United States v. Fifty-Three Virtual Currency Accounts

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UNITED STATES OF AMERICA, v. FIFTY-THREE VIRTUAL CURRENCY ACCOUNTS, et al., Defendants.

Civil Action No. 20-2227 (RC)

United States District Court, District of Columbia

November 19, 2024

MEMORANDUM OPINION

RUDOLPH CONTRERAS UNITED STATES DISTRICT JUDGE

Re Document No.: 54, 62, 68

Granting the Weinstock Claimants' Motion for Leave to File a Surreply;

Granting the Government'S Motion to Amend; and Denying as Moot Claimant

Karatas'S Motion to Stay Discovery

I. INTRODUCTION

The United States of America (“United States” or “Government”) filed suit for forfeiture in rem against the Defendant Properties^[1] - fifty-three virtual accounts, one hundred and twentyseven virtual currency properties, five accounts held at a bank, and three internet domains. After the Internal Revenue Service - Criminal Investigation's Cyber Crimes Unit (“IRS-CI”), Homeland Security Investigations (“HIS”), and Federal Bureau of Investigation (“FBI”) (collectively, the “Government Agencies”) investigated online fundraising activities conducted by the Hamas-Islamic Republic Movement (“Hamas”)'s military wing, the al-Qassam Brigades, the United States alleges that Defendants laundered monetary instruments, operated unlicensed money transmitting businesses, and provided material support or resources to Hamas. Compl. ¶ 2, ECF No. 1. The Complaint includes two claims of civil forfeiture arising from those allegations. Id. ¶¶ 1, 38-39.

After the United States filed suit against Defendant Properties, Claimant Husamettin Karatas (“Claimant Karatas”) filed a verified claim and answer against one defendant property, Defendant Property 180, which he claims to own. See Claimant Karatas's Claim, ECF No. 5; Claimant Karatas's Answer, ECF No. 9. Additionally, Claimants Sharon Weinstock, Moshe Weinstock, Geula Weinstock, Aryeh Weinstock, and Chain Mishael Weinstock, and the Estates of Yitzchak Weinstock, Dov Weinstock, Simon Dolgin, and Shirley Dolgin (collectively, the “Weinstock Claimants”) filed a verified claim, answer, a counterclaim against the United States, and a crossclaim against Claimant Karatas, alleging that all Defendant Properties should be turned over to them to satisfy their judgment against Hamas. The Weinstock Claimants are the family members of Yitzchak Weinstock (both alive family members and representatives of other family members' estates), a United States citizen who was murdered by Hamas in a terrorist shooting near Jerusalem in December 1993. The Weinstock Claimants hold a final judgment against Hamas in the amount of $78,873,000, which remains wholly unsatisfied. Weinstock v. Islamic Republic of Iran, et al., 2019 WL 1993778 (S.D. Fla. May 6, 2019).

Although there are currently six motions pending before the Court, this opinion will only consider the motions that are fully briefed: (1) the Weinstock Claimants' motion to file a surreply; (2) the Government's motion to amend the Complaint; and (3) Claimant Karatas's motion to stay discovery. For the reasons set forth below, the Court finds that the Weinstock Claimants' motion for leave to file a surreply is granted, the Government's motion to amend/correct the Complaint is granted, and Claimant Karatas's motion to stay discovery is denied as moot.

II. FACTUAL AND PROCEDURAL BACKGROUND

In December 1993, Yitzchak Weinstock, a United States citizen, was murdered by the military wing of Hamas, the Al-Qassam Brigades, in a terrorist shooting near Jerusalem. Weinstock Claimants' Answer, Cross-cl. Against Claimant Karatas, and Countercl. Against Gov't (“Weinstock Claimants' Answer”) ¶ 130, ECF No. 53. On May 17, 2019, and on behalf of Yitzchak Weinstock, the estates of other Weinstock family members, and the remaining Weinstock family members, the Weinstock Claimants obtained a final judgment against Hamas for $78,873,000. Id. ¶¶ 130-131; Weinstock v. Islamic Republic of Iran, et al., 2019 WL 1993778 (S.D. Fla. May 6, 2019) (“2019 Judgment”). Despite receiving the necessary notices and proper service, Hamas has yet to “enter[] an appearance in or defend[] against the civil action against it,” and the judgment remains wholly unfulfilled. Weinstock Claimants' Verified Claim (“Weinstock Claimants' Claim”) at 2, ECF No. 11.

On August 13, 2020, the Government filed the instant suit for forfeiture in rem against Defendant Properties, which are the following: “fifty-three virtual currency accounts (Defendant Properties 1, 2, 3, 131 through 180), one hundred and twenty-seven virtual currency properties (Defendant Properties 4 through 130), five accounts held at Financial Institution 1 (Defendant Properties 181 through 185), the alqassam.net domain (Defendant Property 186), the alqassam.ps domain (Defendant Property 187), and the qassam.ps domain (Defendant Property 188).” Compl. at 1-2. After the Government Agencies investigated the online fundraising activities conducted by al-Qassam Brigades, the United States alleges that “[t]he owners of the Defendant Properties, as well as the users and administrators of the al-Qassam Brigades' [w]ebsites, knowingly and willfully conspired with others, and acted individually, to commit the following violations: laundering monetary instruments, in violation of 18 U.S.C § 1956(a)(2), operating unlicensed money transmitting businesses, in violation of 18 U.S.C. § 1960, and providing material support or resources to a designated foreign terrorist organization, namely Hamas, in violation of 18 U.S.C § 2339B.” Id. ¶ 2.

On October 7, 2020, Claimant Karatas filed a verified claim in this action, alleging that he is the owner of Defendant Property 180, one of the virtual currency accounts included as a defendant in this suit, and he “did not and do[es] not have knowledge of any unlawful conduct giving rise to the forfeiture.” Claimant Karatas's Claim. On December 28, 2020, Claimant Karatas filed an answer, alleging that he did not provide any materials to support Hamas, he did not use his virtual currency account for unlawful purposes, and he is an “innocent owner” of Defendant Property 180. Claimant Karatas's Answer ¶¶ 1-3, 119. On February 16, 2021, the Weinstock Claimants filed a verified claim in this action, alleging to be “left to attempt to chase down the assets of Hamas to recover what they can” to satisfy their 2019 Judgment. Weinstock Claimants' Claim at 2. In other words, they cite to their 2019 Judgment as the basis for their interest in this action, and specifically, the Defendant Properties. Id.; see 2019 Judgment.

After the claimants filed their verified claims, the Government filed a motion to stay this action, which the Court approved, so that the suit would not have an impact on the ongoing criminal investigation performed by the Government Agencies. Order, May 16, 2023, ECF No. 43. On December 6, 2023, the Court adopted a new schedule to govern proceedings, which included deadlines for the Government, the Weinstock Claimants, and Claimant Karatas to file any answers, counterclaims, crossclaims, and dispositive motions. Min. Order, Dec. 6, 2023. Then, on May 2, 2024, the Court ordered all briefing deadlines on all pending motions to be stayed pending further order of the Court, and it outlined a briefing schedule for the Government to file its motion for leave to amend the Complaint. Min. Order, May 2, 2024.

The motions that are pending before this Court are the following: (1) Claimant Karatas's motion to stay discovery, see Claimant Karatas's Mot. to Stay Disc. (“Claimant Karatas's Mot.”), ECF No. 54; (2) Claimant Karatas's motion to strike the Weinstock Claimants' answer and crossclaim against him, see Claimant Karatas's Mot. to Strike Weinstock Claimants' Answer and Cross-cl., ECF No. 55; (3) the Government's motion to strike the Weinstock Claimants' claim and answer and dismiss its counterclaim against the United States, see Gov't's Mot. to Strike Weinstock Claimants' Claim and Answer, and Dismiss Countercl., ECF No. 56; (4) the Weinstock Claimants' motion for summary judgment, see Weinstock Claimants' Mot. for Summ. J., ECF No. 59; (5) the Government's motion for leave to amend the complaint, see Gov't's Mot. for Leave to Amend (“Gov't's Mot.”), ECF No. 62; and (6) the Weinstock Claimants' motion to file a surreply, see Weinstock Claimants' Mot. to File Surreply (“Weinstock Claimants' Mot.”), ECF No. 68. However, and although many of the issues overlap, the Court will only address the motions that are fully briefed: (1) the Weinstock Claimants' motion to file a surreply, see Weinstock Claimants' Mot.; (2) the Government's motion for leave to amend the complaint, see Gov't's Mot.; and (3) Claimant Karatas's motion to stay discovery, see Claimant Karatas's Mot.. The Court will first consider the Weinstock Claimants' motion to file a surreply, then resolve the Government's motion to amend the Complaint, and finally address Claimant Karatas's motion to stay discovery. Within its analysis, the Court will assess the Weinstock Claimants' standing in this action, which will also be relevant when resolving the remaining pending motions in this action once they are ripe for review.

III. DISCUSSION

A. Weinstock Claimants' Motion to File a Surreply

After the Government filed its motion for leave to amend the complaint on May 24, 2024, see Gov't's Mot and the Weinstock Claimants filed a memorandum in opposition on June 24, 2024, see Weinstock Claimants' Partial Opp'n to Gov't's Mot. (“Weinstock Claimants' Opp'n”), ECF No. 64), the Government filed a reply to the opposition on July 8, 2024, see Gov't's Reply in Supp. of Mot. for Leave to Amend (“Gov't's Reply”), ECF No. 65. After the Government's reply, the Weinstock Claimants filed a motion to file a surreply on July 30, 2024, see Weinstock Claimants' Mot., where they allege that...