United States of America v. Cryptocurrencies

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IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
UNITES STATES OF AMERICA,
Plaintiff,
v.
CRYPTOCURRENCIES,
Defendant.
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Case No. 3:23-cv-00411-S
FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
OF THE UNITED STATES MAGISTRATE JUDGE
Before 	the 	Court 	is 	Plaintiff 	the 	United 	States 	of 	America’s 	(the
“Government”) Motion for Default Judgment and Final Judgment of Forfeiture
(ECF No. 15), which the District Judge referred to the United States Magistrate
Judge for findings and a recommendation (ECF No. 17). For the reasons explained
below, the District Judge should GRANT the Motion and enter a final judgment
of forfeiture.
Background
The Government brought its Complaint for Forfeiture (ECF No. 1) on
February 22, 2023, seeking the forfeiture of $317,251.94 in cryptocurrencies (the
“Property”), which was seized from the virtual currency wallets of Daniil Shchukin
in December 2022 during an investigation by the Federal Bureau of Investigation
(FBI). See Compl. at 1 (ECF No. 1). In its Complaint, the Government alleges that
the Property is subject to forfeiture under 18 U.S.C. § 981(a)(1)(C) and (G) because
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it “constitutes or was derived from proceeds traceable to a violation, or conspiracy
to violate 18 U.S.C. § 1030 (computer fraud)” and 18 U.S.C. § 1343 (wire fraud). Id.
at 2–3, ¶ 5(A)–(B). The Government also alleges that the Property is subject to
forfeiture under 18 U.S.C. § 981(a)(1)(A) because it was “property involved in a
violation of 18 U.S.C. §§ 1956 and 1957 (money laundering), and any property
traceable to that property, or conspiracy to violate §§ 1956 and 1957.” Id. at 2,
¶ 5(C).
The Government posted notice of the impending forfeiture of the Property
on an official government website for at least 30 consecutive days, beginning on
March 2, 2023. See Notice of Publ’n (ECF No. 9). The Government also sent direct
notice of this action along with a copy of the Complaint to the only known potential
claimant, Daniil Shchukin, a Russian citizen, through Russian authorities in
compliance 	with 	a 	Mutual 	Legal 	Assistance 	Treaty 	(MLAT). 	See 	generally
Certificate of Serv. (ECF No. 12). The MLAT requested Russian authorities to
provide a copy of the Complaint to Shchukin. Id. at 1. The Government has not
received confirmation from Russian authorities that the requested notice was
delivered to Shchukin. Id. at 2.
Neither Shchukin, nor any other claimant who did not receive direct notice,
filed a claim for the Property. Decl. of Default at 4, ¶¶ 8–10 (ECF No. 13-1)
(declaration of Tiffany Eggers). After both the direct notice and publication notice
deadlines expired, the Clerk entered a default against Shchukin and “all other
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persons and entities[.]” Clerk’s Default at 1 (ECF No. 14). The Government then
filed its Unopposed Motion for Default Judgment of Forfeiture (ECF No. 15).
Legal Standards
1. 	Default Judgment
“When a party against whom a judgment for affirmative relief is sought has
failed to plead or otherwise defend, . . . the clerk must enter the party’s default.”
Fed. R. Civ. P. 55(a). When a default has been entered, the factual allegations of
the complaint are taken as true. U.S. For Use of M-CO Constr., Inc. v. Shipco Gen.,
Inc., 814 F.2d 1011, 1014 (5th Cir. 1987) (citing Au Bon Pain Corp. v. Artect, Inc.,
653 F.2d 61, 65 (2nd Cir. 1981) and Nishimatsu Constr. Co. v. Hous. Nat’l Bank,
515 F.2d 1200, 1206 (5th Cir. 1975)). Once default has been entered, the Court may
enter a default judgment against the defaulting defendant upon motion of the
plaintiff. Fed. R. Civ. P. 55(b)(2). Whether to enter default judgment is within the
sound discretion of the court. Mason v. Lister, 562 F.2d 343, 345 (5th Cir. 1977)
(“[T]he entry of default judgment is committed to the discretion of the district
judge.”). “A party is not entitled to a default judgment as a matter of right, even
where the defendant is technically in default.” Ganther v. Ingle, 75 F.3d 207, 212
(5th Cir. 1996) (per curiam) (citing Mason, 562 F.2d at 345); accord Nat’l Cas. Co.
v. KT2 LLC, 2021 WL 1338221, at *2 (N.D. Tex. Apr. 8, 2021) (Brown, J.). Default
judgments are “disfavored” and there is “a strong policy in favor of decisions on
the merits and against resolution of cases through default judgments.” Lindsey v.
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Prive Corp., 161 F.3d 886, 893 (5th Cir. 1998) (cleaned up). To determine whether
to enter default judgment, the Court conducts a two-part analysis.
First, the Court examines whether a default judgment is appropriate under
the circumstances, considering: (1) whether material issues of fact are at issue; (2)
whether there has been substantial prejudice; (3) whether grounds for default are
clearly established; (4) whether default was caused by good-faith mistake or
excusable neglect; (5) the harshness of the default judgment; and (6) whether the
Court would feel obligated to set aside a default on the defendant’s motion. Id. at
893 (citing 10 Charles Alan Wright et al., Federal Practice and Procedure § 2685
(2d ed. 1983)).
Second, the Court assesses the merits of a plaintiff’s claims to determine
whether a sufficient basis for the judgment exists in the pleadings. See Nishimatsu
Constr., 515 F.2d at 1206. Although a defendant may be in default, “[t]he defendant
is not held to admit facts that are not well-pleaded or to admit conclusions of law.”
Id. However, “the requisite threshold for pleading sufficiency is lower on a motion
for default judgment than on a motion to dismiss[.]” Edmond v. Marathon
Petroleum Co., LP, 2021 WL 619503, at *7 (W.D. Tex. Feb. 17, 2021) (citing
Nishimatsu Constr., 515 F.2d at 1206).
2. Civil Forfeiture
“A judgment of forfeiture may be entered only if the government has
published notice of the action within a reasonable time after filing the complaint
or at a time the court orders.” Fed. R. Civ. P. Supp. R. G(4)(a)(i). The government
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can publish notice by “posting a notice on an official internet government forfeiture
site for at least 30 consecutive days.” Fed. R. Civ. P. Supp. R. G(4)(a)(iv)(C). And
“[t]he government must send notice of the action and a copy of the complaint to
any person who reasonably appears to be a potential claimant on the facts known
to the government before [60 days after the first day of publication on an official
internet government forfeiture site].” Fed. R. Civ. P. Supp. R. G(4)(b)(i).
The notice must be sent “by means reasonably calculated to reach the
potential claimant” and must include (1) “the date when the notice is sent”; (2) “a
deadline for filing a claim, at least 35 days after the notice is sent”; (3) notice “that
an answer or a motion under Rule 12 must be filed no later than 21 days after filing
the claim”; and (4) “the name of the government attorney to be served with the
claim and answer.” Fed. R. Civ. P. Supp. R. G(4)(b)(i)–(ii).
Relevant here, a civil forfeiture complaint must “(a) be verified; (b) state the
grounds for subject-matter jurisdiction, in rem jurisdiction over the defendant
property, 	and 	venue; 	(c) 	describe 	the 	property 	with 	reasonable
particularity; . . . (e) identify the statute under which the forfeiture action is
brought; and (f) state sufficiently detailed facts to support a reasonable belief that
the government will be able to meet its burden of proof at trial.” Fed. R. Civ. P.
Supp. R. G(2).
And “the complaint shall state the circumstances from which the claim arises
with such particularity that the defendant or claimant will be able, without moving
for a more definite statement, to commence an investigation of the facts and to
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frame a responsive pleading.” Fed. R. Civ. P. Supp. R. E(2)(a). “Rule E(2)(a)
imposes a substantive pleading requirement” and requires the government to “do
more than simply provide greater detail than it otherwise would be required to
[provide] under Rule 8 of the Federal Rules of Civil Procedure.” United States v.
$49,000 	Currency, 	330 	F.3d 	371, 	375 	n.8 	(5th 	Cir. 	2003). 	Although 	“the
government need not prove elements of its case at the pleading stage, . . . [it] must
allege facts supporting a reasonable belief that it will be able to bear its burden at
trial.” Id. (emphasis omitted) (internal citations omitted).
Analysis
1. 	Default judgment is procedurally proper under the circumstances.
First, the Government has shown that all potential claimants to the Property
are in default. No potential claimants have filed claims for the Property, and the
deadline to file such claims has passed. Decl. of Default at 4, ¶¶ 8–10 (ECF No. 13-
1). Individuals who do not receive direct notice must file claims by either 30 days
from the final date of publication of the notice or 60 days after the first day of
publication. See 18 U.S.C. § 983(a)(4)(A); Fed. R. Civ. P. Supp. R. G(5)(a)(ii)(B).
Here, the first date of internet publication on an official government website
occurred on March 2, 2023, and the final date of publication was March 31, 2023,
meaning the parties who did not receive direct notice needed to file a claim by May
1, 2023. See Decl. of Default at 4, ¶ 8 (ECF No. 13-1); see also United States v. 171
“Dehlavieh” Anti-Tank Guided Missiles, 2021 WL 5310567, at *1–3 (D.D.C. Nov.
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15, 2021) (finding that government met notice requirement by posting such notice
“on a government-forfeiture site”).
In compliance with the MLAT, the Government also sent notice of this
forfeiture action to Russian authorities requesting that they provide notice of the
Complaint to Shchukin. Decl. of Default at 2–3, ¶ 5 (ECF No. 13-1). The notice
included a copy of the forfeiture complaint and stated the deadlines for filing a
claim and an answer, the procedure for filing a claim and answer, and the name of
the government attorney to be served with the claim and answer. Id. at 2–3, ¶¶ 4–
5; see United States v. $1,071,251.44 of Funds Associated with Mingzheng Int’l
Trading Ltd., 324 F. Supp. 3d 38, 47 (D.D.C. 2018) (finding that service through a
MLAT was “more than sufficient under Supplemental Rule G(4)(b)”).
Under 18 U.S.C. § 983(a)(4)(A), potential claimants who receive direct
notice of the forfeiture complaint are required to file a claim to the Property no
later than 30 days after service of the Government’s complaint. To date, Shchukin
has not filed a claim or answered the Government’s complaint. See Decl. of Default
at 3, ¶ 6 (ECF No. 13-1). The Government has shown that the deadlines for
potential claimants who were indirectly or directly notified have passed and no
individuals—including Shchukin—have filed claims. Id. at 4, ¶¶ 8–9. Shchukin is
thus in default. See United States v. $76,273.00 in U.S. Currency, 2025 WL
1349332, at *3 (N.D. Tex. Apr. 7, 2025) (Rutherford, J.), adopted by 2025 WL
1347326 (N.D. Tex. May 8, 2025) (Scholer, J.); United States v. $39,980 in U.S.
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Currency, 2024 WL 4530031, at *3 (N.D. Tex. Sept. 20, 2024) (Rutherford, J.),
adopted by 2024 WL 4529569 (N.D. Tex. Oct. 17, 2024) (Scholer, J.).
The Lindsey factors also support granting default judgment under these
circumstances. Because no potential claimant has filed a claim to the Property,
there are no material facts in dispute. See Nishimatsu Constr., 515 F.2d at 1206
(“The 	defendant, 	by 	his 	default, 	admits 	the 	[Government’s] 	well-pleaded
allegations of fact[.]”). The claimants’ failure to file a claim or “otherwise ‘respond
has 	brought 	the 	adversary 	process 	to 	a 	halt, 	effectively 	prejudicing 	[the
Government’s] interest’ in obtaining forfeiture of the property at issue.” United
States v. $932,501.94 in Funds Seized from BBVA Account Ending in 8653, 2022
WL 4227540, at *4 (N.D. Tex. Aug. 31, 2022) (Horan, J.) (quoting United States v.
Fincanon, 2009 WL 301988, at *2 (N.D. Tex. Feb. 6, 2009) (O’Connor, J.)),
adopted by 2022 WL 4227520 (N.D. Tex. Sept. 13, 2022) (Scholer, J.). As
discussed above, the Government has shown that the grounds for default are
clearly established, and there is no evidence that the default was caused by good-
faith mistake or excusable neglect. See Lindsey, 161 F.3d at 893. Finally, there are
no facts in the record which suggest that the Court would have to set aside the
default, if challenged. Thus, a default judgment is procedurally warranted.
2. There is sufficient basis in the pleadings for entry of a default judgment.
In addition to showing the default judgment is procedurally warranted, the
Government’s 	Complaint 	meets 	the 	requirements 	of 	Federal 	Rule 	of 	Civil
Procedure Supplemental Rule G(2) and pleads sufficient facts supporting entry of
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default judgment. As explained above, a civil forfeiture complaint must “(a) be
verified; (b) state the grounds for subject-matter jurisdiction, in rem jurisdiction
over the defendant property, and venue; (c) describe the property with reasonable
particularity; . . . (e) identify the statute under which the forfeiture action is
brought; and (f) state sufficiently detailed facts to support a reasonable belief that
the government will be able to meet its burden of proof at trial.” Fed. R. Civ. P.
Supp. R. G(2). The Government’s Complaint does all the above.
First, 	the 	Complaint 	is 	verified. 	Compl. 	at 	6 	(ECF 	No. 	1) 	(including
verification from FBI Special Agent Joshua Jacobs). And the Complaint properly
states the grounds for subject matter jurisdiction, in rem jurisdiction, and venue
in this District. Id. at 1–2, ¶ 1. The Complaint describes the subject Property with
reasonable 	particularity, 	explaining 	that 	the 	Property 	is 	$317,251.94 	in
cryptocurrencies seized from Shchukin’s virtual currency wallets beginning with
“0x206f,” “0x6db6,” “0x252d,” bc 1 qlelm,” and “0x6fbe.” Id. at 1. The Complaint
also 	identifies 	the 	statutes 	under 	which 	forfeiture 	is 	sought: 	18 	U.S.C.
§ 981(a)(1)(A), 18 U.S.C. § 981(a)(1)(C), and 18 U.S.C. § 981(a)(1)(G). Id. at 2, ¶ 2.
Finally, the Complaint sets forth sufficiently detailed facts to support a
reasonable belief that the Government will be able to meet its burden of proof at
trial. Specifically, the Complaint alleges that ransomware attacks involving the
Sodinokibi/REvil ransomware variants occurred across the United States and
elsewhere, resulting 	in the receipt of 	over $200 million 	dollars in ransom
payments by Sodinokibi actors. Id. at 3. The Property constitutes, was derived
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from, and is traceable to Shchukin’s ransomware attacks involving Sodinokibi. Id.
The Property is also involved in and traceable to the money laundering conspiracy
involving Sodinokibi ransom payments. Id.
With these facts, the Government has presented a sufficient basis to grant a
default judgment on its claim for forfeiture of the Property. $76,273.00 in U.S.
Currency, 2025 WL 1349332, at *4–5; $39,980 in U.S. Currency, 2024 WL
4530031, at *4.
Recommendation
For the reasons explained above, the Court recommends that the District
Judge GRANT the Government’s Unopposed Motion for Default Judgment and
Final Judgment of Forfeiture (ECF No. 15) and enter a final judgment of forfeiture.
SO RECOMMENDED.
February 10, 2026.
REBECCA RUTHERFORD
UNITED STATES MAGISTRATE JUDGE
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INSTRUCTIONS FOR SERVICE AND
NOTICE OF RIGHT TO APPEAL/OBJECT
A copy of this report and recommendation will be served on all parties in the
manner provided by law. Any party who objects to any part of this report and
recommendation must file specific written objections within 14 days after being
served with a copy. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b). To be specific,
an objection must identify the specific finding or recommendation to which
objection is made, state the basis for the objection, and specify the place in the
magistrate judge’s report and recommendation where the disputed determination
is found. An objection that merely incorporates by reference or refers to the
briefing before the magistrate judge is not specific. Failure to file specific written
objections will bar the aggrieved party from appealing the factual findings and legal
conclusions of the magistrate judge that are accepted or adopted by the district
judge, except upon grounds of plain error. See Douglass v. United Servs. Auto.
Ass’n, 79 F.3d 1415, 1417 (5th Cir. 1996).
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