Full opinion text
ORDER RICHARD H. KYLE, District Judge. Before the Court are the Objections of certain defendants to the March 1, 2010 Report and Recommendation of Magistrate Judge Jeffrey J. Keyes. Judge Keyes has recommended that the pending Motion to Dismiss portions of the Second Amended Complaint be denied. Having reviewed de novo the Report and Recommendation, and Defendants’ Objections thereto, and upon all of the files, records, and proceedings herein, IT IS ORDERED: 1. Defendants’ Objections (Doc. No. 63) are OVERRULED; 2. The Report and Recommendation (Doc. No. 60) is ADOPTED; 3. Defendant Charles T. Thompson’s Motion to Dismiss Second Amended Complaint (Doc. No. 27), and Defendants’ Michael W. Bozora’s, Timothy R. Redpath’s, Capital Solutions Distributors, LLC’s, and Capital Solutions Management, LP’s, Amended Motion to Dismiss (Doc. No. 28), are GRANTED IN PART and DENIED IN PART as follows: a.The Section 12(a)(1) claims in Count I of the Second Amended Complaint of Plaintiffs Ellen DeHaven, John Gardiner, John Gardiner as custodian for Max A. Gardiner, John Gardiner as custodian for Paige M. Gardiner, John Gardiner as custodian for Jake W. Gardiner, Steven R. Gulbrandsen, Steven R. Gulbrandsen Profit Sharing Plan, Blake Johnson, LLC, R. Thomas Lane, Craig Mandery, Guy M. Peterson, Jeffrey M. Petrik, Sally A. Petrik, Joseph H. Ryan, Sandra M. Ryan, Robert Spadafora, Thomas C. Weekly, IRA, and Daniel White are DISMISSED AS TIME BARRED; b. The Section 12(a)(2) claims in Count II of the Second Amended Complaint of Plaintiffs Stephen R. Gulbrandsen, Stephen R. Gulbrandsen Profit Sharing Plan, and Thomas C. Weekly are DISMISSED AS TIME BARRED; c. The Section 10(b) and Rule 10b-5 claims in Count II of the Second Amended Complaint of Plaintiffs Stephen R. Gulbrandsen and Thomas C. Weekly are DISMISSED AS TIME BARRED; d. Count IV of the Second Amended Complaint is DISMISSED for failure to state a claim under the Minnesota Consumer Fraud Act; e. Plaintiffs’ claim for punitive damages is DISMISSED WITHOUT PREJUDICE; and f. The Motions are DENIED in all other respects. REPORT AND RECOMMENDATION JEFFREY J. KEYES, United States Magistrate Judge. This matter is before the Court on Defendant Charles T. Thompson’s Motion to Dismiss Second Amended Complaint (Doc. No. 27), and Defendants’ Michael W. Bozora’s, Timothy Redpath’s, Capital Solutions Distributors, LLC’s, and Capital Solutions Management, LP’s, Amended Motion to Dismiss (Doc. No. 28). The case has been referred to this Court for a Report and Recommendation pursuant to 28 U.S.C. § 636 and D. Minn. Loe. R. 72.1. For the reasons that follow, this Court recommends that the motions be granted in part and denied in part. BACKGROUND 1. Introduction In this case, Plaintiffs allege that Defendants are various individuals and entities affiliated with Paramount Partners, L.P. (“Paramount”), which is a limited partnership hedge fund. Paramount raised capital by selling limited-partnership interests to investors, including Plaintiffs. Paramount told its investors that it would actively invest the funds received from their limited partnership investments in the stock market pursuant to a proprietary trading strategy designed to take advantage of stocks it believed would outperform or underperform the market. Plaintiffs describe a network of business relationships between Defendants Paramount, Crossroad Capital Management, LLC (“Crossroad”), Lawton, Capital Solutions Management, LP (“CSM”), Capital Solutions Distributors, LLC (“CSD”), Timothy R. Redpath (“Redpath”), Charles T. Thompson (“Thompson”), and Michael W. Bozora (“Bozora”). Plaintiffs allege that these Defendants unlawfully sold unregistered securities, the Paramount limited-partnership interests, and made material misrepresentations and omissions in public advertisements and personal solicitations regarding those securities. According to Plaintiffs, Defendants represented Paramount to be a successful and well informed hedge fund and that Defendants closely monitored stock-market trends to engage in aggressive trading strategies that ensured a high return on its limited partners’ investments. Plaintiffs say that, contrary to those and other representations, Paramount was not successful and the funds Plaintiffs believed to be investing in Paramount’s trading activities by purchasing limited-partnership interests were not invested in the stock markets as Defendants represented they would be. Instead, those funds were allegedly misappropriated by one or more Defendants. These events led to the Securities and Exchange Commission (“SEC”) launching an investigation of Defendants Paramount, Lawton, and Crossroad, earlier this year, which resulted in the SEC filing a separate civil-enforcement action. In that SEC action, the District Court froze Paramount’s assets. (See Sec. and Exch. Comm’n v. Lawton, et al., Civ. No. 09-368 (ADM/AJB), Doc. No. 34, July 13, 2009 Order.) In this case, Plaintiffs now seek repayment of the price they paid for their limited-partnership interests in Paramount, statutory doubling of those amounts, compensation for taxes they paid on the fraudulently reported earnings their investments produced, with interest, and their attorneys’ fees. II. Factual Background A. Paramount’s Business Prior to July 12, 2006 In November 2001, Lawton organized a private hedge fund under the name The Crossfire Trading Fund, L.P. (Doc. No. 26, Second Am. Compl. (“SAC”) ¶ 12.) Law-ton used the limited liability corporation Crossroad, as the organizing entity for the Crossfire Trading Fund. (Id. ¶ 3.) On November 1, 2001, Lawton and Crossroad adopted a Limited Partnership Agreement in which Crossroad became the general partner of the hedge fund and the “attorney-in-fact” for all of its limited partners. (Id. ¶ 14.) It appears that, at the start, the Crossfire Trading Fund was a one-man project, as Lawton obtained investors through his personal contacts. (Id. ¶ 12.) On June 11, 2003, the name of the hedge fund was changed from Crossfire to Paramount. (Id. ¶ 13.) Simultaneously with the name change, Lawton and Crossroad adopted an amended limited-partnership agreement. (Id. ¶ 14.) At that time, Law-ton, through Crossroad, allegedly “expanded the public solicitation of investors by means of internet advertisements containing false representations including, inter alia, [the representation that] ‘... [We conduct] fundamental research [and] ... side visits with company management to develop a detailed understanding of each company’s strategy and what drives its business.’ ” (Id. (second and third alterations in original).) From November 1, 2001, through July 12, 2006, Lawton, Crossroad, and the hedge fund (as both Paramount and The Crossfire Trading Fund), sold a total of only $928,636 limited-partnership interests to investors in the hedge fund. (Id. ¶ 12.) B. The Other Defendants Enter Paramount’s Business in 2006. Lawton entered into a new business relationship with the other Defendants in this matter in mid-June 2006. (SAC ¶ 15.) Pursuant to a July 12, 2006 agreement, CSM, which is founded and owned by Defendants Bozora and Redpath (Id. ¶¶ 7-8), and managed by Defendant Thompson (Id. ¶ 6), acquired a minority-ownership interest in Crossroad, the general partner of the Paramount limited partnership. (Id. ¶ 15.) Under that agreement, CSM initially owned 10 percent of Crossroad and “[f]or each $2,000,000 in new assets [Crossroad] t[ook] under management, [CSM] w[ould] own an additional 10 percent of [Crossroad] up to a maximum of 50 percent.” (Id. ¶ 16.) In exchange for this ownership interest, CSM agreed to “advise and assist [Crossroad] in business planning, business management, business development, and fundraising, and [Crossroad agreed to] pay [CSM] a monthly fee for services rendered.” (Id.) According to another July 12, 2006 agreement, CSD, which is an “‘NASD member and wholly owned subsidiary of [CSM]’ ” (Id. ¶ 15), and managed by Thompson (Id. ¶ 6), agreed to be the “ ‘exclusive distributor’ ” of Paramount’s limited-partnership interests. (Id. ¶ 15.) In this role, CSD would act as an exclusive sales agent by soliciting and referring prospective limited partners to Crossroad and Paramount. (Id. ¶ 6.) After CSM, CSD, Thompson, Redpath, and Bozora became affiliated with Lawton, Paramount, and Crossroad, “public solicitation and sales of Paramount limited partnership interests increased dramatically, to the point that Paramount succeeded in the approximate 2-1/2 years from July 12, 2006 through December 2008, in obtaining $9,911,046 from investors who purchased Paramount’s limited partnership interests[.]” (Id. ¶ 15.) Prior to CSM, CSD, Thompson, Redpath, and Bozora’s involvement, Paramount’s sales of limited-partnership interests (including the sales of Paramount’s predecessor) averaged approximately $16,500 per month. (Id.) After these Defendants became involved with Paramount and its limited-partnership sales campaign, the hedge fund’s sales increased dramatically to an average of over $300,000 per month. (Id.) C. Statements and Representations to Plaintiffs Beginning in 2002, investments in Paramount were solicited by use of a prospectus and through oral and written statements regarding the past performance of the hedge fund. (SAC ¶ 19.) Defendants “emphasized Paramount’s purported successful hedge fund ‘track record’ by including both an annual and monthly ‘Performance History,’ in a ‘Marketing Sheet’ that was distributed by Defendant Crossroad on a monthly basis to [Paramount’s] then existing limited partners[.]” (Id.) They also distributed this information to potential new investors as a “sales tool” to encourage investments. (Id.) 1. Documents Used to Solicit Investments When CSM, CSD, Bozora, Thompson, and Redpath became involved with Paramount in 2006, their sales efforts continued to focus on the use of “monthly updated versions of this ‘Performance History’ to distribute both to [Paramount’s] then existing limitéd partners ... and to solicit new investors.” (Id.) These Performance Histories included the following specific statements: The Fund [Defendant Paramount] will employ a proprietary trading strategy, based on 30 years of historical research, technical strategies, fundamental research to uncover sector and economic market inefficiencies. The Fund is dedicated to achieving absolute returns to increase our investor wealth regardless of market trends. The General Partner [Defendant Crossroad] believes with our experience and strong money management strategies the Fund can produce long term gains for our Limited Partners .... [Defendant Crossroad] provides professional portfolio management for high net individuals through its hedge fund. It was founded on the principal that systematic risks can be managed by hedging a portfolio to the current market environment.... ' [Defendant Paramount] is an opportunistic long/short equity trading fund. Extensive and deep electronic directional monitoring and analysis of market conditions and then (sic) same analysis of individual stocks are utilized to identify specific securities for purchase or sale.... Through our .own research/due diligence processes and relationships with research boutiques and regional firms.... We are constantly searching all research and other sources for ideas and then testing them to determine if they fit our industry and company criteria. Then through electronic trend and directional analysis we determine if the particular stock is poised for a breakout or breakdown. Only when all of the requirements are met does the name enter the portfolio. Once in the portfolio, we monitor it closely to decide whether to add to the position if it is working as planned, remove it by way of our lost protection discipline, or let it run until it has reach (sic) our objective .... At the portfolio level, we are responsible for managing systematic risk, such as Beta, to make sure that we remain on target within risk tolerances. At the position level, we are responsible for identifying position risks and helping to set core position sizes and Tactical Trading limits before establishing a position. Research, Trading and Risk Management are defined by Portfolio Manager and include: specific exit triggers, stop loss triggers, and a detailed watch list of items that need to be continuously monitored during the life of a trade. (SAC ¶ 19.) Further, a May 2008 Performance History reported annual investment returns from Paramount’s hedge-fund trading for the six previous years of 21.9% in 2002, 43.07% in 2003, -4.93% in 2004, 23.48% in 2005, 19.22% in 2006, and 64.7% in 2007. (Id.) This May 2008 Performance History also stated that Paramount’s assets at the time totaled $12.68 million. (Id.) Plaintiffs assert that Defendants, through Thompson and CSM, sent- an email to Paramount’s limited partners and to potential investors on July 1, 2008, that purported to communicate a Bloomberg LP, Hedge Fund Universe ranking'of Paramount’s performance. (SAC ¶ 19, Ex. E.) The email explained that in May 2008, Bloomberg LP, an organization that ranks between 6,500 and 10,000 hedge funds each month, reported that Paramount was in the top 100 Bloomberg rankings for several years and in the top • 50 for recent months. (Id. ¶ 19, Ex. E.) And in late November 2008, Paramount reported to its existing limited-partner investors and to potential investors that it had a “Net Performance” of 38.4% over the 11 previous months. (Id.) Defendants also “offered and sold the limited partnership interests in Paramount to Plaintiffs by means of written prospectuses including Private Placement Memoranda dated November 1, 2001, June 26, 2005, and May 23, 2007.” (SAC ¶ 20.) As described in the Second Amended Complaint, these Private Placement Memoranda (“PPM”) made similar representations for the purpose of soliciting potential investors. The November 2001 and June 2005 PPMs explained that Crossroad would use an “active trading strategy” to make investments in various securities based on how Crossroad believed they would perform. (Id. ¶ 21.) Crossroad would “hedge against unknown market risk” by holding onto a substantial portion of Paramount’s assets in cash at the end of each trading day. (Id.) Crossroad’s trading strategy would involve both “technical analysis” and “fundamental analysis.” (Id.) The former, which was Paramount’s primary strategy, involves tracking supply and demand rather than details about a particular “equity,” while the latter involves evaluation of an individual security through measurement of its “intrinsic value.” (Id.) The May 23, 2007 PPM made substantially similar representations about the management of Paramount’s investments. (See id.) Each PPM stated that Paramount primarily invested in companies with “market capitalization over $500 million for an initial investment.” (SAC ¶ 22.) Each PPM also represented 'that Paramount would use the proceeds obtained through the solicitation of limited-partner investments “in accordance with the policies set forth” in the description of the hedge fund’s investment strategies, as set forth above. (Feldhaus Aff. ¶ 4, Ex. 3 at 4.) According to the PPMs, with respect to “Distributions,” Crossroad “generally intends to reinvest all realized income and capital gains into additional [Paramount] investments rather than distribute such realized income and gains to [Paramount’s] investing partnersf.]” (SAC ¶ 24; Feldhaus Aff. ¶ 4, Ex. 3 at 5.) This arrangement and Paramount’s status as a partnership meant that each investor would be “subject to income tax on its proportionate share of [any] income and gains whether or not [Paramount] makes any distributions thereof.” (SAC ¶ 24; Feldhaus Aff. ¶ 4, Ex. 3 at 5.) Investors were permitted to make withdrawals from their “ ‘Capital Accounts’ on an annual basis,” after giving Crossroad at least 60 days’ written notice. (SAC ¶ 25; Feldhaus Aff. ¶ 4, Ex. 3 at 5.) But limited partners were generally not permitted any withdrawals within their first year of investing in the hedge fund, and they could not make withdrawals in amounts that would reduce their capital accounts below their initial investments. (SAC ¶ 25; Feldhaus Aff. ¶ 4, Ex. 3 at 5.) Crossroad could, in its discretion, deviate from these restrictions by permitting greater withdrawals or by requiring an investor to completely withdraw all of its funds. (SAC ¶ 25; Feldhaus Aff. ¶ 4, Ex. 3 at 5.) And the PPMs warned potential investors that additional restrictions could be placed on withdrawals and instructed them to “review the Partnership Agreement carefully before investing.” (SAC ¶ 25; Feldhaus Aff. ¶ 4, Ex. 3 at 5.) The PPMs also stated that Crossroad would provide each investor with “monthly financial statements and performance information of [Paramount] and its operations. Additionally, [Crossroad] will provide each Limited Partner with audited financial statements of [Paramount] as soon as practicable following the date they become available.” (SAC ¶ 26; Feldhaus Aff. ¶ 4, Ex. 3 at 8.) The PPMs identified Virchow, Krause & Co., of Bloomington, Minnesota, as the independent certified public accounting firm chosen by Crossroad to provide Paramount investors with annual financial reports. (SAC ¶ 26; Feldhaus Aff. ¶ 4, Ex. 3 at 8.) 2. Summary of Representations to Individual Plaintiffs The Second Amended Complaint also describes, in 25 separate subparagraphs, the specific representations certain individual Defendants made to specific Plaintiffs. (See SAC ¶ 27(a)-(y).) For instance, Plaintiff Steven B. Cummings explains that after his investment was solicited through the May 23, 2007 PPM, Thompson explained to him that “the trading model of the fund [is] conservative and ‘foolproof.’ ” (Id. ¶ 27(a).) Thompson told Cummings that the Defendants conducted research to get information about potential investments Paramount should make, and he explained that Paramount had “an incredible track record and historically delivered returns in excess of 20% per year.” (Id.) Thompson said that any losses would be minimized because Paramount’s trader “was constantly watching the market” and Thompson told Cummings that “he personally watched the trading and could track the performance of the fund.” (Id.) Based on this information and the other information Paramount used to solicit Cummings’s investment, Cummings invested $125,000 in Paramount on or about October" 15, 2008. (Id.) As a result of the Cummings investment, Thompson and CSD received a commission, and Thompson and CSM updated Cummings with written and oral information regarding his investment. (Id.) Then, in December 2008, after purported statements circulated about Paramount’s viability, Thompson called Cummings to ensure him that there were no problems with Paramount and Thompson again stated that he was personally watching the fund. (Id.) According to Cummings, these later representations induced him to keep his investment in Paramount. (Id.) Other Plaintiffs describe similar discussions they had with Bozora, Redpath, and Thompson, prior to investing in Paramount, and these Plaintiffs recount similar statements made about the past performance of the hedge fund, the safety of the investment, its potential for growth, and the techniques Paramount used to ensure that growth. (See, e.g., SAC ¶ 27(b) (describing Plaintiff DeHaven’s conversations with Bozora); Id. ¶ 27(c) (describing Bozora, Redpath, and Thompson’s meetings with Plaintiff Dziedzic).) These individual accounts explain how Bozora, Redpath, and Thompson assured potential investors that they monitored the hedge fund, had oversight of it, or were otherwise involved in its operations. (See SAC ¶ 27(d) (explaining that Thompson told Plaintiff Gardiner that he was personally tracking the fund); Id. ¶ 27(g) (explaining that Thompson told Plaintiff Hegwood that he was monitoring the fund); Id. ¶27(l) (explaining that Bozora and Thompson told Plaintiff R. Thomas Lane that they were overseeing and monitoring Lawton and his trading activities); Id. ¶27^) (explaining that Thompson and Bozora told Plaintiff Weekly that were monitoring the fund); Cf. id. ¶ 27(c) (explaining that Bozora, Redpath, and Thompson spoke of Paramount using in terms such as “we”).) 3. Information Defendants Omitted to Tell Plaintiffs Plaintiffs also assert that no Defendant informed them of three critically important facts regarding Paramount. (SAC ¶ 29.) First, Plaintiffs assert that Defendants failed to inform them of a January 10, 2007 lawsuit filed in this District by Paramount investors who had requested a 100% withdrawal of their investment in the fall of 2005, but did not receive checks from Paramount until June 2006, which were then dishonored by Crossroad’s bank. (Id. ¶ 29(a).) At the time the lawsuit was filed, the investors’ withdrawal request was unpaid. (Id.) However, the investors eventually dismissed that suit when Paramount “came up with sufficient monies to pay the plaintiffs, which monies apparently came from the proceeds of one or more of the investments in Defendant Paramount by the Plaintiffs herein.” (Id.) Next, Plaintiffs state that although the PPMs discussed above specifically represented that Crossroad would provide audited financial statements prepared by the independent accounting firm of Virchow Krause & Co. on an annual basis, “no audited financial statements or reports of Defendant Paramount’s operations and portfolio holdings were ever prepared by any certified public accounting firm or provided to any of the Plaintiffs[.]” (Id. ¶ 29(b).) Further, Bozora, Redpath, Thompson, CSM, and CSD continued to offer and sell Paramount’s limited-partnership interests even though they knew or should have known that Defendants Law-ton, Paramount, and Crossroad were failing to provide audited financial statements and reports to Paramount’s limited partners. (Id.) And third, Plaintiffs point out that the monthly “Performance Histories” that Defendants provided to Plaintiffs omitted any disclaimer that Bozora, Redpath, Thompson, CSM, and CSD had not overseen Paramount’s reported performance. (SAC ¶ 29(c).) “Given the prior assurance by [these Defendants] that they routinely ‘watched trading and could track performance,’ the absence of such disclaimer was both a material omission of fact and constituted a continuing representation by [these Defendants] that Paramount ‘Performance Histories’ were accurate.” (Id.) 4. Positive Income Statements and Monthly Reports Plaintiffs assert that for the years between 2001 and 2007, Paramount and Crossroad “issued K-l’s to the respective Plaintiffs who had invested in Paramount during or by any such year, with each K-l purporting to reflect actual positive earnings by Paramount ... on behalf of the respective Plaintiff[.]” (SAC ¶ 31.) Relying on these K-l’s, Plaintiffs reported the earnings and corresponding increases in their capital accounts as income on their federal and state income-tax returns. (Id.; see also id. ¶ 31, Ex. G.) For example, Plaintiff Joe Ryan reported over $300,000 of income from increases to his capital account in Paramount during the 2007 year. (Id. ¶ 31, Ex. G.) Plaintiffs also assert that “Defendants also provided each of the respective Plaintiffs with written monthly statements for each ... Plaintiffs limited partnership ‘account’ with Paramount, which ... generally documented a substantial increase in the dollar amount” of each account. (Id. ¶ 32.) These reported monthly increases correspond to the increases documented in the “Performance Histories” documentation discussed above. (See id.; see also id. ¶ 32, Exs. H1-H2.) D. SEC Investigation and Subsequent Events In January 2009, the SEC began an investigation of Lawton, Paramount, and Crossroad. (SAC ¶ 34.) These Defendants provided the SEC with documentation purportedly showing that Paramount’s net assets as of November 30, 2008, were approximately $19,800,000, but had' declined to approximately $16,900,000, as of December 31, 2008. (Id.) Lawton, Paramount, and Crossroad attributed that loss to negative returns on limited partners’ investment accounts during December. (Id.) The SEC determined that Lawton, Paramount, and Crossroad provided false information in connection with the investigation and concluded that on February 13, 2009, Paramount’s liquid assets totaled only approximately $1,300,000. (Id. ¶ 35.) The SEC also concluded that Paramount failed to meet margin calls from Goldman Sachs regarding its stock account on two separate occasions in January 2008, which resulted in Goldman Sachs restricting Paramount’s stock trading to merely winding down the account. (Id.) This was contrary to Lawton, Paramount, and Crossroad’s claims that they had an active account with Goldman Sachs. (Id.) The SEC further determined that limited partners had invested approximately $10,800,000 into Paramount from December 2001 through December 2008, the majority of those investments coming after July 12, 2006, when CSM, CSD, Bozora, Redpath, and Thompson became involved with the hedge fund. (Id. ¶ 36.) Withdrawals by limited partners during the December 2001-Deeember 2008 period totaled only approximately $1,200,000, leaving a net investment by Paramount’s remaining limited partners of around $9,600,000. (Id.) The SEC also concluded that between March 2007 and July 2008, Paramount, Lawton, and Crossroad transferred approximately $2,100,000, from Paramount to Crossroad, and $1,100,000, from Crossroad to Lawton.. (Id. ¶ 37.) In January 2009, Lawton withdrew approximately $900,000 from Paramount’s stock-trading account at Merrill Lynch, and Thompson apparently disaffiliated himself from Bozora, Redpath, CSM, and CSD. (Id.) Lawton and Crossroad also notified Plaintiffs in January 2009 that CSM would end its relationship with Paramount and Crossroad, and Lawton would be the “ ‘sole owner of the business.’ ” (Id.) Thereafter, the SEC filed a civil-enforcement action against Lawton, Crossroad, and Paramount and obtained a temporary restraining order that froze Lawton, Crossroad, and Paramount’s assets. (Id. ¶ 38.) This terminated these Defendants’ trading activities, and the District Court later issued a preliminary injunction. (Id.) On October 30, 2009, the United States filed a Felony Information against Lawton, charging him with mail fraud for providing fraudulent information to an investor in Minnesota in a monthly account statement and knowingly providing false statements to the SEC. (United States v. Lawton, Crim. No. 09-319(PAM) (“USA v. Lawton ”), Doc. No. 1.) On November 24, 2009, Lawton pleaded guilty to both counts. (Id., Doc. No. 3.) III. Procedural History Plaintiffs originally filed their Complaint on April 13, 2009. (Doc. No. 1.) Before any responsive pleading was filed, Plaintiffs filed an Amended Complaint on May 14, 2009. (Doc. No. 4.) On June 6, 2009, CSM, CSD, Redpath, and Bozora moved to dismiss the Amended Complaint, and three days later Thompson moved for dismissal as well. (Doc. Nos. 6, 9.) The parties thereafter stipulated to the filing of a Second Amended Complaint on September 25, 2009 (Doc. No. 24), and Plaintiffs filed their Second Amended Complaint on October 5, 2009. (Doc. No. 26.) The moving Defendants then brought the instant motions to dismiss the Second Amended Complaint. The Second Amended Complaint asserts 10 counts. Counts IX and X are asserted only against Defendants Paramount, Law-ton, and Crossroad, who have not moved for dismissal at this time. Thus, Counts I-VIII are the only claims before this Court pursuant to the pending dismissal motions. Count I claims that all Defendants were involved in the unlawful sale of unregistered securities under Section 12(a)(1) of the Securities Act. Count II asserts that all Defendants made material misrepresentations and omissions in violation of Section 12(a)(2) of the Securities Act, Section 10(b) of the Exchange Act, and Rule 10b-5. Count III asserts that all Defendants made material misrepresentations under the Minnesota Securities Act, and Count IV claims that all Defendants violated the Minnesota Consumer Fraud Act by fraudulently inducing Plaintiffs to invest in Paramount. Count V asserts a common-law claim of unjust enrichment against all Defendants. Count VI asserts that CSM, CSD, Bozora, Redpath, and Thompson breached a fiduciary duty to Plaintiffs in these Defendants’ capacities as financial planners, and Count VIII claims that these same Defendants breached their fiduciary duties to Plaintiffs as partners in Paramount. In Count VII, Plaintiffs allege that CSM, CSD, Bozora, Redpath, and Thompson are liable for negligence. Plaintiffs also include a claim for punitive damages in the Second Amended Complaint’s ad damnum clause. CSM, CSD, Bozora, Redpath, and Thompson (collectively the “moving Defendants”) now seek to dismiss Counts I-VIII, and the punitive-damages claim asserted in the Second Amended Complaint. (Doe. Nos. 27, 28.) Generally, the moving Defendants argue that some of Plaintiffs’ claims are barred by the applicable statutes of limitations, that Plaintiffs have failed to state claims for securities fraud under the heightened pleading standards of the Private Securities Litigation Reform Act, and that Plaintiffs’ remaining claims should be dismissed for failing to adequately plead facts to support their claims. (See generally Doc. No. 30, Def. Charles T. Thompson Mem. of Law in Supp. of Mot. to Dismiss Second Am. Compl. (“Thompson Mem.”); Doc. No. 31, Mem. in Supp. of Defs. Capital Solutions Management, LP, Capital Solutions Distributors, LLC, Timothy R. Redpath, and Michael W. Bozora’s Mot. to Dismiss Second Am. Compl. (“Solutions Mem.”).) DISCUSSION I. STANDARD OF REVIEW A complaint typically must contain only “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). Under Federal Rule of Civil Procedure 12(b)(6), a complaint will be dismissed if it fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6). To state a cause of action that will survive a Rule 12(b)(6) motion, a complaint must allege a set of historical facts, which, if proven true, would entitle the plaintiff to some legal redress against the named defendants under some established legal theory. Martin v. Aubuchon, 623 F.2d 1282, 1286 (8th Cir.1980) (noting that “the complaint must allege facts, which if true, state a claim as a matter of law”). To survive a motion to dismiss, a complaint must contain “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). This standard “calls for enough fact[s] to raise a reasonable expectation that discovery will reveal evidence of [the claim].” Id. at 545, 127 S.Ct. 1955. “A pleading that offers ‘labels and conclusions’ or a ‘formulaic recitation of the elements of a cause of action will not do.’ ... Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’ ” Ashcroft v. Iqbal, — U.S. -, -, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 555, 557, 127 S.Ct. 1955). In deciding a motion to dismiss, a court assumes all facts in the complaint to be true and construes all reasonable inferences from those facts in the light most favorable to the complainant. Morton v. Becker, 793 F.2d 185, 187 (8th Cir.1986). In doing so, however, a court need not accept as true wholly conclusory allegations, Hanten v. Sch. Disk of Riverview Gardens, 183 F.3d 799, 805 (8th Cir.1999), or legal conclusions drawn by the pleader from the facts alleged. Westcott v. City of Omaha, 901 F.2d 1486, 1488 (8th Cir.1990). II. Statute-of-Limitations Issues A. Section 12(a)(1) Claims (Count I) Under Section 12(a)(1) of the Securities Act, any person who: offers or sells a security in violation of [section 5] ... shall be liable ... to the person purchasing such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security. 15 U.S.C. § 77i(a)(l). Such claims must be brought “within one year after the violation” and no more than “three years after the security was bona fide offered to the public.” 15 U.S.C. § 77m. Courts measure the one-year limitations period by focusing on the last conduct constituting the alleged violation. See Stephenson v. Deutsche Bank AG, 282 F.Supp.2d 1032, 1064 (D.Minn.2003) (citing Meadows v. Pac. Inland Sec. Corp., 36 F.Supp.2d 1240, 1243 (S.D.Cal.1999)). The moving Defendants argue that several of Plaintiffs’ claims under Section 12(a)(1) of the Securities Act are barred by the statute of limitations because the Defendants’ last activity with respect to those Plaintiffs’ claims occurred more than one year ago. (Thompson Mem. 7-10; Solutions Mem. 9-11.) Specifically, the moving Defendants assert that Plaintiffs’ Second Amended Complaint was filed on April 13, 2009, and the following Plaintiffs purchased limited-partnership interests in Paramount more than one year prior to that date (as indicated by the corresponding dates listed below), thus barring their claims: —Ellen DeHaven (purchase on May 1, 2007); • — John Gardiner (purchases on September 18, 2006, March 1, 2007, and November 6, 2007); —John Gardiner, as Custodian for Max A. Gardiner (purchase on December 28, 2007); —John Gardiner, as Custodian for Paige M. Gardiner (purchase on December 28, 2007); —John Gardiner, as Custodian for Jake W. Gardiner (purchase on December 28, 2007); ■ — Steven R. Gulbrandsen (purchases on September 7, 2003, October 6, 2005, and August 20, 2006); —Steven R. Gulbrandsen, Profit Sharing Plan (purchase on March 24, 2006); —Blake Johnson, LLC (purchase on July 27, 2007); —R. Thomas Lane (purchase on October 19, 2006); —Craig Mandery (purchase on December 19, 2007); —Guy M. Peterson (purchase on February 1, 2008); —Jeffrey M. Petrik (purchase on March 1, 2007); —Sally Petrik (purchase on March 1, 2007); —Joseph H. Ryan (purchases on August 22, 2006 and July 31, 2007); —Sandra M. Ryan (purchases on July 31, 2007, and January 3, 2008); —Robert Spadafora (purchases on March 1, 2007, September 1, 2007; and January 15, 2008); —Thomas C. Weekly, IRA (purchases on December 26, 2002; September 8, 2003, July 1, 2005; July 12, 2007, and November 1, 2007) —Daniel White (purchase on March 1, 2008). (Thompson Mem., Chart at 8-10; Solutions Mem. 10-11.) The statute plainly states that “if the action is to enforce a liability created under [section 12(a)(1) ] of this title,” it cannot be maintained “unless brought within one year after the violation upon which it is based.” 15 U.S.C. § 77m. And, as noted above, the limitations period is measured from the “last conduct constituting the alleged violation.” Stephenson, 282 F.Supp.2d at 1064. Here, the last conduct constituting the alleged violation for the Plaintiffs listed above is each individuals latest purchase of a limited-partnership interest, on the corresponding date. Thus, the alleged violations listed above happened more than one year prior to the filing of the Complaint, and the above-named Plaintiffs’ claims fall outside the one-year limitations period. Plaintiffs acknowledge that they filed this case more than one year after these Plaintiffs purchased their limited-partnership interests in Paramount. (Doc. No. 36, Pis.’ Resp. to Defs.’ Mots, to Dismiss Second Am. Compl. (“Pis.’ Resp.”) 18.) But Plaintiffs assert that after Defendants sold them the unregistered securities at issue, Defendants continued to solicit sales from these Plaintiffs. (Id.) Plaintiffs argue that because of this continued solicitation the limitations period should not be automatically triggered by the sale of the non-exempt securities at issue here, but, rather, “should be considered suspended post-sale for as long as the violation — i.e., the continuing solicitation of a party who has purchased the nonexempt security — continues.” (Id. at 18-19.) Plaintiffs assert that this is not an argument for tolling the statute of limitations. Instead, they contend that 15 U.S.C. § 77m is ambiguous with respect to whether continued solicitation can extend the limitations period for violations that occur more than one year before suit is filed. (See id. at 19-20.) It is possible that conduct Plaintiffs characterize as “continued solicitation” could be the type of conduct that would constitute an alleged violation. Courts have indicated that if the last conduct to have occurred that gives rise to the liability under section 12(a)(1) is the “offer” of an unregistered security, see Stephenson, 282 F.Supp.2d at 1064 (listing “offer, sale or delivery” as the three possible triggering dates for the one-year limitations period), the one-year limitations period would begin to run from the offer. However, the Second Amended Complaint contains no factual allegations that the moving Defendants offered unregistered securities to the Plaintiffs listed above after the dates on which they purchased their latest interests. Further, Plaintiffs have provided no support, and this Court can find none, for the proposition that the limitations period continues beyond one year for the completed purchase of an unregistered security when a defendant later offers to sell the same individual a separate unregistered security. For these reasons, this Court concludes that the above-listed Plaintiffs’ Section 12(a)(1) claims should be dismissed because they are barred by the one-year limitations period. B. Section 12(a)(2) Claims (Count II) Under Section 12(a)(2) of the Securities Act, any person who: offers or sells a security ... by the use of any means or instruments of transportation or communication in interstate commerce or of the mails, by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall not sustain the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be liable .:. to the person purchasing such security from him, who may sue either at law or in equity in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such, security, or for damages if he .no longer owns the security. 15 U.S.C. § 77i(a)(2). Such claims- must be brought “within one year after the discovery of the untrue statement or the omission, or after such discovery should have been made by the exercise of reasonable diligence.” 15 U.S.C. § 77m. However, “[i]n no event shall any such action be brought to enforce a liability created under ... [Section 12(a)(2) ] of this title more than three years after the sale.” Id. The moving Defendants argue that certain Plaintiffs’ claims under Section 12(a)(2) of the Securities Act are barred by the three-year statute of limitations. (Thompson Mem. 15-16; Solutions Mem. 14-15.) Specifically, the moving Defendants argue that Plaintiffs’ Complaint was filed on April 13, 2009, and the following Plaintiffs last purchased limited-partnership interests in Paramount more than three years prior to that date (as indicated by the corresponding dates listed below), thus barring their claims: —Stephen R. Gulbrandsen (purchases on September 7, 2003, October 6, 2005, and October 27, 2005) —Stephen R. Gulbrandsen Profit Sharing Plan (purchase on March 21, 2006) —Thomas C. Weekly (purchases on December 26, 2002, September 8, 2003, and July 1, 2005) (Thompson Mem., Chart at 15-16; Solutions Mem. 14-15.) Plaintiffs acknowledge that § 77m prohibits the filing of actions asserting liability under section 12(a)(2) more than three years after the sale of the security interest. (Pl.’s Mem. 21.) However, Plaintiffs “urge the Court to adopt the 12(a)(1) rationale contained in Stephenson for Section 12(a)(2) claims.” (Id.) This Court concludes that the above-listed Plaintiffs’ claims under Section 12(a)(2) should be dismissed because they are barred by the statute of limitations. The plain language of § 77m provides that an action brought under Section 12(a)(2) can never be brought more than three years after the sale of the security. This court rejects Plaintiffs’ suggestion that this Court should adopt the Section 12(a)(1) rationale in Stephenson for Section 12(a)(2) claims. In Stephenson, the District Court concluded that the three-year statute of limitations in § 77m does not apply to a Section 12(a)(1) claim for the sale of unregistered securities because such claims must be brought within three years of the date that they were “bona fide offered to the public.” See 15 U.S.C. § 77m. This three-year period does not apply to Section 12(a)(1) claims for the sale of unregistered securities because “such sales are never, in fact, ‘bona fide offered to the public.’ ” Stephenson, 282 F.Supp.2d at 1064. But this rationale has no applicability to that portion of § 77m which governs the absolute three-year limitations period for Section 12(a)(2) claims for misrepresentation and omissions in the sale of a security which is obviously a different claim than one for the sale of unregistered securities under Section 12(a)(1). The trigger for the three-year period for Section 12(a)(2) fraud claims is not when the security is bona fide offered to the public; for Section 12(a)(2) claims, § 77m provides, in clearly distinctive language, that the Section 12(a)(2) claims must be brought no “more than three years after the sale.” 15 U.S.C. § 77m. This means that the Section 12(a)(2)-fraud-in-the-sale claim must be brought within three years of the particular sale in which the wrongdoing allegedly occurred. Thus, the above described Section 12(a)(2) claims of Plaintiffs Gulbrandsen and Weekly should be dismissed because they are barred by the three-year statute-of-limitations period. C. Section 10(b) and Rule 10b-5 Claims Bozora, Redpath, CSM, and CSD argue that Plaintiff Steven Gulbrandsen’s Section 10(b) and Rule 10b-5. claim based on his September 7, 2003. purchase, and Plaintiff Thomas Weekly’s Section 10(b) and Rule 10b-5 claim based on his December 26, 2002 purchase are barred because they are outside the five-year limitations period for private securities-fraud actions. (Solutions Mem. 26.) Private securities-fraud cases brought more than five years after the date of the alleged violation are time-barred because “a private right of action that involves a claim of fraud, deceit, manipulation, or contrivance in contravention of a regulatory requirement concerning the securities laws ... may be brought not later than the earlier of ... 2 years after the discovery of the facts constituting the violation [or] 5 years after such violation.” 28 U.S.C. § 1658(b). Plaintiffs concede that Gulbrandsen and Weekly’s claims are outside the five-year period, but they argue that their claims should be permitted to go forward because they “have alleged continuing acts of misrepresentation that caused them to make additional investments and remain invested in Paramount.” (Pis.’ Resp. 22.) It appears that Plaintiffs are asserting that the statute of limitations on Gulbrandsen’s 2003 claim and Weekly’s 2002 claim should be tolled under the so-called “continuing-violation doctrine” or under a theory of fraudulent concealment. Some courts have determined that a continuing fraud or fraudulent concealment can toll the statute of limitations for Section 10(b) and Rule 10b-5 claims when it is pleaded with sufficient particularity. See, e.g., Bilick v. Eagle Elec. Mfg. Co., 807 F.Supp. 243, 253 (E.D.N.Y.1992) (stating that a federal securities claim may be equitably tolled because of fraudulent concealment when plaintiffs show that the defendant “took affirmative steps to prevent the plaintiffs discovery of his claim or injury or that the wrong itself was of such a nature as to be self-concealing”) (quotations omitted). Other courts, addressing the question prior to Congress’s adoption of 28 U.S.C. § 1658, have questioned whether the fraudulent-concealment doctrine applies to federal securities claims. See, e.g., Cohen v. McAllister, 688 F.Supp. 1040, 1045 (W.D.Pa.1988) (stating that Third Circuit precedent set an absolute three-year limitation on private securities actions, but noting at footnote 3 that “[t]he view that the fraudulent concealment doctrine does not apply in this case flies in the face of Justice Frankfurter’s statement that this equitable doctrine is read into every federal statute of limitations”) (quotations and alterations omitted). One commentator has stated that “[t]he better view would seem to be that since fraudulent concealment and the concept of a continuing fraud are readily accepted under common law, they should be equally applicable to Rüle 10b-5 claims regardless of the expiration of the five-year period.” 4 Thomas Lee Hazen, Treatise on the Law of Securities Regulation § 12.16[7] & n. 134 (6th ed.2005). And this District has observed that “[u]nder the federal law of equitable tolling, the statute of limitations for a 10b-5 action does not begin to run until such time that the alleged securities fraud is or should have been discovered.” Beaubaire v. Priorwood Townhomes Ltd. P’Ship I, Civ. No. 4-90-43 (DSD/FEB), 1992 WL 320991, at *3 (D.Minn.1992) (citing Vanderboom v. Sexton, 422 F.2d 1233, 1240 (8th Cir.1970)). This means that plaintiffs seeking to invoke the doctrine of fraudulent concealment must show that the defendant “took active steps, independent of the original fraud, to cover up the alleged securities violations.” See id. at *4 (citing Volk v. D.A. Davidson & Co., 816 F.2d 1406, 1415 (9th Cir.1987), for the proposition that “fraudulent concealment may be invoked only if a plaintiff establishes affirmative conduct by defendants that would lead a reasonable person to believe that he had no claim for relief’). To support Gulbrandsen’s assertion of fraudulent concealment, Plaintiffs point to paragraph 27(f) of the Second Amended Complaint, which states, in part, that Gulbrandsen had “multiple phone conversations with Lawton from August 2003 through 2008 during which Lawton touted the stellar performance of the fund.” (SAC ¶ 27(f).) That paragraph continues, stating that “Plaintiff was not aware of the fraud, nor could have he, with reasonable diligence, discovered the fraud until the SEC investigation.” (Id.) To support Weekly’s assertion of fraudulent concealment, Plaintiffs point to paragraph 27(v) of the Second Amended Complaint, which states, in part, that Weekly had convérsations with Lawton in 2008, following news of the “ ‘Madoff investment scam,” in which Lawton “assured [Weekly] that the fund had been audited and checked for legal compliance by professionals.” Plaintiffs further allege that Weekly kept his investment in the fund as a result of this and assert that Weekly could not have discovered, even exercising reasonable diligence, “the fraud that was taking place within and related to Defendant Paramount until the SEC ultimately discovered the fraud.” (SAC ¶ 27(v).) In this Court’s view, these statements are conclusory and, therefore, insufficient to satisfy the standards for pleading fraudulent concealment. See Bilick, 807 F.Supp. at 253 (explaining that fraudulent concealment must be pleaded with particularity). Accordingly, this Court recommends that Gulbrandsen and Weekly’s Section 10(b) and Rule 10b5 claims be dismissed as time barred. III. Securities Fraud: Section 10(b) and Rule 10b-5 (Count II) In Count II of the Second Amended Complaint, Plaintiffs assert claims under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 of the rules promulgated by the SEC. See 15 U.S.C. § 78j(b); 17 C.F.R. § 240.10b-5. Plaintiffs assert that the moving Defendants are liable because each was a primary violator of section 10(b) and Rule 10b-5 and they are all “controlling persons” under Section 20(a) of the Exchange Act, 15 U.S.C. § 78t(a). Section 10(b) of the Exchange Act prohibits the use of “any manipulative or deceptive device or contrivance” in violation of the SEC’s rules and regulations “in connection with the purchase or sale of any security.” 15 U.S.C. § 78j(b). SEC Rule 10b-5 makes it unlawful “for any person ... to make any untrue statement of a material fact or to omit to state a material fact necessary in order to a make the statements made, in light of the circumstances under which they were made, not misleading.” 17 C.F.R. § 240.10b-5(b). To state a claim under § 10(b) and Rule 10b-5, a plaintiff must allege “(1) a material misrepresentation or omission by the defendant; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation.” Stoneridge Inv. Partners, LLC v. Scientific-Atlanta, Inc., 552 U.S. 148, 157, 128 S.Ct. 761, 169 L.Ed.2d 627 (2008); McAdams v. McCord, 584 F.3d 1111, 1113 (8th Cir.2009). “The [Private Securities Litigation Reform Act (“PSLRA”) ] imposes heightened pleading requirements on private actions ‘to curb perceived abuses’ of such actions, including ‘nuisance filings, targeting of deep-pocket defendants, vexatious discovery requests and manipulation by class action lawyers.’ ” Horizon Asset Mgmt., Inc. v. H & R Block, Inc., 580 F.3d 755, 761 (8th Cir.2009) (quoting Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 320, 127 S.Ct. 2499, 168 L.Ed.2d 179 (2007)). One such heightened pleading requirement is that the complaint must state any allegedly misrepresentation of omission of material fact with specificity and explain why the statement is misleading. 15 U.S.C. § 78u-4(b). In other words, “a securities plaintiff often must plead the ‘who, what, when, where and how’ of the misleading statements or omissions.” Cornelia I. Crowell GST Trust v. Possis Med., Inc., 519 F.3d 778, 782 (8th Cir.2008) (hereinafter “Crowell Trust ”) (quoting In re K-tel Int’l Sec. Litig., 300 F.3d 881, 890 (8th Cir.2002)). The other heightened pleading requirement for securities-fraud actions is that the plaintiff “must also state with particularity facts giving rise to a strong inference that the defendant acted with the scienter required for the cause of action.” McAdams, 584 F.3d at 1113 (quotations omitted). “Scienter can be established in three ways: (1) from facts demonstrating a mental state embracing an intent to deceive, manipulate, or defraud; (2) from conduct which rises to the level of severe recklessness; or (3) from allegations of motive and opportunity.” Crowell Trust, 519 F.3d at 782. A. Primary liability Any analysis of the securities-fraud issues in this case must start with the fact that Defendant John Lawton has already pleaded guilty to devising a scheme to defraud investors in Paramount hedge fund, through the fund’s general partner Crossroad. The United States Attorney charged Lawton with making material misrepresentations to prospective investors through fact sheets touting the success of the hedge fund, falsifying the fund’s performance history, and providing investors with false monthly statements regarding the increase of their investments’ value, and the Government asserted that these false statements caused new investors to invest and existing investors to invest additional funds. See USA v. Lawton, Crim. No. 09-319(PAM), Doc. No. 1. Lawton pleaded guilty on November 24, 2009, and is awaiting sentencing. Therefore, this is not a garden variety securities-fraud case where shareholders are trying to link alleged misstatements or omissions about a company’s performance to stock-market losses. Here, we start with the fact that the crime of securities fraud was committed by a principal actor in a successful scheme to cheat investors. The question now is how far the wrongdoing and liability extends amongst the moving Defendants. 1. Defendant Thompson Misrepresentations This Court first addresses the alleged misrepresentations or omissions made by Thompson. Thompson asserts that the Second Amended Complaint contains only “generic representations about the management and risk level of the fund allegedly made by Thompson, such as the fund was ‘safe’, ‘well-managed’, and ‘lower risk than most hedge funds,’ ” and that Plaintiffs have failed to plead facts that demonstrate how or why any statements he made were false. (Thompson Mem. 21.) Several Plaintiffs assert that Thompson met with them on one or more occasions, and in these meetings he told them that he was personally monitoring Paramount’s trading and could track performance of the fund, or that Bozora and Redpath were monitoring the fund, and that this monitoring should allay any doubts the investors may have because of Lawton’s trading methods. (See, e.g., SAC ¶¶ 27(a), (d), (e), (g), (l), (p), (s), (t), (v).) Plaintiff Cummings explains that he had conversations with Thompson in which Thompson made such statements during the period leading up to October 2008 while Thompson was soliciting Cummings’s investment in Paramount. (Id. ¶ 27(a).) And other Plaintiffs who allege that Thompson solicited their limited-partnership investments provide a timeframe for when Thompson’s statements were made. (See, e.g., id. ¶¶ 27(d) (stating that Thompson contacted Gardiner in May 2006 and that Thompson said he was monitoring the fund); 27(e) (describing statements made by Thompson in July 2008).) Thompson allegedly made these statements for the purpose of making Paramount and Crossroad appear to be a “sophisticated, secure and reliable investment vehicle for Plaintiffs to invest in as limited partners” and to induce potential investors to purchase limited-partnership interests in the fund. (Id. at ¶ 28.) According to the Second Amended Complaint, these statements were false because Thompson was not actually monitoring or overseeing any trading activity. (Id. ¶ 51.) Plaintiffs also allege that Thompson misrepresented to both existing and potential investors the performance history of the Paramount hedge fund by sending them emails, which contained information about how the fund was managed and what its specific annual rates of growth were from 2002-2007. (SAC ¶ 19.) Thompson allegedly sent one such email to potential investors on July 1, 2008. (Id., Ex. E.) Thompson’s alleged purpose in making these statements was to induce certain Plaintiffs to invest in Paramount by purchasing limited-partnership interests. (Id.) According to the Second Amended Complaint these statements were false because the actual figures showing Paramount’s annual growth rates did not produce a cumulative total of 167.71 % from 2002 through 2007, which is what Thompson represented. (Id. at ¶ 53(a).) Thompson also allegedly represented to several Plaintiffs that an accounting firm, Virchow, Krause & Co., performed an annual audit of the hedge fund’s performance. (See SAC ¶¶ 27(g).) According to Plaintiffs, these statements were false because Plaintiffs were never provided with accountant-audited financial statements for the performance of the fund and the fund’s cash assets and trading accounts were not, in fact, being followed or audited by the accounting firm Virchow, Krause & Co., or any other accounting firm. (See id. at ¶¶ 53(i)-(j).) This Court concludes that Plaintiffs have sufficiently alleged that Thompson made material misrepresentations to several Plaintiffs, which “taken together and in context, would have misled a reasonable investor.” In re NVE Corp. Sec. Litig., 551 F.Supp.2d 871, 881 (D.Minn.2007) (indicating that the central issue is whether the defendant’s representations would have misled a reasonable investor) (quotation omitted). Thompson’s statements to various investors regarding monitoring the fund, the fund’s prior performance, and its oversight by a disinterested third-party accounting firm would leave a reasonable investor believing that the investments were safer than they would have been had he or she been told that the trading was not monitored, the prior performance of the fund was not as represented, and that the fund was not overseen by an independent accounting firm. Scienter Thompson contends that any Section 10(b) and Rule 10b-5 claims against him should be dismissed because the Second Amended Complaint fails to allege sufficient facts to raise a strong inference of scienter. (Thompson Mem. 17-20.) Thompson also asserts that in the event any inference can be drawn that he acted with the requisite state of mind to be liable on a securities-fraud claim, such an inference is “fatally weakened given the fact Thompson was an investor in Paramount, was swindled by Lawton, and is at risk to lose approximately $510,000 in investments with Paramount.” (Id. at 20.) In response, Plaintiffs assert that the following facts asserted in the Second Amended Complaint support a strong inference of Thompson’s scienter. First, Thompson either must have known, or was in a position that he recklessly disregarded information that Paramount was in serious trouble even as he participated in the publication of statements showing a fraudulent value of the fund. (Pl.’s Resp. 33.) Second, Thompson either knew or recklessly disregarded that the fund was not performing well because .the “crux of the fraud” alleged here relates to misrepresentations about how well the fund was performing and how much money was in the fund. (Id. at 33-34.) Third, Thompson’s representations about the fund’s performance were not supported by any data, which could not have been obtained because no data on stocks purchased or held was ever gathered. (Id. at 34.) Fourth, Thompson’s dissociation with Lawton within a month of the SEC investigation also supports an inference of scienter. (Id. at 34-35.) And, finally, Thompson’s position with, and ownership interest in, business entities related to Paramount suggest that he had access to information about the fund’s performance and he either had to have known or recklessly disregarded this information when he made the representations about the fund’s performance. (Id. at 35.) This Court concludes that Plaintiffs allege sufficient facts to raise a strong inference of Thompson’s scienter. According to the Second Amended Complaint, Thompson managed CSM and CSD. Through that management, he entered a relationship with Paramount whereby CSM acquired minority ownership of Paramount and CSD became Paramount’s exclusive distributor. And the May 23, 2007 Private Placement Memorandum provides that CSM would advise and assist Lawton and Crossroad “in business planning, business management, business development, and fundraising.” (SAC ¶ 16.) This relationship permits an inference that Thompson had access to information that contradicted the statements he was making in soliciting future investors. See In re Navarre Corp. Sec. Litig., 299 F.3d 735, 746 (8th Cir.2002) (“One ‘classic’ fact pattern giving rise to a strong inference of scienter is that defendants made statements when they knew or had access to information suggesting these public statements to be materially inaccurate.”). Thompson’s argument that any inference of scienter is “fatally weakened” by the fact that his own money was invested in Paramount presents a relevant counter-inference that is appropriate for this Court to consider. See Tellabs, 551 U.S. at 323, 127 S.Ct. 2499 (establishing that “in determining whether the pleaded fac