United States v. $601,426.19 of Funds Associated With Dynapex Energy

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UNITED STATES OF AMERICA, Plaintiff, v. $601,426.19 OF FUNDS ASSOCIATED WITH DYNAPEX ENERGY LIMITED, $4,866,527.84 OF FUNDS ASSOCIATED WITH DYNAPEX ENERGY LIMITED, $160,810.94 ASSOCIATED WITH BINRIN LIMITED, $1,078,587.67 ASSOCIATED WITH SIBSHUR LIMITED, $999,980.00 ASSOCIATED WITH SIBSHUR LIMITED, $2,599,979.00 ASSOCIATED WITH DINRIN LIMITED $1,579,274.58 OF FUNDS ASSOCIATED WITH PETROCHEM SOUTH EAST LIMITED, $110,232.63 OF FUNDS ASSOCIATED WITH XINGHAI INTERNATIONAL SHIP MANAGEMENT LIMITED, Defendants.

No. 24-cv-542 (JMC)

United States District Court, District of Columbia

November 21, 2024

MEMORANDUM OPINION

JIA M COBB UNITED STATES DISTRICT JUDGE

The United States brought this forfeiture action in rem against eight properties: (1) $601,426.19 of funds associated with Dynapex Energy Limited (“Defendant Funds 1”); (2) $4,866,527.84 of funds associated with Dynapex Energy Limited (“Defendant Funds 2”); (3) $160,810.94 of funds associated with Binrin Limited (“Defendant Funds 3”); (4) $1,078,587.67 of funds associated with Sibshur Limited (“Defendant Funds 4”); (5) $999,980.00 of funds associated with Sibshur Limited (“Defendant Funds 5”); (6) $2,599,979.00 of funds associated with Dinrin Limited (“Defendant Funds 6”); (7) $1,579,274.58 of funds associated with Petrochem South East Limited (“Defendant Funds 7”); and (8) $110,232.63 of funds associated with Xinghai International Ship Management Limited (“Defendant Funds 8”) (collectively “Defendant Funds”). ECF 1 ¶ 1.^[1]

The Government argues that the Defendant Funds are subject to seizure and forfeiture under 18 U.S.C. § 981(a)(1)(G)(i) as “foreign or domestic assets” of designated foreign terrorist organizations that have “engaged in planning and perpetrating” federal crimes of terrorism “against the United States, citizens or residents of the United States, or their property,” and as “assets, foreign or domestic, affording any person a source of influence over” those foreign terrorist organizations. ECF 6-1 at 11 (quoting 18 U.S.C. § 981(a)(1)(G)(i)).^[2] After receiving notice, potential claimants failed to appear or defend this action. The Clerk of Court entered default, and the Government now moves for an entry of default judgment. The Court finds that the Government has demonstrated its entitlement to such judgment and GRANTS the motion.

I. FACTUAL BACKGROUND^[3]

This case concerns the Islamic Revolutionary Guard (IRGC) and the complicated network of state-owned entities and front companies it uses to generate revenue and fund terrorism in Iran and abroad. As alleged, the IRGC is a branch of the Iranian military with the purpose of defending Iran's political system. ECF 1 ¶ 10. According to the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC), the IRGC is “Iran's most powerful economic actor, dominating many sectors of the economy, including energy, construction, and banking.” Id. ¶ 11. The IRGC uses the proceeds from the distribution of Iranian oil products to fund its terror activities, including the proliferation of weapons of mass destruction, a variety of human rights abuses, and support for terrorism, at home and abroad. Id. ¶ 14. Indeed, Iran's petrochemical and petroleum sectors are “primary sources of funding” for the Iranian regime's global terrorist activities, and the IRGC-Qods Force (IRGC-QF) is the most prominent driver of those activities. Id. ¶¶ 14-15. The IRGC has been subject to U.S. sanctions for many years, id. ¶ 12 and has been designated as a Foreign Terrorist Organization under Section 219 of the Immigration and Nationality Act since April 15, 2019. Id. ¶ 15. This designation extends to the IRGC-QF. Id.

The IRGC has a history of attempting to circumvent U.S. sanctions by maintaining a complex web of front companies to provide ostensible legitimacy to illicit Iranian oil transportation and sales. See id. ¶ 12. This complicated enterprise is critical to the IRGC as the revenues from these holding groups and companies in the petrochemical sector provide the IRGC with “financial lifelines.” Id. On September 24, 2012, the Department of the Treasury reported to Congress that the National Iranian Oil Company (NIOC) was an “agent or affiliate” of the IRGC, and part of the IRGC's broader financial enterprise. Id. ¶ 17. NIOC is a subsidiary of the Iranian Ministry of Oil. Id. ¶ 16. It describes itself as one of the largest oil firms in the world, and directs many of the activities of Iran's oil industry, including oil and gas exports. Id. OFAC has stated that NIOC's oil business “helps to finance [IRGC-QF] and its terrorist proxies.” Id.

Triliance Petrochemical Co. Ltd. (“Triliance”) is a Hong Kong-based broker with branches in Iran, the United Arab Emirates, China, and Germany that OFAC describes as “instrumental in brokering the sale of Iranian petrochemicals abroad.” Id. ¶ 18. On January 23, 2020, OFAC designated Triliance for transferring funds on behalf of NIOC and placed Triliance on the List of Specially Designated Nationals and Blocked Persons. Id. ¶ 19. In its designation, OFAC found that Triliance was one of four companies collectively responsible for transferring hundreds of millions of dollars' worth of petroleum product exports on behalf of NIOC, which helped to directly finance the IRGC-QF “and its terrorist proxies.” Id. On October 26, 2020, OFAC similarly designated NIOC pursuant to Executive Order 13,224, a counterterrorism authority, “for having materially assisted, sponsored, or provided financial, material, or technological support for, or goods or services in support of, the IRGC-QF.” Id. ¶ 17.

The United States alleges in its verified complaint that, after it was designated, Triliance began using a network of front companies, including Petrochem South East Limited (“Petrochem”), Dynapex Energy Limited (“Dynapex”), Binrin Limited (“Binrin”), Sibshur Limited (“Sibshur”), Dinrin Limited (“Dinrin”), Donghai International Ship Management Limited (“Donghai”), and Xinghai International Ship Management Limited (“Xinghai”) (collectively “potential claimant companies”) in a scheme to facilitate the continued illegal purchase and transportation of Iranian petrochemical and petroleum exports, afford a source of influence over terrorist entities in Iran, and evade U.S. sanctions on Iran. Id. ¶¶ 1, 27, 30-32. According to the Government, “[v]essels transporting the [Defendant Funds] utilized surreptitious means to hide the [Defendant Funds'] Iranian origin and to transfer the [Defendant Funds] onto other vessels moving the cargo into commerce by, and for the benefit of,” the IRGC, NIOC, and other OFAC-designated entities. ECF 6-1 at 2. The Government now seeks forfeiture of Defendant Funds because they were exchanged in furtherance of this scheme. Id. at 3. To support its forfeiture claim, the Government posits the following factual allegations against each Defendant Fund.

Defendant Funds 1 and 2

The Government's verified complaint establishes that Defendant Funds 1 and 2 were transferred through a U.S. correspondent bank to potential claimant Dynapex on or around August 27, 2020. ECF 6-1 at 14; ECF 1 ¶¶ 33-34. Shipping records from around this time reflect that two of Dynapex's oil tankers traveled within Iran's exclusive economic zone with the ships' Automatic Identification System transceiver turned off, to avoid detection. ECF 6-1 at 15; ECF 1 ¶¶ 36-38. Subsequently, OFAC designated Dynapex on or about September 13, 2020, after OFAC learned that Triliance was using Dynapex to facilitate the shipment and resale of Iranian petrochemical products around the time of the fund transfers. ECF 6-1 at 14-15; ECF 1 ¶¶ 34-35. The complaint also establishes that Dynapex has a history of providing material assistance to Triliance in the shipment and resale of Iranian petroleum products. ECF 1 ¶ 38.

Defendant Funds 3

On or about August 24, 2020, potential claimant Binrin sent Defendant Funds 3 to Canadian Procurement Partner Pte. Ltd. through a U.S. correspondent bank. Id. ¶ 40. Subsequently, on October 29, 2020, OFAC designated Binrin as a front company used by Iranian entities connected with Triliance to facilitate the illicit sale and transport of Iranian oil in violation of U.S. sanctions. Id. ¶ 24. In making that designation, OFAC found that Binrin was associated with these other front entities at the time of the funds transfer. ECF 6-1 at 15-16; ECF 1 ¶ 42.

Defendant Funds 4 and 5

On August 27, 2020, potential claimant Sibshur received Defendant Funds 4 from Quantum Materials Co., Ltd. through a U.S correspondent bank. ECF 6-1 at 16; ECF 1 ¶ 45. On August 31, 2020, Sibshur sent Defendant Funds 5 to Plus Power Co. Ltd. through a U.S. correspondent bank. ECF 6-1 at 16; ECF 1 ¶ 46. According to OFAC, Triliance has used Sibshur, among other companies, “to help settle, process, and transfer millions of dollars in proceeds from petrochemical product sales.” ECF 1 ¶ 25. On October 29, 2020, OFAC designated Sibshur for its ongoing material support of Triliance. Id.

Defendant Funds 6

On October 1, 2020, potential claimant Dinrin sent Defendant Funds 6 to itself via a U.S. correspondent bank. Id. ¶ 50. The complaint alleges that Dinrin is a company that has been used by the Iranian company Zagros to obscure Zagros' involvement in petrochemical sales with Triliance. Id. ¶ 26. To this effect, on September 3, 2020 (prior to Dinrin wiring money to itself), OFAC designated Dinrin for its involvement with Zagros and, by extension, Triliance. Id.; ECF 61 at 16-17.

Defendant Funds 7

On March 27, 2020, potential claimant Xinghai sent Defendant Funds 7 to Petrochem through a U.S. correspondent bank. ECF 1 ¶ 54. The Government claims that Xinghai is a front company for Donghai, a ship management company responsible for...