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FILED: NEW YORK COUNTY CLERK 06/28/2024 03:53 PM INDEX NO. 655379/2023
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EXHIBIT 1
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Supreme Court of the State of New York
New York County
Commercial Division
Beyond Limits, Inc.,
Plaintiff,
— against — No.
Ethos Asset Management Inc. and Summons
Carlos Manuel Da Silva Santos,
Defendants.
TO THE ABOVE-NAMED DEFENDANTS: You are summoned to answer the attached
complaint. Pursuant to the parties’ agreements, service of process is complete upon your receipt
of this summons, and you must serve your answer within 30 days. If you do not do so, a default
judgment may be entered against you for the relief demanded in the complaint. Beyond Limits,
Inc. designates New York County as the place of trial as required by the parties’ agreements.
Respectfully submitted: REED SMITH LLP
Dated: October 30, 2023 William S. Weltman
New York, New York (PHV Forthcoming)
10 South Wacker Drive
Chicago, IL 60606
(312) 207-1000
wweltman@reedsmith.com
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Casey J. Olbrantz
599 Lexington Avenue
New York, NY 10022
(212) 521-5400
colbrantz@reedsmith.com
Counsel for Beyond Limits, Inc.
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Supreme Court of the State of New York
New York County
Commercial Division
Beyond Limits, Inc.,
Plaintiff,
— against —
No.
Ethos Asset Management Inc. and
Carlos Manuel Da Silva Santos,
Defendants.
Complaint
Plaintiff Beyond Limits, Inc. (“Beyond Limits”) files this Complaint against Defendants
Ethos Asset Management, Inc. (“Ethos”) and Carlos Manuel Da Silva Santos (“Santos”), and
alleges as follows:
Nature of the Action
1. This case is about an upstart asset management company, Ethos, and its 29-year-
old purported “self-made billionaire” “tycoon” CEO and founder, Santos, who offered Beyond
Limits hundreds of millions of debt financing as part of a fraudulent scheme. Ethos and Santos
wildly misrepresented their financial conditions to Beyond Limits, and they defaulted on their
commitments almost immediately after they were required to distribute funds in an amount that
exceeded the posted collateral and Ethos’s fees. Despite months of incessant promises that funds
were forthcoming, Ethos and Santos have now repudiated their obligations and refused to even
return Beyond Limits’ collateral. Beyond Limits is entitled to extensive damages for Ethos’s and
Santos’s deceptive schemes and bad faith conduct in connection with the parties’ agreements.
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2. Beyond Limits is an industrial and enterprise-grade artificial intelligence company.
It was founded in 2014, but its team has a long and proud heritage at Caltech and the Jet Propulsion
Laboratory. It transforms advanced technology that was developed for the NASA space program
into advanced AI solutions across demanding sectors like energy, utilities, and healthcare.
3. Hoping to accelerate its growth in a burgeoning sector but facing tight capital
market conditions, upon being introduced to Santos by a trusted third-party broker in 2022, Beyond
Limits was enthused by the prospect of obtaining hundreds of millions in debt financing for
exceptionally low interest rates and long repayment schedules. Santos, who represented that he
was a billionaire, stated that Ethos was willing to provide such favorable terms to Beyond Limits
for “philanthropic” purposes, and to “demonstrate[] [Ethos’s] desire to contribute to pioneering
solutions that will be used to tackle some of the most important problems of our day around
decarbonization, climate change and better utilization of natural resources.”
4. The parties executed two financing agreements to that effect in August 2022 and
January 2023, through which Ethos committed to lend $
schedules, and committed to lend over
- on specific disbursement
more through three future distribution
phases. In executing those agreements, Ethos represented and warranted that it contemporaneously
had unrestricted cash on hand sufficient to advance all amounts owed. Santos individually
represented the same.
5. Under these agreements, Ethos’s distributions were not scheduled to begin in
earnest until spring 2023. However, Beyond Limits was required to (and did) immediately post
considerable collateral with a third-party bank to secure its future repayment obligations. Ethos
was permitted to trade against and profit off that collateral.
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6. Significantly, throughout the negotiation of these agreements, Ethos was insistent
that Beyond Limits should agree to take the full financing in one tranche, which would have
required Beyond Limits to post at least $
- in collateral before receiving any money from
Ethos. After extensive negotiation, Ethos reluctantly agreed to break up the financing into five
separate tranches, but up until the events giving rise to this dispute, Ethos consistently pressured
Beyond Limits to post additional collateral to purportedly begin the new tranches of financing.
7. During this interim period after Beyond Limits posted collateral but before Ethos
was required to meaningfully distribute funds, Ethos took great pains to promote its new affiliation
with Beyond Limits, including by issuing a press release, prominently featuring Beyond Limits as
a “client story” on Ethos’s website, conducting a promotional interview for Ethos’s website, and
repeatedly requesting Beyond Limits to provide references to other prospective borrowers.
8. This promotional activity was presumably quite valuable, as Ethos has had
curiously little media exposure for a company of its purported size, outside of a series of bizarre
puff pieces that were posted on obscure websites in June 2022. These articles claim that Ethos is
purportedly valued at over $50 billion. They indicate that Santos—a purported “finance billionaire
legend”—created a “unique” system that purportedly “safeguards” Ethos and “migrate[s] the
macroeconomic and operational risk to the financial and banking systems” by trading against
borrower collateral or letters of credit. As Santos explained in one article, “This way, we achieve
a magic solution of investing in an asset whilst we don’t take the risk of that asset.”
9. Unbeknown to Beyond Limits, and despite Ethos’s commitments to the contrary,
Ethos apparently never intended to “take risk” in connection with the parties’ agreements.
10. As of late April 2023, Ethos had timely issued its first few required distributions to
Beyond Limits. However, upon the deadline for the first payment that would have resulted in Ethos
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distributing funds to Beyond Limits in an aggregate amount that would have exceeded the total
posted collateral and origination fees charged, Ethos inexplicably defaulted. Santos repeatedly
promised that the money was coming, but he never provided a cogent explanation for the delay,
and the required payment never came.
11. In response to Ethos’s inexplicable failures, Beyond Limits eventually proposed
that it should at least take back the excess collateral it had posted for the purpose of securing a far
greater sum than Ethos was apparently capable of disbursing. Santos agreed to release some of the
collateral in exchange for effectively ending the defaulted-on financing tranche, and he promised
that Beyond Limits could nonetheless “come back for other phases up to the total amount that you
are approved,” that the parties would continue as planned with their other tranche, and that Ethos
might reduce the quantity of collateral required for future tranches.
12. The parties executed an agreement to that effect in July 2023, but none of Santos’s
representations were true, and he and Ethos never intended to release Beyond Limits’ collateral.
After executing the amendment, Santos incessantly promised that Ethos would promptly release
Beyond Limits’ collateral, but failed to do so for months.
13. Beyond Limits was eventually forced to serve notices of default in August 2023.
Ethos sent a response letter that conceded its default, but which claimed that Ethos somehow had
no enforceable obligations as a lender under New York law. Nonetheless, Ethos stated that it might
be willing to agree to return the collateral over four tranches, rather than in one transaction as
previously agreed, but only if Beyond Limits agreed to also delay Ethos’s obligations under the
parties’ other ongoing financing tranche. Beyond Limits indicated it would accept those terms, and
Ethos made the first required repayment of Beyond Limits’ collateral.
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14. In September 2023, however, Ethos promptly defaulted on two of the re-negotiated
deadlines to return the collateral. Santos repeatedly promised that the payments were coming, but
Beyond Limits was again forced to serve a notice of default. Santos lashed out in response at
Beyond Limits’ purported “disrespect” and threatened litigation on specious grounds, baselessly
claiming that Ethos: (i) somehow had grounds “to call back” all of the money disbursed to date,
and (ii) was happy to litigate and cause Beyond Limits to “collapse[]” in a year “because you need
the money now.” In formal correspondence sent a short time later, Ethos repudiated any
obligations under the parties’ financing agreements.
15. Given Ethos’s total unrepentance for its defaults and repeated and deceptive failures
to perform simple and indisputable obligations under the parties’ agreements, Beyond Limits
exercised its right to terminate the parties’ financing agreements on October 30, 2023.
16. Indeed, as Beyond Limits has recently learned, Ethos is apparently running a
scheme wherein it goads borrowers into posting large amounts of collateral—off of which Ethos
can trade and profit—to secure loans on extremely favorable terms. But in several cases that
Beyond Limits has recently become aware of, after locking up its borrowers’ collateral, Ethos
gives the runaround and eventually bilks the borrower, and forces it to take a bath on the deal or
try to litigate.
17. Beyond Limits is forced to bring this action to vindicate its rights under the parties’
financing agreements and redress the harm intentionally caused by Ethos’s and Santos’s bad faith
and fraudulent conduct. As set out below, and as Beyond Limits will prove at trial, Beyond is
entitled to compensatory, consequential, incidental, and punitive damages in an amount to be
proved at trial, including but not limited to all amounts disbursed by Ethos to date, the return of
all collateral provided, damages for lost opportunity cost, lost enterprise value, and the increased
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cost of capital on all amounts promised by Ethos, plus Beyond Limits’ legal fees and costs
expended to enforce its rights.
The Parties, Jurisdiction, and Venue
18. Plaintiff Beyond Limits is a Delaware corporation with its principal place of
business in Glendale, California.
19. Defendant Ethos is a California corporation with its principal place of business in
San Diego, California.
20. Defendant Santos is a natural person and, on information and belief, is a resident
of San Diego, California.
21. The Court has personal jurisdiction and venue under the terms of the financing
agreements between Beyond Limits and Ethos.
22. Specifically, each relevant agreement includes the following mandatory forum
selection clause:
Each party hereto hereby irrevocably and unconditionally agrees that it will not
commence, or permit any of its respective affiliates to commences [sic] or support
any person in commencing any action, litigation or proceeding of any kind or
description, whether in law or equity, whether in contract or tort or otherwise,
against the any [sic] party to in any way relating to this Financing Agreement, this
guaranty or any other related agreements, in any forum other than any New York
State court or Federal court of the United States sitting in the borough of Manhattan
in New York City, and any appellate court from any thereof, and each of the parties
hereto hereby irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in such New York
State or, to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or in
any other manner provided by law.
Each party hereto hereby irrevocably and unconditionally waives, to the fullest
extent it may legally and effectively do so, any objection which it may now or
hereafter have to the laying of venue of any suit, action or proceeding arising out
of, or relating to, this guaranty or any other agreement related thereto in any New
York State or Federal court.
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23. Santos, who is Ethos’s founder, is bound by the forum selection clause in his
individual capacity, as he negotiated, executed, and oversaw the performance of the financing
agreements as the “representative,” “CEO,” and “member” of Ethos. He is also on the board of
directors of Ethos, and, on information and belief, serves as its chair. Through each of these roles,
he was closely related to Ethos, and it was reasonably foreseeable he would be subject to the
relevant agreements’ forum selection clauses given that, as set out below, he personally perpetrated
frauds and engaged in deliberate and deceptive misconduct, through Ethos, in connection with
those agreements. As a member of Ethos, Santos also personally stood to gain from the scheme he
orchestrated and the deceptive misconduct he directed at Beyond Limits’ expense. Further, Santos
represented through an affidavit that he personally held funds in banks, including banks in New
York, that he was able to deploy to satisfy Ethos’s obligations under the parties’ agreements.
Factual Background
I. Santos Founds Ethos Asset Management and Apparently Hatches a
Fraudulent Scheme
24. Ethos is an asset management company that was founded in 2018 by Santos, who
is Ethos’s CEO.
25. Santos is 29 years old as of this filing, and he is purportedly a “self-made” “tycoon”
“billionaire,” and a “finance billionaire legend.”
26. While no mainstream media source has ever apparently reported on Ethos or
Santos, beginning around June 2022, several obscure websites, including, for example, Suger Mint,
WorldsLeaders, LAProgressive, and EntrepreneursBreak, posted interviews with Santos in which
he explained his background and Ethos’s business model. 1
1
See, e.g., The Inc Magazine, “Carlos Santos: Creating Wealth for Stakeholders,” available
at https://theincmagazine.com/carlos-santos-creating-wealth-for-stakeholders/; World’s
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27. In 2012, per these stories, Santos—then an 18-year-old from an “upper-middle-
class family”—started a predecessor version of Ethos in Portugal. He purportedly “made his first
million” that year. Santos claims he “leased an algorithm to major investment funds,” and by 2015
those “investment funds traded $300 billion through this structure.”
28. However, “in 2015 Carlos Santos lost everything,” purportedly by “ma[king]
wrong investments” and being the subject of “many scams that he could not recognize.” Even
though “Everyone he knew criticized his way of living,” Santos and Ethos somehow promptly
recovered, but soon decided not to lease the algorithm and to start “trading [Ethos’s] own funds.”
29. By 2018, Santos founded his “masterpiece,” Defendant Ethos Asset Management.
Per these articles, “Thanks in large part to Carlos’s expertise, vision, and leadership,” Ethos is “one
of the most premium financial organizations in the world today.” It is purportedly “present in 72
countries across the world,” is worth “52 billion USD,” and “the personal wealth of Carlos [Santos]
evaluated to at [sic] least 2 billion USD.”
30. As Santos explained, his unbelievable success is due to a model he developed that
“enables [Ethos] to offer capital at highly competitive terms, based on the fact that it allocates cash
Leaders, “Carlos Santos: A Renowned Finance Professional,” available at
https://worldsleaders.com/carlos-santos-a-renowned-finance-professional/; NYKDaily,
“The Vision And Culture Of Carlos Santos’ Ethos Asset Management,” available at
https://nykdaily.com/2022/06/the-vision-and-culture-of-carlos-santos-ethos-asset-
management/, Suger Mint, “Interview with Carlos Santos: President, CEO and Founder of
Ethos Asset Management,” available at https://sugermint.com/carlos-santos/;
LAProgressive, “Ethos Asset Management Inc., USA And What Are The Clients Saying
About The Company?,” available at https://www.laprogressive.com/sponsored/ethos-
asset-management; EntrepreneursBreak, “LIFE OF CARLOS MANUEL DA SILVA
SANTOS—THE TYCOON FOUNDER OF ETHOS PRIVATE INVESTMENT
COMPANY,” https://entrepreneursbreak.com/life-of-carlos-manuel-da-silva-santos-the-
tycoon-founder-of-ethos-private-investment-company.html.
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from financial trading on the logic of diversification and portfolio rebalancing.” Somehow, this
“generates a magical distinction between traditional funds and banks.”
31. Through his proprietary model, Santos explained, Ethos is “able to provide
autonomy to our clients together with better conditions such as lower interest rate and longer grace
periods and maturities.”
32. As Santos detailed in these articles, Ethos’s business model hinges on the
collateralization of its financing agreements, which enables Ethos to purportedly enter financing
agreements without taking any risk in the underlying assets. Specifically, Ethos obtains pledges of
deposit or letters of credit from borrowers, against which banks extend Ethos a credit line for it to
trade on and profit from.
33. This “unique” system purportedly “safeguards” Ethos and “migrate[s] the
macroeconomic and operational risk to the financial and banking systems.”
34. As Santos explained, “This way, we achieve a magic solution of investing in an
asset whilst we don’t take the risk of that asset.”
35. But for these articles, there is little publicly available information about Ethos—
especially for a company that is purportedly worth over $50 billion.
36. However, Ethos’s website, a litigation in Texas, and a bankruptcy case in Idaho
provide some insight into the true nature of its operations.
37. As of this filing, Ethos’s website identifies approximately 45 transactions that it has
participated in, the vast majority of which it identifies as “small cap” transactions with entities
outside of the United States, including over a dozen transactions in Brazil.
38. Ethos does list three “large cap” American transactions on its website, including
with Beyond Limits, “Delphi Studios 1 LLC,” and “Mulanus Inc.” However, the latter two appear
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to be shell entities with no meaningful public information available, and Ethos has apparently
never promoted its relationship with those companies.
39. Notably, in May 2022, Ethos and Santos were sued in Texas state court under
circumstances that are suspiciously similar to those in this case.
40. Specifically, a company named Entvantage Diagnostics (“Entvantage”) alleged
that it entered a financing agreement with Ethos in 2021, which required Entvantage to provide
Ethos with access to $1 million of pledged collateral. Entvantage claimed it deposited such
collateral in September 2021, but that Ethos then totally failed to fulfill its reciprocal obligations.
After almost six months, Entvantage alleged that Ethos had provided only $200,000 of the $2
million it was then required to fund.
41. As Entvantage alleged, during that time period:
Through a series of flimsy and repeated excuses and pretexts by Santos, Ethos
broke multiples promises to pay from and after the date of the first funding deadline.
Specifically, Santos repeatedly represented that Ethos had wired—not just that it
would wire—as much as $1,700,000.00.
42. Entvantage brought suit for breach of contract and fraud against each of Santos and
Ethos, who responded to the lawsuit with a motion to compel arbitration. The case apparently
settled a few months later.
43. Separately, Ethos’s website lists the Idaho Health Data Exchange (“IHDE”) as a
transaction partner. In 2021, IHDE issued a press release, which included quotes from Santos,
stating that Ethos “committed to providing IHDE with a significant capital infusion of $8 million,
in the form of a grant.”
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44. As reported by the Idaho Capital Sun earlier this year, “that didn’t happen.” 2
Instead, Ethos required IHDE to post $2 million of collateral at the onset of the financing, but then
Ethos failed to disburse funds on the “required distribution schedule” in a way that was “not
adequate to cover the expenses IHDE was incurring,” which forced IHDE into bankruptcy.
45. Santos provided a comment to the Sun’s reporting which contradicted the press
release and claimed IHDE “never had a grant” because “Ethos is not a foundation.” As Santos
stated to the Sun:
We had a financing agreement with IHDE that could go up to 8 Million USD. …
After a mutual decision to not proceed [with] the project for higher values, we
decided to transform our financing to a grant of 2.4 million USD based on the
socially positive external outcomes that our audit team was able to measure from
the project.
(Ellipsis and brackets in original.)
46. However, an IHDE representative told the Sun that, in reality, Ethos claimed its
bank accounts had been hacked, and that Ethos accordingly determined that “some of the projects
that they were going to work on, like [IHDE], just simply were put aside because they [Ethos]
didn’t have the money they thought they originally were going to have.”
47. The Sun reported that it asked Santos if that statement was correct, but that Santos
“did not answer directly,” and instead claimed that the contracts “have strict confidentiality clauses
in their terms and I do not want to disrespect any of our past or existing clients.” The Sun reported
that Santos did add, however, that “Banking crises and hackers are not a reason for projects to be
stopped.”
2
See Audrey Dutton, What happened to the Idaho Health Data Exchange, and can other
states learn from it?, IDAHO CAPITAL SUN (June 22, 2023), available at
https://idahocapitalsun.com/2023/06/28/what-happened-to-the-idaho-health-data-
exchange-and-can-other-states-learn-from-it/.
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48. Curiously, IHDE’s executive director at or around the time of its bankruptcy in
2022 was Hans Kastensmith (“Kastensmith”). In September 2022, Ethos announced that
Kastensmith had accepted a position as Ethos’s executive director for North and Central America.”
Ethos’s website currently lists Kastensmith as the first member of its “leadership team.”
49. Beyond these public examples, in the weeks leading up to this filing, Beyond Limits
became aware that additional counterparties to Ethos have seemingly suffered the same issues
as Entvantage, IHDE, and Beyond Limits.
50. On information and belief, Ethos is apparently running a fraudulent scheme that is
premised on Ethos goading borrowers (many of which are apparently startups and/or are in the
developing world) into posting relatively large amounts of collateral—off of which Ethos can trade
and profit—to secure large loans on extremely favorable terms. After the collateral is posted and
locked up, Ethos then intentionally fails to distribute funds to the borrower, first by giving it the
runaround, and then by eventually affirmatively repudiating its obligations. After bilking the
borrowers and locking up large quantities of their cash, Ethos forces the borrower to either take a
bath on the deal or have an expensive dispute.
II. Ethos Announces a “Financing Partnership” with Beyond Limits
51. Beyond Limits is an industrial and enterprise-grade artificial intelligence company
that was founded in 2014. It incorporates 45 proven technologies from Caltech and NASA’s Jet
Propulsion Lab into its unique Cognitive AI technology, which combines numeric techniques like
machine learning with embedded human knowledge to provide clear, reliable recommendations
across demanding sectors like energy, utilities, and healthcare. As of this filing, Beyond Limits
employs over 250 scientists and engineers, with offices in Glendale, Dubai, Hong Kong, Kuala
Lumpur, Laguna Hills, Shenzhen, Singapore, Tacoma, Taipei, and Tokyo.
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52. Hoping to accelerate its growth in a burgeoning AI sector but facing the tightest
capital market conditions in recent memory, Beyond Limits executives were introduced to Santos
by a trusted mutual contact in early 2022. That person had previously brokered several successful
financings for Beyond Limits over the preceding several years, and had also recently brokered a
financing between Ethos and a different borrower.
53. Beyond Limits was enthused by the prospect of Ethos providing a large cash
infusion at rock-bottom interest rates. Santos, who represented to Beyond Limits that he was a
“billionaire,” explained that Ethos was willing to provide such financing for “philanthropic”
purposes.
54. As Santos would later state in a press release, he purportedly offered Beyond Limits
such favorable terms to “demonstrate[] [Ethos’s] desire to contribute to pioneering solutions that
will be used to tackle some of the most important problems of our day around decarbonization,
climate change and better utilization of natural resources.”
55. As detailed below, Ethos and Beyond Limits eventually executed a financing
agreement, which Ethos publicly announced in November 2022.
56. Specifically, Ethos issued a press release announcing a “financing partnership”
with Beyond Limits, which stated that Ethos was providing “Beyond Limits with highly favorable
long-term financing options for strategic acquisitions, regional partnerships and accelerated roll-
out of its low-code hybrid AI platform.” It explained that “Ethos has committed to provide Beyond
Limits with access to significant ‘infrastructure-project like’ capital that will continue for several
years under terms that are simply not available in today’s markets.”
57. Santos was quoted in the press release as saying Ethos was “honored” and
“absolutely delighted to partner with such a prestigious technology company,” and that Ethos
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“wish[ed] to thank” Beyond Limits’ CEO, AJ Abdallat (“Abdallat”), for “his commitment and
support in concluding this innovative financing transaction.”
58. Likewise, Abdallat was quoted as saying that “The Ethos partnership provides
Beyond Limits with multiple options to accelerate growth through acquisitions, more favorable
partnerships, and regional joint ventures.” He added that, “At a time when prevailing capital
market conditions are challenging, we are excited to leverage this capital to help more customers
solve some of the toughest problems facing industries and the world today.”
59. Ethos further disclosed the terms of this partnership by posting a “Client Story”
about Beyond Limits on its website. As Ethos’s website explains:
To best position themselves for the lucrative $100 Trillion AI market, Beyond
Limits needed substantial capital to support multiple goals including Strategic
Acquisitions, Tactical Acquisitions, Increased Automation of their AI SaaS
Platform, Increased Market Share, and Commitment to Intelligent Infrastructure….
After a lengthy evaluation process that began with an introduction to Ethos through
a US associate, and culminated with meeting [Santos] at a conference, Beyond
Limits turned to Ethos for financing of up to $310 M USD over four distinct phases.
The fact that Beyond Limits was in the process of working toward an IPO added a
layer of complexity that required the Ethos team to be extremely creative and
flexible in terms of the collateral and structure….
Today, Beyond Limits is uniquely positioned to leverage the Ethos capital to help
their customers solve some of the toughest problems facing industries and the world
today. The work being created by Beyond Limits will impact industries such as
Energy & Renewable Systems, Power & Grid Management Systems, Water &
Natural Resource Management, Logistics & Supply-Chain, Industrial Monitoring
& Process Control, Smart Cities, Smart Transportation, Industry 4.0 / M2M
automation and ESG & Sustainability.
60. As of this filing, Beyond Limits is the second most prominent “client story”
featured on Ethos’s website, even though, as discussed below, Ethos has hardly contributed any
net funds to Beyond Limits.
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III. Beyond Limits and Ethos Enter Two Financing Agreements
61. While Ethos’s website’s disclosure that Ethos committed to lend $310 million was
inaccurate, Ethos did agree to lend Beyond Limits hundreds of millions of dollars over five phases.
62. While negotiating the financing agreement, Ethos strongly pushed Beyond Limits
to agree to one large tranche of financing, which would have required Beyond Limits to
-
immediately post at least $ in collateral before seeing a dime from Ethos. Beyond Limits
was uncomfortable with that arrangement, and despite Ethos’s pressure, Beyond Limits eventually
convinced Ethos to agree to break up the financing agreement into five separate tranches.
63. As of this filing, Ethos and Beyond Limits have executed financing agreements for
two phases. However, until the events giving rise to this dispute took place, Ethos consistently
pressured Beyond Limits to post collateral for the additional phases, apparently so that it could use
Beyond Limits’ money for ulterior purposes.
64. The first of these phases was implemented in August 2022, when Ethos and Beyond
Limits entered into Agreement A, Pledge Agreement A, and Guaranty Agreement A (collectively,
the “Phase A Financing Agreement”).
65. The second phase was implemented in January 2023, when Ethos and Beyond
Limits entered into Agreement C, Pledge Agreement C, and Guaranty Agreement C (collectively,
the “Phase C Financing Agreement” and, together with the Phase A Financing Agreement,” the
“Financing Agreements”).
66. The structure and relevant terms of the Financing Agreements are straightforward 3:
3
Agreement A and Agreement C contain provisions indicating that the agreements are
confidential. Beyond Limits does not believe that any terms of the parties’ agreements are
confidential, including because: (i) the associated pledge agreements, guaranty agreements,
and amendments do not contain confidentiality clauses and discuss the terms of Agreement
A and Agreement C, (ii) the confidentiality clauses in Agreement A and Agreement C are
too indefinite, overbroad, and ambiguous to reasonably have legal effect, and (iii) Ethos
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has ah-eady disclosed essentially all of the collllllercial terms of the parties' agreements to
third pa11ies, including through its repeated promotion of the Beyond Limits financing on
its own website. Notwithstanding, for the avoidance of doubt, Beyond Limits has filed this
complaint with redactions on the commercial terms of the financing agreements. Unless
Ethos files a motion to maintain these redactions, at the appropriate point in time, Beyond
Limits will replace the public version of this Complaint with an unredacted copy.
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67. As an inducement to enter into these agreements, enter additional phases, and
continue with the overall financing anangement, Santos provided Beyond Limits with a "Source
of Funds Affidavit" (the "Santos Guarantee"), which he executed in Januru.y 2022.
68. fu relevant pait, the Santos Guarantee included the following promises:
I, CARLOS MANUEL DASILVA SANTOS, declru.·e under penalty of pe1jmy and
with full personal and legal responsibility under the futemational Comt of Law that
I legally hold directly and indirectly the sums of money present in all the contracts
that I have signed, and deposited in Accounts in Top Tier banks in Emope and
USA.
I fu1ther declru.·e these funds are cunent and valid cmTency lawfully obtained and
constitute clean, cleared funds of legitimate, non-criminal, commercial origin.
There are no liens, contractual obligations or encumbrances of any kind against
these funds.
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Preview
FILED: NEW YORK COUNTY CLERK 06/28/2024 03:53 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 RECEIVED NYSCEF: 06/28/2024 EXHIBIT 1 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 1 RECEIVED NYSCEF: 06/28/2024 10/30/2023 Supreme Court of the State of New York New York County Commercial Division Beyond Limits, Inc., Plaintiff, — against — No. Ethos Asset Management Inc. and Summons Carlos Manuel Da Silva Santos, Defendants. TO THE ABOVE-NAMED DEFENDANTS: You are summoned to answer the attached complaint. Pursuant to the parties’ agreements, service of process is complete upon your receipt of this summons, and you must serve your answer within 30 days. If you do not do so, a default judgment may be entered against you for the relief demanded in the complaint. Beyond Limits, Inc. designates New York County as the place of trial as required by the parties’ agreements. Respectfully submitted: REED SMITH LLP Dated: October 30, 2023 William S. Weltman New York, New York (PHV Forthcoming) 10 South Wacker Drive Chicago, IL 60606 (312) 207-1000 wweltman@reedsmith.com ----- Casey J. Olbrantz 599 Lexington Avenue New York, NY 10022 (212) 521-5400 colbrantz@reedsmith.com Counsel for Beyond Limits, Inc. 1 of 1 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 Supreme Court of the State of New York New York County Commercial Division Beyond Limits, Inc., Plaintiff, — against — No. Ethos Asset Management Inc. and Carlos Manuel Da Silva Santos, Defendants. Complaint Plaintiff Beyond Limits, Inc. (“Beyond Limits”) files this Complaint against Defendants Ethos Asset Management, Inc. (“Ethos”) and Carlos Manuel Da Silva Santos (“Santos”), and alleges as follows: Nature of the Action 1. This case is about an upstart asset management company, Ethos, and its 29-year- old purported “self-made billionaire” “tycoon” CEO and founder, Santos, who offered Beyond Limits hundreds of millions of debt financing as part of a fraudulent scheme. Ethos and Santos wildly misrepresented their financial conditions to Beyond Limits, and they defaulted on their commitments almost immediately after they were required to distribute funds in an amount that exceeded the posted collateral and Ethos’s fees. Despite months of incessant promises that funds were forthcoming, Ethos and Santos have now repudiated their obligations and refused to even return Beyond Limits’ collateral. Beyond Limits is entitled to extensive damages for Ethos’s and Santos’s deceptive schemes and bad faith conduct in connection with the parties’ agreements. 1 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 2. Beyond Limits is an industrial and enterprise-grade artificial intelligence company. It was founded in 2014, but its team has a long and proud heritage at Caltech and the Jet Propulsion Laboratory. It transforms advanced technology that was developed for the NASA space program into advanced AI solutions across demanding sectors like energy, utilities, and healthcare. 3. Hoping to accelerate its growth in a burgeoning sector but facing tight capital market conditions, upon being introduced to Santos by a trusted third-party broker in 2022, Beyond Limits was enthused by the prospect of obtaining hundreds of millions in debt financing for exceptionally low interest rates and long repayment schedules. Santos, who represented that he was a billionaire, stated that Ethos was willing to provide such favorable terms to Beyond Limits for “philanthropic” purposes, and to “demonstrate[] [Ethos’s] desire to contribute to pioneering solutions that will be used to tackle some of the most important problems of our day around decarbonization, climate change and better utilization of natural resources.” 4. The parties executed two financing agreements to that effect in August 2022 and January 2023, through which Ethos committed to lend $ schedules, and committed to lend over - on specific disbursement more through three future distribution phases. In executing those agreements, Ethos represented and warranted that it contemporaneously had unrestricted cash on hand sufficient to advance all amounts owed. Santos individually represented the same. 5. Under these agreements, Ethos’s distributions were not scheduled to begin in earnest until spring 2023. However, Beyond Limits was required to (and did) immediately post considerable collateral with a third-party bank to secure its future repayment obligations. Ethos was permitted to trade against and profit off that collateral. -2- 2 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 6. Significantly, throughout the negotiation of these agreements, Ethos was insistent that Beyond Limits should agree to take the full financing in one tranche, which would have required Beyond Limits to post at least $ - in collateral before receiving any money from Ethos. After extensive negotiation, Ethos reluctantly agreed to break up the financing into five separate tranches, but up until the events giving rise to this dispute, Ethos consistently pressured Beyond Limits to post additional collateral to purportedly begin the new tranches of financing. 7. During this interim period after Beyond Limits posted collateral but before Ethos was required to meaningfully distribute funds, Ethos took great pains to promote its new affiliation with Beyond Limits, including by issuing a press release, prominently featuring Beyond Limits as a “client story” on Ethos’s website, conducting a promotional interview for Ethos’s website, and repeatedly requesting Beyond Limits to provide references to other prospective borrowers. 8. This promotional activity was presumably quite valuable, as Ethos has had curiously little media exposure for a company of its purported size, outside of a series of bizarre puff pieces that were posted on obscure websites in June 2022. These articles claim that Ethos is purportedly valued at over $50 billion. They indicate that Santos—a purported “finance billionaire legend”—created a “unique” system that purportedly “safeguards” Ethos and “migrate[s] the macroeconomic and operational risk to the financial and banking systems” by trading against borrower collateral or letters of credit. As Santos explained in one article, “This way, we achieve a magic solution of investing in an asset whilst we don’t take the risk of that asset.” 9. Unbeknown to Beyond Limits, and despite Ethos’s commitments to the contrary, Ethos apparently never intended to “take risk” in connection with the parties’ agreements. 10. As of late April 2023, Ethos had timely issued its first few required distributions to Beyond Limits. However, upon the deadline for the first payment that would have resulted in Ethos -3- 3 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 distributing funds to Beyond Limits in an aggregate amount that would have exceeded the total posted collateral and origination fees charged, Ethos inexplicably defaulted. Santos repeatedly promised that the money was coming, but he never provided a cogent explanation for the delay, and the required payment never came. 11. In response to Ethos’s inexplicable failures, Beyond Limits eventually proposed that it should at least take back the excess collateral it had posted for the purpose of securing a far greater sum than Ethos was apparently capable of disbursing. Santos agreed to release some of the collateral in exchange for effectively ending the defaulted-on financing tranche, and he promised that Beyond Limits could nonetheless “come back for other phases up to the total amount that you are approved,” that the parties would continue as planned with their other tranche, and that Ethos might reduce the quantity of collateral required for future tranches. 12. The parties executed an agreement to that effect in July 2023, but none of Santos’s representations were true, and he and Ethos never intended to release Beyond Limits’ collateral. After executing the amendment, Santos incessantly promised that Ethos would promptly release Beyond Limits’ collateral, but failed to do so for months. 13. Beyond Limits was eventually forced to serve notices of default in August 2023. Ethos sent a response letter that conceded its default, but which claimed that Ethos somehow had no enforceable obligations as a lender under New York law. Nonetheless, Ethos stated that it might be willing to agree to return the collateral over four tranches, rather than in one transaction as previously agreed, but only if Beyond Limits agreed to also delay Ethos’s obligations under the parties’ other ongoing financing tranche. Beyond Limits indicated it would accept those terms, and Ethos made the first required repayment of Beyond Limits’ collateral. -4- 4 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 14. In September 2023, however, Ethos promptly defaulted on two of the re-negotiated deadlines to return the collateral. Santos repeatedly promised that the payments were coming, but Beyond Limits was again forced to serve a notice of default. Santos lashed out in response at Beyond Limits’ purported “disrespect” and threatened litigation on specious grounds, baselessly claiming that Ethos: (i) somehow had grounds “to call back” all of the money disbursed to date, and (ii) was happy to litigate and cause Beyond Limits to “collapse[]” in a year “because you need the money now.” In formal correspondence sent a short time later, Ethos repudiated any obligations under the parties’ financing agreements. 15. Given Ethos’s total unrepentance for its defaults and repeated and deceptive failures to perform simple and indisputable obligations under the parties’ agreements, Beyond Limits exercised its right to terminate the parties’ financing agreements on October 30, 2023. 16. Indeed, as Beyond Limits has recently learned, Ethos is apparently running a scheme wherein it goads borrowers into posting large amounts of collateral—off of which Ethos can trade and profit—to secure loans on extremely favorable terms. But in several cases that Beyond Limits has recently become aware of, after locking up its borrowers’ collateral, Ethos gives the runaround and eventually bilks the borrower, and forces it to take a bath on the deal or try to litigate. 17. Beyond Limits is forced to bring this action to vindicate its rights under the parties’ financing agreements and redress the harm intentionally caused by Ethos’s and Santos’s bad faith and fraudulent conduct. As set out below, and as Beyond Limits will prove at trial, Beyond is entitled to compensatory, consequential, incidental, and punitive damages in an amount to be proved at trial, including but not limited to all amounts disbursed by Ethos to date, the return of all collateral provided, damages for lost opportunity cost, lost enterprise value, and the increased -5- 5 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 cost of capital on all amounts promised by Ethos, plus Beyond Limits’ legal fees and costs expended to enforce its rights. The Parties, Jurisdiction, and Venue 18. Plaintiff Beyond Limits is a Delaware corporation with its principal place of business in Glendale, California. 19. Defendant Ethos is a California corporation with its principal place of business in San Diego, California. 20. Defendant Santos is a natural person and, on information and belief, is a resident of San Diego, California. 21. The Court has personal jurisdiction and venue under the terms of the financing agreements between Beyond Limits and Ethos. 22. Specifically, each relevant agreement includes the following mandatory forum selection clause: Each party hereto hereby irrevocably and unconditionally agrees that it will not commence, or permit any of its respective affiliates to commences [sic] or support any person in commencing any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or tort or otherwise, against the any [sic] party to in any way relating to this Financing Agreement, this guaranty or any other related agreements, in any forum other than any New York State court or Federal court of the United States sitting in the borough of Manhattan in New York City, and any appellate court from any thereof, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of, or relating to, this guaranty or any other agreement related thereto in any New York State or Federal court. -6- 6 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 23. Santos, who is Ethos’s founder, is bound by the forum selection clause in his individual capacity, as he negotiated, executed, and oversaw the performance of the financing agreements as the “representative,” “CEO,” and “member” of Ethos. He is also on the board of directors of Ethos, and, on information and belief, serves as its chair. Through each of these roles, he was closely related to Ethos, and it was reasonably foreseeable he would be subject to the relevant agreements’ forum selection clauses given that, as set out below, he personally perpetrated frauds and engaged in deliberate and deceptive misconduct, through Ethos, in connection with those agreements. As a member of Ethos, Santos also personally stood to gain from the scheme he orchestrated and the deceptive misconduct he directed at Beyond Limits’ expense. Further, Santos represented through an affidavit that he personally held funds in banks, including banks in New York, that he was able to deploy to satisfy Ethos’s obligations under the parties’ agreements. Factual Background I. Santos Founds Ethos Asset Management and Apparently Hatches a Fraudulent Scheme 24. Ethos is an asset management company that was founded in 2018 by Santos, who is Ethos’s CEO. 25. Santos is 29 years old as of this filing, and he is purportedly a “self-made” “tycoon” “billionaire,” and a “finance billionaire legend.” 26. While no mainstream media source has ever apparently reported on Ethos or Santos, beginning around June 2022, several obscure websites, including, for example, Suger Mint, WorldsLeaders, LAProgressive, and EntrepreneursBreak, posted interviews with Santos in which he explained his background and Ethos’s business model. 1 1 See, e.g., The Inc Magazine, “Carlos Santos: Creating Wealth for Stakeholders,” available at https://theincmagazine.com/carlos-santos-creating-wealth-for-stakeholders/; World’s -7- 7 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 27. In 2012, per these stories, Santos—then an 18-year-old from an “upper-middle- class family”—started a predecessor version of Ethos in Portugal. He purportedly “made his first million” that year. Santos claims he “leased an algorithm to major investment funds,” and by 2015 those “investment funds traded $300 billion through this structure.” 28. However, “in 2015 Carlos Santos lost everything,” purportedly by “ma[king] wrong investments” and being the subject of “many scams that he could not recognize.” Even though “Everyone he knew criticized his way of living,” Santos and Ethos somehow promptly recovered, but soon decided not to lease the algorithm and to start “trading [Ethos’s] own funds.” 29. By 2018, Santos founded his “masterpiece,” Defendant Ethos Asset Management. Per these articles, “Thanks in large part to Carlos’s expertise, vision, and leadership,” Ethos is “one of the most premium financial organizations in the world today.” It is purportedly “present in 72 countries across the world,” is worth “52 billion USD,” and “the personal wealth of Carlos [Santos] evaluated to at [sic] least 2 billion USD.” 30. As Santos explained, his unbelievable success is due to a model he developed that “enables [Ethos] to offer capital at highly competitive terms, based on the fact that it allocates cash Leaders, “Carlos Santos: A Renowned Finance Professional,” available at https://worldsleaders.com/carlos-santos-a-renowned-finance-professional/; NYKDaily, “The Vision And Culture Of Carlos Santos’ Ethos Asset Management,” available at https://nykdaily.com/2022/06/the-vision-and-culture-of-carlos-santos-ethos-asset- management/, Suger Mint, “Interview with Carlos Santos: President, CEO and Founder of Ethos Asset Management,” available at https://sugermint.com/carlos-santos/; LAProgressive, “Ethos Asset Management Inc., USA And What Are The Clients Saying About The Company?,” available at https://www.laprogressive.com/sponsored/ethos- asset-management; EntrepreneursBreak, “LIFE OF CARLOS MANUEL DA SILVA SANTOS—THE TYCOON FOUNDER OF ETHOS PRIVATE INVESTMENT COMPANY,” https://entrepreneursbreak.com/life-of-carlos-manuel-da-silva-santos-the- tycoon-founder-of-ethos-private-investment-company.html. -8- 8 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 from financial trading on the logic of diversification and portfolio rebalancing.” Somehow, this “generates a magical distinction between traditional funds and banks.” 31. Through his proprietary model, Santos explained, Ethos is “able to provide autonomy to our clients together with better conditions such as lower interest rate and longer grace periods and maturities.” 32. As Santos detailed in these articles, Ethos’s business model hinges on the collateralization of its financing agreements, which enables Ethos to purportedly enter financing agreements without taking any risk in the underlying assets. Specifically, Ethos obtains pledges of deposit or letters of credit from borrowers, against which banks extend Ethos a credit line for it to trade on and profit from. 33. This “unique” system purportedly “safeguards” Ethos and “migrate[s] the macroeconomic and operational risk to the financial and banking systems.” 34. As Santos explained, “This way, we achieve a magic solution of investing in an asset whilst we don’t take the risk of that asset.” 35. But for these articles, there is little publicly available information about Ethos— especially for a company that is purportedly worth over $50 billion. 36. However, Ethos’s website, a litigation in Texas, and a bankruptcy case in Idaho provide some insight into the true nature of its operations. 37. As of this filing, Ethos’s website identifies approximately 45 transactions that it has participated in, the vast majority of which it identifies as “small cap” transactions with entities outside of the United States, including over a dozen transactions in Brazil. 38. Ethos does list three “large cap” American transactions on its website, including with Beyond Limits, “Delphi Studios 1 LLC,” and “Mulanus Inc.” However, the latter two appear -9- 9 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 to be shell entities with no meaningful public information available, and Ethos has apparently never promoted its relationship with those companies. 39. Notably, in May 2022, Ethos and Santos were sued in Texas state court under circumstances that are suspiciously similar to those in this case. 40. Specifically, a company named Entvantage Diagnostics (“Entvantage”) alleged that it entered a financing agreement with Ethos in 2021, which required Entvantage to provide Ethos with access to $1 million of pledged collateral. Entvantage claimed it deposited such collateral in September 2021, but that Ethos then totally failed to fulfill its reciprocal obligations. After almost six months, Entvantage alleged that Ethos had provided only $200,000 of the $2 million it was then required to fund. 41. As Entvantage alleged, during that time period: Through a series of flimsy and repeated excuses and pretexts by Santos, Ethos broke multiples promises to pay from and after the date of the first funding deadline. Specifically, Santos repeatedly represented that Ethos had wired—not just that it would wire—as much as $1,700,000.00. 42. Entvantage brought suit for breach of contract and fraud against each of Santos and Ethos, who responded to the lawsuit with a motion to compel arbitration. The case apparently settled a few months later. 43. Separately, Ethos’s website lists the Idaho Health Data Exchange (“IHDE”) as a transaction partner. In 2021, IHDE issued a press release, which included quotes from Santos, stating that Ethos “committed to providing IHDE with a significant capital infusion of $8 million, in the form of a grant.” - 10 - 10 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 44. As reported by the Idaho Capital Sun earlier this year, “that didn’t happen.” 2 Instead, Ethos required IHDE to post $2 million of collateral at the onset of the financing, but then Ethos failed to disburse funds on the “required distribution schedule” in a way that was “not adequate to cover the expenses IHDE was incurring,” which forced IHDE into bankruptcy. 45. Santos provided a comment to the Sun’s reporting which contradicted the press release and claimed IHDE “never had a grant” because “Ethos is not a foundation.” As Santos stated to the Sun: We had a financing agreement with IHDE that could go up to 8 Million USD. … After a mutual decision to not proceed [with] the project for higher values, we decided to transform our financing to a grant of 2.4 million USD based on the socially positive external outcomes that our audit team was able to measure from the project. (Ellipsis and brackets in original.) 46. However, an IHDE representative told the Sun that, in reality, Ethos claimed its bank accounts had been hacked, and that Ethos accordingly determined that “some of the projects that they were going to work on, like [IHDE], just simply were put aside because they [Ethos] didn’t have the money they thought they originally were going to have.” 47. The Sun reported that it asked Santos if that statement was correct, but that Santos “did not answer directly,” and instead claimed that the contracts “have strict confidentiality clauses in their terms and I do not want to disrespect any of our past or existing clients.” The Sun reported that Santos did add, however, that “Banking crises and hackers are not a reason for projects to be stopped.” 2 See Audrey Dutton, What happened to the Idaho Health Data Exchange, and can other states learn from it?, IDAHO CAPITAL SUN (June 22, 2023), available at https://idahocapitalsun.com/2023/06/28/what-happened-to-the-idaho-health-data- exchange-and-can-other-states-learn-from-it/. - 11 - 11 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 48. Curiously, IHDE’s executive director at or around the time of its bankruptcy in 2022 was Hans Kastensmith (“Kastensmith”). In September 2022, Ethos announced that Kastensmith had accepted a position as Ethos’s executive director for North and Central America.” Ethos’s website currently lists Kastensmith as the first member of its “leadership team.” 49. Beyond these public examples, in the weeks leading up to this filing, Beyond Limits became aware that additional counterparties to Ethos have seemingly suffered the same issues as Entvantage, IHDE, and Beyond Limits. 50. On information and belief, Ethos is apparently running a fraudulent scheme that is premised on Ethos goading borrowers (many of which are apparently startups and/or are in the developing world) into posting relatively large amounts of collateral—off of which Ethos can trade and profit—to secure large loans on extremely favorable terms. After the collateral is posted and locked up, Ethos then intentionally fails to distribute funds to the borrower, first by giving it the runaround, and then by eventually affirmatively repudiating its obligations. After bilking the borrowers and locking up large quantities of their cash, Ethos forces the borrower to either take a bath on the deal or have an expensive dispute. II. Ethos Announces a “Financing Partnership” with Beyond Limits 51. Beyond Limits is an industrial and enterprise-grade artificial intelligence company that was founded in 2014. It incorporates 45 proven technologies from Caltech and NASA’s Jet Propulsion Lab into its unique Cognitive AI technology, which combines numeric techniques like machine learning with embedded human knowledge to provide clear, reliable recommendations across demanding sectors like energy, utilities, and healthcare. As of this filing, Beyond Limits employs over 250 scientists and engineers, with offices in Glendale, Dubai, Hong Kong, Kuala Lumpur, Laguna Hills, Shenzhen, Singapore, Tacoma, Taipei, and Tokyo. - 12 - 12 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 52. Hoping to accelerate its growth in a burgeoning AI sector but facing the tightest capital market conditions in recent memory, Beyond Limits executives were introduced to Santos by a trusted mutual contact in early 2022. That person had previously brokered several successful financings for Beyond Limits over the preceding several years, and had also recently brokered a financing between Ethos and a different borrower. 53. Beyond Limits was enthused by the prospect of Ethos providing a large cash infusion at rock-bottom interest rates. Santos, who represented to Beyond Limits that he was a “billionaire,” explained that Ethos was willing to provide such financing for “philanthropic” purposes. 54. As Santos would later state in a press release, he purportedly offered Beyond Limits such favorable terms to “demonstrate[] [Ethos’s] desire to contribute to pioneering solutions that will be used to tackle some of the most important problems of our day around decarbonization, climate change and better utilization of natural resources.” 55. As detailed below, Ethos and Beyond Limits eventually executed a financing agreement, which Ethos publicly announced in November 2022. 56. Specifically, Ethos issued a press release announcing a “financing partnership” with Beyond Limits, which stated that Ethos was providing “Beyond Limits with highly favorable long-term financing options for strategic acquisitions, regional partnerships and accelerated roll- out of its low-code hybrid AI platform.” It explained that “Ethos has committed to provide Beyond Limits with access to significant ‘infrastructure-project like’ capital that will continue for several years under terms that are simply not available in today’s markets.” 57. Santos was quoted in the press release as saying Ethos was “honored” and “absolutely delighted to partner with such a prestigious technology company,” and that Ethos - 13 - 13 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 “wish[ed] to thank” Beyond Limits’ CEO, AJ Abdallat (“Abdallat”), for “his commitment and support in concluding this innovative financing transaction.” 58. Likewise, Abdallat was quoted as saying that “The Ethos partnership provides Beyond Limits with multiple options to accelerate growth through acquisitions, more favorable partnerships, and regional joint ventures.” He added that, “At a time when prevailing capital market conditions are challenging, we are excited to leverage this capital to help more customers solve some of the toughest problems facing industries and the world today.” 59. Ethos further disclosed the terms of this partnership by posting a “Client Story” about Beyond Limits on its website. As Ethos’s website explains: To best position themselves for the lucrative $100 Trillion AI market, Beyond Limits needed substantial capital to support multiple goals including Strategic Acquisitions, Tactical Acquisitions, Increased Automation of their AI SaaS Platform, Increased Market Share, and Commitment to Intelligent Infrastructure…. After a lengthy evaluation process that began with an introduction to Ethos through a US associate, and culminated with meeting [Santos] at a conference, Beyond Limits turned to Ethos for financing of up to $310 M USD over four distinct phases. The fact that Beyond Limits was in the process of working toward an IPO added a layer of complexity that required the Ethos team to be extremely creative and flexible in terms of the collateral and structure…. Today, Beyond Limits is uniquely positioned to leverage the Ethos capital to help their customers solve some of the toughest problems facing industries and the world today. The work being created by Beyond Limits will impact industries such as Energy & Renewable Systems, Power & Grid Management Systems, Water & Natural Resource Management, Logistics & Supply-Chain, Industrial Monitoring & Process Control, Smart Cities, Smart Transportation, Industry 4.0 / M2M automation and ESG & Sustainability. 60. As of this filing, Beyond Limits is the second most prominent “client story” featured on Ethos’s website, even though, as discussed below, Ethos has hardly contributed any net funds to Beyond Limits. - 14 - 14 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 III. Beyond Limits and Ethos Enter Two Financing Agreements 61. While Ethos’s website’s disclosure that Ethos committed to lend $310 million was inaccurate, Ethos did agree to lend Beyond Limits hundreds of millions of dollars over five phases. 62. While negotiating the financing agreement, Ethos strongly pushed Beyond Limits to agree to one large tranche of financing, which would have required Beyond Limits to - immediately post at least $ in collateral before seeing a dime from Ethos. Beyond Limits was uncomfortable with that arrangement, and despite Ethos’s pressure, Beyond Limits eventually convinced Ethos to agree to break up the financing agreement into five separate tranches. 63. As of this filing, Ethos and Beyond Limits have executed financing agreements for two phases. However, until the events giving rise to this dispute took place, Ethos consistently pressured Beyond Limits to post collateral for the additional phases, apparently so that it could use Beyond Limits’ money for ulterior purposes. 64. The first of these phases was implemented in August 2022, when Ethos and Beyond Limits entered into Agreement A, Pledge Agreement A, and Guaranty Agreement A (collectively, the “Phase A Financing Agreement”). 65. The second phase was implemented in January 2023, when Ethos and Beyond Limits entered into Agreement C, Pledge Agreement C, and Guaranty Agreement C (collectively, the “Phase C Financing Agreement” and, together with the Phase A Financing Agreement,” the “Financing Agreements”). 66. The structure and relevant terms of the Financing Agreements are straightforward 3: 3 Agreement A and Agreement C contain provisions indicating that the agreements are confidential. Beyond Limits does not believe that any terms of the parties’ agreements are confidential, including because: (i) the associated pledge agreements, guaranty agreements, and amendments do not contain confidentiality clauses and discuss the terms of Agreement A and Agreement C, (ii) the confidentiality clauses in Agreement A and Agreement C are too indefinite, overbroad, and ambiguous to reasonably have legal effect, and (iii) Ethos - 15 - 15 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 has ah-eady disclosed essentially all of the collllllercial terms of the parties' agreements to third pa11ies, including through its repeated promotion of the Beyond Limits financing on its own website. Notwithstanding, for the avoidance of doubt, Beyond Limits has filed this complaint with redactions on the commercial terms of the financing agreements. Unless Ethos files a motion to maintain these redactions, at the appropriate point in time, Beyond Limits will replace the public version of this Complaint with an unredacted copy. -- 16 -- 16 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024 10/30/2023 67. As an inducement to enter into these agreements, enter additional phases, and continue with the overall financing anangement, Santos provided Beyond Limits with a "Source of Funds Affidavit" (the "Santos Guarantee"), which he executed in Januru.y 2022. 68. fu relevant pait, the Santos Guarantee included the following promises: I, CARLOS MANUEL DASILVA SANTOS, declru.·e under penalty of pe1jmy and with full personal and legal responsibility under the futemational Comt of Law that I legally hold directly and indirectly the sums of money present in all the contracts that I have signed, and deposited in Accounts in Top Tier banks in Emope and USA. I fu1ther declru.·e these funds are cunent and valid cmTency lawfully obtained and constitute clean, cleared funds of legitimate, non-criminal, commercial origin. There are no liens, contractual obligations or encumbrances of any kind against these funds. -- 17 -- 17 of 38 FILED: NEW YORK COUNTY CLERK 06/28/2024 10/30/2023 03:53 05:54 PM INDEX NO. 655379/2023 NYSCEF DOC. NO. 21 2 RECEIVED NYSCEF: 06/28/2024