United States v. Klimenka

1

UNITED STATES OF AMERICA, Plaintiff, v. ALIAKSANDR KLIMENKA, Defendant.

No. 22-cr-00256-SI-1

United States District Court, N.D. California

November 19, 2024

ORDER DENYING MOTION TO DISMISS AND GRANTING MOTION FOR BILL OF PARTICULARS RE: DKT. NO. 63

SUSAN ILLSTON UNITED STATES DISTRICT JUDGE

On November 15, 2024, the Court held a hearing on defendant's motion to dismiss the indictment for lack of notice and lack of venue. For the reasons set forth below the Court DENIES the motion to dismiss but GRANTS the motion in the alternative for a bill of particulars.

BACKGROUND

On July 12, 2022, defendant Aliaksandr Klimenka was indicted on one count of operating, and aiding and abetting the operation of an unlicensed money services business, in violation of 18 U.S.C. §§ 1960 and 2 (“Count One”); and one count of conspiracy to commit money laundering, in violation of 18 U.S.C. § 1956(h) (“Count Two”). The indictment alleges that Klimenka, a citizen of the Republic of Belarus, “controlled” SOFT-FX a technology services company; and “controlled” FX OPEN, a financial company. Dkt. No. 1 ¶¶ 1-3.

The indictment further alleges that “[f]rom in or around 2011 to in or around July 2017, BTC-e was a digital currency exchange controlled by Alexander Vinnik, ALIAKSANR [sic] KLIMENKA, and others.”^[1] Id. ¶ 4. “[O]ne of the world's largest digital currency exchanges[,]” BTC-e is alleged to have “processed several billion dollars' worth of transactions and served over one million users worldwide, including numerous customers in the United States and customers in the Northern District of California.” Id. ¶ 5. The indictment alleges that “BTC-e was one of the primary ways by which cyber criminals around the world transferred, laundered, and stored the criminal proceeds of their illegal activities.” Id. ¶ 6. “Unlike legitimate payment processors or digital currency exchanges, BTC-e did not require its users to validate their identity information by providing official identification documents[,]” making it easy for users to open accounts anonymously. Id. ¶¶ 8-9. Despite doing substantial business in the United States and in contravention of federal law, BTC-e did not register as a money services business with the Treasury Department's Financial Crimes Enforcement Network and had no anti-money laundering and/or “Know-Your-Customer” processes and policies in place. Id. ¶ 11. According to the indictment, BTC-e maintained its servers in the United States. Id. ¶ 13. The servers were leased to and maintained by SOFT FX and Klimenka. Id.

DISCUSSION

Klimenka moves to dismiss the indictment for failure to provide notice of the charges against him or, in the alternative, for a bill of particulars. Dkt. No. 63 (“Mot.”). Klimenka also moves to dismiss both counts for lack of venue in this district and to dismiss Count Two for lack of jurisdiction in the United States.

I. Lack of Notice

A. Legal Standard

Federal Rule of Criminal Procedure 7(c) provides, in relevant part:

The indictment or information must be a plain, concise, and definite written statement of the essential facts constituting the offense charged and must be signed by an attorney for the government. It need not contain a formal introduction or conclusion. A count may incorporate by reference an allegation made in another count. A count may allege that the means by which the defendant committed the offense are unknown or that the defendant committed it by one or more specified means. For each count, the indictment or information must give the official or customary citation of the statute, rule, regulation, or other provision of law that the defendant is alleged to have violated....

Fed. R. Crim. P. 7(c)(1).

In the Ninth Circuit, an indictment is usually sufficient if it sets forth the elements of the offense charged. United States v. Fernandez, 388 F.3d 1199, 1217-18 (9th Cir. 2004) (citations omitted); see also United States v. Woodruff, 50 F.3d 673, 676 (9th Cir. 1995) (“In the Ninth Circuit the use of a ‘bare bones' information-that is one employing the statutory language alone-is quite common and entirely permissible so long as the statute sets forth fully, directly and clearly all essential elements of the crime to be punished.”) (alteration, citation, and internal quotation marks omitted). In considering a pre-trial motion to dismiss an indictment, the Court may not look beyond “the four corners of the indictment.” United States v. Boren, 278 F.3d 911, 914 (9th Cir. 2002). “[T]he court must accept the truth of the allegations in the indictment in analyzing whether a cognizable offense has been charged.” Id. “[A] bill of particulars cannot save an invalid indictment.” United States v. Cecil, 608 F.2d 1294, 1296 (9th Cir. 1979) (per curiam) (citations omitted).

An indictment is sufficient to withstand a defendant's motion to dismiss “if it contains the elements of the charged offense in sufficient detail (1) to enable the defendant to prepare his defense; (2) to ensure him that he is being prosecuted on the basis of the facts presented to the grand jury; (3) to enable him to plead double jeopardy; and (4) to inform the court of the alleged facts so that it can determine the sufficiency of the charge.” United States v. Rosi, 27 F.3d 409, 414 (9th Cir. 1994) (citation omitted).

B. Analysis

Klimenka contends that the indictment is unconstitutionally vague. He argues the indictment must identify the alleged “control” of BTC-e and must specify the ways in which Klimenka is alleged to have “controlled” BTC-e. He seeks dismissal of Count Two for the same reasons.

As to Count One, Klimenka concedes that the indictment “recites the bare bones language of the statute,” but he contends that is not enough for this crime. Mot. at 11. He points to cases in which courts have found that greater factual specificity beyond a recitation of the statutory language was required in order to provide adequate notice.

The Court finds Klimenka's cases distinguishable. In Russell v. United States, 369 U.S. 749 (1962), the Supreme Court reversed the convictions of defendants charged with refusing to answer questions when summoned before a congressional subcommittee, in violation of 2 U.S.C. § 192, where the indictments failed to identify the subject matter under investigation at the time of the subcommittee's interrogation. In Cecil, the Ninth Circuit reversed convictions in a marijuana conspiracy case, where the “rather barren” indictment tracked the statutory language but lacked a statement of facts, made only two specific factual allegations concerning the conspiracies, and “fail[ed] to place the conspiracies within any time frame.” 608 F.2d at 1296-97. In United States v. Curtis, 506 F.2d 985, 992 (10th Cir. 1974), the Tenth Circuit found an indictment reciting the mail fraud statute, without more, was unconstitutionally vague. The indictment alleged the defendant ran a fraudulent dating service but failed to give “any fair indication of the nature or character of the scheme or artifice relied upon, or the false pretenses, misrepresentations or promises forming a part of it.” Similarly, in United States v. Steffen, 687 F.3d 1104 (8th Cir. 2012), the Eighth Circuit affirmed the dismissal of an indictment charging bank fraud, mail fraud, and wire fraud. As in Curtis, the Steffen court found that although “[a]n indictment is normally sufficient if its language tracks the statutory language[,] . . . where an indictment alleges a scheme to defraud under the bank, mail, or wire fraud statutes, it must specify facts . . . with such reasonable particularity . . . as will apprise [the defendant], with reasonable certainty, of the nature of the accusation ....” Id. at 1113 (internal quotation marks and citations omitted). This is so because “the term ‘scheme to defraud' . . . is not capable of precise definition.” Id. (citation omitted). In his reply brief, defendant relies heavily on Judge Davila's ruling in a case charging Theranos executives with wire fraud and conspiracy to commit wire fraud. See Dkt. No. 66 (“Reply”) at 4-5 (citing United States v. Holmes, No. 18-cr-00258-EJD, 2020 WL 666563 (N.D. Cal. Feb. 11, 2020)). But in that case, after analyzing many of the same cases Klimenka cites here, Judge Davila denied the defendants' request to dismiss the superseding indictment for lack of notice. See Holmes, 2020 WL 666563, at *5-7.

Notably, none of Klimenka's cases involved the statute at issue here. Most of the cases on which he relies are those involving fraud charges, where courts found the indictment required more detail regarding the fraud scheme in order to provide adequate notice to the defendant and to ensure the defendant was prosecuted on the basis of the same conduct on which the grand jury indicted.

Here Klimenka is charged in Count One with a violation of 18 U.S.C. § 1960. That statute makes it a crime to “knowingly conduct[], control[], manage[], supervise[], direct[], or own[] all or part of an unlicensed money transmitting business[.]” 18 U.S.C. § 1960(a). The indictment alleges, in relevant part, that “[f]rom in or around 2011 to in or around July 2017, BTC-e was a digital currency exchange controlled by Alexander Vinnik, ALIAKSANR [sic] KLIMENKA, and others.” Dkt. No. 1 ¶ 4. The indictment describes BTC-e's operations and how criminals used BTC-e to launder criminal proceeds and transfer funds. Id. ¶¶ 5-21. The indictment also alleges that “SOFT-FX was a technology services company controlled by ALIAKSANDR KLIMENKA[,]” that BTC-e maintained its servers in the United States, that the “servers were one of the primary ways in which BTC-e and its operators effectuated their scheme[,]” and that the “servers were leased to and maintained by SOFT FX and ALIAKSANDR...