PLAINTIFF’S FIRST AM ENDED COMPLAINT, CAS E NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MAYER BROWN LLP Alex C. Lakatos ( SBN 182108 ) Richard M. Rosenfeld ( pro hac vice ) Grace Kim ( pro hac vice ) 1999 K Street, N.W. Washington, D.C. 20006 - 1101 alakatos@mayerbrown.com rr osenfeld@mayerbrown.com gkim@mayerbrown.com Telephone: (202) 263 - 3000 Facsimile: (202) 263 - 5323 Kathryne M. Gray ( pro hac vice ) Anna V. Durham ( pro hac vice ) 700 Louisiana Street, Suite 3400 Houston, TX 77002 kgray@mayerbrown.com adurham@mayerbrown.com T elephone: (713) 238 - 3000 Facsimile: (713) 238 - 7000 Attorneys for Plaintiff CardStarter, Ltd. UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN FRANCISCO DIVISION CARDSTARTER, Ltd., a BVI Business Company , Plaintiff, vs. SUNDAESWAP, Inc., a Wyoming Corporation, MATEEN MOTAVAF, Chief Executive Officer, SundaeSwap, Inc., PI LANNINGHAM, Chief Information Officer, SundaeSwap, Inc., ARTEM WRIGHT, Chief Operating Officer, SundaeSwap, Inc., CHRISTOPHER BORDERS, Legal Advisor, SundaeSwap, Inc , Defendants. C ase No. 3:22 - cv - 757 - CRB FIRST AMENDED COMPLAINT FOR BREACH OF CONTRACT; PROMISSORY ESTOPPEL; FRAUD; UNFAIR BUSINESS PRACTICES DEMAND FOR JURY TRIAL Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 1 of 44 1 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 INTRODUCTION Plaintiff CardStarter, Ltd. (“CardStarter”) for its Complaint against Defendants SundaeSwap Labs, Inc. (“SundaeSwap”); Mateen Motavaf, Chief Executive Officer (“CEO”) , SundaeSwap; Pi Lanningham, Chief Information Officer (“CIO”) , SundaeSwap; Artem Wright, Chief Operating Officer (“COO”) , SundaeSwap; and Christopher Borders, Legal Advisor, SundaeSwap, by and through counsel, alleges as follows: 1. CardStarter was among the first companies to start developing an automated cryp tocurrency exchange (known as a “DEX”) that would operate on what is known as the Cardano blockchain. In support of its DEX, and in preparation for its DEX’s launch on the Cardano blockchain, CardStarter developed several multimillion dollar “ liquidity po ol s.” Each liquidity pool contained an inventory of cryptocurrency that would be swapped on CardStarter’s DEX The inventory of cryptocurrency in the liquidity pools was supplied in part by CardStarter itself and in part by members of the public who cont ributed their own cryptocurrency (the “CardStarter community” or “CSWAP miners” ), in exchange for rewards in the form of a token (CSWAP) supplied by CardStarter. 2. L iquidity pool s are essential to the success of any DEX, and developing liquidity pool s is one of the greatest hurdles, if not the greatest hurdle, facing a DEX. CardS tarter’s success in developing several massive liquidity pool s afforded CardStarter a tremendous and unique opportunity to capitalize on a booming market within one of the mos t significant blockchain ecosystems. 3. After CardStarter had begun development of its DEX, SundaeSwap — then an unknown player in the market — unexpectedly tweeted that it would create a competing DEX to operate on the Cardano blockchain. At the time of this announcement, (1) the SundaeSwap DEX was not the market leader (CardStarter’s DEX demonstrably held that p osition) and (2) SundaeSwap did not have any liquidity pool s , let alone the several multimillion dollar liquidity pool s that CardStarter had developed Defendants wanted both. But it has become apparent that Defendants did not want to pay for either. 4. To get what they wanted, Defendants undertook an opportunistic campaign of Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 2 of 44 2 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 actively misleading CardStarter and its community Through a series of affirmative misrepresentations of fact and false promises on which CardStarter reasonably relied , Defendants caused CardStarter to (1) abandon development of its market - leading DEX; (2) forego its positioning as market lead ; (3 ) support and help develop th e new SundaeSwap DEX instead ; (4 ) provide a known and trusted brand to back SundaeSwap ’s DEX and help attract needed investment to SundaeSwap ; (5 ) save SundaeSwap’s DEX from ruin with an emergency cash infusion ; ( 6 ) transfer its interests in its liquidity pools to SundaeSwap ; and (7) encourage and incentivize the CardStarter community to do the same 5. CardStarter took these steps in reasonable reliance on Defendants’ unequivocal promises , including , but not limited to , Defendants’ commitment to deliver 7.5% of the total supply of SundaeSwap’s “ SUNDAE ” tokens — i.e. , 150,000,000 tokens, or 7.5% of SundaeSwap’s total supply of 2,000,000,000 tokens — to CardStarter , for further distribution to CardStarter’s community Thus, C SWAP miners would be able to receive SUNDAE tokens in exchange for their CSWAP. 6. Then, on January 18, 2022, after CardStarter had already irrevocably given SundaeSwap nearly everything it wanted , Defendants unilaterally and in bad faith announced (as they a ppear to have been planning all along) that SundaeSwap would no longer deliver the p romised tokens to CardStarter. Defendants’ bait and switch occurred (1) months after the pa rties had reached a definitive agreement, pursuant to which SundaeSwap had promised to deliver 7.5% of its tokens in exchange for the liquidity pools controlled by CardStarter and the liquidity pools CardStarter encouraged and incentivized its community to migrate , (2) after CardStarter had relied on Defendan ts ’ promises to its detriment , and (3) just before SundaeSwap’s launch of its DEX — a launch made possible only through months of CardStarter ’s necessary support. 7. On January 18, 2022, CardStarter, shocked by Defendants’ blatant misconduct, sought confirmat ion that the SundaeSwap team was no longer fulfilling one of its key promises: “Looks like you guys want to drop the token amount from the agreed upon 150m [150,000,000 tokens , or 7.5% of the total SUNDAE token supply ] to 10m [10,000,000 tokens, or 0.5% of the total SUNDAE token supply ]. Can you confirm?” (emphasis added). In response, Defendants did Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 3 of 44 3 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 not deny that the pa rties had reached an agreement, nor could they . Instead, SundaeSwap , through Defendant Wright, brusquely replied, “ Yes, that’s correct .” (emphasis added). 8. But Defendants were not free to ignore their contractual obligations and unequivocal promises , as reaffirmed by Defendants themselves on numerous occasions , to deliver the agreed upon tokens to Plaintiff 9. Specifically, t he parties had entered into two separate agreements : 10. The Collaboration and Marketing Agreement First, on June 30, 2021 , the p arties entered into the Collaboration and Marketing Agreement. In that Agreement, CardStarter promised to (1) provide SundaeSwap with any futur e liquidity pools that CardStarter would create after the launch of SundaeSwap’s DEX (which would arise from new projects launched by CardStarter after the launch of the SundaeSwap DEX) , (2) shutter its own DEX , and (3) provide SundaeSwap with blockchain e xpertise and marketing . SundaeSwap made a number of promises in exchange, including that it would not support any competitor of CardStarter (that is, any other blockchain launchpad, incubator and/or accelerator) 11. The Gentlemen’s Agreement Second, o n September 23, 2021, the Parties entered into the Gentlemen’s Agreement. The Gentlemen's Agreement was meant to address two topics that were not covered in the Collaboration and Marketing Agreement. First , Defendants promised to deliver to CardStarter 7 .5% of SundaeSwap’s total supply of tokens for further distribution to the CardStarter community In exchange , CardStarter agreed to provide SundaeSwap with the liquidity pools that CardStarter already had developed — by directly transferring to SundaeSwap the portion of the liquidity pools CardStarter controlled, and by encouraging and incentivizing its community to do the same 1 This is separate and distinct from the Collaboration and Marketing Agreement, which addressed CardStarter ’s obligation to provid e SundaeSwap with liquidity pools that CardStarter might develop in the future, but had not yet developed. 12. On the eve of CardStarter’s announcement of reward incentives to encourage its community to irrevocably transfer the community’s portion of CardSta rter’s Current Liquidity 1 The liquidity pools controlled b y CardStarter and the liquidity pools CardStarter encouraged and incentivized its community to migrate to SundaeSwap are referred to herein collectively as “ CardStarter’s Current Liquidity Pools .” Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 4 of 44 4 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Pools to SundaeSwap, Defendants specifically reaffirmed their promise s by reassuring CardStarter that “7.5% of the total supply is set aside for the CardStarter partnership ” They did so in the face of CardStarter repeated ly making clear to Defendants that it was relying , to its detriment, on SundaeSwap’s promise to deliver the agreed - upon tokens. For example, CardStarter admonished Defendants that “there will be a mutiny if there is any less than 7.5% total ” SUNDAE tokens d elivered to CardStarter for its community , to which Defendants responded assuring CardStarter that SundaeSwap would deliver the tokens as promised and agreeing that “ it would be a whole god damn scandal if we didn’t keep to our word here .” (emphasis added) 13. CardStarter held up its end of the bargain; Defendants did not. 14. When Defendants failed to deliver the promised tokens — which CardStarter planned to distribute to its community — there was, as CardStarter had predicted, a “ mutiny. ” CardStarter’s principals received death threats and were “doxxed,” with their home addresses, family members’ personal information, license plates, and other details shared with an increasingly angry mob of CardStarter community members 15. On January 23, 2 022, Defendants, obviously feeling the public pressure of their own gross misconduct, issued a public announcement en titled “Addressing the CardStarter Community , ” which stated that the “SundaeSwap team will provide a cross - chain airdrop of 20,000,000 SUND AE tokens” (1% of the total supply) to the individual supporters who contributed to CardStarter’s liquidity pool. 16. But this is far from what the parties bargained for. Defendants’ backtracking attempt to save face with the public unacceptably offered ten s of million s fewer tokens than what they had agreed to deliver , and far less than what CardStarter had relied on SundaeSwap to provide. And even this post hoc attempt by Defendants to pacify the mob and protect their reputation has proven illusory , becau se SundaeSwap has not even managed to follow through by airdropping the 20 million SUNDAE tokens it pledged to the CardStarter community 17. To add fuel to the fire, SundaeSwap is now supporting and marketing the products and services of CardStarter’s direc t competitor (a launchpad known as Carda s hift). SundaeSwap is thus breaching its contractual obligations under the Collabo ration and Marketing Agreement. Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 5 of 44 5 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 18. In hindsight, it appears that Defendants never intended to honor their promises. Instead, they sought (albeit unsuccessfully) to preserve their freedom to renege on their obligations by declining to formally memoria lize the Gentlemen’s Agreement , and offering a series of disingenuous excuses for not doing so — including , but not limited to , asserting that the Gentlem en’ s Agreement had to be a secret so that the U S Securities and Exchange Commission (“SEC”) would not know that SundaeSwap had agreed to provide CardStarter with SUNDAE tokens 19. CardStarter brings suit to require Defendants to honor their obligations and to prevent Defendants from profiting, and continuing to profit, from their fraud. PARTIES 20. Plaintiff CardStarter is a British Virgin Islands (“BVI”) Business Company with its principal place of business outside of the United States . CardStarter is a well - respected company in the cryptocurrency and blockchain community. Known as a “launchpad,” “accelerator,” and “incubator,” CardStarter is dedicated to assisting the launch of new projects on the Cardano blockchain. CardStarter als o is the creator of CardSwap, which was slated to become the primary DEX running on the Cardano blockchain. 21. Defendant SundaeSwap is a Wyoming corporation with its principal place of business in Greenbrae, California. Sunda eSwap is the developer of a DEX k nown as SundaeSwap, which was created to run on the Cardano blockchain , initially as a competitor of CardStarter’s CardSwap DEX 22. Defendant Mateen Motavaf is the Chief Executive Officer of SundaeSwap. On information and belief, he is a U.S. citizen who resides in or around Saratoga , California. 23. Defendant Pi Lanningham is SundaeSwap’s Chief Information Officer. On information and belief, he is a U.S. citizen who resides in or around Brooklyn , New York 24. Defendant Artem Wright is the Chief Operating Offic er of SundaeSwap. On information and belief, he is a U.S. citizen who resides in or around Raleigh, North Carolina 25. Defendant Christopher Borders is a Legal Advisor of SundaeSwap. On information and belief, he is a U.S. citizen who resides in or around Larkspur , California. 26. Non - party Cardashift is a community - run launchpad built on the Cardano Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 6 of 44 6 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 blockchain that raises funds for , builds , and accelerates startups and projects through investment by its community . It is a direct competitor of CardStarter. JU RISDICTION AND VENUE 27. This Court has subject matter jurisdiction over this action under 28 U.S.C. § 1332, because the amount in controversy in this lawsuit, exclusive of interest and costs, exceeds $75,000 and because it is an action between a citizen of a State and a subject of a foreign state, and there is complete diversity between the parties. 28. Venue properly lies in, and Defendants are subject to the personal jurisdiction of, this Court. At least t wo of the individual D efendants are residents of the Sta te of California, and Defendant SundaeSwap’s principal place of business and registered address is located in Greenbrae, California, in the County of Marin, which is located within this District. There is no other district in which a substantial part of t he events giving rise to the claim occurred. Venue properly lies in this District. 28 U.S.C. § 1391(b)( 3 ). STATEMENT OF FACTS A. Background on cryptocurrencies, blo ckchain technology, and Cardano 29. Fifteen years ago, cryptocurrencies were an academic concept, largely unknown to the world’s general population. This all changed in 2009 with the creation of Bitcoin — the first decentralized cryptocurrency, which became popular in 2011 to 2012. Cryptocurrencies like Bitcoin operate on blockchain technology. A “bl ockchain” is a decentralized, digital ledger that provides a public record of transactions of different cryptocurrencies, like Bitcoin, allowing every member of the public to see every transaction ever made. Today, there are thousands of cryptocurrencies in existence, each of which operates on a blockchain. For example, there is the Ethereum blockchain, on which the “Ether” cryptocurrency trades, and the Solana blockchain, on which the cryptocurr ency known as “Solana” trades. 30. Importantly, supporting trans actions in cryptocurrency is not the only possible use of blockchain technology. Blockchain technology also can be used, for example, to support smart contracts. Smart contracts are programs stored on the blockchain that run when predetermined conditions are met. Because smart contracts are self - executing , with the terms of the agreement Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 7 of 44 7 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 written directly into lines of code, the commerce happens automatically . A smart contract might require a commitment of cryptocurrency, for example, and then automatica lly deliver certain benefits in exchange. And because the code controls the execution, transactions are trackable and irreversible , and smart contracts permit trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority or external enforcement mechanism. Among other things, smart contracts allow developers to build a wide range of decentralized finance apps, new crypto tokens, and games. 31. Cardano is a blockchain that was launched in Septe mber 2017 by Ethereum co - founder Charles Hoskinson Cardano aims to be a third - generation blockchain (or “blockchain 3.0”) project, competing with and building on the technology pioneered by Bitcoin (or “first gen”) and Ethereum (or “second gen”). Cardan o’s native cryptocurrency is the eponymously named Cardano; its symbol is ADA (so named for the nineteenth century mathematician, Ada Lovelace). Although less well known than Bitcoin and Ethereum, Cardano is a highly successful blockchain in its own right . It is one of the biggest cryptocurrencies by market capitalization ( i.e. , total Cardano crypto units, multiplied by price per Cardano crypto unit), which stood at nearly $40 billion as of December 2021. Cardano’s goal is to be a highly scalable and ene rgy - efficient smart contract platform, and its stake in the market continues to rise. Notably, mining ADA consumes a fraction of the energy it costs to produce Bitcoin, and so Cardano has benefitted from a new emphasis on greener credentials for cryptocur rency, particularly after Tesla CEO Elon Musk’s May 2021 announcement that Tesla would stop accepting Bitcoin for environmental reasons. 32. Although the Cardano blockchain and its native ADA cryptocurrency launched in 2017, it was not possible to use smart c ontracts on the Cardano blockchain until September 12, 2021. The moment when the Cardano blockchain was finally ready to accept smart contracts is referred to as the “ADA mainnet launch.” (A “mainnet” is an independent blockchain running its own network with its own technology and protocol ) Before Cardano’s ADA mainnet launch, however, many companies began to develop smart contract projects that would operate on the Cardano blockchain; the objective of these companies was to be ready to launch on the Ca rdano blockchain once the ADA mainnet launched. In the interim, these projects would exist on the Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 8 of 44 8 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Ethereum blockchain, before migrating upon mainnet. B. Background on a decentralized cryptocurrency exchange, or “DEX” 33. A DEX is a decentralized cryptocurrency e xchange, pursuant to which users can swap one cryptocurrency for another without an intermediary As with a traditional foreign currency exchange (on which Dollars, Euros, UK Pounds, and the like are exchanged) , there are many possible cryptocurrencies th at can be exchanged on a DEX. A DEX running on the Cardano blockchain would be designed to allow the exchange of all cryptocurrencies and tokens that r un on the Cardano blockchain. 34. For a DEX to function, it needs liquidity — the more the better. That is, t he DEX needs to have a substantial inventory of each type of cryptocurrency that the DEX wants to allow its users to swap. The more liquidity, the more cryptocurrencies that can be swapped, and the faster the swaps can occur. If a DEX has a thin liquidit y pool, then the cupboard might be bare ( e.g. , out of Ethereum, out of Cardano) when a user wants to swap currencies, and the swap either cannot be completed , take days to settle, and/ or may result in the user receiving a worse exchange rate for the crypto currency it seeks. A DEX attempts to avoid this issue by maintaining a deep liquidity pool and a wide variety of the most popular cryptocurrencies and tokens. A DEX without liquidity is unlikely to function competitively, if at all. And novel DEXes face particular challenges: a new DEX may not always function efficiently, resulting in, inter alia , delayed transaction times that can reach hours or more 35. To be available for exchange on a DEX, a cryptocurrency typically is paired with the cryptocurrency that is native to the blockchain on which the DEX is operating. A Cardano - based DEX might have, for example, an inventory of ETH - ADA (which allows Ethereum to be traded for Cardano’s cryptocurrency), and inventory of USDC - ADA (which allows USD Coin to be traded for Cardano’s cryptocurrency), and so forth. 36. The total inventory of each cryptocurrency pairing available to a DEX is known as a liquidity pool (o r, “LP”), which creates the market for the pair of tokens contained in a given pool. Liquidity pools, which are the backbone of any DEX, are thus collections of crypto tokens locked in a smart contract which facilitates trades of tokens in the pool with b oth buyers and sellers Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 9 of 44 9 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Imagine a basket containing two kinds of fruits in a barter trading system; taking one of these fruits requires you to replace them with an equal value of the other fruit. The basket in this analogy is the liquidity pool. 37. The DEX itself does not own the liquidity pool. Rather, liquidity providers contribute their own cryptocurrency to form the liquidity pool, and those liquidity providers continue to own an interest in the underlying liquidity pool after they contribute their cryptocurrency to it. To incentivize the provision of liquidity, a DEX may issue token rewards to liquidity providers according to the amount of liquidity supplied, as a reward for providing liquidity and risking economic loss The platform will announce a liquidity rewards program with a start and expiration date, a reward size, and a reward distribution scheme. 38. “Total Value Locked , ” or TVL, is a measure of the value of the liquidity pool T he TVL of a given project is publically available inform ation and updates in real time N o one can guarantee the future amount of TVL on a given day , and TVL is often difficult to measure with one numerical value. Analyses of TVL statistics must take into account , for instance, market volatility and shifting perceptions; indeed, a decentralized project’s TVL may hang in the balance of the rapidly shifting perceptions of its community. Thus, because TVL generally is correlated with usage and confidence in a project, announcements to the project’s community about its plans for the future may have a dramatic effect on its TVL. C. Aatash Amir f ounds CardStarter 39. Not long after Bitcoin’s ascendency, CardStarter’s founder, Mr. Aatash Amir , began a career focused on the then - nascent blockchain technology industry. For eight years, Mr. Amir worked for numerous blockchain development initiatives as a blockchain technology consultant. Throughout this time, Mr. Amir played a key role in the development of many successful ventures, partnering with individual s and entities across the industry. 40. In early 2021, Mr. Amir became CEO of a new venture in the blockchain space, CardStarter. CardStarter is a launch pad, accelerator, and incubator for blockchain projects. CardStarter’s role is, in many respects, analogous to an incubator for traditional startups; that is, CardStarter provides a wide variety of assistance to help projects launch on blockchains, including Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 10 of 44 10 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 the Ethereum blockchain . CardStarter also has helped projects prepare for deployment or migration to the Cardano blockchain. CardStarte r provides these early - stage blockchain ventures with advice, technical expertise, networking assistance/community bootstrapping, branding, token sales, and other support. 41. CardStarter has helped several such projects launch successfully. As a result, C ardStarter developed a strong, positive reputation in the blockchain community, including in the more recently - developed Cardano community. Defendants fully understood and coveted that reputation. In an interview with Coin Telegraph, a leading publicatio n on cryptocurrency and blockchain - related content, SundaeSwap’s CEO, Defendant Motavaf, explained that “ CardStarter was the first — and continues to be the best — launchpad for Cardano innovators ,” (emphasis added) noting that “CardStarter proved its lead ership in empowering Cardano entrepreneurs and investors early on.” D. CardStarter announces plans for DEX 42. On or around April 24, 2021, CardStarter announced that as the world’s first incubator and launchpad for Cardano projects, it would be releasing CardS wap, a DEX built on the Cardano network. CardSwap would go live on the Cardano blockchain upon Cardano’s ADA mainnet launch bringing smart contracts to Cardano. Until CardStarter agreed to forego CardSwap and support SundaeSwap’s DEX, CardSwap was slated to be the top DEX on the Cardano network. E. SundaeSwap announces plans to create a competing DEX 43. While CardStarter was advancing its plans to launch its CardSwap DEX on the Cardano blockchain, SundaeSwap announced its own plans to de velop a separate DEX on the Cardano blockchain. That is, SundaeSwap would be competing with CardStarter’s DEX. But SundaeSwap was new to the space and was missing two key ingredient s : the cash resources needed to develop, market, and host the DEX, and th e liquidity pools needed for the DEX to function 44. Without sufficient investor support, cash resources, and a reputation and liquidity pool s like CardStarter’s, SundaeSwap was far behind in its efforts to develop a DEX in time for Cardano’s eagerly awaited , imminent ADA mainnet launch. SundaeSwap recognized the enormous value in herent in simply publically associating and joining forces with a n experienced, Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 11 of 44 11 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 and widely - known platform with mounting community support — a critical component to grow ing liquidity an d attract ing liquidity providers to a DEX. F. The parties discuss a collaboration. 45. After SundaeSwap ’s announcement of its plan s to create a competing DEX, CardStarter concluded that the Cardano community would be best served by a single, unified DEX on the Cardano platform. A unified DEX likely would amass more liquidity than either of the two alone, and as noted above, liquidity is vital to a DEX. Thus, by joining forces with another DEX, CardStarter sought to increase the chances of achieving the largest market share and user base of all Cardano DEXs, as opposed to splitting the user base, liquidity pools , and development efforts across two competing platforms. 46. While a unifie d DEX would provide significant benefits to both companies, it was obvious that CardStarter itself had a tremendous amount of value to offer the new - to - market SundaeSwap. First , at the time it approached SundaeSwap, CardStarter controlled millions of doll ars in liquidity pools . SundaeSwap , in contrast, had none. Second, and relatedly, CardStarter had a loyal community that proved it would contribute to liquidity pools backed by CardStarter and would participate in a DEX endorsed by CardStarter. Third , CardStarter , unlike SundaeSwap, had a head start on developing its DEX and a far deeper and more significant track record Fourth , SundaeSwap had not yet raised sufficient , if any, capital to develop a DEX of its own. 47. On June 10, 2021, CardStarter’s CEO , Mr. Amir, first approached SundaeSwap’s CEO, Defendant Motavaf, and explained, “I’m actually looking to discuss potential collaboration between [S]undae and a couple of our incubator projects – I’m not sure if the sentiment was passed forward, but we hav e no intention of ‘competing’ with projects looking to build out in the ADA space . . . . I truly believe that working together is generally the most efficient and successful path forward.” SundaeSwap was quick to respond, and CardStarter orally outlined its thoughts about joining forces with SundaeSwap on a combined DEX. 48. As CardStarter had anticipated, SundaeSwap was enthusiastic about the prospect of partnering with CardStarter. SundaeSwap’s incentives were obvious: knock CardStarter’s leading DEX out of the competition , use CardStarter’s experience and knowledge — and the benefit of Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 12 of 44 12 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 associating with the CardStarter brand — to attract seed and other investment funding , snag the rich prize of CardStarter’s Current Liquidity Pools, worth millions of dollars , and gain the support of CardStarter’s enthusiastic community As SundaeSwap would later explain in a PR release, by partnering with CardStarter , SundaeSwap “ expect[s] to launch with both the largest community and the most Total Value Locked [TVL] of any Cardano DEX at the time.” (emphasis added). G. SundaeSwap acts in b latant b ad f aith by undertak ing a campaign to deceive CardStarter, destroy its business, and provide nothing in exchange. 49. Starting on or around June 11, 2021, CardStarter and Su ndaeSwap entered into a Non - Disclosure Agreement (“NDA”) to ensure the confidentiality of their negotiations. Once talks began in earnest, Defendants’ strategy was simple: (1) promise to deliver to CardStarter millions of SUNDAE tokens in exchange for Car dStarter’s Current Liquidity Pools ; (2) try (albeit unsuccessfully) to avoid making a record of that promise; (3) promise CardStarter that SundaeSwap would refrain from supporting CardStarter’s competitors ; and (4 ) renege on those promises once CardStarter had forfeited its leverage and delivered nearly everything that SundaeSwap desired i. The p arties e nter i nto t he Collaboration and Marketing Agreement 50. On June 30 , 2021, the Parties entered into the Collaboration and Marketing Agreement 51. In the Collaboration and Marketing Agreement, CardStarte r agreed that it would “provide the following support and/or take the following actions to assist SundaeSwap in the development and launch of the DEX:” a. Provide advice, expertise, consultation, introdu ctions and other support on the technical and financial structure of the DEX ; b. Provide marketing and community support and advice to SundaeSwap (directly or through its subsidiary CardStarter Labs, Inc. [)]; c. Provide to the DEX all total value locked (“TVL”) in or from CardStarter projects developed or contributed in the 12 months after the DEX launc h ; (emphasis added) d. Wind - down its CardSwap decentralized exchange [DEX] project in the next 30 days ; Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 13 of 44 13 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 e. Engage in joint public marketing, promotion or social media communications regarding the DEX and SundaeSwap ; and f. Not support, collaborate with, advise, develop or market products or services similar to the DEX for the 12 months after the DEX launch 52. SundaeSwap, in turn, agreed to the following commitments: a. D iligently develop the DEX so as to launch promptly after the development of smart - contracts capability on the Cardano blockchain ; b. E nsure that the DEX includes features (such as a public API) that will allow C ardStarter to un - pool TVL on the Ethereum blockchain, bridge to the Cardano blockchain and DEX, and re - pool on the Cardano blockchai n; c. Provide Most Favored Nation status to listing pairs contributed by CardStarter within the first 12 months after the DEX launch, including but not limited to ensuring that any rewards available to a SUNDAE - ADA pair are offered to a CARDS - ADA pair ; d. R efer projects approaching SundaeSwap for a launchpad directly to CardStarter ; and e. W ill not support, collaborate with, advise, develop or market products or services similar to the CardStarter launchpad business model for the 12 months after the DEX launch (emphasis added). ii. CardStarter fully performs under the Collaboration and Marketing Agreement. 53. CardStarter has fully p er formed under the Collaboration and Marketing Agreement. This includes, but is not limited to, the following: CardStarter has terminated its DEX ; provided marketing and community support and advice to SundaeSwap ; provided advice, expertise, consultation, i ntroductions and other support on the technical and financial structure of the DEX ; and engaged in joint public marketing, promotion , and social media communications regarding the DEX and SundaeSwap iii. The p arties e nter i nto t he Gentlemen’s Agreement. 54. At Def endants ’ insistence , SundaeSwap ’s commitment to provide CardStarter with SundaeSwap tokens for distribution to CardStarter’s community, and CardStarter’s commitment to deliver the liquidity pools it had developed to SundaeSwap, were not included in the Col laboration and Marketing Agreement, but rather were executed in a separate “Gentlemen’ s Agreement.” As Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 14 of 44 14 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Defendant Motavaf wrote on June 28, 2021 , “the tokens can just be a gentlemen’s agreement. ” Defendants Wright and Lanningham concurred. 55. CardStarter agr eed , after the parties had several calls, virtual meetings, and written exchanges, to provide the liquidity pools directly controlled by CardStarter and to encourage and incentivize its community to migrate their liquidity to SundaeSwap as well 56. On or around July 2, 2021, Defendants issued an announcement that the parties had reached a deal, specifically disclosing CardStarter’s obligations under the Gentlemen’s Agreement ( i.e. , to deliver its C urrent L iquidity P ool s to SundaeSwap, which is not part of the Collaboration and Marketing Agreement) and describing them as binding commitments On information and belief, the announcement was reviewed and approved by Defendant Borders 57. SundaeSwap’s announcement reads as follows: We are pleased to announce that SundaeSwap has entered into a partnership agreement with Cardano project accelerator CardStarter. This agreement will help us develop the SundaeSwap DEX in a number of ways, including by assuring that CardStarter will contribute liquidity to SundaeSw ap on day one of the DEX launch . With this partnership, we expect to launch the DEX with both the largest community and the most Total Value Locked (TVL) of any Cardano DEX . . . 58. The Coin Telegraph article that SundaeSwap linked in its press release furth er explained: All current and future TVL raised from CardStarter’s initial DEX offerings will be directly funneled to SundaeSwap , where users will be able to swap tokens directly with the most favorable conditions given the significant liquidity provided. (emphasis added). 59. On July 8, 2021, SundaeSwap’s Chief Information Officer, Defendant Lanningham, publicly posted that “[t]he biggest things that have changed for the SundaeSwap project is, though, that we’ve now secured day one liquidity for the DEX.” (emp hasis added). Defendant Lanningham , in other words, was public ly stating that SundaeSwap had secured CardStarter’s C urrent L iquidity P ools — a term being negotiated as part of the Gentlemen’s Agreement and wholly absent from the Collaboration and Marketing Agreement. 60. On September 23, 2021, the Parties reached a final agreement on the remaining Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 15 of 44 15 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv - 757 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 terms of the Gentlemen's Agreement : In exchange for CardStarter ’s deliver y to SundaeSwap of the portion of the liquidity pools it controlled and encouraging and inc entivizing the CardStarter community to do the same , SundaeSwap would deliver to CardStarter, for further distribution to CardStarter’s community, 7.5% of the SundaeSwap token supply. As discussed above, t he agreement that CardStarter would deliver to Sun daeSwap the liquidity pools it had developed had been settled for months, but agreement over the amount of tokens SundaeSwap would deliver in exchange was not finalized until September 23, 2021 After the parties discussed by phone, Aatash Amir, the CEO o f CardStarter, stated in a written Telegram message his understanding of the parties’ agreement as calling for SundaeSwap to provide “ 7.5% of the total supply ” of SundaeSwap tokens and that, because SundaeSwap had insisted that their agreement not be put “on paper , ” CardStarter was “ [ g ] oing to trust that this [] is all going to happen (otherwise, community scandal, as we all fully appreciate, understand, and want to avoid at all costs).” (emphasis ad ded). In response to Mr. Amir, SundaeSwap’s CEO, Defendant Motavaf , replied, “ Sounds good .” (emphasis added). iv. SundaeSwap refuses to formally memorialize the Gentlemen ’ s Agreement, while assuring CardStarter that SundaeSwap will honor the Agreement. 61. Defenda nts refused to formalize the Gentlemen’s Agreement in a written contract, despite CardStarter’s repeated efforts to do so. Each time CardStarter pressed for the parties’ agreement to be formalized in a written contract, Defendants reassure d CardStarter th at the Gentlemen’s Agreement would bind both parties. Defendant Motavaf assured CardStarter from the start that “ there is no reason why both parties wouldn’t deliver ” on their respective promises in the Gentlemen’s Agreement “ as it benefits both of us to follow through with it. ” (emphasis added). Later, Defendant Motavaf again attempted to reassure CardStarter, stating that “the risk is almost equal. It’s in our best interest to deliver on our word [on the delivery of the SUNDAE tokens] because the promis e of current TVL [ CardStarter’s Current Liquidity Pools, which CardStarter agreed it would provide to SundaeSwap] isn’t on the signed [Collaboration and Marketing Agreement] either. That was sort of the [c]ommitment we both made to keep us on equal playing field.” (emphasis added). Case 3:22-cv-00757-CRB Document 30 Filed 05/06/22 Page 16 of 44 16 PLAINTIFF’S FIRST AMENDED COMPLAINT; CASE NO. 3:22 - cv