## Facts

- Five South Korean traders brought a putative class action based on their trading in KOSPI 200 futures on the Korea Exchange (KRX) overnight “night market.”
- The KRX night market accepted orders entered in Korea, but orders were matched on CME Globex, an electronic platform located in Aurora, Illinois; trades were later cleared and settled on the KRX in Korea.
- Defendants were a New York-based high-frequency trading firm and its CEO.
- Plaintiffs alleged defendants used “spoofing” in 2012 by placing large orders to create false market signals, rapidly canceling or self-filling them, and then executing genuine trades at distorted prices.
- Plaintiffs alleged defendants earned more than $14 million from the scheme and that plaintiffs were harmed either as likely counterparties or through price distortion affecting the market generally.
- Plaintiffs asserted claims under the Commodity Exchange Act (CEA) and New York unjust enrichment.

## Issues

1. Whether applying the CEA to the alleged KRX night-market trades would be impermissibly extraterritorial, or whether the complaint plausibly alleged “domestic transactions” because irrevocable liability was incurred in the United States.
2. Whether plaintiffs plausibly stated a claim for unjust enrichment under New York law.

## Decision

- The Second Circuit vacated the dismissal and remanded.
- The court held plaintiffs plausibly alleged the futures transactions were domestic because irrevocable liability attached in the United States when orders were matched on CME Globex in Illinois.
- The court held the district court erred in dismissing the New York unjust enrichment claim at the pleading stage.

## Legal Principles

- Under the Morrison/Absolute Activist framework, a transaction is “domestic” if the parties incur irrevocable liability in the United States (or if title passes in the United States).
- For futures executed through a foreign exchange’s product, the location of binding contract formation (order matching that fixes essential terms) can establish domesticity even if clearing and settlement occur abroad.
- At the motion-to-dismiss stage, CEA domesticity may be plausibly pleaded by alleging that the matching engine in the United States is the point at which parties become bound.
- Under New York law, unjust enrichment requires allegations that (1) defendants were enriched, (2) at plaintiffs’ expense, and (3) equity and good conscience call for restitution; pleading may be sufficient where alleged manipulation generated wrongful profits in a market in which plaintiffs traded and defendants’ conduct has a New York connection.

## Conclusion

The Second Circuit reinstated CEA and unjust enrichment claims, holding that KRX night-market futures trades plausibly qualified as domestic transactions because the parties became bound when matched on a U.S.-based platform, and that plaintiffs adequately pleaded defendants’ enrichment from the alleged manipulation.


Myun-Uk Choi v. Tower Research Capital LLC, 890 F.3d 60 (2d Cir. 2018)