Default Judgment in Bitcoin Forfeiture Case Advances with Magistrate’s Recommendation

News | February 16, 2024 By:

On Wednesday, February 7, 2024, Kendall J. Newman, U.S. Magistrate Judge of the U.S. District Court for the Eastern District of California, recommended that the court grant the United States’ motion for default judgment in the case of United States v. Approximately 1.10387626 Bitcoin.

This case concerned the civil forfeiture of approximately 1.10387626 bitcoin that was seized by the U.S. Secret Service on September 6, 2022. According to court documents, the cryptocurrency was connected to a wire fraud scheme targeting a victim in Rocklin, California in May 2022.

The victim received instructions to take out money from his bank account and place it in a secure digital wallet. Following the instructions, The victim withdrew $40,000 in cash from his Bank of America savings account. He then transferred all but $100 into a digital wallet associated with Patel Ankitbhai Ramanbhai using the QR code. Utilizing the digital wallet, the victim carried out three transactions, delivering a combined total of 1.104 bitcoin to the fraudster.

Ramanbhai’s Binance exchange account containing the bitcoin was identified and initially frozen by Binance at the Secret Service’s request. A federal seizure warrant was then executed on August 16, 2022 to seize the bitcoin from the Binance account. The government initiated forfeiture proceedings in U.S. District Court in December 2022.

Judge Newman found that the government gave appropriate notice of the forfeiture action through public notices on forfeiture.gov and direct notices mailed and emailed to potential claimants Ramanbhai and Joseph McLellan. When neither claimant responded to assert an interest in the bitcoin, the clerk entered default against them in May 2023.

In her recommendations, Judge Newman analyzed factors from the Eitel test and found that they supported entering default judgment. This included that the government would be prejudiced if it had to continue litigating without a claimant, the complaint and supporting evidence showed the probable merits of the forfeiture claim, and the amount at stake was not substantial enough to deny the motion.

Judge Newman proposed that the district judge grant the default judgment motion and enter final judgment forfeiting all legal interest in the approximately 1.10387626 bitcoin to the United States. If accepted, this would allow the government to dispose of the seized cryptocurrency according to law with no claimant successfully challenging the forfeiture. The case is expected to conclude following the district judge’s review of the recommendations.

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