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United States v. JP Morgan Chase Bank

United States District Court, N.D. New York

April 22, 2015

UNITED STATES OF AMERICA, Plaintiff,
v.
JP MORGAN CHASE BANK, ACCOUNT NUMBER XXXXX3317, in the name of BLAZPERU, INC., VL: $8, 439.60, et al., Defendants.

MEMORANDUM-DECISION and ORDER

LAWRENCE E. KAHN, District Judge.

I. INTRODUCTION

Plaintiff United States of America ("Plaintiff" or the "Government") commenced this action in rem to forfeit and condemn Defendant bank accounts and currency in a Verified Complaint dated November 1, 2013. Dkt. Nos. 1; 18 ("Amended Complaint"). Plaintiff alleges that Defendant bank accounts and currency constitute the proceeds of violations of 21 U.S.C. §§ 841(a) and 846; property involved in violations of 18 U.S.C. §§ 1956(a)(1)(B)(i); and property involved in violations of 31 U.S.C. § 5324. Am. Compl. ¶ 1. Presently before the Court is Claimants Latam Games, LLC ("Latam") and Crescent Marketing, Inc.'s ("Crescent") (collectively, "Claimants") Motion to dismiss Plaintiff's Amended Complaint pursuant to Supplemental Rule G(2)(f), or alternatively, Federal Rule of Civil Procedure 12(b)(6), and for lack of in rem jurisdiction under 28 U.S.C. § 1355(b)(1). Dkt. Nos. 42 ("Motion"); 43 ("Memorandum").

II. BACKGROUND[1]

Claimants sell video games wholesale. Am Compl. ¶¶ 44, 47. Claimants were founded and are run by five brothers: Khalid Baqai ("Khalid"), Tariq M. Baqai ("Tariq"), Qasim M. Baqai ("Qasim"), Zahid Baqai ("Zahid"), and Babar M. Baqai ("Babar"). Id. ¶¶ 31, 47, 51. Crescent was founded in 1991, and is located at 8322 Artesia Boulevard, Buena Park, California, 90621. Id. ¶¶ 31, 38. The brothers also run Millennium Investment, LLC, Topz Investment, LLC, and Mini Max Group, LLC, which are all located at the same address; the property is owned by Millennium Investment, LLC. Id. ¶ 51. Latam was incorporated on July 5, 2012, and is located at 7310 N.W. 41st Street, Miami, Florida. Id. ¶ 36. The 7310 N.W. 41st Street property is owned by QNK Investments, LLC ("QNK"); Khalid and Qasim are listed members of QNK. Id. ¶¶ 36, 51. In a conversation with an Internal Revenue Service ("IRS") special agent, Tariq stated that Crescent and Latam used to be part of the same organization, but separated for business reasons. Id. ¶ 47. Claimants have sold video games to Blazperu, Inc. ("Blazperu"), which sells video games exclusively in Peru. Id. ¶ 44.

On June 27, 2013, Drug Enforcement Administration ("DEA") officers, operating in the Northern District of New York ("Northern District"), executed a search warrant of an individual based upon his/her sale of cocaine to a DEA informant. Id. ¶ 13. That individual later became a Confidential Source ("CS"). Id. At the time of his/her arrest, the CS was in possession of unprocessed heroin which had been shipped to him/her from outside of the United States. Id. ¶ 14. The CS stated that he/she was going to deliver this heroin to an individual, who later became a Confidential Informant ("CI"), for processing; the CI would then return the processed heroin to the CS, who would distribute it throughout the Northern District. Id. The CI was later arrested while waiting to meet the CS for a scheduled delivery of heroin. Id. ¶ 15.

The DEA learned from the CI that since approximately early 2012, the CI and CS, acting with others, had distributed cocaine throughout the Northern District. Id. ¶ 17. As with the heroin found on the CS and CI at the time of arrest, the cocaine was shipped from outside of the United States, concealed in various objects, to the CS; the CS then delivered the cocaine to the CI, who would extract it and return it to the CS for distribution. Id. ¶ 18. The CS returned the proceeds of the distribution to the CI. Id. The CI was then instructed by an individual (the "UI") to deposit the cash into various bank accounts. Id.

The CI identified Bank of America ("BOA") account number 1577, in the name of Blazperu, as one of the accounts into which he/she deposited cash proceeds from cocaine sales. Id. ¶ 19. The UI instructed the CI to make all cash deposits under $10, 000 to avoid bank reporting requirements. Id. ¶ 20. BOA records for account number 1577 reveal a pattern of large cash deposits made on consecutive days by unknown sources; over a period from March 2012 to February 2013, approximately ninety-four cash deposits, totaling approximately $662, 559.00 and all under $10, 000, were made into the account. Id. ¶¶ 22-23. On June 20, 2012, BOA account number 0277 was opened in the name of Blazperu; records show a similar pattern of deposits into BOA account number 0277. Id. ¶ 23. On January 3, 2013, a BOA employee in Astoria, New York observed two individuals arriving together; one of the individuals entered and made a cash deposit into account number 0277, while the other waited outside. Id. ¶ 26. The first individual then exited the bank, and the second individual entered and made a cash deposit into account number 1577. Id. The employee stated that this was an ongoing pattern. Id.

In March 2013, BOA closed both account number 1577 and account number 0277 due to suspicious activity. Id. ¶ 28. In February 2013, account number 3317, in the name of Blazperu, was opened at JP Morgan Chase Bank ("JP Morgan"). Id. ¶ 29. Bank records show a pattern of cash deposits under $10, 000, totaling approximately $136, 333.00, were made into account number 3317 from February 2013 through June 2013. Id.

From August 2012 until February 2013, approximately $227, 000 was wire transferred in increments under $10, 000 from Blazperu account number 1577 to BOA account number 9149, in the name of Crescent. Id. ¶ 31. Two wire transfers, one in April 2013 and one in June 2013, were also made from Blazperu account number 3317 to account number 9149. Id. ¶ 30.

BOA records also show a pattern of cash deposits under $10, 000 and on consecutive days, made into BOA account number 9149. Id. ¶ 32. From July 2012 to May 2013, approximately 115 cash deposits totaling approximately $732, 488.90 were made into the account. Id. From January 2010 through October 2010, a pattern of cash deposits under $10, 000 totaling approximately $267, 282.50, were also made into the account. Id. ¶ 40. Tariq stated in a conversation with an IRS special agent that Crescent receives no cash transactions, and that all of its account transactions are made by check, credit card, or wire transfers. Id. ¶ 48.

The records for BOA account number 9149 also show numerous deposits from legitimate sources of income such as Amazon, UPS, and American Express. Id. ¶ 38. Investigators believe, based upon review of the available bank records, that BOA account number 9149 was used to conceal and launder drug proceeds. Id. On August 19, 2013, BOA account number 9149 was closed by Crescent. Id. ¶ 41.

JP Morgan account number 1606 and account number 3517 were both opened in the name of Crescent, with Khalid and Tariq as signatories. Id. ¶ 34. In July 2013, a total of $2.8 million was electronically transferred from BOA account number 9149 to JP Morgan account number 3517. Id. ¶ 33. On August 6, 2013, $2.4 million was transferred from JP Morgan account number 3517 to JP Morgan account number 1606. Id. ¶ 34.

The CI also stated that the UI instructed him/her to deposit cash proceeds from the sale of cocaine into BOA account number 5832, in the name of Latam. Id. ¶ 35. Bank records show that from August 2012 through February 2013, approximately $7.1 million was transferred from ...


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