Court Opinion

ID: 4380329
Source: CourtListenerOpinion
Date Created: 2019-03-22 23:00:32.000258+00
Date Added: 2024-06-11T09:26:47.500807
License: Public Domain

UNITED STATES DISTRICT COURT
                            FOR THE DISTRICT OF COLUMBIA

UNITED STATES OF AMERICA,         :
                                  :
        Plaintiff,                :                      Civil Action No.:       17-1705 (RC)
                                  :
        v.                        :                      Re Document No.:        28
                                  :
$6,999,925.00 OF FUNDS ASSOCIATED :
WITH VELMUR MANAGEMENT PTE LTD, :
et al.,                           :
                                  :
        Defendants.               :

                                  MEMORANDUM OPINION

             GRANTING IN PART PLAINTIFF’S MOTION FOR DEFAULT JUDGMENT

                                      I. INTRODUCTION

       Plaintiff United States of America (“the government”) seeks forfeiture and civil money

penalties from two foreign companies that have allegedly acted as fronts for the Democratic

People’s Republic of Korea (“North Korea”). According to the government, these two

companies—Velmur Management Pte. Ltd. (“Velmur”) and Transatlantic Partners Pte. Ltd.

(“Transatlantic”)—made transactions on behalf of sanctioned North Korean entities, using the

United States banking system, in contravention of federal law and United States sanctions on

North Korea. Velmur failed to respond to the government’s complaint, and the government asks

this Court to enter a default judgment against it. For the reasons set forth below, the Court

concludes that the government’s factual allegations are sufficient to show that Velmur is liable

for the offenses with which it is charged, that the government sent proper notice of this action to

interested parties, and that the money the government claims under the forfeiture statute was

involved in Velmur’s offenses. However, the government’s allegations support only a portion of
the civil money penalty it seeks against Velmur. Thus, the Court grants the government’s

motion for default judgment in full with respect to the forfeiture, and in part with respect to civil

money penalties.

                                II. FACTUAL BACKGROUND

       This case began with an FBI investigation of Velmur and Transatlantic in connection

with an alleged North Korean scheme to subvert international sanctions through the use of front

companies. Compl. ¶ 1, ECF No. 1. According to the government: (1) North Korean banks

directed Transatlantic and other front companies to send United States dollars to Velmur; (2)

those front companies wired the money to Velmur, using United States banks as conduits; (3)

Velmur then wired the money to a Russian gasoil supplier; which (4) shipped gasoil to North

Korea. See id. ¶ 55. The government alleges that this scheme ran afoul of, among other laws,

the International Emergency Economic Powers Act (“IEEPA”) and federal anti-money

laundering and bank fraud statutes. 1 The Court will briefly summarize those laws and then

describe the alleged money laundering scheme in more detail.

                           A. Statutory and Regulatory Framework

                    1. The International Emergency Economic Powers Act

       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” from 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. §

       1
         The government also alleges that this scheme violated the North Korean Sanctions and
Policy Enhancement Act (“NKSPEA”). 22 U.S.C. §§ 9201–9255. Because the government
sufficiently alleged that Velmur violated the IEEPA and the anti-money laundering statute, the
Court need not consider Velmur’s liability under the NSKPEA.

                                                  2
1702(a)(1)(A). Exercising his IEEPA authority, President Bill Clinton issued Executive Order

12,938, which designates “Weapons of Mass Destruction” (“WMDs”) as an “unusual and

extraordinary threat” under the IEEPA. Exec. Order No. 12,938, 59 Fed. Reg. 58,099 (Nov. 14,

1994). Executive Order 13,382, issued a decade later, denies 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. 2 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). And 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.

       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). And property “which constitutes or is derived from

proceeds traceable to” a violation of the IEEPA 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 . . .

promulgated pursuant to the IEEPA is subject to forfeiture.” In re 650 Fifth Avenue & Related

       2
         If an account is “blocked,” “payments, transfers, exportations, withdrawals, or other
dealings may not be made” from that account unless licensed by the Office of Foreign Assets
Control. 31 C.F.R. § 544.301.

                                                  3
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).

                        2. The Federal Anti-Money Laundering Statute

       The federal anti-money laundering statute, 18 U.S.C. § 1956, makes it a crime to

“transport[], transmit[], or transfer[] . . . a monetary instrument or funds from a place in the

United States to or through a place outside the United States . . . with the intent to promote the

carrying on of [a] specified unlawful activity.” 3 18 U.S.C. § 1956(a)(2)(A). “Specified unlawful

activity” includes violating the IEEPA. Id. § 1956(c)(7)(D). Additionally, “any property . . .

involved in a transaction . . . in violation of” the federal anti-money laundering statute is subject

to forfeiture. Id. § 981(a)(1)(A). To show that the property was “involved in” such a

transaction, the government must show that “there was a substantial connection between the

property and the offense.” Id. § 983(c)(3). A violator of the anti-money laundering statute is

also liable “for a civil penalty of . . . the value of the property, funds, or monetary instruments

involved in the transaction.” Id. § 1956(b)(1)(A).

                        B. Relevant Facts and Procedural History

       In 2013, OFAC designated North Korea’s primary foreign exchange bank, the Foreign

Trade Bank (“FTB”), as an SDN. Compl. ¶¶ 19, 46. In 2016, the Department of Treasury’s

Financial Crimes Enforcement Network (“FinCEN”) deemed “the entire North Korean financial

sector as a jurisdiction of primary money laundering concern.” Id. ¶ 27 (emphasis in original)

(citing 81 Fed. Reg. 35,665 (June 3, 2016)). FinCEN found, in making that determination, that

       3
           This statute also criminalizes conspiracy to engage in money laundering. 18 U.S.C. §
1956(h).

                                                  4
North Korea makes extensive use of front companies and deceptive financial practices to evade

international sanctions. Id. ¶¶ 32, 50.

       Velmur is registered in Singapore, and is purportedly a commercial and industrial real

estate management company. Id. ¶¶ 58-59. Despite Velmur’s legitimate-sounding business, the

government alleges that it “bears the hallmarks of a front company”; it “lacks an official website

and appears to have little to no web presence” while also not “having a true physical office

space.” Id. ¶ 59; Decl. Special Agent Benjamin Whitley (“Whitley Decl.”) ¶ 6, ECF No. 28-2.

Relying in part on confidential sources, the government contends that Velmur “has been a

recipient of U.S. dollar payments on behalf of North Korean entities—in particular, FTB.”

Compl. ¶¶ 60-61.

       During its investigation of Velmur, the FBI allegedly identified several payments made to

or from Velmur, through United States banks, for the purpose of laundering money or purchasing

gasoil on behalf of North Korea. See id. ¶ 84. In May 2017, OFAC blocked five of these

transactions, totaling $4,999,925, that were described as “prepayment for gasoil” and that

involved three alleged North Korean front companies. See id. ¶¶ 56, 85-93; Whitley Decl. ¶ 7.

The blocked funds (the “Defendant Funds”) are “currently held in a bank account in the United

States.” Compl. ¶ 10. 4 OFAC found that “an SDN had an interest in each one of the . . .

transactions” and no SDN “obtain[ed] an OFAC license prior to engaging in the transactions.”

Whitley Decl. ¶ 7; see also Compl. ¶¶ 70, 72, 74. The transactions prompted OFAC, in August

2017, to designate Velmur as an SDN “for operating in the energy industry in the North Korean

       4
          OFAC also blocked two wire transfers to Velmur from Transatlantic. See id. ¶ 56.
Transatlantic has entered an appearance in this case, and the government has not yet sought
forfeiture of the blocked payments involving Transatlantic. See Pl.’s Mem. Supp. Mot. Default
J. (“Pl.’s Mem.”) at 4 n.3, ECF No. 28-1.

                                                5
economy,” and for “attempt[ing] to use the U.S. financial system to send millions of dollars in

payments on behalf of North Korea-related transactions.” Compl. ¶ 57.

       In addition to the transactions blocked by OFAC, the FBI’s investigation identified

several other Velmur transactions involving North Korean front companies and companies

known to do business with North Korea. In early 2017, Velmur wired $6,853,000 over eight

transactions to JSC Independent Petroleum Company (“IPC”), a Russian company, “for gasoil.” 5

Id. ¶¶ 75–77; Whitley Decl. ¶ 13. OFAC subsequently designated IPC as an SDN, noting that it

“had a contract to provide oil to North Korea and reportedly shipped over $1 million worth of

petroleum products to North Korea.” Compl. ¶ 75. One of the government’s “reliable”

confidential sources stated that IPC shipped the gasoil purchased by Velmur from a Russian port

to North Korea. Id. ¶¶ 78-79. Through 2016 and 2017, Velmur was also the recipient of four

United States dollar wire transfers, totaling $1,169,980, from companies known to be associated

with or front companies for FTB. Id. ¶ 61. These companies are known “to have made

payments for FTB” and are believed to have “laundered funds to promote sanctions violations”.

Id.

       In August 2017, the government filed a verified complaint for forfeiture in rem against

$6,999,925 in blocked funds associated with Velmur, and for civil money penalties in personam

against Defendants Velmur and Transatlantic. 6 The government claims that the $6,999,925 was

involved in Defendants’ IEEPA and money laundering violations, and that the civil money

       5
         The complaint includes a chart listing seven wire transfers that make up only
$5,503,000 of the listed total of $6,853,000. Compl. ¶ 76. However, Special Agent Whitley’s
declaration provides the eighth wire transfer of $1,350,000, which brings the total up to the listed
$6,853,000. Whitley Decl. ¶ 13.
       6
       As noted, the blocked funds associated with Transatlantic are not at issue in the
government’s motion for default judgment. See Pl.’s Mem.

                                                 6
penalties are necessary to redress Defendants’ money laundering violations. On February 9,

2018, the Clerk of the Court entered default as to the Defendant Funds and Defendants. See

Clerk’s Entry of Default as to Def. Funds, ECF No. 13; Clerk’s Entry of Default as to Defs., ECF

No. 14. Transatlantic then entered an appearance, see Notice of Appearance, ECF No. 15, and

the government and Transatlantic “continue to have substantive conversations about the status

of” this action. Status Report at 3, ECF No. 27. Velmur, however failed to appear, and the

government has filed a motion for default judgement under Federal Rule of Civil Procedure 55,

seeking forfeiture of the Defendant Funds—$4,999,925—and the imposition of $21,691,187.30

in civil money penalties against Velmur. Pl.’s Mot. Default J. 1-2, ECF No. 28. That motion is

now before the Court.

                                  III. LEGAL STANDARDS

       Federal Rule of Civil Procedure 55 establishes a two-step process for default judgment.

Fed. R. Civ. P. 55; see also Bricklayers & Trowel Trades Int’l Pension Fund v. KAFKA

Construction, 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)). Then, the party

must move for entry of default judgment and, upon the party’s request, allow the court “to enter

or effectuate judgment.” Fed. R. Civ. P. 55(b).

       “‘[D]efault judgment must normally be viewed as 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.’” Jackson v. Beech, 636 F.2d 831, 836 (D.C. Cir. 1980) (quoting

H.F. Livermore Corp. v. Aktiengesellschaft Gebruder Loepfe, 432 F.2d 689, 691 (D.C. Cir.

                                                  7
1970)); see also Gilmore v. Palestine Interim Self-Gov’t Auth., 843 F.3d 958, 965 (D.C. Cir.

2016). However, “a defendant’s failure to appear . . . do[es] not automatically entitle plaintiff to

a default judgment.” Jackson v. Corr. Corp. of Am., 564 F. Supp. 2d 22, 26 (D.D.C. 2008).

Rather, “the defendant’s default notwithstanding, the plaintiff is entitled to a default judgment

only if the complaint states a claim for relief.” Id. at 27 (quoting Descent v. Kolitsidas, 396 F.

Supp. 2d 1315, 1316 (M.D. Fla. 2005). In other words, “[d]efault establishes the defaulting

party’s liability for the well-pleaded allegations of the complaint,” but not for allegations that are

not sufficiently pleaded. Boland v. Elite Terrazzo Flooring, Inc., 763 F. Supp. 2d 64, 67 (D.D.C.

2011) (citing Adkins v. Teseo, 180 F. Supp. 2d 15, 17 (D.D.C. 2001)).

                                          IV. ANALYSIS

       The government asks this Court to authorize the forfeiture of certain funds belonging to

Velmur, and to impose civil money penalties on Velmur. Although Velmur has not appeared to

contest these claims, the Court must assure itself that the government has established Velmur’s

liability for both. Because the government has properly notified all interested parties and

sufficiently alleged that Velmur’s property is subject to forfeiture, the motion for default

judgment is granted as it relates to the forfeiture. On the other hand, the government has not

sufficiently alleged that Velmur is subject to the full amount of civil money penalties sought.

The Court will impose a penalty less than that requested.

                                           A. Forfeiture

       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. It

                                                  8
contains both notice requirements and substantive pleading requirements. 7 See Fed. R. Civ. P.

Supp. R. G(2), (4). The government has met those requirements here.

                                             1. Notice

       Supplemental Rule G requires the government to (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 must “describe the property

with reasonable particularity,” “state the times . . . to 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). The government must also “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). That notice “must be sent by means reasonably calculated to reach the potential

claimant.” Fed. R. Civ. P. Supp. R. G(4)(b)(iii)(A). That said, Supplemental Rule G “requires

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)).

       7
          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). The funds at
issue here are in the government’s control. See Compl. at 1, ¶ 10 (“The Defendant Funds are
currently held in a bank account in the United States”). And the Clerk of Court issued a warrant
for the funds’ arrest one day after the government filed its complaint. See Warrant for Arrest In
Rem, ECF No. 2. The government has thus met this Supplemental Rule G requirement.

                                                  9
       Here, the government complied with Supplemental Rule G’s public notice requirement.

The government publicized the forfeiture on its official forfeiture website, http://www.

forfeiture.gov, for thirty consecutive days in September and October 2017. Decl. of Publication,

ECF No. 3; Pl.’s Mem. Supp. Mot. Default J. at 5, ECF No. 28-1. The publication described the

funds, it provided a date by which interested parties were required to file a claim, November 23,

2017, and it named the government attorney to be served, Zia Faruqui. Decl. of Publication at 2.

       The government also complied with Supplemental Rule G’s direct notice requirement. It

sent notice to potential claimants of the funds, including Velmur, at their registered addresses via

international service in December 2017. See Status Report at 2–3, ECF No. 5; Aff. Supp.

Default at 2–3, ECF No. 10; Clerk’s Entry of Default as to Def. Funds. That notice included a

copy of the complaint, and it notified the potential claimants that they could file a claim for the

funds with this Court within thirty-five days of service. Aff. Supp. Default at 2–3. While the

government has not shown that Velmur received the notice, proof of delivery is sufficient under

Supplemental Rule G. See Mingzheng, 324 F. Supp. 3d at 47 (holding that the government’s

direct notice was “more than” sufficient when it sent “international package service to parties in

China and the United Kingdom, and service through a Mutual Legal Assistance Treaty request to

the potential claimant in Switzerland”); United States v. Funds Up to and Including the Amount

of $56,634 in U.S. Currency on Deposit in Banesco Int’l, Panama, Acct. # 201000274785, Titled

in the Name of Inversiones Cedeno C.A., and/or Prop. Traceable Thereto, 79 F. Supp. 3d 112,

114 (D.D.C. 2015) (holding that the government provided sufficient notice when it attempted,

but failed, to obtain contact information for specific account holders related to the funds at issue,

and it posted public notice of the forfeiture on its forfeiture website). Thus, the government has

met Supplemental Rule G’s notice requirements. See Fed. R. Civ. P. Supp. R. G(4).

                                                 10
                                  2. Adequacy of the Complaint

       Along with 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 “be verified,” state the grounds for jurisdiction and venue, “describe the property with

reasonable particularity,” “identify the statute under which the forfeiture action is brought,” and

“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 this a “higher

standard of pleading” than that imposed by Federal Rule 8. United States v. All Assets Held at

Bank Julius Baer & Co., Ltd., 571 F. Supp. 2d 1, 16 (D.D.C. 2008). Rule 8, however, “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 of the complaint are largely formal and are easily met here.

The complaint is verified; it identifies the basis for jurisdiction and venue; it describes the

property at issue by (1) identifying the specific amount of money involved in Velmur’s illicit

transactions and blocked by OFAC, and (2) providing details about the wire transfers

themselves; and it identifies the provisions under which forfeiture is sought as 18 U.S.C. §

981(a)(1)(A), which permits forfeiture of property involved in money laundering, and 18 U.S.C.

§ 981(a)(1)(C), which permits forfeiture of property traceable to IEEPA violations. See Compl.

¶¶ 9–10, 56, 85–104, at 33.

       The fifth requirement is more substantive; the government must establish the legal basis

for its claims. See Mingzheng, 324 F. Supp. 3d at 51. The government’s forfeiture theory can be

summarized as follows: the Defendant Funds are forfeitable because Velmur intended to use

them to transact business, through United States banks, on behalf of SDNs without an OFAC

                                                  11
license, in violation of the IEEPA. Thus, 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 transactions at issue were made on behalf of [SDNs].” Id. That standard, “which is not

particularly onerous,” has again been met here. Id. (citing United States v. Aguilar, 782 F.3d

1101, 1108–09 (9th Cir. 2015)).

       Any entity that transacts with or on behalf of FTB—which was designated as an SDN in

2013—or other North Korean SDNs, through the United States financial system, must first

obtain a license from OFAC. See 31 C.F.R. § 544.201(a); United States v. All Wire Transactions

Involving Dandong Zhicheng Metallic Material Co., Ltd., 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 United States dollar wire transfers without first obtaining a

license from OFAC). The government alleges that to subvert this restriction, North Korean

financial institutions, including FTB, use front companies to send money through United States

banks. See Compl. ¶¶ 50–54. Citing FinCEN and OFAC reports, the government claims, more

specifically, that FTB “acts as North Korea’s primary foreign exchange bank,” and has “illegally

laundered ‘millions of U.S. dollars’” through front companies, including as recently as May

2017. Id. ¶¶ 45–49. This alleged elaborate network of front companies allows North Korea to

execute commodities contracts in United States dollars that would otherwise be rendered

impossible by international sanctions. Id. ¶¶65–69. For instance, North Korea and IPC allegedly

entered into a gasoil contract in United States dollars, which was carried out through front

companies using the United States banking system. Id. ¶ 75–80.

                                                12
       Having laid that groundwork, the government alleges that Velmur provided material

support for North Korean front companies, including FTB front companies, by helping them

purchase gasoil on behalf of North Korea. Id. ¶¶ 57–58. The government’s confidential sources

state that, despite Velmur’s self-described activities as a real estate manager, its business

“focuses on facilitating the laundering of funds for North Korean financial facilitators and

sanctioned entities.” Id. ¶¶ 58–61. The government alleges that the five wire transactions that

transferred the Defendant Funds into Velmur’s United States bank accounts were issued by front

companies of designated North Korean banks, and were intended to facilitate Velmur’s purchase

of gasoil from IPC on behalf of North Korea. Id. ¶¶ 56, 70–93. True to form, Velmur allegedly

wired nearly $7 million to IPC. Id. ¶ 76. And a confidential witness stated that a “clandestine

FTB branch located outside of North Korea ordered a $1.09 million payment to be made via a[n]

FTB front company to Velmur” during this period. Id. ¶ 81–82. IPC was subsequently

designated as an SDN by OFAC. Id. ¶ 75. Notably, Velmur never sought OFAC licensing for

the transactions. See Whitley Decl. ¶ 7. Thus, the government claims that Velmur violated the

IEEPA because it conducted transactions on behalf of SDNs—FTB and others—through United

States banks without obtaining OFAC licenses. See Compl. ¶¶ 70-74, 85-92, 99, 102; Whitley

Decl. ¶ 7; see also 31 C.F.R §§ 544.202(c), 544.301, 544.405.

       The government’s allegations establish a reasonable basis to believe that it could show at

trial that the Defendant Funds “constitute[d]” or were “derived from” IEEPA violations. 18

U.S.C. § 981(a)(1)(C). The funds were sent by SDN front companies to Velmur for the purpose

of making transactions on behalf of those SDNs. That OFAC blocked each transaction because

it concluded that an SDN had an interest in it, and that OFAC subsequently designated Velmur

and IPC as SDNs, add additional weight to this conclusion. See Compl. ¶¶ 57, 85–93; Whitley

                                                 13
Decl. ¶ 7; see also Consarc Corp. v. Iraqi Ministry, 27 F.3d 695, 702 (D.C. Cir. 1994) (stating

that “OFAC[] . . . receives an even greater degree of deference than the Chevron standard”). The

government “has thus surpassed its burden under Supplemental Rule G(2).” Mingzheng, 324 F.

Supp. 3d at 53 (holding that blocked transactions made by FTB front companies to a different

FTB front company were subject to forfeiture); see also United States v. $396,589 in U.S. Funds,

349 F. Supp. 3d 13, 21–22 (D.D.C. 2018) (holding that funds used to pay for specialized

petroleum parts on behalf of Iran, in violation of sanctions on that country, were subject to

forfeiture as proceeds traceable to an IEEPA violation).

        The government’s allegations also establish that the Defendant Funds are subject to

forfeiture under 18 U.S.C. § 981(a)(1)(C), as derived from proceeds traceable to violations of the

anti-money laundering statute, id. § 1956. Section 1956 makes it unlawful to “transport[ ],

transmit[ ], or transfer[ ] . . . a monetary instrument or funds . . . to a place in the United States

from or through a place outside the United States . . . with the intent to promote the carrying on

of specified unlawful activity,” 18 U.S.C. § 1956(a)(2), or to conspire to do so, see id. § 1956(h).

The government alleges that the SDN front companies wired the Defendant Funds from outside

the United States with the intention that they pass through Velmur’s United States bank

accounts, with Velmur’s knowledge and participation. See Compl. ¶¶ 56, 84–93. And as already

discussed, the government alleges that these payments constitute or are derived from proceeds

traceable to IEEPA violations, which are “specified unlawful activit[ies]” under § 1956. See 18

U.S.C. § 1956(c)(7)(D) (defining “specified unlawful activity” to include offenses under “section

206 ... of the [IEEPA]”). Thus, the government’s well-pleaded allegations are sufficient to

establish that the defendant funds are derived from proceeds traceable to a violation of §

                                                   14
1956(a)(2)(A), or at least a conspiracy to commit such a violation, and consequently §

981(a)(1)(A) provides an alternative ground for forfeiture of the defendant funds. 8

                                     B. Civil Money Penalties

       The government also asks this Court to impose civil money penalties on Velmur, as

authorized by the anti-money laundering statute. Under that statute, an individual who violates

subsection (a)(1) is “liable to the United States for a civil penalty” of up to the “value of the

property, funds, or monetary instruments involved in the [illegal] transaction[s].” 18 U.S.C. §

1956(b).

       The government’s claim for civil money penalties is brought in personam, so it is not

subject to Supplemental Rule G. Instead, Rule 8 of the Federal Rules of Civil Procedure sets the

standard for in personam complaints. Rule 8 requires “a short and plain statement of the claim

showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). This standard requires that

the complaint “contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is

plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 555 (2007)). Rule 8’s standard is more permissive than the standard

imposed by Supplemental Rule G. See All Assets Held at Bank Julius Baer & Co., Ltd., 571 F.

Supp. 2d at 16. Further, “[w]hen moving for default judgment, a plaintiff must prove that it is

entitled to the requested damages.” Commodity Futures Trading Comm’n v. GIGFX, LLC, 844

F. Supp. 2d 58, 64 (D.D.C. 2012) (citing R.W. Amrine Drywall Co., 239 F. Supp. 2d 26, 30

(D.D.C. 2002)).

       8
         The government’s allegations are also sufficient to demonstrate that there exists a
“substantial connection between the [Defendant Funds] and the [alleged] offense[s],” as required
by 18 U.S.C. § 983(c)(3). The Defendant Funds were necessary to carry out the gasoil
transactions intended to subvert the IEEPA.

                                                  15
       As noted, the government has sufficiently alleged that Velmur violated the federal anti-

money laundering statute with respect to the Defendant Funds. Velmur received the Defendant

Funds on behalf of SDNs without properly obtaining a license from OFAC, and the transactions

involved the movement of money across United States borders. Compl. ¶¶ 46, 70-74, 85-92;

Whitley Decl. ¶ 7. Thus, Velmur is subject to civil money penalties up to “the value of the

property, funds, or monetary instruments involved in the transaction[s].” 18 U.S.C. §

1956(b)(1)(A). The government, however, also seeks civil money penalties arising from

additional Velmur transactions.

       First, the government identifies eight wire transfers from Velmur to IPC between

February and Aril 2017, each wire referencing payment “[f]or Gasoil.” See Compl. ¶¶ 76-78;

Whitley Decl. ¶¶ 13–14. The wires totaled $6,853,000. See Compl. ¶ 76; Whitley Decl. ¶ 13. A

confidential source stated that around the same time, pursuant to a different contract with

Velmur, IPC shipped diesel fuel from a Russian port known as a key waypoint for shipments to

North Korea. See Whitley Decl. ¶¶ 15–16. And as discussed above, both IPC and Velmur were

subsequently designated by OFAC as operating to provide gasoil to North Korea in

contravention of United States sanctions. See Compl. ¶¶ 57, 75; Whitley Decl. ¶¶ 8–9. Given

Velmur’s other money laundering activities and the government’s allegation that both IPC and

Velmur were operating under agreements with FTB, the government has plausibly alleged that

Velmur’s payments to IPC were made on behalf of an SDN without an OFAC license. Thus, the

two entities transmitted money through the United States banking system “with the intent to

promote the carrying on of specified unlawful activity,” the IEEPA, in violation of 18 U.S.C. §

1956(a)(2)(A). Velmur is subject to civil money penalties up to the total amount of its

transactions with IPC. See id. § 1956(b)(1)(A).

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       Second, the government identifies four wire transfers allegedly sent by FTB affiliates and

front companies to Velmur. Compl. ¶ 61; Whitley Decl. ¶ 12. In September 2016, Velmur

received a $230,000 wire transfer from Dandong Zhicheng Metallic Material Company, which

was subsequently found to have laundered money on behalf of North Korea. See Compl. ¶ 61(a);

Whitley Decl. ¶ 12(a); see also Dandong, 2017 WL 3233062, at *5 (finding probable cause that

Dandong was a North Korean front company engaged in IEEPA violations, justifying the

forfeiture of Dandong funds routed through United States banks). In July 2016, Velmur received

$189,980 from Ruizhi Resources Limited, a company found to be a front for Dandong Zhicheng.

See Compl. ¶ 61(b); Whitley Decl. ¶ 12(b). Sometime in 2016, Velmur received “more than

$250,000” from “Company A,” which a confidential source identified as an FTB front company

that was directed by FTB to wire money to Velmur. See Compl. ¶ 61(c); Whitley Decl. ¶ 12(c).

Similarly, sometime in 2017, Velmur received “more than $500,000” from “Company B,” which

the same confidential source identified as another FTB front company that was directed by FTB

to wire money to Velmur. See Compl. ¶ 61(d); Whitley Decl. ¶ 12(d). Again, the government’s

allegations with respect to these transactions are sufficient to show that Velmur knowingly

transacted across United States borders on behalf of SDNs without obtaining OFAC licenses, in

violation of the IEEPA and 18 U.S.C. § 1956(a)(2)(A). Again, Velmur is subject to civil money

penalties up to the total amount of these illicit transactions. See 18 U.S.C. § 1956(b)(1)(A).

       The government alleges that in total, Velmur “was a counterparty to [thirty-five] illicit

wire transfers in U.S. dollars from known North Korean financial facilitators, totaling

$14,838,187.50, which funds were routed through U.S. correspondent banking accounts.”

Whitley Decl. ¶ 12. Adding those funds to the $6,853,000 wired by Velmur to IPC, see Whitley

Decl. ¶ 13, the government seeks civil money penalties of $21,691,187.30, see id. ¶ 20. Aside

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                                       V. CONCLUSION

       For the foregoing reasons, the Court GRANTS the government’s Motion for Default

Judgment (ECF No. 28) as it relates to forfeiture and GRANTS IN PART the Motion for

Default Judgments as it relates to civil money penalties. The Defendant Funds, $4,999,925, are

forfeited to the United States, and judgment is entered in favor of the United States and against

Velmur in the amount of $13,022,905. An order consistent with this Memorandum Opinion is

separately and contemporaneously issued.

Dated: March 22, 2019                                             RUDOLPH CONTRERAS
                                                                  United States District Judge

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