ‘knew’ or 
‘must have known’ that their statements were false do not create a strong inference of scienter as 
a matter of law.”) 
In addition, any possible inference of scienter that might be divined from the scanty 
allegations in the complaint still would need to be weighed against “any opposing inference of 
nonfraudulent intent.”  Rahman, 736 F.3d at 242 (quoting Tellabs, 551 U.S. at 314).  The most 
plausible inference available from the allegations here is that CRB, as one of Sunlight’s capital 
providers, did its best to work with Sunlight as it confronted an increasingly difficult financial 
environment due to rising interest rates.   
Plaintiff alleges CRB waived defaults by Sunlight and worked with Sunlight to amend their 
agreements to allow Sunlight to continue doing business despite significant headwinds caused by 
rising interest rates.  See Compl. ¶¶ 8, 20, 48, 50, 54, 68, 75.  But if CRB believed Sunlight was 
destined for failure, which appears to be plaintiff’s premise, then CRB would have been throwing 
good money after bad in making those concessions.  That “defies economic reason.”  ECA, Loc. 
134 IBEW Joint Pension Tr. of Chicago v. JP Morgan Chase Co., 553 F.3d 187, 203 (2d Cir. 
2009).  The “inference of nonfraudulent intent” is the only reasonable one that can be drawn from 
the allegations here.  Rahman, 736 F.3d at 242.   
4. 
The Complaint Does Not Plead Any “Inherently Deceptive” Conduct. 
Plaintiff also fails to plead a “scheme” claim because he has not alleged CRB engaged in 
any “inherently deceptive conduct” specifically “employed to deceive investors” in Sunlight 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 27 of 33 PageID:
863

22 
common stock.  Trustcash Holdings, 668 F. Supp. 2d at 662.  “Inherently deceptive” conduct 
includes “sham agreements, sham transactions, sham companies,” and the like.  Turquoise Hill, 
625 F. Supp. 3d at 253; see RenovaCare, 2024 WL 2815034, at *23 (“pump-and-dump scheme”).  
There is no “sham” alleged here.  The loans CRB originated, and its agreements with Sunlight, 
“were legitimate business transactions[.]”  Lucent, 610 F. Supp. 2d at 360.  “The alleged deception 
in this case” goes no farther than Sunlight’s alleged “failure to disclose the real terms of the deal.”  
Id. at 361 (internal quotations omitted).  That does not amount to a “scheme” for purposes of the 
federal securities laws. 
5. 
The Complaint Also Should Be Dismissed for Lack of Standing and 
Loss Causation. 
Plaintiff also lacks “standing to pursue” his claim because it depends on alleged conduct 
occurring after his last alleged purchase of Sunlight stock on September 29, 2022.  Winer Family 
Tr. v. Queen, 503 F.3d 319, 325-26 (3d Cir. 2007); see Compl., Sched. A.  The complaint alleges 
that CRB did not begin to “grant[] ever-increasing amounts of credit to Sunlight and its 
contractors,” “lift[] loan caps,” and “waive[] defaults under its agreement” until December 2022.  
Compl. ¶ 54; see Exh. 3.  That disconnection requires dismissal.  See, e.g., In re Dr. Reddy’s Lab. 
Ltd. Sec. Litig., 2019 WL 1299673, at *13 (D.N.J. Mar. 21, 2019) (dismissing claims to the extent 
“based on fraudulent conduct that occurred after the purchase of shares”).   
Plaintiff also has not pleaded loss causation, 15 U.S.C. § 78u-4(b)(4), which requires a 
“causal link between the alleged misconduct and the economic harm ultimately suffered by the 
plaintiff.”  Lentell v. Merrill, Lynch & Co., 396 F.3d 161, 172 (2d Cir. 2005); see McCabe v. Ernst 
& Young, LLP, 494 F.3d 418, 425 (3d Cir. 2007) (loss causation requires allegations “that the 
fraudulent misrepresentation or omission actually caused the economic loss suffered”).  That 
requires plausible allegations of a “corrective disclosure,” Born v. Quad/Graphics, Inc., 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 28 of 33 PageID:
864

23 
521 F. Supp. 3d 469, 494 (S.D.N.Y. 2021), meaning one that “adequately demonstrate[s] a market 
correction of the artificial inflation caused by” prior “misrepresentations,” Nat’l Junior Baseball 
League, 720 F. Supp. 2d at 561; see id. at 562. “In the absence of any allegation of a causal link 
between the ‘corrective disclosure’ . . . and an economic loss,” loss causation is missing.  Takata 
v. Riot Blockchain, Inc., 2020 WL 2079375, at *17 (D.N.J. Apr. 30, 2020).   
The complaint alleges that the most significant drop in Sunlight’s stock during the relevant 
period occurred on September 28, 2022, allegedly in connection with SEC disclosures by Sunlight 
that had nothing to do with CRB but instead related to “liquidity issues by one installer[.]”  Compl. 
¶ 49.  As for the other corrective disclosures, plaintiff fails to tie any of them to any alleged prior 
misrepresentation relating to CRB.  Compl. ¶¶ 50-70; see Nat’l Junior Baseball League, 720 F. 
Supp. 2d at 561.  Plaintiff instead alleges only a series of accurate disclosures providing updates 
on Sunlight’s deteriorating financial condition and “concomitant market dissatisfaction to allege 
loss causation.  That is simply not enough.”  Born, 521 F. Supp. 3d at 494.   
6. 
Plaintiff Has Not Alleged Fraud with Particularity.  
Finally, the complaint does not plead fraud with the particularity required under Rule 9(b).  
See Henry, 2024 WL 4285129, at *11 (quoting United States ex rel. Moore & Co, P.A. v. Majestic 
Blue Fisheries, LLC, 812 F.3d 294, 307 (3d Cir. 2016)).  That requires “enough particularity to 
place defendants on notice of the precise misconduct with which they are charged.”  BioLineRx 
Ltd. Sec. Litig., 2024 WL 3409800, at *6 (cleaned up).   
The complaint’s four-paragraph description of an alleged “scheme to deceive Sunlight 
investors” – over a period of nearly three years – does not satisfy this standard.  Compl. ¶¶ 45-48.  
There are no specifics provided concerning who at CRB allegedly was involved in this “scheme,” 
what they allegedly did to further the “scheme,” when they allegedly took such an action, or how 
any such action furthered the purported scheme.  The complaint speaks only in generalities about 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 29 of 33 PageID:
865

24 
allegedly unlawful conduct by “two of Sunlight’s primary vendors” disconnected from CRB.  
Id. ¶¶ 46-47.  There is no factual allegation offered in support of plaintiff’s conclusory allegation 
that CRB allowed modifications to its agreements with Sunlight “all with knowledge that such 
defaults and Sunlight’s unsustainable debt load were being concealed from Sunlight’s investors.”  
Id. ¶ 48.  The complaint therefore fails to put CRB “on notice of the precise misconduct with which 
[it is] charged.”  BioLineRx Ltd. Sec. Litig., 2024 WL 3409800, at *6.   
II. 
THE COMPLAINT IS BARRED BY THE SUNLIGHT BANKRUPTCY PLAN 
INJUNCTION AND SECURITIES CLASS ACTION RELEASE. 
In addition to these pleading defects, the complaint also violates the broad plan injunction 
that results from the confirmed Sunlight bankruptcy plan and is barred in substantial part by the 
class-wide release in the settlement reached in the prior Sunlight securities class action.   
A. 
The Sunlight Bankruptcy Plan Injunction Bars Plaintiff’s Claims. 
As the complaint acknowledges, Sunlight filed a bankruptcy petition in October 2023.  
Compl. ¶¶ 22, 70.  Sunlight’s plan of reorganization, confirmed by the bankruptcy court on 
December 5, 2023, broadly enjoins any person who previously held an interest in Sunlight from 
pursuing any claim “affecting, directly or indirectly,” the assets of the reorganized Sunlight.  
Exh. 4, Sunlight Plan § 10.6.   
CRB continues to serve as one of Sunlight’s capital providers, see id. § 5.12, and 
reorganized Sunlight owes CRB broad indemnity obligations.  See Exh. 5, Loan Program Agmt. 
§ 10.1; Exh. 6, Loan & Sec. Agmt. § 11.3.  CRB is entitled to indemnity from Sunlight for this 
matter and similar claims, as the reorganized Sunlight acknowledged in a response to plaintiff’s 
objection to the settlement and release in the Fung securities action that is discussed in the next 
section.  See Exh. 9 at 1, 10.  This action therefore “violate[s] the terms of the [Sunlight] plan and 
confirmation order.”  In re Essar Steel Minnesota, LLC, 652 B.R. 709, 720 (Bankr. D. Del. 2023).   
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 30 of 33 PageID:
866

25 
B. 
The Class-Wide Release in the Sunlight Securities Class Action Effectively 
Bars Plaintiff’s Claim. 
Plaintiff’s claim also is barred under the class-wide release approved by the U.S. District 
Court for the Southern District of New York in the settlement of an earlier securities action against 
Sunlight that appears to be the source of many of plaintiff’s Sunlight allegations.  See generally 
Exh. 7 (Sunlight complaint).  In that earlier case, the lead plaintiff alleged a class period running 
from January 25, 2021 through September 28, 2022.  Id. ¶ 1.  In this case, plaintiff alleges a class 
period from January 25, 2021 through October 31, 2023, but the largest alleged stock drop during 
that class period occurred on September 28, 2022.  Compl. ¶¶ 49, 81.  The class period in the 
Sunlight securities case therefore covers approximately 60 percent of the class period here, as well 
as the most significant stock drop.   
Even though the alleged class periods are slightly different, plaintiff’s claim was released 
in its entirety in the settlement approved by the New York court, which applies to claims against 
Sunlight’s “shareholders” and “partners,” among others, that arise out of, are based upon, or in any 
way relate to the purchase and sale of Sunlight common stock from January 25, 2021 through and 
including September 28, 2022.  Exh. 8, Sunlight Settlement ¶¶ 1.6, 1.27, 1.28, 1.35, 5.1.  The 
complaint alleges that CRB is both a “shareholder” and a “partner” of Sunlight.  See, e.g., 
Compl. ¶¶ 6, 35, 61, 71.   
Plaintiff’s claims “fall within the release’s terms.  So the release bars them.”  In re 
Nanthealth, Inc. Stockholder Deriv. Litig., 2021 WL 1909885, at *2 (D. Del. May 12, 2021) 
(Bibas, J.) (citing In re Prudential Ins. Co. of Am. Sales. Prac. Litig., 261 F.3d 355, 366-67 
(3d Cir. 2001)).   
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 31 of 33 PageID:
867

26 
CONCLUSION 
For the foregoing reasons, the complaint should be dismissed in its entirety and with 
prejudice. 
Dated: New York, New York  
April 9, 2025 
Of Counsel: 
John J. Clarke, Jr.* 
john.clarke@us.dlapiper.com  
1251 Avenue of the Americas 
New York, New York 10020 
(212) 335-4500 
Richard Zelichov* 
richard.zelichov@us.dlapiper.com  
2000 Avenue of the Stars 
Suite 400 North Tower 
Los Angeles, California 90067 
(310) 595-3000 
*Admitted pro hac vice
DLA PIPER LLP (US) 
By:  /s/ Steven M. Rosato 
 
Steven M. Rosato 
steven.rosato@us.dlapiper.com 
1251 Avenue of the Americas 
New York, New York 10020 
(212) 335-4500 
Attorneys for Defendant 
  Cross River Bank
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 32 of 33 PageID:
868

CERTIFICATE OF SERVICE 
I hereby certify that on April 9, 2025, I caused the foregoing document to be served on all 
counsel of record by electronic filing through the Court’s ECF system.   
Dated: New York, New York  
/s/ Steven M. Rosato  
April 9, 2025  
Steven M. Rosato 
Case 2:24-cv-09510-ES-JRA     Document 39-1     Filed 07/25/25     Page 33 of 33 PageID:
869

File and source

File

gov.uscourts.njd.555169.39.1.pdf

Size

138,779 bytes

SHA-256

bcdd264de779c29bd647c0e705aece3479952e0e26b37997689552b176365722

Our copy

gov.uscourts.njd.555169.39.1.pdf

Original

No public link identified.