UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, : : Plaintiff, : Civil Action No.: 20-cv-2228 (RC) : v. : Re Document No.: 10 : 155 VIRTUAL CURRENCY ASSETS, : : Defendants. :
MEMORANDUM OPINION
GRANTING PLAINTIFF’S MOTION FOR ENTRY OF DEFAULT JUDGMENT
I. INTRODUCTION
This action arises out of an investigation by the Internal Revenue Service Criminal
Investigation’s Cyber Crimes Unit, the Federal Bureau of Investigation, and Homeland Security
Investigations. Plaintiff United States of America (“the Government”) seeks the forfeiture of
155 virtual currency assets (collectively, “Defendant Properties”) that were involved in a number
of transactions that directly or indirectly supported and financed terrorism. No claimant to the
assets has responded to the complaint, and the Clerk of the Court entered default on February 26,
2021. The Government now asks this Court to enter a default judgment against the Defendant
Properties. For the reasons set forth below, the Court grants this motion.
II. FACTUAL BACKGROUND
This case involves a number of entities designated by the United States Secretary of State
as Foreign Terrorist Organizations (“FTOs”), including al-Qaeda, Jam’at al Tawhid wa’al-Jihad,
and al-Nusrah Front, as well as their aliases and entities soliciting donations to financially
support them. According to the Government, a number of entities solicited online donations of
bitcoin, a decentralized virtual currency, to finance these FTOs. The Government alleges that this scheme ran afoul of 18 U.S.C. § 2332b, an antiterrorism statute, and that the entities’ assets
are thus subject to forfeiture pursuant to 18 U.S.C. § 981(a)(1)(G)(i). The Court will briefly
summarize the relevant law and describe the alleged financing scheme in more detail.
A. Statutory Framework
Federal statute makes “[a]ll assets, foreign or domestic[,] of any individual, entity, or
organization engaged in planning or perpetrating any . . . Federal crime of terrorism” subject to
forfeiture to the United States. 18 U.S.C. § 981(a)(1)(G)(i). Numerous offenses may qualify as
a “Federal crime of terrorism” so long as they are “calculated to influence or affect the conduct
of government by intimidation or coercion, or to retaliate against government conduct.” Id.
§ 2332b(g)(5). One such offense is “knowingly provid[ing] material support or resources to a
foreign terrorist organization.” See id. § 2339B(a); see also id. § 2332b(g)(5)(i). For the
purposes of that offense, a “terrorist organization” is any organization designated as such under
section 219 of the Immigration and Nationality Act. Id. § 2339B(g)(6).
This statutory scheme “empowers the government to seek the forfeiture of property
outside the United States, which may have never touched the United States. The broad expanse
of this language is for forfeiture actions to reach all property of terrorist organizations.” United
States v. One Gold Ring with Carved Gemstone, No. 16-CV-2442, 2019 WL 5853493, at *1
(D.D.C. Nov. 7, 2019).
B. Relevant Facts and Procedural History
The Government outlines in its verified complaint a number of instances in which various
organizations solicited, via social media, donations that directly or indirectly financed a number
2 of FTOs. Before describing the alleged financing scheme, the Court will briefly explain the
method of financing, Bitcoin. 1
Bitcoin is a decentralized virtual currency, sometimes referred to as “cryptocurrency,”
which is supported by a peer-to-peer network. Compl. ¶ 14, ECF No. 1; see also United States v.
Harmon, 474 F. Supp. 3d 76, 80 (D.D.C. 2020). All transactions are posted to a public ledger
called the blockchain. Compl. ¶ 14. Transactions occur between bitcoin addresses, which
consist only of a complex series of numbers that contains no information identifying the parties
involved. Id. The cryptocurrency’s pseudonymous nature makes it favored by many criminal
actors who use it to facilitate illegal transactions, such as purchasing drugs or illegal services. Id.
As of writing, the value of one unit of bitcoin is $52,133.23. See Bitcoin, Blockchain.com,
https://www.blockchain.com/explorer (last visited Mar. 25, 2021).
Despite Bitcoin’s pseudonymous nature, law enforcement can sometimes identify parties
to a transaction. Compl. ¶¶ 15–19. By analyzing the blockchain (the public ledger that records
transactions) law enforcement can ascertain the counterparties’ unique bitcoin addresses. Id.
¶ 17. And because users often combine multiple bitcoin addresses and use them together in the
same transaction (a “cluster”), analysis of one transaction might reveal many addresses
belonging to a single individual or organization. See id. ¶¶ 15, 17. Several private companies
have used that kind of analysis to identify bitcoin address clusters associated with the same
parties. Id. ¶¶ 17–18. With the right clues, one can then attribute a cluster to a particular
individual or organization. Id. ¶¶ 17–19. Authorities took advantage of third-party blockchain
software to perform the investigation here. Id. ¶ 17.
1 “Conventionally, the Bitcoin network and its protocols are referred to with a capital B, while the units transmitted on the network are referred to with a lowercase b.” United States v. Harmon, 474 F. Supp. 3d 76, 81 (D.D.C. 2020).
3 The Government outlines a scheme in which several organizations solicited donations for
FTOs. To begin, the Government investigated groups on the social media platform Telegram,
including one named “Tawheed & Jihad Media” (“Tahweed”). Id. ¶ 20. Tahweed asked
supporters to send donations for al-Qaeda soldiers to its bitcoin address, labeled in the complaint
as “Defendant Property AQ1” (“AQ1”). Id. ¶¶ 21–22. AQ1 sent its entire balance of bitcoin to a
cluster of bitcoin addresses, Defendant Property AQ2 (“AQ2”), which was identified as a central
hub used to collect and redistribute funds to FTOs. Id. ¶¶ 23–25. AQ2 received approximately
15.27050803 bitcoin via 187 transactions from February 2019 to February 2020. Id. ¶ 25.
Between February 25 and July 29, 2019, AQ2 sent approximately 9.10918723 bitcoin to
Defendant Property 1, an account at a virtual currency exchange, which then disbursed the
money through online gift cards, a common method of money laundering. Id. ¶¶ 26–27. In May
2019, AQ2 received bitcoin from Defendant Property 2, another address, which then sent
approximately 0.07630859 bitcoin to yet another address, Defendant Property 3. Id. ¶¶ 26–27.
Defendant Property 3 subsequently transmitted bitcoin to AQ2. Id. ¶ 27.
Another organization, Leave an Impact Before Departure (“LIBD”) allegedly solicited
bitcoin donations via social media to equip, support, and finance militants in Syria. Id. ¶ 30.
LIBD posted images seeking funds for military equipment. Id. ¶ 30–31. Its bitcoin address,
Defendant Property 4, received approximately 14.58133728 bitcoin via 65 transactions from
March 10, 2019, to December 11, 2019, including seven transactions receiving bitcoin from
AQ2. Id. ¶ 34. A cluster of 29 bitcoin addresses, Defendant Properties 5–33, received
approximately 0.29328346 bitcoin from AQ2 and then sent 0.76916964 bitcoin to Defendant
Property 1 and 0.2270076 bitcoin to Defendant Property 4. Id. ¶ 35.
4 A third organization, Al Ikhwa, allegedly sought donations via Telegram too. Id. ¶ 36.
Al Ikhwa posted eleven bitcoin addresses to receive donations, collectively Defendant Properties
34–44 or “Al Ikhwa Cluster.” Id. ¶ 38. Half of the bitcoin received by this cluster was sent to
AQ2, which then sent bitcoin to Defendant Property 1. Id. ¶ 40–41. Al Ikhwa also posted four
bitcoin addresses on Facebook soliciting donations. Id. ¶ 42. Two of these were part of the Al
Ikhwa cluster, and the other two were a cluster of six more addresses, collectively Defendant
Properties 45–50 or “Al Ikhwa Facebook Cluster.” Id. Al Ikhwa Facebook Cluster sent
approximately 0.09413247 bitcoin to the Al Ikhwa Cluster during April and May of 2020. Id.
The Al Ikhwa Cluster sent various amounts of bitcoin through layered transactions to AQ2 from
January 2019 to July 2019. Id. ¶ 45.
Al Ikhwa is connected to Malhama Tactical, a jihadist military company that trains
fighters in Syria and has solicited donations for Hayat Tahrir al-Sham (“HTS”), an alias of al-
Nusrah Front, another FTO. Id. ¶¶ 12, 46–48. The Twitter account of Malhama Tactical’s
founder, Abu Salman Belarus, solicited donations to two bitcoin addresses. Id. ¶ 50. These
addresses are part of a cluster of twenty-three bitcoin addresses, Defendant Properties 51–73 or
“MT Cluster,” that on October 9, 2018 sent approximately 0.03839 bitcoin to another cluster that
has previously sent bitcoin to AQ2. Id. ¶¶ 51–52.
The Government identifies another organization, Reminders from Syria (“RFS”) that has
forwarded posts by (and has had its own posts forwarded by) Al Ikhwa on Telegram that include
the address of Al Ikhwa’s bitcoin account. Id. ¶ 53. An undercover Homeland Security
Investigations agent messaged the administrator of the RFS Telegram channel asking for an
address to donate bitcoin to, and the administrator provided a bitcoin address, Defendant
Property 74, which was clustered with Defendant Property 75 and 76. Id. ¶ 56. The
5 administrator also shared his own “wallet,” Defendant Property 77. Id. ¶ 58. Defendant
Property 77 and the RFS Cluster both sent bitcoin around the same time on July 23, 2020 to a
cluster of bitcoin addresses that then sent the majority of the funds to another address, Defendant
Property 78, which is hosted at the same exchange as Defendant Property 1. Id. ¶¶ 60–61.
The final organization, Al Sadaqah, is a Syrian organization that describes itself as a
charity, id. ¶ 63, and has solicited donations on Telegram, including one post that directed the
readers to donate to provide “the Mujahidin in Syria with weapons, finicial [sic] aid and other
projects relating to the jihad.” Id. ¶ 63. Al Sadaqah solicited donations to a bitcoin address,
Defendant Property 79, which is clustered with another address, Defendant Property 80. Id. ¶ 63.
The Government filed a verified complaint on August 13, 2020 for forfeiture in rem
against the Defendant Properties, claiming these accounts were used in the support and financing
of terrorism. See Compl. On September 11, 2020, the Government issued a Warrant for Arrest
In Rem, ECF No. 3, and commenced notification of this forfeiture on September 14, 2020, online
at http://www.forfeiture.gov, for thirty consecutive days, see Decl. of Publication, ECF No. 6.
The Government also identified multiple potential claimants to the properties and effectuated
service on these individuals via email on December 4, 2020. See Aff. Supp. Default ¶ 6, ECF
No. 8. No claimants have filed a claim. Id. ¶ 8. After the Clerk of the Court entered a default as
to the Defendant Properties, Default, ECF No. 9, the Government filed this motion for default
judgment under Federal Rule of Civil Procedure 55, seeking forfeiture under 18 U.S.C.
§ 981(a)(1)(G)(i). See Pl.’s Mem. Supp. Mot. for Def. J. (“Pl.’s Mot.”), ECF No. 10-1.
III. LEGAL STANDARD
There is a two-step process for default judgment. Fed. R. Civ. P. 55; see also Bricklayers
& Trowel Trades Int’l Pension Fund v. KAFKA Constr., Inc., 273 F. Supp. 3d 177, 179 (D.D.C.
6 2017). First, a party must “request[ ] that the Clerk of the Court enter default against a party who
has ‘failed to plead or otherwise defend’” the action. Bricklayers, 273 F. Supp. 3d at 179
(quoting Fed. R. Civ. P. 55(a)). The entry of default “establishes the defendant’s liability for the
well-pleaded allegations of the complaint.” United States v. Twenty-Four Cryptocurrency
Accounts, 473 F. Supp. 3d 1, 4 (D.D.C. 2020). Second, “the party must move for entry of default
judgment and, upon the party’s request, allow the court ‘to enter or effectuate judgment.’”
United States v. $6,999,925.00 of Funds Associated with Velmur Mgmt. Pte. Ltd., 368 F. Supp.
3d 10, 17 (D.D.C. 2019) (quoting Fed. R. Civ. P. 55(b)).
Default judgment is typically available “only when the adversary process has been halted
because of an essentially unresponsive party. In that instance, the diligent party must be
protected lest he be faced with interminable delay and continued uncertainty as to his rights.” Id.
at 17 (quoting Jackson v. Beech, 636 F.2d 831, 836 (D.C. Cir. 1980)); see also Gilmore v.
Palestinian Interim Self-Gov’t Auth., 843 F.3d 958, 965 (D.C. Cir. 2016). But a defendant’s
failure to respond or appear “do[es] not automatically entitle plaintiff to a default judgment.”
Velmur, 368 F. Supp. 3d at 17 (alteration in original) (quoting Jackson, 564 F. Supp. 2d at 26).
Rather, the complaint must state a claim for relief in order for the plaintiff to be entitled to
default judgment. Id. (citing Jackson, 564 F. Supp. 3d at 26). Stated differently, “[d]efault
establishes the defaulting party’s liability for the well-pleaded allegations of the complaint,” but
not for allegations that are insufficiently pleaded. Id. (quoting Boland v. Elite Terrazzo Flooring,
Inc., 763 F. Supp. 2d 64, 67 (D.D.C. 2011)).
IV. ANALYSIS
The Government asks this Court to authorize the forfeiture of the Defendant Properties.
Rule G of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture
7 Actions governs in rem civil forfeiture actions. See Fed. R. Civ. P. Supp. R. G. It contains both
notice requirements and substantive pleading requirements. See Velmur, 368 F. Supp. 3d at 17;
Fed. R. Civ. P. Supp. R. G(2), (4). Because the Government has properly notified all interested
parties and sufficiently alleged that the Defendant Properties are subject to forfeiture, its motion
for default judgment is granted.
A. Notice
Under Supplemental Rule G, the government must (1) publish public notice of a
forfeiture and (2) provide direct notice to potential claimants of the property to be forfeited. Fed.
R. Civ. P. Supp. R. G(4)(a), (b). One option for public notice is publication on an official
government forfeiture website for at least thirty consecutive days. Fed. R. Civ. P. Supp. R.
G(4)(a)(iii)–(iv). The publication should “describe the property with reasonable particularity,”
“state the times . . . to file a claim and to answer,” and “name the government attorney to be
served with the claim and answer.” Fed. R. Civ. P. Supp. R. G(4)(a)(ii). In addition to public
notice, the government is required to “send notice of the action and a copy of the complaint to
any person who reasonably appears to be a potential claimant.” Fed. R. Civ. P. Supp. R.
G(4)(b)(i). The notice “must be sent by means reasonably calculated to reach the potential
claimant.” Fed. R. Civ. P. Supp. R. G(4)(b)(iii)(A). But the rule requires only “that the
government attempt to provide actual notice; it does not require that the government demonstrate
that it was successful in providing actual notice.” United States v. $1,071,251.44 of Funds
Associated with Mingzheng Int’l Trading Ltd., 324 F. Supp. 3d 38, 47 (D.D.C. 2018) (quoting
Mesa Valderrama v. United States, 417 F.3d 1189, 1197 (11th Cir. 2005)).
Here, the Government has complied with Supplemental Rule G’s notice requirement. It
publicized the forfeiture on its official forfeiture website for thirty consecutive days starting
8 September 14, 2020. Decl. of Publication; Aff. Supp. Default ¶ 8. The publication described
and identified the virtual currency accounts, provided a date by which interested parties were
required to file a claim, and identified the attorney to be served with a claim. See Decl. of
Publication. No claims were filed in response to the publication by the deadline, November 13,
2020. Aff. Supp. Default ¶ 8; see also Fed. R. Civ. P. Supp. R. G(5)(a)(ii)(B) (requiring any
claim to be filed “no later than 30 days after final publication of . . . legal notice under Rule
G(4)(a)”). Accordingly, the Government has satisfied its obligation to provide public notice.
See Fed. R. Civ. P. Supp. R. G(4)(a)(iv)(C).
The Government has also complied with Supplemental Rule G’s direct notice
requirement. It sent direct notice by email to three potential claimants on December 4, 2020.
Aff. Supp. Default ¶ 6. Email is an appropriate means of providing notice when “the case
involves international defendants whose locations are hard to pin down and the nature of the
crimes necessarily entails some degree of cyber-proficiency on the part of the Defendant
Properties’ owners.” United States v. Twenty-Four Cryptocurrency Accounts, 473 F. Supp. 3d 1,
6 (D.D.C. 2020) (citing FTC v. PCCare247, Inc., No. 12-CV-7189, 2013 WL 841037, at *4
(S.D.N.Y. Mar. 7, 2013)). The Government’s publication on its forfeiture website and emails to
potential claimants thus satisfy Supplemental Rule G’s notice requirements. See United States v.
$56,634 in U.S. Currency on Deposit in Banesco Int’l, Panama, 79 F. Supp. 3d 112, 114 (D.D.C.
2015) (holding that the Government provided sufficient notice when it posted public notice of
the forfeiture online and attempted, but failed, to obtain contact information for the owners of the
funds at issue); see also Fed. R. Civ. P. Supp. R. G(4)(b).
9 B. Adequacy of the Complaint
Along with its notice requirements, “Supplemental Rule G sets the specifications of a
complaint in an in rem forfeiture action.” Mingzheng, 324 F. Supp. 3d at 45. The complaint
must (1) “be verified”; (2) state the grounds for jurisdiction and venue; (3) “describe the property
with reasonable particularity”; (4) “identify the statute under which the forfeiture action is
brought”; and (5) “state sufficiently detailed facts to support a reasonable belief that the
government will be able to meet its burden of proof at trial.” Fed. R. Civ. P. Supp. R. G(2).
Courts consider those requirements to establish a “higher standard of pleading” than that
imposed by Federal Rule of Civil Procedure 8. United States v. All Assets Held at Bank Julius
Baer & Co., Ltd., 571 F. Supp. 2d 1, 16 (D.D.C. 2008). Nevertheless, Rule 8 “may help to
clarify when a civil forfeiture complaint” states a claim. United States v. $22,173.00 in U.S.
Currency, 716 F. Supp. 2d 245, 249 (S.D.N.Y. 2010).
The first four requirements for a forfeiture complaint are largely formal, and the
Government meets them here. The complaint is verified; it identifies the basis for jurisdiction
and venue; it describes the properties at issue by identifying the specific account and cluster
numbers that sent, held, or received bitcoin and by providing details about the transactions
themselves; and it identifies the provision under which forfeiture is sought, 18 U.S.C.
§ 981(a)(1)(G)(i). See Compl. ¶¶ 2–4, 20–66.
The fifth requirement is more substantive; it requires the Government to establish the
legal basis for its claims. See Mingzheng, 324 F. Supp. 3d at 51. Here, the Government claims
as its legal basis 18 U.S.C. § 981(a)(1)(G)(i), which subjects to forfeiture “[a]ll assets, foreign or
domestic, of any individual, entity, or organization engaged in planning or perpetrating any . . .
Federal crime of terrorism . . . and all assets, foreign or domestic, affording any person a source
10 of influence over any such entity or organization.” 18 U.S.C. § 981(a)(1)(G)(i). Its forfeiture
theory can be summarized as follows: the Defendant Properties are forfeitable because they “are
owned, operated, promoted and/or registered by al-Queda [sic] and affiliated terrorist
organizations,” Pl.’s Mot. at 25, which have “knowingly provide[d] material support or resources
to” FTOs and therefore committed a “Federal crime of terrorism,” see 18 U.S.C. § 2339B(a)(1);
see also id. § 2332b(g)(5). Accordingly, the Government must allege “sufficient facts to support
a reasonable belief that [it] would be able to show at trial by a preponderance of the evidence
that” the Defendant Properties belonged to or afforded a source of influence over an organization
that provided material support to an FTO. See Mingzheng, 324 F. Supp. 3d at 51. That standard,
“which is not particularly onerous,” id., is satisfied here.
The Government alleges that al-Qaeda and affiliated terrorist groups named in the
complaint have been operating a Bitcoin money laundering network using social media platforms
to solicit donations to fund terrorism. Compl. ¶ 24. This network laundered money through
layered transactions, assisted by Bitcoin’s pseudonymous nature. Id. ¶¶ 24, 29. The
Government further alleges that, through blockchain analysis, it identified the accounts used in
the scheme as the Defendant Properties.
The Government has provided documented trails of bitcoin transfers originating from
several named organizations. First, it identified “Tawheed & Jihad Media” as an organization
that used the social media platform Telegram to solicit bitcoin donations and then sent funds to a
central hub, AQ2, that redistributed funds to various terrorist groups. Compl. ¶¶ 20–29. LIBD
also allegedly solicited bitcoin donations via images seeking funds for military equipment. Id.
¶¶ 30–32. The organization received bitcoin from several donors, including AQ2, then sent
bitcoin to another cluster the Government wants forfeited. Id. ¶¶ 34–35. Next, the Government
11 alleges that the organization Al Ikhwa solicited donations of bitcoin via Telegram and Facebook,
then sent bitcoin to other Defendant Properties, including accounts linked to al-Qaeda and
Tawheed & Jihad Media. Id. ¶¶ 36–45. The Government further alleges that the founder of
Malhama Tactical, a jihadist military organization that trains fighters in Syria, tweeted bitcoin
addresses that constitute a cluster of accounts that has previously sent bitcoin to AQ2 on several
occasions. Id. ¶¶ 46–52. Another organization, RFS, is allegedly linked to Al Ikhwa, and the
Government reports that an undercover Homeland Security Investigations agent received two
bitcoin addresses to donate to that were hosted at the same exchange as other Defendant
Properties. Id. ¶¶ 53–62. Finally, the Government alleges that another Syrian organization, Al
Sadaqah, solicited and received donations at two bitcoin addresses to provide militants with
“weapons, finicial [sic] aid and other projects relating to the jihad.” Id. ¶¶ 63–66. In sum, the
Government says that Al-Qaeda and affiliated organizations used the Defendant Properties to
house, launder, and distribute funds solicited for the express purpose of equipping militants.
The Government has thus established a reasonable basis to believe that it could show at
trial that the Defendant Properties belonged to entities that provided financial support to FTOs.
It alleges that the named organizations owned and operated the Defendant Properties. Those
organizations used their social media accounts and the Defendant Properties to send funds
directly to terrorist organizations (in the case of Tahweed, LIBD, and Al Ikhwa), id. ¶¶ 23–29,
33–35, 45, assist in laundering funds on behalf of terrorist organizations (in the case of Tahweed,
LIBD, and Al Ikhwa), id. ¶¶ 28–29, 35, 45, and/or expressly solicit funds for arming and training
militants in furtherance of terrorist activities (in the case of LIBD, Malhama Tactical, RFS, and
Al Sadaqah), id. ¶¶ 21, 30, 50, 54–55, 64–66. These activities fall squarely within 18 U.S.C.
§ 2339B(a)(1)’s prohibition on providing material support to designated terrorist organizations.
12 Accordingly, each of the properties belong to entities perpetrating a “Federal crime of terrorism”
and are subject to forfeiture. See 18 U.S.C. § 981(a)(1)(G)(i); see also id. § 2332b(g)(5). 2
V. CONCLUSION
For the foregoing reasons, Plaintiff’s motion for default judgment (ECF No. 10) is
GRANTED. An order consistent with this Memorandum Opinion is separately and
contemporaneously issued.
Dated: April 9, 2021 RUDOLPH CONTRERAS United States District Judge
2 In what appears to be an attempt to cover its bases in case the Defendant Properties are not the “assets . . . of” the named organizations, the Government invokes the forfeiture statute’s language that encompasses assets “affording any person a source of influence” over an organization committing a Federal crime of terrorism. See Pl.’s Mot. at 25; see also 18 U.S.C. § 981(a)(1)(G)(i). It analogizes to the RICO forfeiture statute, 18 U.S.C. § 1963(a), which also uses the “source of influence” language. See Pl.’s Mot. at 25. That statute’s “source of influence” language, the Government explains, covers any property that “made the prohibited conduct less difficult or more or less free from obstruction or hindrance.” Id. (quoting United States v. Neff, 303 F. Supp. 3d 342, 349 (E.D. Pa. 2018)). Applying the same interpretation here, the Government suggests that the Defendant Properties should be subject to forfeiture because they facilitated the supporting of terrorism by providing a charitable front that concealed a terror financing network. Id. While the Government may well offer a correct reading of the forfeiture statute, the Court does not need to determine the precise scope of the “source of influence” clause to resolve the motion before it today. The Government’s complaint adequately alleges facts “to support a reasonable belief that [it] would be able to show at trial by a preponderance of the evidence” that the Defendant Properties belong to the named organizations and that those organizations are providing material support to FTOs. See Mingzheng, 324 F. Supp. 3d at 51.