By Dan Christensen, FloridaBulldog.org
More than $11.4 billion in the crypto currency Bitcoin, allegedly stolen from a China-Iran crypto mining operation but now in U.S. hands, has touched off a “race to the courthouse” in New York by multiple law firms seeking to claim it for the 9/11 families and other victims of terrorism.
Fifteen years ago, a federal judge ruled Iran was liable for providing “material support” to the al Qaeda terrorists who hijacked four U.S. passenger jets on Sept. 11, 2001 and crashed them into New York’s World Trade Center towers, the Pentagon and a field in Pennsylvania. Nearly 3,000 people were killed in the attacks.
Since then, the court has ordered Iran to pay more than $140 billion in damages to thousands of the injured, relatives of the dead and insurers. The Taliban, the Islamic rulers of Afghanistan, were also found liable and similarly ordered to pay.
What’s happening now in federal courts in the Eastern and Southern Districts of New York was sparked by a sprawling wire fraud and money-laundering conspiracy indictment unsealed Oct. 14 and parallel forfeiture action. The indictment charged Chen Zhi, a Cambodian national born in China, with running “forced-labor scam compounds” across Cambodia.
“Individuals held against their will in the compounds engaged in cryptocurrency investment fraud schemes known as ‘pig butchering’ scams, that stole billions of dollars from victims in the United States and around the world,” says a Justice Department press release.
“The defendant was the mastermind behind…a criminal enterprise built on human suffering,” said Assistant Attorney General John Eisenberg. “Trafficked workers were confined in prison-like compounds and forced to carry out online scams on an industrial scale.”
PIG BUTCHERING = ENORMOUS PROFITS
Chen is the founder and chairman of Prince Holding Group, a 10-year-old multinational conglomerate ostensibly focused on real estate development but in fact was “one of Asia’s largest transnational criminal organizations that reaped ‘enormous profits’ operating its scam compounds,’’ the press release says. The Guardian reported Jan. 8 that Chen was being held in China following his extradition from Cambodia.
The Justice Department’s forfeiture complaint is the largest in its history. It asks the court to allow the U.S. government to take ownership of “approximately” 127,271 Bitcoin it seized and contends “are the proceeds and instrumentalities of the defendant’s fraud and money laundering schemes, and were previously stored in unhosted cryptocurrency wallets whose private keys the defendant had in his possession.”
The Bitcoin stash was worth about $15 billion when the government announced Chen’s indictment. By Friday the value of a single Bitcoin was pegged at $89,445.06 and the cache’s total value had dropped by 24 percent.
Word of the huge crypto stash prompted the filing of a 75-page civil suit on Dec. 26 in the Eastern District of New York. The lead plaintiff is Noala Fritz, the mother of West Point graduate 1st Lieut. Jacob Fritz who was one of four soldiers abducted and killed in Iraq in January 2007. The complete list of plaintiffs, all said to be the “direct victims and surviving family members” of various overseas terrorist attacks, takes up the suit’s first 34 pages.
The incidents they endured include the 1983 Hezbollah bombing of the U.S. Marine barracks in Beirut, Lebanon, the 1998 al Qaeda bombings of the U.S. embassies in Tanzania and Kenya, the 2001 Hamas bombings of a Sbarro restaurant in Jerusalem and the 2006-2007 kidnapping and murders of four U.S. service members on deployment in Iraq.
The complaint targets the “Iran and China Investment Development Group, doing business as LuBian.com,” which it contends was an “intermediary” used by the Iranian government to evade U.S. economic sanctions imposed for being a state sponsor of terrorism.
“One of Iran’s most recent sanctions-defying gambits revolves around its extensive efforts to mine and deal in cryptocurrencies,” says the complaint written by lawyers with the large Los Angeles-based Gibson, Dunn & Crutcher law firm. “Cryptocurrency in particular helps Iran to launder proceeds of its energy industry. While Iran cannot directly export its oil and natural gas to a host of other countries, its leaders have recognized that Iran instead can convert that oil and natural gas to electricity and then create a form of electricity export through cryptocurrency mining, where energy is converted into digital assets.”
THE HACKER WHO GAVE AWAY $15 BILLION
But the LuBian mining operation collapsed in December 2020 when an “anonymous ‘Whitehat’ – slang for an ethical hacker – breached LuBian’s pool and stole” its Bitcoin. “LuBian repeatedly attempted to make contact with the hacker to secure return of that cryptocurrency, even offering a reward but to no avail,’’ the complaint states. “Eventually, the hacker instead apparently handed over the keys to the Iran-China Group’s, i.e. LuBian’s, cryptocurrency wallets (containing the Bitcoin at issue) to the U.S. government, where, on information and belief, the keys – and thus the cryptocurrency – remain.” At that time of the government’s announcement, the Bitcoin was valued at $15 billion.
The lawsuit says that each of the hundreds of plaintiffs are “judgment creditors of Iran – collectively awarded $23.2 billion in damages” for their suffering. To justify their claim, It cites the Terrorism Risk Insurance Act, which states that individuals with judgments against “a terrorist party may execute on (their) blocked assets,” which are defined to include assets ‘seized…by the United States.’”
No defrauded victims of the Cambodia-based “pig butchering” scheme are known to have filed claims for the Bitcoin in U.S. custody to date. But lawyers for thousands of 9/11 survivors and family members of the dead are shouting not so fast.
And they’ve recently begun lining up in the Southern District of New York – where the massive, 23-year-old civil case that principally targets Saudi Arabia is being waged – to file notices of their own claims to those enormous Bitcoin assets.
Wednesday evening, four law firms declaring that they represent “approximately 95 percent of the wrongful death and serious physical injury (9/11) plaintiffs,” wrote to U.S. District Judge George Daniels to take issue with motion papers filed five days earlier by two law firms representing a subset of 9/11 victims known as the “Havlish plaintiffs” that asks the court to allow them to take control of all that Bitcoin.
“In recent days and weeks, a number of other judgment holders, with claims primarily relating to Iranian terrorism, and others, have asserted claims against the Bitcoin assets in the forfeiture proceeding, including many other 9/11 victims in this MDL [Multi-District Litigation],” says the letter written by New York attorneys Jerry Goldman of Anderson Kill; Megan Wolfe Benett of Kreindler & Kreindler; Jeanne O’Grady of Speiser Krause, and John Eubanks of South Carolina’s Motley Rice law firm.
The lawyers went on to tell Judge Daniels they intend to soon file a joint motion to intervene in the Fritz case regarding the non-9/11 victims of terrorism.
“Our overarching purpose will be to see to it that the proceeds of the forfeiture proceeding will be distributed in a fair and equitable manner to all 9/11 victims, without a ‘race to the courthouse and competing attachment proceedings in different jurisdictions,” they wrote.
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