United States v. Battle Born Investments Company, LLC

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS AUG 18 2023
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, No. 22-16348
Plaintiff-Appellee, D.C. No. 3:20-cv-07811-RS
v.
MEMORANDUM*
BATTLE BORN INVESTMENTS
COMPANY, LLC; et al.,
Claimants-Appellants,
v.
APPROXIMATELY 69,370 BITCOIN
(BTC), BITCOIN GOLD (BTG) BITCOIN
SV (BSV) AND BITCOIN CASH (BCH),
Defendant.
Appeal from the United States District Court
for the Northern District of California
Richard Seeborg, Chief District Judge, Presiding
Argued and Submitted June 8, 2023
San Francisco, California
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
Before: MILLER and KOH, Circuit Judges, and LYNN,** District Judge.
In this civil forfeiture case, Claimants-Appellants First 100, LLC, 1st One
Hundred Holdings, LLC, and Battle Born Investments Company, LLC
(collectively, “the Battle Born parties”) appeal the district court’s order granting
the government’s motion to strike their claims for lack of Article III standing. We
have jurisdiction to review the Battle Born parties’ appeal under 28 U.S.C. § 1291.
The parties are familiar with the facts recounted in the government’s
Amended Complaint for Forfeiture regarding the seizure of 69,370.22491543
Bitcoin (BTC), Bitcoin Gold (BTG), Bitcoin SV (BSV), and Bitcoin Cash (BCH)
(“Defendant Property”), seized from Bitcoin address
1HQ3Go3ggs8pFnXuHVHRytPCq5fGG8Hbhx (the “1HQ3” wallet) after it was
stolen from the online Silk Road marketplace by “Individual X,” so we do not
recite them here. First 100, LLC and 1st One Hundred Holdings, LLC (together,
the “First 100 claimants”) jointly filed a verified claim, and Battle Born
Investments filed a separate verified claim, of ownership of all of the Defendant
Property.
Both claims arise out of a Chapter 7 bankruptcy action filed in the United
**
The Honorable Barbara M. G. Lynn, United States District Judge for
the Northern District of Texas, sitting by designation.
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States Bankruptcy Court, District of Nevada, Case No. 17-14166-BTB
(“Bankruptcy Action”). Both claims assert that the Bankruptcy Action was filed
by an individual who, upon information and belief, is, or is associated with,
Individual X. The First 100 claim states that, in March 2017, the First 100
claimants jointly and severally obtained a $2,211,039,718.46 judgment against the
bankruptcy debtor. Accordingly, the First 100 claimants assert they are innocent
owners of all of the Defendant Property pursuant to their status as judgment
creditors.
The verified claim filed by Battle Born Investments states that, in March
2018, Battle Born Investments entered into an agreement to purchase from the
Chapter 7 trustee all assets of the bankruptcy estate, and that the bitcoin recovered
from the 1HQ3 wallet “belonged to what we assert to be Individual X, or a party
associated with Individual X.” Accordingly, Battle Born Investments asserts it is
an innocent owner of all of the Defendant Property pursuant to its status as the
purchaser of the bankruptcy estate.
Neither of the claims filed by the Battle Born parties identify the debtor that
the parties assert to be or associated with Individual X. However, it is undisputed
that when the claims were filed, the Battle Born parties knew the debtor in the
Bankruptcy Action was an individual named Raymond Ngan.
The government moved to strike the Battle Born parties’ claims. In granting
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the motion, the district court explained that the Battle Born parties had made only
conclusory allegations that the 1HQ3 wallet belongs to Ngan’s bankruptcy estate,
and therefore failed to carry their burden to show some evidence in support of
Article III standing. The Battle Born parties timely appealed. We affirm.
In a civil forfeiture case, this Court reviews de novo the district court’s
determination of whether a claimant has standing. United States v. 17 Coon Creek
Rd., 787 F.3d 968, 972 (9th Cir. 2015). We review de novo a district court’s
decision to grant summary judgment and may affirm on any ground supported by
the record. Chemehuevi Indian Tribe v. Newsom, 919 F.3d 1148, 1150–51 (9th
Cir. 2019).
The district court correctly struck the Battle Born parties’ claims for lack of
standing. Claimants in civil forfeiture actions carry the burden to establish Article
III standing by showing that they have “a colorable interest in the property, for
example, by showing actual possession, control, title, or financial stake.” United
States v. 475 Martin Lane, 545 F.3d 1134, 1140 (9th Cir. 2008) (quoting United
States v. 5208 Los Franciscos Way, 385 F.3d 1187, 1191 (9th Cir. 2004)).
Although a claimant may establish standing at the pleading stage by making an
unequivocal assertion of ownership, a claimant’s “bare assertion of an ownership
or possessory interest, in the absence of some other evidence, is not enough to
survive a motion for summary judgment.” United States v. $133,420.00 in U.S.
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Currency, 672 F.3d 629, 638 (9th Cir. 2012). Instead, a claimant asserting an
ownership interest in the defendant property “must also present ‘some evidence of
ownership’ beyond the mere assertion” to establish standing, id. at 639 (quoting
United States v. U.S. Currency, $81,000.00, 189 F.3d 28, 35 (1st Cir. 1999)), and
“a conclusory, self-serving affidavit, lacking detailed facts and any supporting
evidence, is insufficient to create a genuine issue of material fact,” id. at 638
(quoting FTC v. Publ’g Clearing House, Inc., 104 F.3d 1168, 1171 (9th Cir.
1997)).
As a preliminary matter, the Battle Born parties argue that the district court
improperly struck their claims on the pleadings. Neither the district court’s
opinion nor the government’s motion specified whether the Battle Born parties’
claims were or should be stricken on the pleadings or at summary judgment.
However, the First 100 claimants made an unequivocal assertion of ownership in
their verified claim by stating they are “entitled to unencumbered right, title and
ownership” of the Defendant Property. In its verified claim, Battle Born
Investments made an unequivocal assertion of ownership by stating that the
Defendant Property “has been since May 14, 2018 and is still currently owned by
Claimant Battle Born.” Those assertions are sufficient at the pleading stage.
Accordingly, the issue on appeal is whether the district court properly struck the
Battle Born parties’ claims for lack of standing at summary judgment.
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Reviewing the record de novo, we conclude that the Battle Born parties
failed to carry their burden to establish some evidence, beyond a mere assertion, of
ownership of the Defendant Property, from which a reasonable and fair-minded
jury could find that they have standing. See $133,420.00 in U.S. Currency, 672
F.3d at 638–40. In addition to their verified claims, the Battle Born parties rely on
five declarations to establish evidence of ownership, i.e., that Ngan owned the
bitcoin in 1HQ3 prior to seizure so that it is now part of Ngan’s bankruptcy estate.
At best, their verified claims and declarations establish that the Battle Born parties
have ownership rights to the bankruptcy estate of Ngan, who they believe is or is
associated with Individual X. The only evidence the Battle Born parties present
that could arguably tie Ngan to Individual X is a screenshot of the 1HQ3 wallet on
the publicly accessible blockchain.com, found in Ngan’s possession. They provide
nothing beyond speculation that Ngan had some association with Individual X, and
they offer nothing to suggest how Ngan would have come into ownership of the
bitcoin in 1HQ3. Given the lack of evidence in the record, even without
considering the government’s declaration, the district court correctly held that no
reasonable jury could find that the Battle Born parties have a colorable claim of
ownership as to the Defendant Property sufficient to confirm standing.
None of the Battle Born parties’ arguments warrant disturbing the decision
below. The district court did not err by denying the Battle Born parties’ request
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under Federal Rule of Civil Procedure 56(d) to defer ruling on the government’s
motion to strike until the Battle Born parties could take additional discovery.
Reviewing the district court’s implicit denial of the Rule 56(d) motion de novo, the
motion relies on the speculative premise that a screenshot of a publicly-available
website is indicative of ownership, and the Battle Born parties do not explain how
this discovery would produce evidence of their ownership of the Defendant
Property. Further, nothing in Supplemental Rule G(8) precludes the government
from moving to strike a claim prior to discovery. See Supp. R. G(8)(c)(i).
The district court did not err by requiring the Battle Born parties to connect
their ownership interest to that of Individual X. The Battle Born parties point to no
authority in this Circuit for their assertion that a court may not strike a claim on the
ground that the claimant’s account of ownership is irreconcilable with the
government’s theory of forfeiture. In addition, the Battle Born parties’ own
assertion of ownership, as set forth in their claims, is that Individual X is Ngan or
someone associated with Ngan, and their account of ownership is not
irreconcilable with the government’s theory that from at least 2012 until the
government’s seizure in 2020, Individual X stole bitcoin from Silk Road which
ultimately was transferred to 1HQ3.
AFFIRMED.
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