United States v. Approximately 69

Background

This civil forfeiture action concerns approximately 69,370 Bitcoin, Bitcoin Gold, Bitcoin SV, and Bitcoin Cash allegedly derived from unlawful activity. The opinion states that “Individual X” hacked Silk Road in 2020 and transferred more than 70,000 bitcoin through 54 transactions to addresses controlled by that individual. The government later seized most of that bitcoin from another address.

Earlier orders had struck several claims and denied another potential claimant’s motion to intervene. At the time of this order, Buckley’s claim was the only remaining claim. The order also addressed a request by another claimant to seek reconsideration of the earlier order striking that claimant’s claim, as well as motions seeking separate judgments under Rule 54(b) of the Federal Rules of Civil Procedure.

Buckley claim

Lucas Buckley, acting as trustee for the Gox Victim Bitcoin Trust, filed a verified claim asserting an ownership interest in 0.01 BTC and related cryptocurrency assets, including Bitcoin Gold, Bitcoin SV, Bitcoin Cash, and future Bitcoin hard forks. Buckley had purchased the bitcoin from another claimant whose claim had previously been struck.

The government argued that Buckley’s claim was entirely derivative of the earlier claimant’s claim. The court did not rely solely on that argument. It explained that Buckley’s claim could not automatically be foreclosed merely because the earlier claimant had not plausibly shown that the claimant’s stolen bitcoin was part of the seized property.

The court nevertheless held that Buckley’s claim failed for two independent reasons. First, Buckley could not meet the statutory definition of an “innocent owner” under 18 U.S.C. § 983(d). That provision requires a person who acquired the property interest after the conduct giving rise to forfeiture to have been a bona fide purchaser for value and to have lacked knowledge, and reasonable cause to believe, that the property was subject to forfeiture. The court found that Buckley knew the bitcoin had already been seized and was the subject of the forfeiture proceeding when he bought it.

Second, the court held that Buckley had offered only speculation that the seized bitcoin was his property. His theory was that he bought 0.01 BTC from the small amount remaining in the other claimant’s account after most of that claimant’s bitcoin was stolen, and that the remaining bitcoin was later transferred through Silk Road and ultimately into the seized wallet. The court found that sequence implausible based on the timing described in the record. It also found that Buckley’s expert declaration did not establish that the other claimant’s bitcoin was part of the seized property or provide a sufficiently plausible factual basis for the claim.

The court rejected Buckley’s argument that a verified claim had to be treated as evidence sufficient to prevent resolution at the pleading stage. It also rejected the argument that factual disputes required discovery. The court discussed whether cryptocurrency should be treated as fungible—meaning interchangeable for legal purposes—in the same way as paper currency. It concluded that Buckley and the other claimants had not shown that the law permitted them to trace individual bitcoins without addressing fungibility. The court also noted that Buckley acknowledged he did not know which, if any, of approximately 34,754 additional bitcoin formerly held in accounts on Mt. Gox had reached the seized wallet.

The court granted the government’s motion to strike Buckley’s claim.

Request to seek reconsideration

The other claimant sought permission to ask the court to reconsider the order striking that claimant’s claim. The claimant relied on Buckley’s expert declaration as purported new evidence and argued that it showed factual disputes about when and where the bitcoin moved.

The court denied the request. It held that the expert declaration did not create factual issues preventing resolution at the pleading stage. The court also stated that, even without relying on the government’s evidence about the timing and movement of the funds, the earlier claim still failed because it offered only speculation that the seized bitcoin had belonged to that claimant.

Rule 54(b) motions and disposition

Battle Born Investments Company, LLC, First 100, LLC, 1st One Hundred Holdings, LLC, and Ilija Matusko sought separate judgments under Rule 54(b). The court stated that separate judgments would not have been warranted in any event. Because striking Buckley’s claim left the matter ready for final judgment, the court held that the motions were moot and denied them.

The court ordered the government to promptly submit a proposed final judgment. Judge Richard Seeborg signed the order.