USA v. Kontos et al

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
WO
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF ARIZONA
United States of America,
Plaintiff,
v.
Tyler Kontos - 001
Joel Max Kupetz - 002
Jorge Kinds - 003,
Defendant.
No. CR-25-00915-001-PHX-SMB
ORDER
The Court now considers Defendant Joel Max Kupetz’s Motion to Vacate (Doc.
54). The Motion is fully briefed. The Court rules as follows.
I. INTRODUCTION
As part of a pre-indictment investigation, the Government obtained seizure warrants
from a magistrate judge for the contents of three financial accounts connected to Defendant
(the “Three Accounts”). (Doc. 54 at 2.) The Government executed the warrants and seized
a total of $6.6 million1 from the Three Accounts. (Id.) A grand jury indicted Defendant
and he was charged with “conspiracy to commit health care fraud (18 U.S.C. § 1349),
health care fraud (18 U.S.C. §§ 1347 and 2), conspiracy to defraud the United States (18
U.S.C. § 371), receiving health care kickbacks (42 U.S.C. §§ 1320a-7(b)(1) and 2), and
transactional money laundering (18 U.S.C. §§ 1957 and 2).” (Doc. 60 at 3.) The
Government seized Defendant’s $6.6 million based on his alleged money laundering
1 This Order uses approximate numbers unless otherwise stated.
Case 2:25-cr-00915-SMB Document 73 Filed 06/01/26 Page 1 of 10

- 2 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
pursuant to 18 U.S.C. §§ 981–982, 21 U.S.C. § 853, and 28 U.S.C. § 2461(c). (Doc. 58
at 1, 29, 56.)
The Government’s Probable Cause Affidavit stated as follows. Alexandra Gehrke
and Jeffrey King pleaded guilty to “conspiracy to commit health care and wire fraud . . . for
their roles in submitting false and fraudulent claims for amniotic wound allografts
(“allografts”) that were medically unreasonable and unnecessary, ineligible for
reimbursement, and procured through illegal kickbacks.” (Doc. 58 at 5.) “Gehrke ran two
companies, Apex Medical LLC (“Apex”) and its successor, Viking Medical Consultants
LLC (“Viking”).” (Id. (footnote omitted).) These companies contracted with Defendant
“to locate elderly and/or hospice patients who had wounds at any stage and order allografts
to be purchased from Legacy Medical.” (Id.) “Gehrke then referred the patients to Apex
Mobile Medical LLC (“Apex Mobile Medical”) and its successor, APX Mobile Medical
LLC (“APX”), co-owned by King.” (Id.) Apex Mobile Medical and APX contracted with
nurses who would apply allografts to patients, regardless of medical necessity. (Id.) Apex
Mobile Medical and APX would then fraudulently bill Medicare and other healthcare
programs for the allografts. (Id. at 6.) $1.2 billion in fraudulent claims were submitted
and $615 million was paid out. (Id.)
The Affidavit continues, stating that Defendant’s “role was to identify Medicare
beneficiaries with wounds of any size and severity, often targeting hospice facilities; order
and recommend the ordering of allografts to be placed on the wounds; and refer the
beneficiaries to APX to receive allografts.” (Id.) The Affidavit outlines how the
companies and individuals received “kickbacks” and were ultimately paid. (Id. at 6–7.)
As relevant here, Apex and Viking held accounts from which distributions were made to
Defendant. (Id. at 9.)
The Affidavit describes the distributions made to Defendant as follows. Defendant
was the sole signatory on an account opened by Karma Medical Consulting LLC
(“Karma”). (Id. at 15.) The Karma account received $8.3 million as follows: (1) a $93,000
check from Apex; (2) a $7.1 million check from Apex; (3) and a $1.1 million check from
Case 2:25-cr-00915-SMB Document 73 Filed 06/01/26 Page 2 of 10

- 3 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Viking. (Id.) The Karma account did not receive funds from any other source. (Id.)
Defendant then opened a personal checking account (“PC Account”) which received $3.3
million from the Karma account. (Id.) The PC Account had $1,000 in it prior to the deposit
from the Karma account. (Id.) Distributions were made from these two accounts into the
Three Accounts: (1) a U.S. Bank account in Defendant and Karma’s names (“US Bank
Account”); a Charles Schwab account held in Defendant’s name (“CS Account”); and a
Coinbase account held in Defendant’s name (“Coinbase Account”). (Id. at 3, 15.) The
details of each account are as follows.
On the day the US Bank Account was opened, a $930,000 check was deposited from
the Karma account. (Id. at 16.) The US Bank Account did not receive any other deposits,
aside from interest, and had a balance of $131,000 at the time of the Affidavit. (Id.)
The CS Account was opened and funded with $277,000 from sources not traceable
to the aforementioned fraudulent scheme. (Id.) Thereafter, the CS Account received $1.2
million in transfers from the Karma account. (Id.) The CS Account did not receive deposits
from any other source, and no cash has been withdrawn from the account. (Id.) The CS
Account was an investment/brokerage account and grew to $3.3 million at the time of the
Affidavit. (Id. at 17.)
The Coinbase Account received $3 million through multiple deposits from the PC
Account. (Id.) The funds were converted into cryptocurrency. (Id.) Before the PC
Account deposits, the Coinbase Account had $48,000 worth of cryptocurrency. (Id.) Due
to changes in market value, the Coinbase Account totaled $2.9 million at the time of the
Affidavit. (Id.)
After the warrants were granted, the Government seized: (1) $28,000 from the US
Bank Account; (2) $3.7 million from the CS Account; and (3) $2.9 million from the
Coinbase Account. (Doc. 60 at 12–13.)
Defendant moves for the Court to vacate or modify these warrants. (Doc. 54 at 4.)
He argues: (1) “The warrants were issued without probable cause as to each account and
are overbroad, because the supporting affidavit failed to trace criminal proceeds to the
Case 2:25-cr-00915-SMB Document 73 Filed 06/01/26 Page 3 of 10

- 4 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
seized funds and instead impermissibly treated commingled accounts as wholly
forfeitable”; (2) “The Government’s application did not satisfy [21 U.S.C.] § 853(f)’s
requirement to show why less restrictive restraining orders were inadequate, rendering the
seizures unlawful”; (3) “The seizures offend the Fourth Amendment’s particularity and
probable cause requirements by sweeping in untainted assets without specific
justification”; (4) “The scope of these seizures, if left uncorrected, would violate the
Excessive Fines Clause of the Eighth Amendment, as the value seized is grossly
disproportionate to the legitimate penalties or forfeitable proceeds in this matter.” (Id.
at 4.) Defendant also argues that the seizure implicates Fifth and Sixth Amendment
concerns. (Id. at 12–14.)
II. LEGAL STANDARD
Section 1957(a) provides that a person is guilty of money laundering if they
“knowingly engage[] or attempt[] to engage in a monetary transaction in criminally derived
property of a value greater than $10,000 and is derived from specified unlawful activity.”
“Any property, real or personal, involved in a transaction or attempted transaction in
violation of [§ 1957], or any property traceable to such property” is subject to civil and
criminal forfeiture. § 981(a)(1)(A) (civil); see § 982(a)(1) (criminal); see also United
States v. Lo, 839 F.3d 777, 791 (9th Cir. 2016) (Ҥ 2461(c) permits the government to seek
criminal forfeiture whenever civil forfeiture is available and the defendant is found guilty
of the offense.” (citation modified)).
Section 853(a) “provides for pretrial restraint and seizure of potentially forfeitable
property if certain statutory requirements are met.” United States v. Swenson, No.
1:13-CR-91-BLW, 2014 WL 2506300, at *2 (D. Idaho June 3, 2014) (citing § 853(e), (f)).
Under this statute, forfeitable property includes “any property constituting, or derived
from, any proceeds the person obtained, directly or indirectly, as the result of” a crime and
“any of the person’s property used, or intended to be used, in any manner or part, to
commit, or to facilitate the commission of” a crime.2 § 853(a)(1), (2). Under § 853(e), a
2 Section 853 only applies to certain criminal offenses. The parties do not dispute, as a
general matter, that financial accounts are subject to forfeiture under the charged crimes.
Case 2:25-cr-00915-SMB Document 73 Filed 06/01/26 Page 4 of 10

- 5 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
“court may enter a restraining order or injunction, require the execution of a satisfactory
performance bond, or take any other action to preserve the availability of” the property
described in § 853(a). However, “[i]f the court determines that there is probable cause to
believe that the property to be seized would, in the event of conviction, be subject to
forfeiture and that an order under subsection (e) may not be sufficient to assure the
availability of the property for forfeiture, the court shall issue a warrant authorizing the
seizure of such property.” § 853(f).
III. DISCUSSION
“[A] pre-trial asset restraint [is] constitutionally permissible whenever there is
probable cause to believe that the property is forfeitable.” Kaley v. United States, 571 U.S.
320, 323 (2014). “That determination has two parts, reflecting the requirements for
forfeiture under federal law: There must be probable cause to think (1) that the defendant
has committed an offense permitting forfeiture, and (2) that the property at issue has the
requisite connection to that crime.” Id. at 323–24. “Probable cause . . . is not a high bar:
It requires only the kind of fair probability on which reasonable and prudent people, not
legal technicians, act.” Id. at 338 (citation modified). Defendant primarily argues that the
second part was not satisfied here.
A. Probable Cause
Defendant argues that there was not probable cause to support the seizing of the
accounts. (Doc. 54 at 4.) Specifically, Defendant argues that there was not “probable cause
to believe that all funds in each targeted account were forfeitable.” (Id. at 5 (emphasis in
original).) Importantly, “the Kaley Court held that an indicted defendant has no
constitutional right to contest in a pretrial hearing a grand jury determination of probable
cause to believe that a crime has been committed because, on this issue, ‘[t]he grand jury
gets the final word.’” See United States v. Bikundi, 125 F. Supp. 3d 178, 185 (D.D.C.
2015) (quoting Kaley, 571 U.S. at 341)). “[A]lthough a defendant may not challenge the
grand jury’s determination that the defendant committed the offense charged, the defendant
(See Doc. 60 at 4).
Case 2:25-cr-00915-SMB Document 73 Filed 06/01/26 Page 5 of 10

- 6 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
may challenge [a] grand jury’s determination that the seized property is sufficiently related
to the crime or crimes charged in the indictment.” United States v. Miller, 295 F. Supp. 3d
690, 696 (E.D. Va. 2018), aff’d, 911 F.3d 229 (4th Cir. 2018) (citing Kaley, 571 U.S.
at 341).
As a threshold matter, the Court reviewed the Affidavit and finds that it contains
sufficient allegations to establish probable cause to seize the accounts—at least in part.
Again, Defendant was charged with multiple crimes including transactional money
laundering under § 1957. (Doc. 60 at 3.) Section 1957“provides that a person who
‘knowingly engages or attempts to engage in a monetary transaction in criminally derived
property of a value greater than $10,000 and is derived from specified unlawful activity’
may be convicted of transactional money laundering.” United States v. Clark, No.
CR-24-00611-PHX-SPL-01, 2025 WL 814270, at *3 (D. Ariz. Mar. 13, 2025) (quoting
§ 1957(a)). As noted, the Affidavit describes a sophisticated scheme in which Defendant
received millions of dollars from companies which perpetuated an expansive health care
fraud scheme. (Doc. 58 at 5–8.) Defendant was a “sales representative” for these
companies, despite not being medically trained, and was paid $8.3 million in less than one
year. (Id. at 15.) The Affidavit specifically identifies the date and amount of each dollar
flowing from Apex and Viking to Defendant’s Karma and PC accounts, and from those
accounts to the Three Accounts. Indeed, Defendant acknowledges that the Affidavit can
be read to establish “that certain deposits into the accounts (or transfers between them)
were derived from the suspect health-care business operations.” (Doc. 54 at 5.) Given the
generous probable cause standard, and the fact that a magistrate judge’s “probable cause
finding must be accorded ‘great deference,’” the Court finds that there was probable cause
to seize the funds generated by the alleged fraudulent healthcare scheme. See United States
v. Swenson, No. 1:13-CR-00091-BLW, 2013 WL 3322632, at *4 (D. Idaho July 1, 2013)
(quoting Illinois v. Gates, 462 U.S. 213, 236 (1983)).
Still, Defendant contends that the Government was not entitled to seize all the funds
in the accounts because they also contained “untainted” funds. (Doc. 54 at 5.) The
Case 2:25-cr-00915-SMB Document 73 Filed 06/01/26 Page 6 of 10

- 7 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
Government concedes that it seized untainted funds, but nevertheless argues that “[u]nder
18 U.S.C. § 1957, if criminal proceeds are commingled with untainted assets, the untainted
assets are subject to forfeiture.” (Doc. 60 at 5.) The Court disagrees.
Again, the Government may restrain assets before trial to the extent those assets are
ultimately forfeitable. See Kaley, 571 U.S. at 323. The Government contends that under
§ 982, any funds “involved in” money laundering are subject to forfeiture. (Doc. 60 at 14.)
While this is true, the Government does not identify any authority persuasively establishing
that when tainted money is deposited into an account with untainted money, that the
untainted money becomes “involved in” or is otherwise traceable to the underlying money
laundering.
The only authority remotely standing for the Government’s proposition is United
States v. Real Property, No. 5:08-CV-303-OC-10GRJ, 2008 WL 11470836, at *6 (M.D.
Fla. Dec. 29, 2008). There, the court explained that “under section 1957 the United States
is entitled to seek forfeiture of all funds in an account, even if clean funds are involved.”
Id. Though this proposition is broadly stated, the cases on which Real Property relies
stand for a narrower proposition. Real Property, in making the foregoing assertion, relies
on cases such as United States v. One 1987 Mercedes Benz 300E, 820 F. Supp. 248, 252–53
(E.D.Va. 1993) and United States v. Real Property Known as 1700 Duncanville, 90 F.Supp.
2d 737, 741 (N.D. Tex. 2000). Real Property, 2008 WL 11470836, at *6. However, 1987
Mercedes Benz and 1700 Duncanville both involved the forfeiture of property purchased
with legitimate and illegitimate funds. See 1987 Mercedes Benz, 820 F. Supp. at 252
(holding that a car partially purchased with legitimate funds was still subject to forfeiture
because the entire vehicle [] was involved in the money laundering transaction, not merely
the funds traceable to the extortion”); 1700 Duncanville, 90 F.Supp. 2d at 741 (“Since the
purchase of the subject properties was itself a money laundering transaction under section
1957, it is immaterial that claimants may have also used untainted funds for its purchase.”).
The Court is not convinced that seizing property purchased with tainted and
untainted funds is similar to seizing an account with tainted and untainted funds. In the
Case 2:25-cr-00915-SMB Document 73 Filed 06/01/26 Page 7 of 10

- 8 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
former situation, the property is connected to money laundering because it was purchased
with illegitimate funds. In such circumstances, the untainted funds actually become
commingled with tainted funds. However, such a connection does not exist merely because
tainted and untainted funds reside in the same account; especially here where it is clear
which funds are legitimate and illegitimate.
Notably, Real Property also relies on United States v. Tencer, 107 F.3d 1120, 1134
(5th Cir. 1997), which holds “that merely pooling tainted and untainted funds in an account
does not, without more, render that account subject to forfeiture.” Tencer goes on to note
that courts generally recognize that there must be some nexus between the tainted and
untainted funds for the untainted funds to be subject to forfeiture. See id. at 1135 (citing
cases). The Court finds this persuasive as it aligns with the text of the applicable forfeiture
statutes. Again, these statutes provide that property is subject to seizure only if the property
is “involved in” or otherwise traceable to money laundering. See § 981–982; see also §853.
Applied here, the Government does not suggest that there is any nexus between the
untainted and tainted funds aside from residing in the same account. Neither does the
Government offer an explanation as to how untainted funds deposited in the CS and
Coinbase Accounts are “involved in” money laundering. The untainted funds were
deposited into the accounts prior to the tainted funds. Accordingly, the Court will grant
Defendant’s request for the Government to relinquish the untainted funds, namely, the
$277,210.34 from the CS Account and the $47,605.11 from the Coinbase Account. See
United States v. Stewart, 185 F.3d 112, 130 (3d Cir. 1999) (noting there is no difficulty in
separating tainted funds from untainted funds in a bank account). This conclusion obviates
the need for the Court to entertain Defendant’s Sixth and Eighth Amendment arguments,
which were primarily predicated on the continued seizure of the untainted funds. (Doc. 54
at 14–16.) This conclusion also renders moot Defendant’s request for a Monsanto hearing.3
(Doc 54 at 13.)
3 Courts generally provide defendants “a hearing to any indicted defendant seeking to lift
an asset restraint to pay for a lawyer, i.e., a Monsanto hearing.” United States v. Lacey,
No. CR-18-00422-001-PHX-DJH, 2021 WL 5882638, at *7 (D. Ariz. Dec. 10, 2021)
(citation modified); see also United States v. Unimex, Inc., 991 F.2d 546 (9th Cir. 1993).
Case 2:25-cr-00915-SMB Document 73 Filed 06/01/26 Page 8 of 10

- 9 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
B. § 853(f) Requirement
Defendant also argues that the seizure warrants must be vacated because the
Government failed to demonstrate that a protective order under § 853(e) would “not be
sufficient to assure the availability of the property for forfeiture,” as required for seizure
under § 853(f). (Doc. 54 at 8.) In the Affidavit, the Government asserted that seizure was
necessary because “there is a substantial risk that the [Three Accounts] will be withdrawn,
moved, dissipated, or otherwise become unavailable for forfeiture unless immediate steps
are taken to secure them at the time the requested seizures are executed.” (Doc. 58 at 20.)
The Affidavit also noted that without seizure, banks may “fail[] to put the necessary
safeguards in place to freeze the money in time to prevent the account holder from
accessing the funds electronically, or fail[] to notify the proper personnel as to the existence
of the order, or the bank exercises its own right of setoff to satisfy an outstanding debt
owed to the bank by the account holder.” (Id.)
The Court finds that § 853(f) applies. Indeed, courts have noted under § 853(f) that
funds in a bank account can “be easily transferred and that [a] seizure warrant was
necessary to insure that the funds would be available for later forfeiture.” United States v.
Lewis, No. 04-403 (JNE/SRN), 2006 WL 1579855, at *5 (D. Minn. June 1, 2006); see, e.g.,
United States v. Wiese, No. CIV. 10-51297, 2012 WL 43369, at *2 (E.D. Mich. Jan. 9,
2012) (upholding the seizure of a bank account on the basis that “property of that nature
could easily be transferred out of those accounts”); United States v. Martin, 460 F.Supp.2d
669, 677 (D. Md. 2006) (“Given the fungible and readily transferable nature of the property
(mostly cash) and the size and seriousness of this alleged conspiracy . . . this Court cannot
conclude that there was no probable cause to believe that a seizure warrant was necessary
to secure the property for trial.”).
IV. CONCLUSION
Accordingly,
IT IS ORDERED granting in part Defendant’s Motion to Vacate (Doc. 54) and
directing the Government to return of $277,210.34 seized from the CS Account and the
Case 2:25-cr-00915-SMB Document 73 Filed 06/01/26 Page 9 of 10

- 10 -
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
assets valued at $47,605.11 seized from the Coinbase Account.
Dated this 1st day of June, 2026.
Case 2:25-cr-00915-SMB Document 73 Filed 06/01/26 Page 10 of 10