United States v. $429,900.00 of Blocked Funds Associated With Ryer International Trading, Ltd.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA, :
:
Plaintiff, : Civil Action No.: 20-2546 (RC)
:
v. : Re Document No.: 10
:
$429,900.00 OF BLOCKED FUNDS :
ASSOCIATED WITH RYER :
INTERNATIONAL TRADING, LTD., et al., :
:
Defendants. :
MEMORANDUM OPINION
GRANTING PLAINTIFF’S MOTION FOR ENTRY OF DEFAULT JUDGMENT
I. INTRODUCTION
This action arises out of an investigation by the Federal Bureau of Investigation. Plaintiff
United States of America (“the Government”) seeks the forfeiture of $429,900 associated with
Ryer International Trading, Ltd. (“Ryer”) (“Defendant Funds 1”), $501,771 associated with a
U.S. Customs and Immigration Service EB-5 Immigrant Investment Program account held in the
name of Tang Xin (“Tang”) (“Defendant Funds 2”), and $24,209.85 associated with Tang and Li
Xichun (“Li”) (“Defendant Funds 3”) (collectively, “Defendant Funds”). The Government
argues that the Defendant Funds are subject to forfeiture because they (1) constitute (or are
derived from) proceeds traceable to violation of, or conspiracy to violate, the International
Emergency Economic Powers Act (“IEEPA”), and (2) are property involved in (or traceable to)
money laundering offenses. No claimant responded to the Government’s complaint, and the
Clerk of Court entered default on May 3, 2021. The Government now asks this Court to enter
default judgment against the Defendant Funds. For the reasons set forth below, the Court
concludes that the government’s factual allegations are sufficient to show that the Defendant
Funds constitute or were derived from proceeds of IEEPA violations. Thus, the Court grants the
Government’s motion for default judgment.
II. FACTUAL BACKGROUND
This case involves two companies that the Government alleges acted as intermediaries in
transmitting money from sanctioned North Korean banks to and through the United States
financial system in violation of U.S. sanctions. The Government alleges that this scheme ran
afoul of the IEEPA, 50 U.S.C. § 1701, and the federal money laundering statute and its
accompanying conspiracy offense, 18 U.S.C. § 1956(a)(2)(A) and § 1956(h). The Government
claims that, as such, the Defendant Funds are subject to forfeiture under 18 U.S.C.
§ 981(a)(1)(C) as property which constitutes or is derived from proceeds traceable to a violation
of the IEEPA (or conspiracy to violate IEEPA) and 18 U.S.C. § 981(a)(1)(A) as property
involved in a violation of the federal money laundering statute (or property traceable to such
property). See Compl. ¶¶ 61–62, 64–65.
According to the Government, North Korean financial facilitators, funded by sanctioned
North Korean banks—including the Foreign Trade Bank of the Democratic People’s Republic of
North Korea (“FTB”)—wired money to two affiliated front companies, Ryer and Rensy
International Trading Co., Ltd. (“Rensy”), which worked in tandem to transmit the funds to and
through the United States financial system. The Government also alleges that the relevant front
companies assisted ZTE Corporation (“ZTE”), a China-based telecommunications company, in
exporting controlled goods containing U.S.-origin components to North Korea, also in violation
of U.S. sanctions. Compl. ¶¶ 12–19. Because no claimant to the funds has come forward, the
Government asks this court to enter default judgment in its favor. See Pl.’s Mot. Def. J. (“Pl.’s
Mot”), ECF No. 10; Mem. Supp. Pl.’s Mot. Def. J. (“Pl.’s Mem.”), ECF No. 10-1.
2
A. Statutory and Regulatory Framework
The Government alleges that this scheme ran afoul of the IEEPA and the federal money
laundering statute. The Court finds that the Government has sufficiently pleaded its allegations
to connect the Defendant Funds to IEEPA violations.1 The Court summarizes the IEEPA below
and then describes the alleged scheme in more detail.
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” originating
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. § 1702(a)(1)(A).
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). Property “which constitutes or is derived from
proceeds traceable to” an IEEPA violation 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 and [regulations]
promulgated pursuant to the IEEPA is subject to forfeiture.” In re 650 Fifth Avenue & Related
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).
Exercising his IEEPA authority, President Clinton issued Executive Order 12,938, which
designates “Weapons of Mass Destruction” (“WMDs”) as an “unusual and extraordinary threat”
1
The Court, after finding for the Government on the IEEPA claim, does not go into the
money laundering issue because this alternative legal theory provides no additional remedy. For
the same reason, the Court does not address the Government’s conspiracy claims.
3
under the IEEPA. Exec. Order No. 12,938, 59 Fed. Reg. 58,099 (Nov. 14, 1994). A decade
later, President George W. Bush issued Executive Order 13,382 denying 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. 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). 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.
On March 16, 2016, President Obama signed Executive Order 13,722, which, among
other things, prohibits the exportation of goods, services, and technology to North Korea unless
done with the appropriate licensing from OFAC. Exec. Order No. 13,722, 81 Fed. Reg. 14,943(Mar. 15, 2016); see 31 C.F.R. § 510.206 (2018); id. § 510.202(c) (“[A] license or other
authorization issued by OFAC before, during, or after a transfer shall validate such transfer or
make it enforceable to the same extent that it would be valid or enforceable . . . .”); see also Pl.’s
Mem. at 15. In 2017, President Trump signed Executive Order 13,810, blocking “all funds that
are in the United States . . . that originate from, are destined for, or pass through a foreign bank
account that has been determined by the Secretary of the Treasury . . . to have been used to
transfer funds in which any North Korean person has an interest.” Exec. Order No. 13,810, 82
Fed. Reg. 44,705 (Sep. 20, 2017). The successive Presidents of the United States have renewed
4
the national emergency underlying these sanctions annually, most recently in June of 2021. See,
e.g., Notice, 86 Fed. Reg. 33,075 (June 21, 2021).
A violation of any of the above orders and regulations would constitute a violation of the
IEEPA under 50 U.S.C. § 1705(a), and, accordingly, any property or funds involved in or
derived from unlicensed transactions in the United States with SDNs would be subject to
forfeiture under 18 U.S.C. § 981(a)(1)(C).
B. Relevant Facts and Procedural History2
In March 2017, ZTE agreed to plead guilty for conspiring to violate the IEEPA. Compl.
¶ 12. Documents from ZTE’s legal proceedings “substantiate” that ZTE exported controlled
items to North Korea in exchange for payment in U.S. dollars made by various shell
corporations. Id. ¶ 13. Two of these shell companies included Ryer and Rensy. Id. ¶ 18.
Ryer is registered in Hong Kong with its primary place of business in Shanghai, and
Rensy was incorporated in Shenzhen and headquartered in Shanghai. Id. ¶¶ 11, 20, 27. The
Government alleges that both companies were used by sanctioned North Korean banks and
financial facilitators to transmit funds through the United States financial system in violation of
U.S. sanctions and without proper licensing from the OFAC. Id. ¶¶ 4, 24, 34, 36–46. The
Government also alleges that the companies assisted ZTE in effecting trade with North Korea in
violation of U.S. sanctions. Id. ¶¶ 17–18. Most of ZTE’s contracts with North Korea serviced
the Korea Posts and Telecommunications Company (“KPTC”), a state-owned
telecommunications company in North Korea. Id. ¶ 16.
The Government alleges that Tang and Li, a married couple, helped carry out the Ryer
and Rensy scheme. Tang served as Ryer’s legal representative and Li “described his duties [at
2
The facts described here are drawn from the Government’s allegations in its complaint.
5
Ryer] as ‘being in charge of the company’s overall operation and management.’” Id. ¶¶ 20–21.
Li was previously the North Korean Account Manager for ZTE and worked out of ZTE’s North
Korean office. Id. ¶¶ 22–23. Ryer was the sole source of income for both individuals after they
began work with the company in 2009. Id. ¶ 51.
According to the Government, designated North Korean financial facilitators, paid by
sanctioned North Korean banks, would funnel money to Ryer, which would then transit the
money through the United States and deliver payment in U.S. dollars. Id. ¶¶ 24, 34. In
particular, Li made at least two requests that the FTB transfer U.S. dollars to a designated entity,
each request made on Rensy letterhead. Id. ¶¶ 40, 47–48. The Government alleges that Ryer
received approximately $12,412,223.08 from various documented North Korean financial
facilitators, including Dandong Zhicheng Metallic Materials Co., Ltd., the Dandong Hongxiang
Industrial Development Co., Ltd. network, Mingzheng International Trading Limited, and
Mansundae Overseas Projects. Id. ¶¶ 36–46.
Specifically, between November 2010 and July 2015, the Government alleges that Ryer,
on behalf of the KPTC, wired a total of $7,759,888.12 to ZTE without OFAC licensing. Id. ¶ 24.
The Government alleges that the funds in question came from North Korean financial
facilitators, who were paid by sanctioned North Korean banks. Id. Li served as the responsible
signatory on contracts between Ryer and ZTE. Id. ¶ 25.
Rensy, the Government alleges, worked in tandem with Ryer to carry out its illicit
activities. See id. ¶ 32. Between April 2015 and May 2016, Ryer laundered approximately
$6,921,065.88 in U.S. dollars to Rensy, which was transmitted through the United States
financial system without proper OFAC licensing. Id. ¶ 34. North Korean financial facilitators,
paid by sanctioned North Korean banks, funded Ryer to make its payments to Rensy. Id.6
Around May 3, 2016, a $429,900 payment from Ryer to Rensy was blocked by a U.S. bank due
to the funds’ connection to North Korean sanctions violations. Id. ¶ 35. The Government seeks
forfeiture of this payment (Defendant Funds 1).
The Government also seeks forfeiture of $501,771 ($500,000 plus interest) in funds
associated with an EB-5 investment visa account opened by Tang and Li in Tang’s name
(Defendant Funds 2). Id. ¶ 49; see also Pl.’s Mem. at 1 (providing only instance of precise
$501,771 amount). Because Ryer was Tang and Li’s sole source of income at the time they
submitted the funds, the Government alleges that proceeds from Ryer were used to fund this
investment account. Id. ¶ 51; id. at 10 (“Tang Xin Used Proceeds from Ryer to Fund EB-5
Investment”).
Lastly, the Government seeks forfeiture of funds in “personal checking and savings
accounts with U.S. banks” and “a U.S. bank account on behalf of Ryer Investment LLC” opened
by Tang in 2013. Id. ¶¶ 52–53. The bank accounts in question received $2,414,600 from Ryer’s
overseas accounts, which the Government alleges were funded by North Korean financial
facilitators. Id. ¶ 54. The Government seeks forfeiture of the remaining balance of $24,209.85
from the accounts (Defendant Funds 3). Id. ¶¶ 54–55.
The Government filed a complaint for forfeiture in rem on September 11, 2020, seeking
forfeiture of the Defendant Funds. Compl. On September 14, 2020, the Clerk of Court entered a
Warrant for Arrest in Rem. Warrant for Arrest, ECF No. 4. The Government then, after
identifying all known potential claimants, published a public notice of forfeiture and sent direct
notices to all potential claimants, including Tang and Li. See Decl. Publication, ECF No. 6;
Decl. Supp. Default ¶ 6, ECF No. 7. The deadline to file a claim after the Government submitted
its notice passed and no party filed a claim. See Decl. Supp. Default ¶ 7. On May 3, 2021, the
7
Clerk of the Court entered default as to the Defendant Funds. See Clerk’s Entry of Default, ECF
No. 9. The Government moved for entry of default judgment on May 28, 2021. Pl.’s Mot. That
motion is now before the Court.
III. LEGAL STANDARD
Default judgment requires a two-step process. Fed. R. Civ. P. 55; see also Bricklayers &
Trowel Trades Int’l Pension Fund v. KAFKA Constr., 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)). The entry of default “establishes the defendant’s liability for the
well-pleaded allegations of the complaint.” United States v. Twenty-Four Cryptocurrency
Accts., 473 F. Supp. 3d 1, 4 (D.D.C. 2020). Second, “the party must move for entry of default
judgment and, upon the party’s request, allow the court ‘to enter or effectuate judgment.’”
United States v. $6,999,925.00 of Funds Associated with Velmur Mgmt. Pte. Ltd., 368 F. Supp.
3d 10, 17 (D.D.C. 2019) (quoting Fed. R. Civ. P. 55(b)).
Default judgment is typically 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.” Id.(quoting Jackson v. Beech, 636 F.2d 831, 836 (D.C. Cir. 1980)). But a defendant’s failure to
respond or appear “do[es] not automatically entitle plaintiff to a default judgment.” Id.(alteration in original) (quoting Jackson v. Corr. Corp. of Am., 564 F. Supp. 2d 22, 26 (D.D.C.
2008)). Rather, the complaint must state a claim for relief in order for the plaintiff to be entitled
to default judgment. Id. Stated differently, “[d]efault establishes the defaulting party’s liability
for the well-pleaded allegations of the complaint,” but not for allegations that are insufficiently
8
pleaded. Id. (quoting Boland v. Elite Terrazzo Flooring, Inc., 763 F. Supp. 2d 64, 67 (D.D.C.
2011)).
IV. ANALYSIS
The Government asks the Court to authorize forfeiture of the three Defendant Funds.
The Government’s claim must meet both the legal standard for default judgment and for civil
forfeiture under the Federal Rules of Civil Procedure. Specifically, 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. The rule contains both notice requirements
and substantive pleading requirements.3 See Velmur, 368 F. Supp. 3d at 17; Fed. R. Civ. P.
Supp. R. G(2), (4). The Government has met those requirements here.
A. Notice
Under Supplemental Rule G’s notice requirements, the government must (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 should “describe the property with reasonable particularity,” “state the times . . . to
3
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). All
Defendant Funds are currently in the government’s control. See Compl. at 1 (“$429,900.00 . . .
which are currently held in a blocked funds account at Bank 1 . . . $501,771.00 . . . which funds
the government previously seized . . . and $24,209.85 . . . which funds the government
previously seized.”). The Clerk of Court issued a warrant for the funds’ arrest three days after
the government filed its complaint. See Warrant for Arrest in Rem. Thus, this requirement
Supplemental Rule G is met.
9
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).
Here, the Government has complied with Supplemental Rule G’s public notice
requirement. The Government published a notice on its official forfeiture website,
http://www.forfeiture.gov, for thirty consecutive days from February 3, 2021, to March 5, 2021.
Pl.’s Mem. at 9; Decl. of Publication at 4. The online notice described the seized funds and the
parties with whom the funds were associated; provided a date by which parties were required to
file a claim, sixty days from date of publication; and identified the appropriate government
attorney to whom the parties should serve a claim and an answer, Michael Grady. Decl. of
Publication at 2–3. As such, the Government has met Supplemental Rule G’s public notice
requirement.
In addition to public notice, the government is required to directly “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). The notice “must be sent by means reasonably
calculated to reach the potential claimant.” Fed. R. Civ. P. Supp. R. G(4)(b)(iii)(A). But the rule
requires only “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)). The direct notice must include the date on which the notice is sent and the deadline for
filing a claim (at least 35 days after the notice is sent), must state that an answer or a Rule 12
motion must be filed no later than twenty-one days after filing the claim, and must name the
10
government attorney to be served with the claim and answer. Fed. R. Civ. P. Supp. R.
G(4)(b)(ii).
The Government has also complied with Supplemental Rule G’s direct notice
requirement.4 The Government identified all known claimants and emailed notice to claimants
on February 3, 2021, Decl. Supp. Default ¶ 6, which included Tang and Li.5 Pl.’s Mem. at 9.
While the Government has not shown that Tang and Li received notice, email is sufficient for
notifying international defendants whose location cannot be easily identified. See Twenty-Four
Cryptocurrency Accts, 473 F. Supp. 3d at 6 (holding that email is appropriate notice when “the
case involves international defendants whose locations are hard to pin down and the nature of the
crime necessarily entails some degree of cyber-proficiency on the part of the Defendant
Properties’ owners”); United States v. 155 Virtual Currency Assets, No. 20-cv-2228, 2021 WL
1340971, at *5 (D.D.C. 2021) (finding email notification sufficient under Supplemental Rule G).
As such, the Government has met Supplemental Rule G’s direct notice requirement.
4
Supplemental Rule G states that a direct notice must contain (1) the date on which the
notice is sent, (2) the deadline for filing a claim, at least thirty-five days after the notice is sent,
(3) a statement that an answer or Rule 12 motion must be filed within twenty-one days of filing a
claim, and (4) the name of the government attorney to be served with the claim and answer. Fed.
R. Civ. P. Supp. R. G(4)(b)(ii). The Government does not allege particular facts demonstrating
that it has met these requirements. The Government merely states that it “identified all known
potential claimants” and sent notice to them via email, Decl. Supp. Default ¶ 6, and “gave notice
of this action to all known potential claimants pursuant to the procedures set forth in Rule G(4)
of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions,” id.
¶ 5. Nevertheless, the Court accepts these assertions as sufficient.
5
In its motion for default judgment, the Government asserts that it sent direct notice by
email to Tang and Li specifically. Pl’s Mem. at 5. But the Government did not assert that it sent
notice directly to Tang and Li in its declaration in support of default judgment, instead broadly
stating that it gave notice to “all known potential claimants” without naming Tang and Li. Decl.
Supp. Default ¶ 5. The Court will accept the Government’s claim in its default judgment motion
that the email was sent directly to Tang and Li.
11
B. Adequacy of the Complaint
Alongside 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 (1) “be verified”; (2) state the grounds for jurisdiction and venue; (3) “describe the property
with reasonable particularity”; (4) “identify the statute under which the forfeiture action is
brought”; and (5) “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 these requirements to establish a “higher standard of pleading” than that
imposed by Federal Rule of Civil Procedure 8. United States v. All Assets Held at Bank Julius
Baer & Co., 571 F. Supp. 2d 1, 16 (D.D.C. 2008). Nevertheless, Rule 8 “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 for forfeiture are largely formal, and the Government meets
them here. The complaint is verified. See Compl. at 13. It identifies the basis for jurisdiction
and venue. See id. ¶¶ 7–11. It describes the properties at issue by identifying specific amounts
transferred, relevant dates, and entities involved in the transactions, as well as providing details
about the relevant transactions. See id. ¶¶ 34–35, 49–55. Lastly, it identifies the provisions
under which the Government seeks forfeiture. See id. ¶¶ 4–6.
The fifth requirement is more substantive; it requires the Government to establish the
legal basis for its claims. See Mingzheng, 324 F. Supp. 3d at 51. Here, the Government claims
as its legal bases 18 U.S.C. § 981(a)(1)(C), which subjects to forfeiture property that constitutes
or is derived from proceeds traceable to violations of, among other things, the IEEPA (or
conspiracies to commit such violations), and 18 U.S.C. § 981(a)(1)(A), which subjects to
12
forfeiture property involved in money laundering offenses (or property traceable to such
property). See Compl. ¶¶ 62, 66. 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 Defendant Funds constituted or were derived from proceeds traceable to an IEEPA violation
or were involved in money laundering violations and are thus subject to forfeiture. See
Mingzheng, 324 F. Supp. 3d at 51. Allegations that do not meet the standard, for example, are
those that “merely describe[] the property, and, parroting the language of the statute, state[] that
[the property is] forfeitable as proceeds of a[n unlawful] transaction.” United States v. Pole No.
3172, Hopkinton, 852 F.2d 636, 638–39 (1st Cir. 1988).6 This standard is “not particularly
onerous,” Mingzheng, 324 F. Supp. 3d at 51, and the Government’s factual allegations satisfied
this standard.
1. IEEPA Violation
As previously detailed, property constituting or derived from proceeds traceable to a
violation of the IEEPA, including violation of any order or regulation issued under the IEEPA or
conspiracy to commit such an offense, is subject to forfeiture. See 18 U.S.C. § 981(a)(1)(C); id.§ 1956(c)(7)(D); 50 U.S.C. § 1705(a). The Government must state “sufficiently detailed facts”
to support a reasonable belief that it will meet its burden of proof at trial to show that the
Defendant Funds constitute or are derived from proceeds traceable to an IEEPA violation to be
subject to forfeiture under 18 U.S.C. § 981(a)(1)(C).
6
Hopkinton concerned Supplemental Rule E(2)(a) instead of Supplemental Rule G(2)(f),
“but the advisory committee’s note indicates that the [G(2)(f)] language is designed to codify the
‘standard’ that ‘has evolved’ from case law interpreting its predecessor—Supplemental Rule
E(2)(a)—and ‘carr[y] this forfeiture case law forward without change.’” United States v.
Aguilar, 782 F.3d 1101, 1108 (9th Cir. 2015).
13
The relevant part of the IEEPA regulations entail that any entity that transacts with or on
behalf of North Korean SDNs through the United States financial system must first obtain a
license from OFAC. See 31 C.F.R. § 544.201(a); Exec. Order No. 13382; United States v. All
Wire Transactions Involving Dandong Zhicheng Metallic Material Co., 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 unauthorized United States dollar wire transfers). The
Government alleges a pattern of North Korean financial institutions and their affiliates using
front companies to subvert United States trade sanctions, access the United States financial
system, and obtain U.S.-origin products without a license. See Compl. ¶¶ 1–3, 14. In a related
case, ZTE entered a guilty plea for conspiring to violate the IEEPA, and the proceedings
revealed that Ryer and Rensy facilitated its violations, see id. ¶¶ 12–18.
Defendant Funds 1 is a $429,000 payment from Ryer to Rensy that was blocked by a
U.S. bank due to a connection with sanctions. Compl. ¶ 35. The government believes that
Defendant Funds 1 constitute IEEPA violations because the transaction was funded by SDNs,
transacted on behalf of SDNs, routed through United States banks, and attempted without
obtaining OFAC licenses. The Government identifies Defendant Funds 1 as following a series
of 23 previous illicit payments totaling $6,921,065.88. Id. ¶ 34. To support the claim that these
payments were funded by North Korean financial facilitators, the government outlines in detail
that Ryer received approximately $12,412,223 from designated front companies Dandong
Zhicheng, Dandong Hongxiang, Mingzheng, and Mansundae. Id. ¶ 36–46. Further supporting
that Ryer and Rensy acted on behalf of sanctioned North Korean entities, the government points
to the related case in which Chinese company ZTE ceded that Ryer and Rensy facilitated its
14
violations, id. ¶ 12–18, specifically by wiring $7,759,888.12 to ZTE on behalf of the KPTC to
fund ZTE’s exports, id. ¶ 24. Importantly, Ryer and Rensy failed to seek OFAC licensing for
their transactions in the United States. Id. ¶ 34.
Defendant Funds 2 is a $501,771 sum associated with an EB-5 investment visa account
opened by Tang and Li in 2012. Compl. ¶ 49. The Government alleges that Tang and Li’s EB-5
records indicate that their employment with Ryer constituted their sole source of income since
2009. Id. ¶ 51. Thus, the Government infers that the couple’s income, used to fund the EB-5
account, was in turn funded by Ryer. Given that various designated entities funded Ryer, see id.¶¶ 36–46, this implies that Defendant Funds 2 is traceable to proceeds of IEEPA violations.
Defendant Funds 3 is the remaining balance of $24,209.85 in three bank accounts that
Tang and Li opened in United States banks. Pl.’s Mem. at 5. The Government links Tang and
Li (and their activities with Ryer and Rensy) to the FTB, ZTE, and other designated entities. For
example, the allegations include payments from Ryer to ZTE on behalf of the KPTC. Compl.
¶ 24. Documents from ZTE’s legal proceedings allegedly show that when Ryer made those
payments, Li represented the company on contracts with ZTE. Compl. ¶ 25. Altogether, the
Government argues that Tang and Li are the perpetrators behind the actions of Ryer and Rensy to
support the North Korean government and its financial institutions. Id. ¶ 59. The Government
alleges that after Tang and Li opened the three United States bank accounts in 2012, Ryer wired
approximately $2,414,600 into these accounts. Id. ¶ 54. Again, the Government points out that
Ryer is funded by sanctioned North Korean banks. Id. ¶¶ 38, 42, 44, 46. The remaining balance
of the three accounts comprise Defendant Funds 3, and thus the allegations suggest that
Defendant Funds 3 constitute an IEEPA violation.
15
The Court finds that the allegations support a reasonable belief that the Government
could meet its burden at trial and show that each of the Defendant Funds are subject to forfeiture
as funds that constitute or are derived from IEEPA violations. Fed. R. Civ. P. Supp. R. G(2); 18
U.S.C. § 981(a)(1)(C). The allegations go beyond merely describing the property and parroting
the language of the statute. See Hopkinton, 852 F.2d at 638–39. The Complaint alleges the
details of specific transactions involving entities already designated by OFAC. See Mingzheng,
324 F. Supp. 3d at 51 (finding that the Government met the pleading standard by alleging that
the FTB was a designated entity and that the defendant funds were transacted on the FTB’s
behalf). The Government also describes tangible records—such as transaction requests that Li
sent to the FTB on Rensy letterhead and documents from ZTE’s legal proceedings. Compl.
¶¶ 47–48, 13. Notably, in addition to alleging upwards of eighty-five illicit transactions, the
Government alleges that the actors never sought OFAC licensing.
By identifying unauthorized transactions with SDNs and documents that could support
their illicit nature, the Government has provided a sufficient level of detail. See Velmur, 368
F. Supp. 3d at 20 (finding that the Government met the pleading standard when the Government
specified transactions and alluded to confidential sources who could attest to the illicit nature of
these transactions). Given that any transaction conducted with or on behalf of North Korean
SDNs through the United States financial system requires an OFAC license (and is otherwise an
IEEPA violation), and given that the standard of pleading is “not particularly onerous,” the
Government has surpassed its burden under Supplemental Rule G(2).
Because the Government has sufficiently pleaded that each of the Defendant Funds
constitute or are traceable to an IEEPA violation, the Court will not consider the money
laundering and conspiracy allegations, which only serve as alternative theories for relief. The
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Court holds that the Government has met its burden under Supplemental Rule G(2) for forfeiture
of the Defendant Funds under 18 U.S.C. § 981(a)(1)(C) and, accordingly, the Court grants the
Government’s default judgment motion for forfeiture of Defendant Funds on the grounds of its
well-pleaded allegations.
V. CONCLUSION
For the foregoing reasons, this Court GRANTS the Government’s motion for default
judgment (ECF No. 10). Judgment is entered in favor of the United States and against the
potential claimants of the Defendant Funds, and the Defendant Funds are forfeited. An order
consistent with this Memorandum Opinion is separately and contemporaneously issued.
Dated: November 1, 2021 RUDOLPH CONTRERAS
United States District Judge
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