UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, : : Plaintiff, : Civil Action No.: 17-1705 (RC) : v. : Re Document No.: 28 : $6,999,925.00 OF FUNDS ASSOCIATED : WITH VELMUR MANAGEMENT PTE LTD, : et al., : : Defendants. :
MEMORANDUM OPINION
GRANTING IN PART PLAINTIFF’S MOTION FOR DEFAULT JUDGMENT
I. INTRODUCTION
Plaintiff United States of America (“the government”) seeks forfeiture and civil money
penalties from two foreign companies that have allegedly acted as fronts for the Democratic
People’s Republic of Korea (“North Korea”). According to the government, these two
companies—Velmur Management Pte. Ltd. (“Velmur”) and Transatlantic Partners Pte. Ltd.
(“Transatlantic”)—made transactions on behalf of sanctioned North Korean entities, using the
United States banking system, in contravention of federal law and United States sanctions on
North Korea. Velmur failed to respond to the government’s complaint, and the government asks
this Court to enter a default judgment against it. For the reasons set forth below, the Court
concludes that the government’s factual allegations are sufficient to show that Velmur is liable
for the offenses with which it is charged, that the government sent proper notice of this action to
interested parties, and that the money the government claims under the forfeiture statute was
involved in Velmur’s offenses. However, the government’s allegations support only a portion of the civil money penalty it seeks against Velmur. Thus, the Court grants the government’s
motion for default judgment in full with respect to the forfeiture, and in part with respect to civil
money penalties.
II. FACTUAL BACKGROUND
This case began with an FBI investigation of Velmur and Transatlantic in connection
with an alleged North Korean scheme to subvert international sanctions through the use of front
companies. Compl. ¶ 1, ECF No. 1. According to the government: (1) North Korean banks
directed Transatlantic and other front companies to send United States dollars to Velmur; (2)
those front companies wired the money to Velmur, using United States banks as conduits; (3)
Velmur then wired the money to a Russian gasoil supplier; which (4) shipped gasoil to North
Korea. See id. ¶ 55. The government alleges that this scheme ran afoul of, among other laws,
the International Emergency Economic Powers Act (“IEEPA”) and federal anti-money
laundering and bank fraud statutes. 1 The Court will briefly summarize those laws and then
describe the alleged money laundering scheme in more detail.
A. Statutory and Regulatory Framework
1. The International Emergency Economic Powers Act
The IEEPA authorizes the President to “deal with any unusual and extraordinary threat
… to the national security, foreign policy, or economy of the United States” from outside the
United States. 50 U.S.C. § 1701(a). This authority includes the ability to investigate
“transactions in [the] foreign exchange” or “the importing or exporting of currency.” Id. §
1 The government also alleges that this scheme violated the North Korean Sanctions and Policy Enhancement Act (“NKSPEA”). 22 U.S.C. §§ 9201–9255. Because the government sufficiently alleged that Velmur violated the IEEPA and the anti-money laundering statute, the Court need not consider Velmur’s liability under the NSKPEA.
2 1702(a)(1)(A). Exercising his IEEPA authority, President Bill Clinton issued Executive Order
12,938, which designates “Weapons of Mass Destruction” (“WMDs”) as an “unusual and
extraordinary threat” under the IEEPA. Exec. Order No. 12,938, 59 Fed. Reg. 58,099 (Nov. 14,
1994). Executive Order 13,382, issued a decade later, denies access to the United States banking
system to anyone designated as a “proliferator” of WMDs. Exec. Order No. 13,382, 70 Fed.
Reg. 38,567 (June 28, 2005). The “WMD Proliferators Sanctions Regulations,” which
implement Executive Order 13,382, “block” any property interests, including money and other
financial instruments, belonging to or used in support of individuals and entities designated as
WMD proliferators. 2 31 C.F.R. §§ 544.201, 544.308. Those individuals and entities are placed
on the “Specially Designated Nationals and Blocked Persons” list (the “SDN” list) administered
by the Department of Treasury’s Office of Foreign Assets Control (“OFAC”). See id. §
544.201(a). And Department of Treasury regulations bar the “provision of funds, goods, or
services by, to, or for the benefit of any person” designated as an SDN, unless OFAC licenses the
transactions. Id. § 544.201(b); see also id. §§ 544.202(c), 544.301, 544.405.
Section 206 of the IEEPA makes it “unlawful for a person to violate, attempt to violate,
conspire to violate, or cause a violation of any license, order, regulation, or prohibition issued
under” the IEEPA. 50 U.S.C. § 1705(a). And property “which constitutes or is derived from
proceeds traceable to” a violation of the IEEPA is subject to forfeiture. 18 U.S.C. §
981(a)(1)(C). “This chain of interlocking statutes can thus be summarized as follows: property
that ‘constitutes or is derived from proceeds traceable to’ violations of executive orders . . .
promulgated pursuant to the IEEPA is subject to forfeiture.” In re 650 Fifth Avenue & Related
2 If an account is “blocked,” “payments, transfers, exportations, withdrawals, or other dealings may not be made” from that account unless licensed by the Office of Foreign Assets Control. 31 C.F.R. § 544.301.
3 Props., 830 F.3d 66, 87 (2d Cir. 2016) (citing 18 U.S.C. §§ 981(a)(1)(C), 1956(c)(7)(D); 50
U.S.C. § 1705).
2. The Federal Anti-Money Laundering Statute
The federal anti-money laundering statute, 18 U.S.C. § 1956, makes it a crime to
“transport[], transmit[], or transfer[] . . . a monetary instrument or funds from a place in the
United States to or through a place outside the United States . . . with the intent to promote the
carrying on of [a] specified unlawful activity.” 3 18 U.S.C. § 1956(a)(2)(A). “Specified unlawful
activity” includes violating the IEEPA. Id. § 1956(c)(7)(D). Additionally, “any property . . .
involved in a transaction . . . in violation of” the federal anti-money laundering statute is subject
to forfeiture. Id. § 981(a)(1)(A). To show that the property was “involved in” such a
transaction, the government must show that “there was a substantial connection between the
property and the offense.” Id. § 983(c)(3). A violator of the anti-money laundering statute is
also liable “for a civil penalty of . . . the value of the property, funds, or monetary instruments
involved in the transaction.” Id. § 1956(b)(1)(A).
B. Relevant Facts and Procedural History
In 2013, OFAC designated North Korea’s primary foreign exchange bank, the Foreign
Trade Bank (“FTB”), as an SDN. Compl. ¶¶ 19, 46. In 2016, the Department of Treasury’s
Financial Crimes Enforcement Network (“FinCEN”) deemed “the entire North Korean financial
sector as a jurisdiction of primary money laundering concern.” Id. ¶ 27 (emphasis in original)
(citing 81 Fed. Reg. 35,665 (June 3, 2016)). FinCEN found, in making that determination, that
3 This statute also criminalizes conspiracy to engage in money laundering. 18 U.S.C. § 1956(h).
4 North Korea makes extensive use of front companies and deceptive financial practices to evade
international sanctions. Id. ¶¶ 32, 50.
Velmur is registered in Singapore, and is purportedly a commercial and industrial real
estate management company. Id. ¶¶ 58-59. Despite Velmur’s legitimate-sounding business, the
government alleges that it “bears the hallmarks of a front company”; it “lacks an official website
and appears to have little to no web presence” while also not “having a true physical office
space.” Id. ¶ 59; Decl. Special Agent Benjamin Whitley (“Whitley Decl.”) ¶ 6, ECF No. 28-2.
Relying in part on confidential sources, the government contends that Velmur “has been a
recipient of U.S. dollar payments on behalf of North Korean entities—in particular, FTB.”
Compl. ¶¶ 60-61.
During its investigation of Velmur, the FBI allegedly identified several payments made to
or from Velmur, through United States banks, for the purpose of laundering money or purchasing
gasoil on behalf of North Korea. See id. ¶ 84. In May 2017, OFAC blocked five of these
transactions, totaling $4,999,925, that were described as “prepayment for gasoil” and that
involved three alleged North Korean front companies. See id. ¶¶ 56, 85-93; Whitley Decl. ¶ 7.
The blocked funds (the “Defendant Funds”) are “currently held in a bank account in the United
States.” Compl. ¶ 10. 4 OFAC found that “an SDN had an interest in each one of the . . .
transactions” and no SDN “obtain[ed] an OFAC license prior to engaging in the transactions.”
Whitley Decl. ¶ 7; see also Compl. ¶¶ 70, 72, 74. The transactions prompted OFAC, in August
2017, to designate Velmur as an SDN “for operating in the energy industry in the North Korean
4 OFAC also blocked two wire transfers to Velmur from Transatlantic. See id. ¶ 56. Transatlantic has entered an appearance in this case, and the government has not yet sought forfeiture of the blocked payments involving Transatlantic. See Pl.’s Mem. Supp. Mot. Default J. (“Pl.’s Mem.”) at 4 n.3, ECF No. 28-1.
5 economy,” and for “attempt[ing] to use the U.S. financial system to send millions of dollars in
payments on behalf of North Korea-related transactions.” Compl. ¶ 57.
In addition to the transactions blocked by OFAC, the FBI’s investigation identified
several other Velmur transactions involving North Korean front companies and companies
known to do business with North Korea. In early 2017, Velmur wired $6,853,000 over eight
transactions to JSC Independent Petroleum Company (“IPC”), a Russian company, “for gasoil.” 5
Id. ¶¶ 75–77; Whitley Decl. ¶ 13. OFAC subsequently designated IPC as an SDN, noting that it
“had a contract to provide oil to North Korea and reportedly shipped over $1 million worth of
petroleum products to North Korea.” Compl. ¶ 75. One of the government’s “reliable”
confidential sources stated that IPC shipped the gasoil purchased by Velmur from a Russian port
to North Korea. Id. ¶¶ 78-79. Through 2016 and 2017, Velmur was also the recipient of four
United States dollar wire transfers, totaling $1,169,980, from companies known to be associated
with or front companies for FTB. Id. ¶ 61. These companies are known “to have made
payments for FTB” and are believed to have “laundered funds to promote sanctions violations”.
Id.
In August 2017, the government filed a verified complaint for forfeiture in rem against
$6,999,925 in blocked funds associated with Velmur, and for civil money penalties in personam
against Defendants Velmur and Transatlantic. 6 The government claims that the $6,999,925 was
involved in Defendants’ IEEPA and money laundering violations, and that the civil money
5 The complaint includes a chart listing seven wire transfers that make up only $5,503,000 of the listed total of $6,853,000. Compl. ¶ 76. However, Special Agent Whitley’s declaration provides the eighth wire transfer of $1,350,000, which brings the total up to the listed $6,853,000. Whitley Decl. ¶ 13. 6 As noted, the blocked funds associated with Transatlantic are not at issue in the government’s motion for default judgment. See Pl.’s Mem.
6 penalties are necessary to redress Defendants’ money laundering violations. On February 9,
2018, the Clerk of the Court entered default as to the Defendant Funds and Defendants. See
Clerk’s Entry of Default as to Def. Funds, ECF No. 13; Clerk’s Entry of Default as to Defs., ECF
No. 14. Transatlantic then entered an appearance, see Notice of Appearance, ECF No. 15, and
the government and Transatlantic “continue to have substantive conversations about the status
of” this action. Status Report at 3, ECF No. 27. Velmur, however failed to appear, and the
government has filed a motion for default judgement under Federal Rule of Civil Procedure 55,
seeking forfeiture of the Defendant Funds—$4,999,925—and the imposition of $21,691,187.30
in civil money penalties against Velmur. Pl.’s Mot. Default J. 1-2, ECF No. 28. That motion is
now before the Court.
III. LEGAL STANDARDS
Federal Rule of Civil Procedure 55 establishes a two-step process for default judgment.
Fed. R. Civ. P. 55; see also Bricklayers & Trowel Trades Int’l Pension Fund v. KAFKA
Construction, Inc., 273 F. Supp. 3d 177, 179 (D.D.C. 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)). Then, the party
must move for entry of default judgment and, upon the party’s request, allow the court “to enter
or effectuate judgment.” Fed. R. Civ. P. 55(b).
“‘[D]efault judgment must normally be viewed as 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.’” Jackson v. Beech, 636 F.2d 831, 836 (D.C. Cir. 1980) (quoting
H.F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 691 (D.C. Cir.
7 1970)); see also Gilmore v. Palestine Interim Self-Gov’t Auth., 843 F.3d 958, 965 (D.C. Cir.
2016). However, “a defendant’s failure to appear . . . do[es] not automatically entitle plaintiff to
a default judgment.” Jackson v. Corr. Corp. of Am., 564 F. Supp. 2d 22, 26 (D.D.C. 2008).
Rather, “the defendant’s default notwithstanding, the plaintiff is entitled to a default judgment
only if the complaint states a claim for relief.” Id. at 27 (quoting Descent v. Kolitsidas, 396 F.
Supp. 2d 1315, 1316 (M.D. Fla. 2005). In other words, “[d]efault establishes the defaulting
party’s liability for the well-pleaded allegations of the complaint,” but not for allegations that are
not sufficiently pleaded. Boland v. Elite Terrazzo Flooring, Inc., 763 F. Supp. 2d 64, 67 (D.D.C.
2011) (citing Adkins v. Teseo, 180 F. Supp. 2d 15, 17 (D.D.C. 2001)).
IV. ANALYSIS
The government asks this Court to authorize the forfeiture of certain funds belonging to
Velmur, and to impose civil money penalties on Velmur. Although Velmur has not appeared to
contest these claims, the Court must assure itself that the government has established Velmur’s
liability for both. Because the government has properly notified all interested parties and
sufficiently alleged that Velmur’s property is subject to forfeiture, the motion for default
judgment is granted as it relates to the forfeiture. On the other hand, the government has not
sufficiently alleged that Velmur is subject to the full amount of civil money penalties sought.
The Court will impose a penalty less than that requested.
A. Forfeiture
Rule G of the Supplemental Rules for Admiralty or Maritime Claims and Asset
Forfeiture Actions governs in rem civil forfeiture actions. See Fed. R. Civ. P. Supp. R. G. It
8 contains both notice requirements and substantive pleading requirements. 7 See Fed. R. Civ. P.
Supp. R. G(2), (4). The government has met those requirements here.
1. Notice
Supplemental Rule G requires the government to (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). The government must select one of three options for public notice, one
of which 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 must “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). The government must also “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). That notice “must be sent by means reasonably calculated to reach the potential
claimant.” Fed. R. Civ. P. Supp. R. G(4)(b)(iii)(A). That said, Supplemental Rule G “requires
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)).
7 Supplemental Rule G also requires that if—as is the case here—the subject of the seizure is not real property, the “clerk must issue a warrant to arrest the property if it is in the government’s possession, custody, or control.” Fed. R. Civ. P. Supp. R. G(3)(b)(i). The funds at issue here are in the government’s control. See Compl. at 1, ¶ 10 (“The Defendant Funds are currently held in a bank account in the United States”). And the Clerk of Court issued a warrant for the funds’ arrest one day after the government filed its complaint. See Warrant for Arrest In Rem, ECF No. 2. The government has thus met this Supplemental Rule G requirement.
9 Here, the government complied with Supplemental Rule G’s public notice requirement.
The government publicized the forfeiture on its official forfeiture website, http://www.
forfeiture.gov, for thirty consecutive days in September and October 2017. Decl. of Publication,
ECF No. 3; Pl.’s Mem. Supp. Mot. Default J. at 5, ECF No. 28-1. The publication described the
funds, it provided a date by which interested parties were required to file a claim, November 23,
2017, and it named the government attorney to be served, Zia Faruqui. Decl. of Publication at 2.
The government also complied with Supplemental Rule G’s direct notice requirement. It
sent notice to potential claimants of the funds, including Velmur, at their registered addresses via
international service in December 2017. See Status Report at 2–3, ECF No. 5; Aff. Supp.
Default at 2–3, ECF No. 10; Clerk’s Entry of Default as to Def. Funds. That notice included a
copy of the complaint, and it notified the potential claimants that they could file a claim for the
funds with this Court within thirty-five days of service. Aff. Supp. Default at 2–3. While the
government has not shown that Velmur received the notice, proof of delivery is sufficient under
Supplemental Rule G. See Mingzheng, 324 F. Supp. 3d at 47 (holding that the government’s
direct notice was “more than” sufficient when it sent “international package service to parties in
China and the United Kingdom, and service through a Mutual Legal Assistance Treaty request to
the potential claimant in Switzerland”); United States v. Funds Up to and Including the Amount
of $56,634 in U.S. Currency on Deposit in Banesco Int’l, Panama, Acct. # 201000274785, Titled
in the Name of Inversiones Cedeno C.A., and/or Prop. Traceable Thereto, 79 F. Supp. 3d 112,
114 (D.D.C. 2015) (holding that the government provided sufficient notice when it attempted,
but failed, to obtain contact information for specific account holders related to the funds at issue,
and it posted public notice of the forfeiture on its forfeiture website). Thus, the government has
met Supplemental Rule G’s notice requirements. See Fed. R. Civ. P. Supp. R. G(4).
10 2. 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 “be verified,” state the grounds for jurisdiction and venue, “describe the property with
reasonable particularity,” “identify the statute under which the forfeiture action is brought,” and
“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 this a “higher
standard of pleading” than that imposed by Federal Rule 8. United States v. All Assets Held at
Bank Julius Baer & Co., Ltd., 571 F. Supp. 2d 1, 16 (D.D.C. 2008). Rule 8, however, “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 of the complaint are largely formal and are easily met here.
The complaint is verified; it identifies the basis for jurisdiction and venue; it describes the
property at issue by (1) identifying the specific amount of money involved in Velmur’s illicit
transactions and blocked by OFAC, and (2) providing details about the wire transfers
themselves; and it identifies the provisions under which forfeiture is sought as 18 U.S.C. §
981(a)(1)(A), which permits forfeiture of property involved in money laundering, and 18 U.S.C.
§ 981(a)(1)(C), which permits forfeiture of property traceable to IEEPA violations. See Compl.
¶¶ 9–10, 56, 85–104, at 33.
The fifth requirement is more substantive; the government must establish the legal basis
for its claims. See Mingzheng, 324 F. Supp. 3d at 51. The government’s forfeiture theory can be
summarized as follows: the Defendant Funds are forfeitable because Velmur intended to use
them to transact business, through United States banks, on behalf of SDNs without an OFAC
11 license, in violation of the IEEPA. Thus, 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 transactions at issue were made on behalf of [SDNs].” Id. That standard, “which is not
particularly onerous,” has again been met here. Id. (citing United States v. Aguilar, 782 F.3d
1101, 1108–09 (9th Cir. 2015)).
Any entity that transacts with or on behalf of FTB—which was designated as an SDN in
2013—or other North Korean SDNs, through the United States financial system, must first
obtain a license from OFAC. See 31 C.F.R. § 544.201(a); United States v. All Wire Transactions
Involving Dandong Zhicheng Metallic Material Co., Ltd., Nos. 17-mj-217, et al., 2017 WL
3233062, at *1, 5 (D.D.C. May 22, 2017) (explaining that foreign entities that are acting on
behalf of North Korean SDNs have committed violations of IEEPA and the anti-money
laundering statute by conducting United States dollar wire transfers without first obtaining a
license from OFAC). The government alleges that to subvert this restriction, North Korean
financial institutions, including FTB, use front companies to send money through United States
banks. See Compl. ¶¶ 50–54. Citing FinCEN and OFAC reports, the government claims, more
specifically, that FTB “acts as North Korea’s primary foreign exchange bank,” and has “illegally
laundered ‘millions of U.S. dollars’” through front companies, including as recently as May
2017. Id. ¶¶ 45–49. This alleged elaborate network of front companies allows North Korea to
execute commodities contracts in United States dollars that would otherwise be rendered
impossible by international sanctions. Id. ¶¶65–69. For instance, North Korea and IPC allegedly
entered into a gasoil contract in United States dollars, which was carried out through front
companies using the United States banking system. Id. ¶ 75–80.
12 Having laid that groundwork, the government alleges that Velmur provided material
support for North Korean front companies, including FTB front companies, by helping them
purchase gasoil on behalf of North Korea. Id. ¶¶ 57–58. The government’s confidential sources
state that, despite Velmur’s self-described activities as a real estate manager, its business
“focuses on facilitating the laundering of funds for North Korean financial facilitators and
sanctioned entities.” Id. ¶¶ 58–61. The government alleges that the five wire transactions that
transferred the Defendant Funds into Velmur’s United States bank accounts were issued by front
companies of designated North Korean banks, and were intended to facilitate Velmur’s purchase
of gasoil from IPC on behalf of North Korea. Id. ¶¶ 56, 70–93. True to form, Velmur allegedly
wired nearly $7 million to IPC. Id. ¶ 76. And a confidential witness stated that a “clandestine
FTB branch located outside of North Korea ordered a $1.09 million payment to be made via a[n]
FTB front company to Velmur” during this period. Id. ¶ 81–82. IPC was subsequently
designated as an SDN by OFAC. Id. ¶ 75. Notably, Velmur never sought OFAC licensing for
the transactions. See Whitley Decl. ¶ 7. Thus, the government claims that Velmur violated the
IEEPA because it conducted transactions on behalf of SDNs—FTB and others—through United
States banks without obtaining OFAC licenses. See Compl. ¶¶ 70-74, 85-92, 99, 102; Whitley
Decl. ¶ 7; see also 31 C.F.R §§ 544.202(c), 544.301, 544.405.
The government’s allegations establish a reasonable basis to believe that it could show at
trial that the Defendant Funds “constitute[d]” or were “derived from” IEEPA violations. 18
U.S.C. § 981(a)(1)(C). The funds were sent by SDN front companies to Velmur for the purpose
of making transactions on behalf of those SDNs. That OFAC blocked each transaction because
it concluded that an SDN had an interest in it, and that OFAC subsequently designated Velmur
and IPC as SDNs, add additional weight to this conclusion. See Compl. ¶¶ 57, 85–93; Whitley
13 Decl. ¶ 7; see also Consarc Corp. v. Iraqi Ministry, 27 F.3d 695, 702 (D.C. Cir. 1994) (stating
that “OFAC[] . . . receives an even greater degree of deference than the Chevron standard”). The
government “has thus surpassed its burden under Supplemental Rule G(2).” Mingzheng, 324 F.
Supp. 3d at 53 (holding that blocked transactions made by FTB front companies to a different
FTB front company were subject to forfeiture); see also United States v. $396,589 in U.S. Funds,
349 F. Supp. 3d 13, 21–22 (D.D.C. 2018) (holding that funds used to pay for specialized
petroleum parts on behalf of Iran, in violation of sanctions on that country, were subject to
forfeiture as proceeds traceable to an IEEPA violation).
The government’s allegations also establish that the Defendant Funds are subject to
forfeiture under 18 U.S.C. § 981(a)(1)(C), as derived from proceeds traceable to violations of the
anti-money laundering statute, id. § 1956. Section 1956 makes it unlawful to “transport[ ],
transmit[ ], or transfer[ ] . . . a monetary instrument or funds . . . to a place in the United States
from or through a place outside the United States . . . with the intent to promote the carrying on
of specified unlawful activity,” 18 U.S.C. § 1956(a)(2), or to conspire to do so, see id. § 1956(h).
The government alleges that the SDN front companies wired the Defendant Funds from outside
the United States with the intention that they pass through Velmur’s United States bank
accounts, with Velmur’s knowledge and participation. See Compl. ¶¶ 56, 84–93. And as already
discussed, the government alleges that these payments constitute or are derived from proceeds
traceable to IEEPA violations, which are “specified unlawful activit[ies]” under § 1956. See 18
U.S.C. § 1956(c)(7)(D) (defining “specified unlawful activity” to include offenses under “section
206 ... of the [IEEPA]”). Thus, the government’s well-pleaded allegations are sufficient to
establish that the defendant funds are derived from proceeds traceable to a violation of §
14 1956(a)(2)(A), or at least a conspiracy to commit such a violation, and consequently §
981(a)(1)(A) provides an alternative ground for forfeiture of the defendant funds. 8
B. Civil Money Penalties
The government also asks this Court to impose civil money penalties on Velmur, as
authorized by the anti-money laundering statute. Under that statute, an individual who violates
subsection (a)(1) is “liable to the United States for a civil penalty” of up to the “value of the
property, funds, or monetary instruments involved in the [illegal] transaction[s].” 18 U.S.C. §
1956(b).
The government’s claim for civil money penalties is brought in personam, so it is not
subject to Supplemental Rule G. Instead, Rule 8 of the Federal Rules of Civil Procedure sets the
standard for in personam complaints. Rule 8 requires “a short and plain statement of the claim
showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). This standard requires that
the complaint “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is
plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 555 (2007)). Rule 8’s standard is more permissive than the standard
imposed by Supplemental Rule G. See All Assets Held at Bank Julius Baer & Co., Ltd., 571 F.
Supp. 2d at 16. Further, “[w]hen moving for default judgment, a plaintiff must prove that it is
entitled to the requested damages.” Commodity Futures Trading Comm’n v. GIGFX, LLC, 844
F. Supp. 2d 58, 64 (D.D.C. 2012) (citing R.W. Amrine Drywall Co., 239 F. Supp. 2d 26, 30
(D.D.C. 2002)).
8 The government’s allegations are also sufficient to demonstrate that there exists a “substantial connection between the [Defendant Funds] and the [alleged] offense[s],” as required by 18 U.S.C. § 983(c)(3). The Defendant Funds were necessary to carry out the gasoil transactions intended to subvert the IEEPA.
15 As noted, the government has sufficiently alleged that Velmur violated the federal anti-
money laundering statute with respect to the Defendant Funds. Velmur received the Defendant
Funds on behalf of SDNs without properly obtaining a license from OFAC, and the transactions
involved the movement of money across United States borders. Compl. ¶¶ 46, 70-74, 85-92;
Whitley Decl. ¶ 7. Thus, Velmur is subject to civil money penalties up to “the value of the
property, funds, or monetary instruments involved in the transaction[s].” 18 U.S.C. §
1956(b)(1)(A). The government, however, also seeks civil money penalties arising from
additional Velmur transactions.
First, the government identifies eight wire transfers from Velmur to IPC between
February and Aril 2017, each wire referencing payment “[f]or Gasoil.” See Compl. ¶¶ 76-78;
Whitley Decl. ¶¶ 13–14. The wires totaled $6,853,000. See Compl. ¶ 76; Whitley Decl. ¶ 13. A
confidential source stated that around the same time, pursuant to a different contract with
Velmur, IPC shipped diesel fuel from a Russian port known as a key waypoint for shipments to
North Korea. See Whitley Decl. ¶¶ 15–16. And as discussed above, both IPC and Velmur were
subsequently designated by OFAC as operating to provide gasoil to North Korea in
contravention of United States sanctions. See Compl. ¶¶ 57, 75; Whitley Decl. ¶¶ 8–9. Given
Velmur’s other money laundering activities and the government’s allegation that both IPC and
Velmur were operating under agreements with FTB, the government has plausibly alleged that
Velmur’s payments to IPC were made on behalf of an SDN without an OFAC license. Thus, the
two entities transmitted money through the United States banking system “with the intent to
promote the carrying on of specified unlawful activity,” the IEEPA, in violation of 18 U.S.C. §
1956(a)(2)(A). Velmur is subject to civil money penalties up to the total amount of its
transactions with IPC. See id. § 1956(b)(1)(A).
16 Second, the government identifies four wire transfers allegedly sent by FTB affiliates and
front companies to Velmur. Compl. ¶ 61; Whitley Decl. ¶ 12. In September 2016, Velmur
received a $230,000 wire transfer from Dandong Zhicheng Metallic Material Company, which
was subsequently found to have laundered money on behalf of North Korea. See Compl. ¶ 61(a);
Whitley Decl. ¶ 12(a); see also Dandong, 2017 WL 3233062, at *5 (finding probable cause that
Dandong was a North Korean front company engaged in IEEPA violations, justifying the
forfeiture of Dandong funds routed through United States banks). In July 2016, Velmur received
$189,980 from Ruizhi Resources Limited, a company found to be a front for Dandong Zhicheng.
See Compl. ¶ 61(b); Whitley Decl. ¶ 12(b). Sometime in 2016, Velmur received “more than
$250,000” from “Company A,” which a confidential source identified as an FTB front company
that was directed by FTB to wire money to Velmur. See Compl. ¶ 61(c); Whitley Decl. ¶ 12(c).
Similarly, sometime in 2017, Velmur received “more than $500,000” from “Company B,” which
the same confidential source identified as another FTB front company that was directed by FTB
to wire money to Velmur. See Compl. ¶ 61(d); Whitley Decl. ¶ 12(d). Again, the government’s
allegations with respect to these transactions are sufficient to show that Velmur knowingly
transacted across United States borders on behalf of SDNs without obtaining OFAC licenses, in
violation of the IEEPA and 18 U.S.C. § 1956(a)(2)(A). Again, Velmur is subject to civil money
penalties up to the total amount of these illicit transactions. See 18 U.S.C. § 1956(b)(1)(A).
The government alleges that in total, Velmur “was a counterparty to [thirty-five] illicit
wire transfers in U.S. dollars from known North Korean financial facilitators, totaling
$14,838,187.50, which funds were routed through U.S. correspondent banking accounts.”
Whitley Decl. ¶ 12. Adding those funds to the $6,853,000 wired by Velmur to IPC, see Whitley
Decl. ¶ 13, the government seeks civil money penalties of $21,691,187.30, see id. ¶ 20. Aside
17 V. CONCLUSION
For the foregoing reasons, the Court GRANTS the government’s Motion for Default
Judgment (ECF No. 28) as it relates to forfeiture and GRANTS IN PART the Motion for
Default Judgments as it relates to civil money penalties. The Defendant Funds, $4,999,925, are
forfeited to the United States, and judgment is entered in favor of the United States and against
Velmur in the amount of $13,022,905. An order consistent with this Memorandum Opinion is
separately and contemporaneously issued.
Dated: March 22, 2019 RUDOLPH CONTRERAS United States District Judge