Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-18-56451/USCOURTS-ca9-18-56451-0/pdf.json

Nature of Suit Code: 470
Nature of Suit: Civil (Rico)
Cause of Action: 

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CITY OF ALMATY, a foreign state,

Plaintiff-Appellant,

v.

VIKTOR KHRAPUNOV, an individual; 

LEILA KHRAPUNOV, an individual; 

ILIYAS KHRAPUNOV, an individual; 

MADINA ABLYAZOVA, AKA Madina 

Khrapunova, an individual; 

CROWNWAY, LTD., a Belize 

corporation; VILDER COMPANY S.A., 

a Panama corporation; RPM USA,

LLC, a New York corporation; 

WORLD HEALTH NETWORKS, INC., 

FKA Health Station Networks, Inc., 

a Delaware corporation; RPMMARO, LLC, a New York 

corporation; DANIEL KHRAPUNOV, an 

individual; MARO DESIGN LLC, a 

California corporation; THIRTYEIGHT 

ENTERPRISES, LLC, a California 

Corporation; HAUTE HUE LLC, a 

California corporation; 628

HOLDINGS LLC, a California 

corporation; CANDIAN 

INTERNATIONAL LTD., a British 

Virgin Islands corporation; ELVIRA 

KHRAPUNOV, as Trustee for The 

No. 18-56451

D.C. Nos.

2:14-cv-03650-

FMO-FFM

2:15-cv-02628-

FMO-CW

OPINION

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2 CITY OF ALMATY V. KHRAPUNOV

Kasan Family Trust; DMITRI 

KUDRYASHOV, AKA Dmitry 

Kudryashov, an individual, and as 

Trustee for The Kasan Family Trust,

Defendants-Appellees.

Appeal from the United States District Court

for the Central District of California

Fernando M. Olguin, District Judge, Presiding

Argued and Submitted February 4, 2020

Pasadena, California

Filed April 22, 2020

Before: Sandra S. Ikuta and Morgan Christen, Circuit 

Judges, and Algenon L. Marbley,* District Judge.

Opinion by Judge Marbley

* The Honorable Algenon L. Marbley, United States Chief District 

Judge for the Southern District of Ohio, sitting by designation.

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CITY OF ALMATY V. KHRAPUNOV 3

SUMMARY**

Racketeer Influenced and Corrupt Organizations Act

The panel affirmed the district court’s dismissal for 

failure to state a claim of an action brought under the 

Racketeer Influenced and Corrupt Organizations Act by a 

city in Kazakhstan.

The city alleged that Victor Khrapunov and his family 

engaged in a scheme to defraud it of millions of dollars. 

After absconding with the money to Switzerland, the family 

allegedly began laundering the money into property and 

other investments in the United States. The city alleged that 

it was forced to spend money and resources in the United 

States to trace where its money was laundered.

The panel held that the city failed to state any cognizable 

injury other than the foreign theft of its funds, and its 

voluntary expenditures in the United States were not 

proximately caused by defendants’ alleged acts of money 

laundering. Accordingly, the city failed to state a RICO 

claim.

** This summary constitutes no part of the opinion of the court. It 

has been prepared by court staff for the convenience of the reader.

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4 CITY OF ALMATY V. KHRAPUNOV

COUNSEL

Richard P. Bress (argued) and Margaret A. Upshaw, Latham 

& Watkins LLP, Washington, D.C.; David J. Schindler and 

Kendall M. Howes, Latham & Watkins LLP, Los Angeles, 

California; for Plaintiff-Appellant.

Martha Boersch (argued) and Matthew C. Dirkes, Boersch 

Shapiro LLP, Oakland, California, for DefendantsAppellees.

Matthew L. Schwartz, Boies Schiller Flexner LLP, New 

York, New York, for Amici Curiae Anti-Money Laundering 

Experts.

OPINION

MARBLEY, District Judge:

The City of Almaty, in Kazakhstan, alleges that Victor 

Khrapunov and his family engaged in a scheme to defraud 

the city of millions of dollars. After absconding with the 

money to Switzerland, the family allegedly began laundering 

the money into property and other investments in the United 

States. Almaty brought suit pursuant to 18 U.S.C. § 1964(c), 

alleging that it was forced to spend money and resources in 

the United States to trace where its money was laundered. 

The district court dismissed Almaty’s claim on the basis that 

it failed to state a domestic injury pursuant to the Supreme 

Court’s recent decision in RJR Nabisco, Inc. v. European 

Community, 136 S. Ct. 2090 (2016), holding that the 

presumption against extraterritoriality applies to the civil 

remedy of the Racketeer Influenced and Corrupt 

Organizations Act. The City of Almaty appeals the district 

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CITY OF ALMATY V. KHRAPUNOV 5

court’s decision arguing that its injury was domestic. We 

affirm the district court’s decision since Almaty failed to 

state any cognizable injury other than the foreign theft of its 

funds and since its voluntary expenditures were not 

proximately caused by Appellees’ acts of money laundering.

BACKGROUND 

Appellant, the City of Almaty, (hereinafter “Plaintiff” or 

“Almaty”), is the largest in the Republic of Kazakhstan. 

From 1997 until December 2004, Victor Khrapunov served 

as its mayor. According to Almaty, Khrapunov oversaw the 

privatization of much of its real estate while he was mayor. 

During the process, however, Khrapunov allegedly abused 

his power by rigging auctions for properties so that his wife, 

Leila Khrapunova, and children, Iliyas Khrapunov and 

Elvira Kudryashova, could purchase these properties 

through shell entities at drastically reduced prices.

Appellees, (hereinafter “the Khrapunovs” or 

“Defendants”), fled Kazakhstan for Switzerland around 

2007, taking the proceeds from the sale of the government 

properties with them. Kazakh authorities traced the allegedly 

stolen proceeds to Switzerland and informed Swiss 

authorities. Swiss authorities began an investigation into the 

Khrapunovs for money laundering and froze the 

Khrapunovs’ Swiss bank accounts.

In 2010, Elvira and her husband left Switzerland for the 

United States, where they purchased a home in Beverly 

Hills, California. Almaty alleges that this home, along with 

other real estate and property in California, was purchased 

using the stolen proceeds. According to Almaty, the 

Khrapunovs increased their efforts to launder money into the 

United States as the Swiss investigations against them 

intensified in 2012. In early 2012 and 2013, Almaty alleges 

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6 CITY OF ALMATY V. KHRAPUNOV

that Iliyas and his wife used several shell companies to 

purchase two homes in Beverly Hills, California. In addition 

to using the stolen funds to launder the money into real estate 

in the United States, Almaty alleges that Elvira made “sham 

business investments” in the United States as a means of 

securing “under false pretenses U.S. visas for Elvira” and her 

husband. Almaty also alleges that the Khrapunovs cycled the 

stolen money in and out of California real estate and other 

investments in order to prevent Almaty from locating and 

recovering the funds.

In 2014, Almaty filed the instant lawsuit alleging RICO 

violations by the Khrapunovs as well as violations of U.S. 

mail, wire and bank fraud, anti-money laundering, and 

Travel Act statutes, in addition to various state law claims 

including fraud, conversion, and breach of fiduciary duty. In 

2015, Almaty and a state-owned Kazakh bank, BTA Bank, 

also brought suit against the Khrapunovs and others in the 

Southern District of New York, bringing RICO claims for 

money laundering the stolen proceeds, along with other 

claims against another defendant. City of Almaty, 

Kazakhstan v. Ablyazov, No. 15-CV-5345 (AJN), 2018 WL 

3579100 (S.D.N.Y. July 25, 2018). The Southern District of 

New York dismissed the case for failure to allege a plausible 

domestic injury, determining that the money laundering in 

the United States did not turn the plaintiffs’ injuries into 

domestic ones where the alleged misappropriations occurred 

in Kazakhstan. Id. at *5.

Since filing the instant lawsuit in 2014, Almaty has 

amended the complaint several times. The first consolidated 

complaint, which is the operative complaint and at issue in 

this proceeding, was filed in January 2018. The Khrapunovs 

moved to dismiss the first consolidated complaint in 

February 2018. The district court granted the motion to 

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CITY OF ALMATY V. KHRAPUNOV 7

dismiss the RICO claims with prejudice in September 2018, 

determining that Almaty failed to allege a domestic injury. 

After the court entered judgment, Almaty appealed.

JURISDICTION AND STANDARD OF REVIEW

This Court has jurisdiction under 28 U.S.C. § 1291. We 

review a district court’s order granting a motion to dismiss 

for failure to state a claim de novo. Palm v. Los Angeles 

Dep't of Water & Power, 889 F.3d 1081, 1085 (9th Cir. 

2018). The plaintiff’s factual allegations are taken as true, 

and dismissal is affirmed “only if it appears beyond doubt 

that [plaintiff] can prove no set of facts in support of [its] 

claims which would entitle [it] to relief.” Painters & Allied 

Trades Dist. Council 82 Health Care Fund v. Takeda Pharm. 

Co. Ltd., 943 F.3d 1243, 1248 (9th Cir. 2019) (citation and 

internal quotation marks omitted).

ANALYSIS

Plaintiff asks that we reverse the district court’s 

dismissal of its complaint. Plaintiff argues that it has alleged 

a domestic injury pursuant to 18 U.S.C. § 1964(c) by 

alleging that it was “compelled . . . to expend additional 

resources in the United States to find its stolen assets in the 

United States.” Defendants urge us to affirm the district 

court’s decision, arguing that there are two reasons why 

Almaty cannot bring a civil RICO claim. First, Defendants 

argue that Almaty has failed to allege a viable domestic 

injury. Second, Defendants argue that Plaintiff lacks 

standing to bring its claim, because one of our prior 

decisions forecloses civil RICO claims brought by 

governments in their sovereign capacity.

First, Plaintiff argues that Defendants’ act of laundering 

money into the United States forced it to spend money to 

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8 CITY OF ALMATY V. KHRAPUNOV

investigate and locate its stolen money in the United States. 

According to the City of Almaty, this is a domestic injury to 

its property pursuant to 18 U.S.C. § 1964(c), the provision 

of the Racketeer Influenced and Corrupt Organizations Act 

(hereinafter “Civil RICO”) permitting individuals to bring 

civil suit after being harmed by a violation of the statute.

Defendants argue that the Supreme Court implicitly 

rejected a definition of domestic injury that includes 

spending money and time to “trace and recover . . . stolen 

funds hidden in the United States” in RJR Nabisco, Inc. v. 

European Community, 136 S. Ct. 2090 (2016). According to 

Defendants, one of the primary allegations made by the 

European Community in RJR Nabisco was that illegal drug 

proceeds were laundered into the United States. Defendants 

claim that since the European Community expended funds 

in the U.S. in pursuit of its legal claims, and no one in that 

case suggested that such voluntary expenditures could 

constitute domestic injury, the Supreme Court implicitly 

determined that those were not domestic injuries.

The Supreme Court’s decision in RJR Nabisco, however, 

does not address, either explicitly or implicitly, whether the 

injuries alleged in that case were domestic or foreign. In RJR 

Nabisco, the Supreme Court only determined that the 

presumption against extraterritorial application of statutes 

applies to 18 U.S.C. § 1964(c). The terms of the Civil RICO 

statute permit “[a]ny person injured in his business or 

property by reason of a violation of § 1962” to recover treble 

damages. RJR Nabisco clarified that injuries must be 

domestic but declined to decide the question of how to 

determine whether injuries are “foreign” or “domestic” 

because the European Community had stipulated that all the 

injuries they alleged were foreign. 136 S. Ct. at 2111. Thus, 

RJR Nabisco provides little guidance as to how to resolve 

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CITY OF ALMATY V. KHRAPUNOV 9

the question of whether the injuries alleged here are 

domestic or foreign.

The Ninth Circuit has not yet addressed the question of 

how to determine whether an injury is domestic or foreign 

after RJR Nabisco, and we need not do so today. That is 

because Plaintiff’s alleged injury is merely a consequential 

effect of its admittedly foreign injury, and not an 

independent injury cognizable under § 1964(c).

To state a claim under RICO, a plaintiff is required to 

show harm to a specific business or property interest, an 

inquiry “typically determined by reference to state law.” 

Diaz v. Gates, 420 F.3d 897, 900 (9th Cir. 2005) (en banc). 

In Diaz, we determined that financial loss alone is 

insufficient to state a claim, noting that there must be an 

injury to a “business or property interest.” Id. Plaintiff 

alleges that its property, here money, was injured by reason 

of the Khrapunovs’ acts of money laundering in the U.S., 

because it spent money to trace its already stolen funds. But, 

there is no state law indicating that voluntary expenditures 

to track down stolen property constitutes a separate injury to 

property. And, while California does recognize the tort of 

conversion,1 the injuries caused by that tort encompass the 

injury Plaintiff alleges was caused by money laundering, 

“fair compensation for the time and money properly 

expended in pursuit of the property.” Cal. Civ. Code § 3336. 

Therefore, the district court properly determined that 

Plaintiff’s alleged injury was a mere downstream effect of 

the Khrapunovs’ initial theft and not an independent harm 

itself.

1 See Lee v. Hanley, 354 P.3d 334, 344 (Cal. 2015) (“Conversion is 

the wrongful exercise of dominion over the property of another.”).

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10 CITY OF ALMATY V. KHRAPUNOV

Plaintiff also fails to satisfy the proximate cause inquiry. 

That is, it cannot show that Defendants’ predicate act of 

money laundering was the actual cause of its expenditure of 

money. Proximate cause requires “some direct relation 

between the injury asserted and the injurious conduct 

alleged.” Holmes v. Sec. Inv’r Prot. Corp., 503 U.S. 258, 268 

(1992). Plaintiff argues that money is a form of property and 

consequently, its expenditures to track the laundered money 

constitutes an injury to property, citing our decisions in 

Harmoni Int'l Spice, Inc. v. Hume, 914 F.3d 648 (9th Cir. 

2019) and Canyon Cty. v. Syngenta Seeds, Inc., 519 F.3d 

969, 976 (9th Cir. 2008). In Harmoni, plaintiffs were 

Chinese garlic importers who brought a civil RICO action 

after their competitors made sham filings requesting an 

administrative review of Harmoni’s business. 914 F.3d at 

650. We determined that plaintiffs stated a viable injury—

being “forced to incur significant expenses responding to the 

administrative review”—and that the injury was proximately 

caused by defendant’s sham filings because “refusing to 

respond was not a viable option” since it would result in 

prohibitively high import duties. Id. at 652. We noted that 

“this is not a case in which the Department of Commerce 

acted independently to initiate an investigation, which would 

perhaps have been an intervening act that broke the causal 

chain,” finding it determinative that the Department of 

Commerce was required by law to initiate an administrative 

review when it receives a request for review from a party 

with standing. Id.

Plaintiff also relies on Canyon County, where we 

decided that a government’s expenditures on healthcare and 

policing services are not an injury to business or property 

because the government does not have a property interest in 

the services it provides to enforce law and promote public 

welfare. 519 F.3d at 976. We specifically noted, however, a 

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CITY OF ALMATY V. KHRAPUNOV 11

line of cases indicating that forced expenditures made in a 

state’s commercial capacity state an injury to property. Id.

We relied on the Supreme Court’s decision in Reiter v. 

Sonotone Corp., 442 U.S. 330, 342 (1979), and other cases 

where government entities overcharged in commercial 

transactions could claim injury to their property. See 

519 F.3d at 976.

Unlike in Harmoni and Canyon County, however, 

Plaintiff has not shown that it was forced to spend its money 

or that it was otherwise shortchanged by Defendants’ actions 

in the United States. Plaintiff points to no legal obligation to 

track its money nor evidence that it would otherwise be 

unable to collect the money it is owed. Furthermore, upon 

obtaining a legal judgment anywhere in the world against 

Defendants, Plaintiff could bring that judgment to the United 

States and execute it against any of Defendants’ assets for 

the full amount of money owed. See, e.g., Cal. Civ. Proc. 

Code § 1716 (permitting the enforcement of foreign 

judgments in California courts). This is because money is a 

fungible asset, and not an otherwise unique or irreplaceable 

piece of property. See United States v. Sperry Corp., 

493 U.S. 52, 62 n.9 (1989).

Moreover, there will still be instances where the 

predicate act of money laundering is so integral to a scheme 

to deprive a plaintiff of his or her money that he or she can 

state a domestic injury. In fact, this was the case in Maiz v. 

Virani, 253 F.3d 641 (11th Cir. 2001), where the court 

determined that money laundering was integral to 

defendants’ scheme to defraud plaintiffs of their money. In 

Maiz, defendants argued that plaintiffs suffered no injury 

proximately caused by their alleged money laundering 

because they had committed these acts after plaintiffs had 

made their initial investments. Id. at 673–74. The court 

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12 CITY OF ALMATY V. KHRAPUNOV

rejected this argument, noting that plaintiffs had made those 

investments for a specific purpose and defendants had 

misappropriated and laundered those funds “in order to

conceal the existence of those profits from the Plaintiffs and, 

indeed, induce further contributions.” Id. at 674. In other 

words, the Maiz plaintiffs’ monetary losses were not caused 

by the initial investment, but by the money laundering. Here, 

Plaintiff was not separately harmed by the money 

laundering, and the amount allegedly due to it has not been 

devalued as a result of Defendants’ money laundering.

Accordingly, we need not determine whether Plaintiff 

states a domestic or foreign injury, since it fails to state a 

cognizable injury at all. The City of Almaty’s expenditure of 

funds to trace its allegedly stolen funds is a consequential 

damage of the initial theft suffered in Kazakhstan and is not 

causally connected to the predicate act of money laundering.

Defendants also argue for the first time on appeal that the 

district court’s decision should be affirmed for the separate 

reason that Almaty lacks standing to bring claims for injuries 

sustained in its sovereign capacity. A party waives an 

argument relating to statutory or prudential standing if the 

argument was not raised in the district court. See Bilyeu v. 

Morgan Stanley Long Term Disability Plan, 683 F.3d 1083, 

1090 (9th Cir. 2012). Additionally, because we determine 

that Almaty failed to allege a cognizable injury, we need not 

decide this issue.

AFFIRMED.

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