United States of America v. $6,973,984.14 in US Currency

• Court: District Court, D. Arizona
• Decided: January 23, 2026
• Docket: 2:24-cv-00331
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 United States of America, No. CV-24-00331-PHX-SHD

10 Plaintiff, ORDER

11 v.

12 $6,973,984.14 in US Currency,

13 Defendant. 14 15 Before the Court is Plaintiff’s (the “Government”) Motion for Default Judgment of 16 Forfeiture. (Doc. 22.). On February 16, 2024, the United States of America filed this civil 17 in rem forfeiture action against “Approximately $6,973,984.14 Held in 2,094 Citibank 18 Accounts Listed in Attachment A” (the “Currency”). (Doc. 1.) Because no party appeared, 19 answered, or otherwise pleaded, the Clerk of Court entered default on March 6, 2025. 20 (Doc. 9.) The Government now moves for default judgment pursuant to Fed. R. Civ. P. 21 55(b) and Supplemental Rule G. For the reasons set forth below, the Government’s motion 22 will be granted. 23 I. FACTUAL BACKGROUND 24 Because the Clerk entered default, the Court will take the Complaint’s factual 25 allegations as true. See Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977) 26 (stating that upon default, a complaint’s allegations are taken as true, except those relating 27 to damages). The following facts were alleged in the Complaint. 28 1 A. Arizona’s Unemployment Insurance Program and Pandemic Benefits 2 Unemployment Insurance (“UI”) is a joint state-federal program that provides 3 temporary financial assistance to eligible workers who are unemployed through no fault of 4 their own. (Doc. 1 at 3.) State workforce agencies (“SWA”) administer their respective 5 UI programs in accordance with federal law and regulations. (Id.) In Arizona, the Arizona 6 Department of Economic Security (“Arizona DES”) administers the state’s UI program. 7 (Id. at 4.) 8 In response to the COVID-19 pandemic, Congress enacted several statutes that 9 expanded UI benefits and created new, temporary benefit programs. (Id. at 4–5.) These 10 included the Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus 11 Aid, Relief, and Economic Security (“CARES”) Act. (Id.) The CARES Act provided for 12 three temporary UI programs: (1) Pandemic Unemployment Assistance (“PUA”); (2) 13 Pandemic Emergency Unemployment Compensation (“PEUC”); and (3) Federal Pandemic 14 Unemployment Compensation (“FPUC”). (Id. at 5.) Under these temporary programs, 15 eligible individuals could receive weekly UI benefits, including supplemental federal 16 payments, for extended periods. (Id. at 5–7.) 17 Pandemic-related UI funds were distributed to Arizona DES through the United 18 States Department of the Treasury. (Id. at 8.) Payments were transmitted electronically 19 via Automated Clearing House (“ACH”) transfers and ultimately disbursed by Arizona 20 DES to approved claimants, either by check, prepaid debit card, or direct deposit to bank 21 accounts designated by claimants. (Id. at 8, 10.) 22 Arizona DES administered these benefits through an online application system. (Id. 23 at 8.) Through the online application, applicants seeking benefits under PUA were 24 “required to answer specific questions to establish their eligibility, including their name, 25 Social Security number, and mailing address.” (Id. at 9.) “PUA applicants were also 26 required to self-certify that they met one of the COVID-19 related reasons for being 27 unemployed, partially unemployed, or unable to work on or after January 27, 2020 through 28 1 December 31, 2020.” (Id.) The applicants were also “required to self-certify that they 2 understood the civil and criminal ramifications for submitting false statements.” (Id.) 3 The PUA program did not require applicants to submit documentation to establish 4 their identify or prove they were eligible for benefits. (Id. at 10.) The program also did 5 not vet or verify the Arizona residential address that PUA applicants provided. (Id.) 6 B. Fraud Investigation 7 The Secret Service, in coordination with other federal agencies including the United 8 States Department of Labor—Office of Inspector General (“DOL-OIG”), conducted a 9 nationwide investigation into suspected UI fraud involving thousands of claims submitted 10 to SWAs and thousands of bank accounts designated to receive UI benefit payments. (Id. 11 at 11–12.) The investigation discovered that “organized criminal groups were engaging in 12 schemes to defraud SWAs by using personally identifiable information (‘PII’) of United 13 States citizens, along with fabricated employment information, to file fraudulent 14 applications for UI benefits online.” (Id. at 11.) Arizona DES was one of the SWAs 15 victimized by the fraud schemes. (Id. at 12.) “[A]s a result of the fraudulent UI benefit 16 claims relevant to this Complaint, Arizona DES caused Bank of America (headquartered 17 in North Carolina) to electronically transfer benefit payments to Citibank, N.A. 18 (headquartered in New York) for deposit into the subject accounts.” (Id.) 19 Through subpoenas and data-sharing agreements, DOL-OIG obtained UI claims 20 data from all 54 SWAs and banking records associated with accounts that received UI 21 payments. (Id. at 13.) The Government “obtained documentation pertaining to the 22 Citibank accounts, including demographic data on the reported owners of the suspected 23 fraudulent accounts. The data included information such as first name, last name, Social 24 Security number, date of birth, residential address, city, state, and email address.” (Id. at 25 15.) 26 DOL-OIG data scientists and special agents conducted data analyses of the data for 27 the UI claims associated with the accounts at issue in the Complaint. (Id.) The data 28 scientists and investigators analyzed this information using the nine criteria often 1 associated with fraudulent UI claims including: (1) mailing address listed on Citibank 2 account was not in Arizona; (2) email address listed on Citibank account did not match 3 email associated with the UI claim; (3) social security number (“SSN”) listed on Citibank 4 did not match the number used to file the UI claim; (4) UI claim benefits associated with 5 multiple SSNs were deposited into the same Citibank account; (5) mailing address listed 6 on the Citibank account did not match the mailing address listed on the UI claims; 7 (6) Citibank account was designated to receive payments from one or more states in 8 addition to Arizona; (7) IP address associated with Arizona UI Claim was not physically 9 located in Arizona; (8) email listed on the Citibank account matched one or more fraud 10 criteria for emails; and (9) one or more emails used for the UI claims that paid into the 11 Citibank account matched one or more fraud criteria for emails. (Id. at 15–16.) 12 This analysis revealed widespread fraud associated with the Citibank accounts at 13 issue. (Id. at 16.) “[A]ll but one of the Defendant Citibank accounts (99.95%) met one or 14 more of the above-referenced fraud criteria.” (Id.) “98.81% of the Citibank accounts 15 (2,069 of the 2,094 accounts) received Arizona DES UI claims money as a result of UI 16 claims satisfying two or more of the fraud criteria, and approximately 56.65% of the 17 accounts (1,186 of the 2,094 accounts) received Arizona DES UI claims money as a result 18 of UI claims satisfying four or more of the fraud criteria.” (Id. at 17.) Arizona DES 19 conducted its own review of the UI claims and found that “1,955 (93.36%) of the 2,094 20 Citibank accounts were associated with at least one UI claim flagged by Arizona DES for 21 suspected fraud.” (Id. at 18–19.) The one account that failed to satisfy any of DOL-OIG’s 22 fraud criteria was “listed in a UI claim flagged by Arizona DES for identify theft.” (Id. at 23 20.) 24 To confirm the results of the data analysis, the Government conducted an in-depth 25 review of five randomly selected Citibank accounts that received Arizona UI benefit 26 payments. (Id. at 20–21.) In each instance, the associated UI claims contained false or 27 inconsistent information, were submitted from IP addresses located outside Arizona, or 28 involved claimants who had no employment history in Arizona. (Id. at 21–29.) Law 1 enforcement interviewed several of the individuals whose names were used to open the 2 accounts or file UI claims. (Id.) These individuals denied applying for Arizona UI benefits, 3 denied owning the accounts at issue, and denied authorizing any transactions. (Id.) 4 II. PROCEDURAL HISTORY 5 On February 16, 2024, the Government filed a Verified Complaint for Forfeiture In 6 Rem against the Currency. (Doc. 1.) The Government alleges that the Currency constitutes 7 or is derived from proceeds traceable to wire fraud, in violation of 18 U.S.C. § 1343, a 8 specified unlawful activity under 18 U.S.C. §§ 1956(c)(7) and 1961(1). Based upon a 9 finding of probable cause, on February 20, 2024, the Court issued a warrant of arrest in 10 rem for the Currency, and ordered the United States Postal Inspection Service to arrest and 11 to maintain legal, physical and/or constructive custody of the defendant property until 12 further order. (Doc. 3.) 13 Pursuant to the warrant of arrest in rem, Citibank transferred $6,550,729.16 to the 14 Government. (Doc. 5 at 1.) Citibank advised that $423,254.98 held in 67 accounts had 15 been remitted to third parties prior to issuance and execution of the warrant and therefore 16 was not seized. (Id.) On the Government’s motion, the Court granted partial dismissal and 17 dismissed from this action the $423,254.98 held in 67 accounts that had been remitted prior 18 to execution of the warrant. (Doc. 7.) 19 No person or entity filed a verified claim or answer contesting forfeiture of the 20 Currency within the time permitted. The Clerk of Court subsequently entered default 21 against all potential claimants. (Doc. 9.) The Government now seeks default judgment 22 forfeiting the Currency to the United States. 23 III. LEGAL STANDARD 24 Once default is entered, the Court may enter default judgment under Rule 55(b). 25 Deciding to grant default judgment is discretionary but the Court must consider: (1) the 26 possibility of prejudice to the plaintiff; (2) the merits of the plaintiff’s substantive claim; 27 (3) the sufficiency of the complaint; (4) the amount in controversy; (5) the possibility of a 28 factual dispute; (6) whether the default was due to excusable neglect; and (7) the strong 1 preference to decide cases on the merits. Eitel v. McCool, 782 F.2d 1470, 1472 (9th Cir. 2 1986). Further, the Government must fully comply with forfeiture procedures. United 3 States v. $27,800 in U.S. Currency, 2017 WL 6345394, at *2 (S.D. Cal. 2017). 4 IV. DISCUSSION 5 For the reasons set forth below, the Court finds the Government has complied with 6 the forfeiture procedures in 18 U.S.C. § 981(a)(1)(C) and has satisfied the Eitel factors. 7 Default judgment is thus warranted. 8 A. Compliance with Forfeiture Procedures 9 As a threshold matter, the Court finds that the Government has established that the 10 Currency constitutes proceeds traceable to violations of 18 U.S.C. § 1343 (wire fraud), and 11 is therefore subject to civil forfeiture to the United States pursuant to 18 U.S.C. 12 § 981(a)(1)(C). Section 981(a)(1)(C) provides for the civil forfeiture of any property which 13 constitutes or is derived from proceeds traceable to various offenses, including any offense 14 that is a “specified unlawful activity,” as defined in 18 U.S.C. § 1956(c)(7). That definition 15 incorporates by reference the offenses listed in 18 U.S.C. § 1961(1), which include wire 16 fraud in violation of 18 U.S.C. § 1343. 17 To obtain civil forfeiture, the Government must comply with the forfeiture 18 procedures set forth in Supplemental Rule G. Subsection (5)(a)(i) of that Supplemental 19 Rule requires that once the government has complied with subsections two through four of 20 the Rule (setting forth the requirements for the complaint, judicial authorization and 21 process, and notice), “[a] person who asserts an interest in the defendant property may 22 contest the forfeiture by filing a claim in the court where the action is pending.” “Unless 23 the court for good cause sets a different time,” the claim must be filed “by the time stated 24 in a direct notice sent under Rule G(4)(b).” Fed. R. Civ. P. Supp. G(5)(a)(ii)(A). This 25 stated time must be within “at least 35 days after the notice is sent.” Fed. R. Civ. P. Supp. 26 G(4)(b)(ii)(B). Where the government publishes notice of an action, a claimant who was 27 not sent direct notice may file a claim “no later than 60 days after the first day of publication 28 on an official internet government forfeiture site.” Fed. R. Civ. P. Supp. G(5)(a)(ii)(b). 1 After filing a claim, “[a] claimant must serve and file an answer to the complaint or a 2 motion under Rule 12 within 21 days after filing a claim.” Fed. R. Civ. P. Supp. G(5)(b). 3 The Government has satisfied the procedural requirements of 18 U.S.C. 4 § 981(a)(1)(C) and Supplemental Rule G, and has thus complied with all necessary 5 requirements to bring this forfeiture action. 6 First, as required by Supplemental Rule G(2), the Government filed a complaint on 7 February 16, 2024, stating the grounds for jurisdiction and venue, describing the property 8 being forfeited with reasonable particularity, identifying the statute under which the 9 forfeiture action was brought, and setting forth ample factual detail to support a reasonable 10 belief that the Government would be able to meet its burden of proof at trial. (Doc. 1). 11 Second, pursuant to Supplement Rule G(3), the Court issued a warrant authorizing 12 the United States Postal Inspection Service to arrest and maintain legal, physical, and/or 13 constructive custody of the Currency until further order of the Court. (Doc. 3.) 14 Third, the Government provided notice of the forfeiture action in accordance with 15 Supplemental Rule G(4). On or about March 8, 2024, the Government sent direct notice 16 of this action to all known potential claimants via email. (Doc. 22 at 2, Doc. 9-1.) The 17 notice included a cover letter containing the information required by Supplemental Rule 18 G(4)(b)(ii), a copy of the verified complaint, and notice of the availability of a United States 19 Magistrate Judge. (Id.) After 782 of the emailed notices were returned as undeliverable, 20 on or about April 11, 2024, the Government sent supplemental direct notice by First Class 21 U.S. Mail to those potential claimants, again including a cover letter satisfying 22 Supplemental Rule G(4)(b)(ii) and a copy of the complaint. (Id.) The notice advised 23 potential claimants of the deadline to file a verified claim and answer as required by 24 Supplemental Rule G(5). 25 Finally, the Government provided notice by publication. Pursuant to Supplemental 26 Rule G(4)(b), the Government posted notice of the forfeiture on an official government 27 website, www.forfeiture.gov, for at least 30 consecutive days starting on March 11, 2024. 28 (Doc. 4). 1 Because the Government has fully complied with all necessary requirements to 2 proceed with this forfeiture action, the analysis shifts to the Eitel factors and whether the 3 Government is entitled to a default judgment. 4 B. Eitel Factors 5 1. Prejudice to Plaintiff 6 Denying default judgment would “unduly prejudice the Government because it 7 would be required to litigate this action even though no potential claimants have appeared 8 to contest the forfeiture.” See $27,800 in U.S. Currency, 2017 WL 6345394, at *4 (citing 9 United States v. Approximately $28,000 in U.S. Currency, 2010 WL 1340110, at *4 (N.D. 10 Cal. Apr. 5, 2010) (pointing out prejudice where the government would have to expend 11 further time and effort in an action that has no opposing party)). The first Eitel factor 12 weighs in favor of entering default judgment. 13 2. Merits of the Claim and Sufficiency of the Complaint 14 Under 18 U.S.C. § 981(a)(1)(C), the government must prove by a preponderance of 15 the evidence that the Currency constitutes, or is derived from, proceeds traceable to certain 16 offenses, including wire fraud under 18 U.S.C. § 1343. See 18 U.S.C. § 983(c)(1); United 17 States v. $80,180.00 in U.S. Currency, 303 F.3d 1182, 1184 (9th Cir. 2002). 18 Wire fraud requires proof of (1) a scheme to defraud, (2) use of interstate wires in 19 furtherance of the scheme, and (3) specific intent to defraud. United States v. McNeil, 320 20 F.3d 1034, 1040 (9th Cir. 2003) (citing United States v. Garlick, 240 F.3d 789, 792 (9th 21 Cir. 2001). The government may establish its case using a combination of direct and 22 circumstantial evidence. United States v. Currency, U.S. $42,500, 283 F.3d 977, 980 (9th 23 Cir. 2002). 24 The facts set forth in the Complaint establish that the Currency is property traceable 25 to wire-fraud. The Complaint alleges a scheme to defraud the Arizona DES and the federal 26 government by submitting fraudulent online UI applications. Applicants were required to 27 self-certify eligibility and provide identifying information, including names, SSNs, and 28 mailing addresses, but Arizona DES did not require documentation or independent 1 verification of identify or eligibility for PUA benefits. Investigators determined that 2 organized actors used stolen personally identifiable information and fabricated 3 employment data to submit thousands of fraudulent applications. 4 As a result of the fraudulent scheme, Arizona DES caused Bank of America 5 (headquartered in North Carolina), which is Arizona DES’s financial institution, to transfer 6 millions of dollars, including the Currency, for deposit into accounts at Citibank 7 (headquartered in New York). The use of interstate wires in the transmission of 8 applications and benefit payments satisfies the interstate wire element. 9 The Complaint also demonstrates the requisite intent to defraud. Data scientists and 10 special agents used nine commonly recognized criteria for detecting UI fraud. The data 11 scientists and agents analyzed the UI application and payment data. The investigators 12 identified multiple fraud indicators across thousands of accounts, including mismatched 13 SSNs, out-of-state addresses, claim benefits from multiple SSNs deposited into one 14 account, claims filed from out-of-state IP addresses, and multiple deposits from different 15 states into single accounts. The analysis revealed that all but one of the accounts at issue 16 met at least one fraud criterion, 98.81% of the Citibank accounts satisfied two or more 17 criteria, and approximately 56.65% met four or more criteria. The single account that met 18 no criteria was separately flagged for identity theft by Arizona DES based on a complaint 19 from the individual whose PII was used to open the account. 20 To verify these findings, the Government conducted an in-depth review of five 21 randomly selected Citibank accounts. The investigation of these accounts revealed that all 22 five of the accounts were flagged due to the presence of one or more fraud indicators. 23 Moreover, each of these five accounts received UI benefits issued by the Arizona DES to 24 a different individual than the account holder. The three account holders who were 25 interviewed each denied any knowledge of either the specific Citibank accounts at issue or 26 the person in whose name UI benefits were paid out. This random sampling corroborates 27 the broader fraud analysis, confirming that the accounts received proceeds from 28 fraudulently submitted UI applications. 1 Taken together, these allegations and investigative findings establish, by a 2 preponderance of the evidence, that the Currency constitutes proceeds traceable to 3 violations of 18 U.S.C. § 1343. Thus, both the merits of the claim and sufficiency of the 4 complaint Eitel factors favor default judgment. 5 3. Amount in Controversy 6 Under the fourth Eitel factor, “the Court must consider the amount of money at stake 7 in relation to the seriousness of Defendant’s conduct.” Dr. JKL Ltd. v. HPC IT Educ. Ctr., 8 749 F. Supp. 2d 1038, 1050 (N.D. Cal. 2010) (cleaned up). When the amount at stake is 9 substantial or unreasonable in light of the allegations in the complaint, default judgment is 10 disfavored. See Eitel, 782 F.2d at 1472 (affirming the denial of default judgment where 11 the plaintiff sought $3 million in damages and the parties disputed material facts in the 12 pleadings). “However, when the sum of money at stake is tailored to the specific 13 misconduct of the defendant, default judgment may be appropriate.” Yelp Inc. v. Catron, 14 70 F. Supp. 3d 1082, 1100 (N.D. Cal. 2014) (quotation marks omitted). 15 Here, the Currency consists of approximately $6,550,729.16 in funds held across 16 over 2,000 Citibank accounts. While the total sum is substantial, the amount seized and 17 forfeited from each individual account is relatively modest—the accounts range from 18 hundreds of dollars to approximately $43,000—reflecting the specific proceeds of 19 fraudulent deposits into each account. (See Doc. 1-1.) The aggregated amount is therefore 20 reasonable when considering the scope and seriousness of the fraudulent scheme. 21 Additionally, no person has come forward to challenge the forfeiture, despite the 22 known potential claimants receiving direct notice of this case. Thus, default judgment is 23 reasonable in relation to the defaulting parties’ conduct. See, e.g., United States v. 24 Approximately $94,600 in U.S. Currency, 2018 WL 2215845, at *8 (N.D. Cal. 2018) 25 (finding this factor favors default judgment in forfeiture case where “the Currency 26 27 28 1 represents the entire amount of money actually seized” and “[n]o person has come forward 2 to challenge the forfeiture”). 3 4. Dispute Concerning Material Facts 4 No claim or answer has been filed, so there is no possibility of a factual dispute by 5 any potential claimant. “Because upon entry of default, all well-pleaded facts in the 6 complaint are taken as true, the fifth factor weighs in favor of default judgment when the 7 claims in the complaint are well-pleaded.” Durland v. Straub, 2022 WL 2704169, at *7 8 (D. Or. 2022)(cleaned up). The fifth Eitel factor supports default judgment. 9 5. Excusable Neglect 10 There is no evidence in the record to suggest the default was due to excusable 11 neglect by any potential claimant. Further, the Government has complied with all noticing 12 requirements. Thus, the sixth is factor supports default judgment. 13 6. Policy Favoring Judgment on the Merits 14 The seventh Eitel factor generally weighs against default judgment. See Zekelman 15 Indus. Inc. v. Marker, 2020 WL 1495210, *4 (D. Ariz. 2020). However, because no party 16 has filed a valid claim or answer, a decision on the merits here is “impracticable, if not 17 impossible.” See $27,800 in U.S. Currency, 2017 WL 6345394, at *4 (quoting PepsiCo, 18 Inc. v. Cal. Sec. Cans, 238 F. Supp. 2d 1172, 1177 (C.D. Cal. 2002)). 19 V. CONCLUSION 20 Because the Government complied with the applicable forfeiture provisions and the 21 Eitel factors support default judgment, the Court will grant the Government’s Motion. 22 IT IS ORDERED that the Government’s Motion for Default Judgment (Doc. 22) 23 is granted. 24 IT IS FURTHER ORDERED that all interests in in rem defendant $6,550,729.16, 25 consisting of $6,973.984.14 named in the Government’s verified Complaint for Forfeiture 26 In Rem less $423,254.98 dismissed by order of the Court on February 10, 2025, is forfeited 27 to the United States of America in accordance with 18 U.S.C. § 981(a)(1)(A). 28 1 IT IS FURTHER ORDERED the Clerk of Court is directed to enter judgment || accordingly and close this case. 3 Dated this 22nd day of January, 2026. 4 5 /

8 H le Sharad H. Desai 9 United States District Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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