Adar Bays, LLC v. GeneSYS ID, Inc., No. 18-3023 (2d Cir. 2022)
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GenSys appealed the district court's grant of summary judgment in favor of Adar Bays, the holder of a Convertible Redeemable Note securing a loan to GeneSYS. The district court held that the Note's interest rate did not violate the New York State criminal usury law, N.Y. Penal Law 190.40. The Second Circuit then certified two questions to the New York Court of Appeals, which answered as follows: (1) a stock conversion option that permits a lender, in its sole discretion, to convert any outstanding balance to shares of stock at a fixed discount should be treated as interest for the purpose of determining whether the transaction violates N.Y. Penal Law 190.40, the criminal usury law; and (2) if the interest charged on a loan is determined to be criminally usurious under N.Y. Penal Law 190.40, the contract is void ab initio pursuant to N.Y. Gen. Oblig. Law 5-511.
The Second Circuit vacated the district court's order because the New York Court of Appeals stressed that the value of any individual floating-price stock conversion option is a question of fact. Accordingly, the court remanded for further proceedings.
This opinion or order relates to an opinion or order originally issued on June 11, 2020.
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