122 F. Supp. 3d 57
S.D.N.Y.2015Background
- Government alleges a $230 million tax‑refund fraud in Russia (the "Organization") and that roughly $1.9 million of those proceeds were laundered into Manhattan real estate via Prevezon Holdings and related entities (Bunicon, Elenast, Company‑1, Megacom, Castlefront, etc.).
- Prevezon Holdings (Cyprus) and eight U.S. LLC subsidiaries bought New York property beginning in 2009; funds for many purchases came from a UBS Zurich account (Prevezon 8160) that the AVC alleges contained laundered proceeds.
- Key transfers: February–March 2008 wires from Moldovan shell companies Bunicon and Elenast (and intermediaries) into Prevezon’s UBS account; many transfers were misdescribed in bank records (e.g., "sanitary equipment" or "auto parts").
- Kolevins Ltd. and Ferencoi Investments Ltd. (BVI) are alleged to have provided funds that were commingled into Prevezon’s account; substantial overlap in ownership/directors among Prevezon, Kolevins, and Ferencoi (Katsyv, Litvak, Krit).
- Procedural posture: Government filed an Amended Verified Complaint seeking civil forfeiture and civil money‑laundering penalties; Prevezon moved to dismiss for failure to state a claim and for verification issues; Kolevins and Ferencoi moved to dismiss for lack of personal jurisdiction and failure to state a claim. Court denied all motions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Sufficiency of tracing tainted funds into Prevezon accounts and NY property | AVC traces ~$1.9M from Russian refunds through intermediaries into Prevezon 8160 using dates, amounts, and bank records; Banco Cafetero accounting rules permit tracing through commingled accounts | Prevezon: tracing is conclusory, funds commingled with large untainted balances, and key Russian records destroyed or unauthenticated | Denied — AVC plausibly traces tainted funds under Banco Cafetero assumptions and pleads enough facts for Rule G and Rule 12(b) pleading stage |
| Specified unlawful activity (SUA) under 18 U.S.C. § 1956(c)(7) | Government: SUA pleaded as wire fraud or, alternatively, offenses against a foreign nation (embezzlement/misappropriation of public funds or fraud against a foreign bank) | Defendants: wire‑fraud SUA is extraterritorial and thus not available; other SUAs insufficiently alleged | Denied on wire‑fraud theory but sustained on alternative SUA: embezzlement/misappropriation of public funds and fraud against a foreign bank plausibly alleged |
| Scienter (knowledge / intent to launder) | Suspicious indicia (shell companies, false descriptions, sham contracts, apparent nominee signatory, overlapping principals) support knowledge or willful blindness | Defendants: no direct proof they knew funds were proceeds of crime; allegations concern others' conduct | Denied — AVC alleges facts supporting a reasonable belief Government can prove knowledge or conscious avoidance at trial |
| Personal jurisdiction over Kolevins and Ferencoi | Government: defendants transacted business in NY by investing/commingling funds into Prevezon accounts used to buy NYC real estate; ownership overlap supports purposeful availment | Kolevins/Ferencoi: mere transfers or common‑ownership are insufficient to subject them to NY jurisdiction or liability | Denied — prima facie showing of specific jurisdiction under NY CPLR §302(a)(1) and due process; allegations suffice to state plausible liability |
Key Cases Cited
- In re 650 Fifth Ave. & Related Props., 777 F. Supp. 2d 529 (S.D.N.Y. 2011) (tracing and forfeiture pleading principles in commingled accounts)
- Banco Cafetero Panam. v. United States, 797 F.2d 1154 (2d Cir. 1986) (permitting accounting assumptions for tracing in commingled accounts)
- Walsh v. United States, 712 F.3d 119 (2d Cir. 2013) (affirming application of Banco Cafetero tracing in forfeiture context)
- Morrison v. Nat'l Australia Bank Ltd., 561 U.S. 247 (2010) (presumption against extraterritorial application of U.S. statutes)
- RJR Nabisco, Inc. v. European Cmty., 764 F.3d 129 (2d Cir. 2014) (wire‑fraud statute does not apply extraterritorially absent domestic completion of elements)
- Pasquantino v. United States, 544 U.S. 349 (2005) (wire fraud may reach schemes using U.S. wires to defraud a foreign sovereign; distinguished by later extraterritoriality doctrine)
- Licci ex rel. Licci v. Lebanese Canadian Bank, SAL, 732 F.3d 161 (2d Cir. 2013) (personal jurisdiction analysis for foreign defendants; CPLR §302 and due process framework)
- Petroleos Mexicanos v. SK Eng'g & Const. Co., [citation="572 Fed. App'x 60"] (2d Cir. 2014) (rejecting wire‑fraud as extraterritorial predicate where domestic contacts were attenuated)