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I have a soft spot for civil RICO: treble damages, enterprise allegations, the chance to elevate ordinary fraud into something operatic. But, as many of us have learned, civil RICO is not meant to transform ordinary commercial disputes into racketeering cases. Courts routinely dismiss such claims when plaintiffs fail to meet the statute’s strict pleading requirements.

We previously covered one such example in this post: A RICO Claim in an Ordinary Business Dispute? Not So Fast, Says the Commercial Division | New York Commercial Division Practice. There, the court denied leave to amend to add a civil RICO claim because the plaintiff failed to allege that defendants engaged in an enterprise— an essential element of a RICO claim.

A recent New York County Supreme Court case, Bank of India, N.Y. Branch v Anaya Gems, Inc., 2026 NY Slip Op 30094(U) (Sup. Ct., N.Y. Cnty. Jan. 5, 2026), illustrates the same reality: even complex, multi-party fraud schemes cannot survive a motion to dismiss without clear enterprise allegations. 

Background

The dispute arises from lending relationships between the plaintiff banks and the jewelry company Anaya Gems, Inc. and its related entities. Bank of India and Allahabad Bank extended approximately $40 million in credit to Anaya, secured by a lien on the company’s assets.

In early 2018, Anaya defaulted on its obligations. Around the same time, Anaya informed the banks that it was experiencing financial difficulties and was winding down operations. The banks, concerned about a sharp decline in reported inventory—including an unreported $10.5 million write-off of loose diamonds—obtained the appointment of a receiver.

The receiver’s investigation revealed that Anaya’s CEO, Anshul Gandhi, and the other defendants allegedly diverted Anaya’s assets and operations to affiliated companies, allegedly leaving Anaya largely stripped of its value. Michael Pasqual (VP of Sales and Marketing at Anaya) and Michael Scheinman (President of Sales at Anaya) were alleged to have participated in a coordinated, multi-year effort to move Anaya’s assets—including inventory, product lines, customer and vendor relationships, and accounts receivable—to affiliated entities controlled by the Gandhi family and their close associates, including the principals of SDC Designs.

The banks also alleged that Gandhi and other defendants had been conducting an international customs-related fraud scheme since 2010, involving the underreporting of the value of imported jewelry from Hong Kong and Thailand. Payments reflecting the difference between reported and unreported values were allegedly funneled to Gandhi family entities.

The banks attempted to frame these actions as a civil RICO enterprise, alleging that Pasqual and Scheinman facilitated the transfer of collateral out of Anaya to benefit Gandhi, his family, and affiliated entities. Specifically, the complaint claims that:

  • Pasqual purchased UPC prefix codes with his personal credit card to enable inventory transfers to Starlight Designs and later Super Diamond, and was subsequently reimbursed by Anaya.
  • Pasqual, working with Scheinman, coordinated the transfer of product samples, inventory, and customer relationships through shell companies to place collateral beyond the banks’ reach.

Defendants Pasqual and Scheinman later moved to dismiss the RICO and conspiracy claims in the second amended complaint.

The Court’s Decision

In Bank of India, N.Y. Branch, Manhattan Commercial Division Justice Andrea Masley dismissed the civil RICO and RICO conspiracy claims asserted against Sheinman and Pasqual, holding that the banks failed to adequately plead the existence of a RICO enterprise, a required element of a civil RICO claim under 18 U.S.C. § 1962(c).

The Court stated:

“[T]o state a claim under RICO, a Plaintiff must allege and prove the existence of an enterprise which is separate and distinct from the alleged pattern of racketeering activity.” (Goldfine v Sichenzia, 118 F Supp 2d 392, 400 [SD NY 2000] [internal questions marks and citation omitted]; see also United States v Turkette, 452 US at 583 [“The ‘enterprise’ is not the ‘pattern of racketeering activity’; it is an entity separate and apart from the pattern of activity in which it engages”].) Thus, if “the alleged enterprise would not exist but for the alleged pattern of racketeering activity,” the claim must be dismissed. (Id.) The enterprise must also be “distinct from the person conducting the affairs of the enterprise.” (First Capital Asset Mgt., Inc., 385 F3d at 173 [citations omitted].)”

Justice Masley found that the Second Amended Complaint did not satisfy that requirement. The plaintiffs relied on two sets of alleged misconduct: (1) a customs-related fraud scheme and (2) an alleged scheme to divert Anaya Gems’ assets to affiliated entities. Even with additional factual detail, the allegations did not show that the various defendants were part of a coordinated association-in-fact enterprise with a shared structure, purpose, and ongoing relationships. Instead, the court concluded that the Second Amended Complaint merely described separate instances of alleged fraud rather than a cohesive enterprise operating as a continuing unit.

The court also dismissed the RICO conspiracy claim, noting that a “claim for conspiracy to commit a RICO violation fails when Plaintiff fails to state a claim for a RICO violation.”

Be Careful When Pleading Civil RICO Claims

The ruling underscores a recurring pleading problem in commercial RICO cases: allegations that defendants worked together to commit fraud—even multiple frauds—do not satisfy the enterprise requirement unless the complaint plausibly alleges a structured, ongoing organization operating independently of the racketeering conduct.