UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
UNITED STATES OF AMERICA,
Plaintiff,
v.
No. 20-cv-712 (DLF)
THREE HUNDRED THREE VIRTUAL
CURRENCY ACCOUNTS, et al.,
Defendants.
MEMORANDUM OPINION
This action arises out of an international investigation of DarkScandals (the Website), a
website that directed users to child pornography and other illicit videos and images. Compl. ¶ 2,
Dkt. 1. The United States initiated this civil forfeiture action in rem against two domain names
and 303 virtual currency exchange accounts (the Defendant Properties), which were allegedly
used in connection with the Website’s criminal activities. Before the Court is the government’s
Motion for Default Judgment against the Defendant Properties. Pl.’s Mot. for Default J. (Pl.’s
Mot.), Dkt. 12. For the reasons that follow, the Court will grant the motion.
I. BACKGROUND
A. Factual Background1
Bitcoin and Ether are two virtual currencies which are controlled through computer
software and traded over the Internet rather than issued by a bank or government. Compl. ¶¶ 11–
12. Both Bitcoin and Ether are bought and sold on “virtual currency exchanges,” where
1
On a motion for default judgment following the entry of default, courts construe the well-
pleaded allegations of the complaint as admitted. Boland v. Elite Terrazzo Flooring, Inc., 763 F.
Supp. 2d 64, 68 (D.D.C. 2011).
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conventional money can be converted into virtual currencies and vice versa. Id. ¶ 17. These
virtual currencies are sent and received through “addresses” akin to email addresses, id. ¶ 14,
each of which has a “private key” akin to a password that is generated by the user, id. ¶ 15. For
each virtual currency transaction, a customer can use a single address or multiple addresses. Id.
¶¶ 14–15. These transactions are recorded on a decentralized public ledger called the
“blockchain.” Id. ¶¶ 11, 18–19.
The DarkScandals Website—which was available on both the darknet and the clearnet in
virtually identical form—offered users the same service: access to “obscene content, including
videos that depicted sexual assault and child pornography.”2 Id. ¶ 2. The Website delivered
these illicit materials in “packs,” each of which “contained approximately 2,000 videos and
images.” Id. ¶¶ 27–28. Website users could access the packs by uploading illicit videos that
could be used in future packs, id. ¶¶ 27–29, or by purchasing the packs with virtual currencies,
id. ¶¶ 27, 33–34. The Website instructed purchasing customers to send payment to one of the
Website’s four virtual currency addresses and to then send proof of payment to an encrypted
email address associated with the Website. Id. ¶¶ 33–35. Altogether, the Website received
approximately 1,650 deposits totaling roughly $1.6 million in Bitcoin and $5,730 in Ether. Id. ¶
37.
While conducting an investigation of Welcome to Video, another child pornography
website, law enforcement officers discovered that some of the Welcome to Video customers also
had made payments to the DarkScandals Website. Id. ¶¶ 38–40. These transactions prompted
officers to open a separate investigation. See id. In this investigation, undercover officers in
2
The two domain names for the DarkScandals Website were “darkscandals.com and
darkscandals.co.” Compl. ¶ 1; see also id. ¶ 46.
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Washington, D.C. sent virtual currency payments to one of the Website’s virtual currency
addresses, id. ¶ 40, and proof of payment to one of the encrypted email addresses associated with
the Website, see id. ¶¶ 33–35, 41. Thereafter, the officers received illicit videos containing child
pornography from an email account associated with the Website. Id. ¶ 42. By analyzing the
blockchain, id. ¶ 20, law enforcement officials identified eight virtual currency exchanges (the
Exchanges) that hosted transactions between the Website and the 303 virtual currency accounts
at issue here, id. ¶ 48. All of the 303 virtual currency accounts “made at least one payment to the
[Website],” id. ¶ 50, and many of those accounts appear to have been used solely to transact with
the Website, id. ¶ 51.
B. Procedural History
On March 12, 2020, the United States filed a verified complaint for forfeiture in rem of
the Defendant Properties. Compl. On March 13, 2020, the Clerk of the Court entered a warrant
for arrest in rem of the Defendant Properties. Dkt. 2. The government posted notice on
http://www.forfeiture.gov for thirty consecutive days from March 21, 2020 to April 19, 2020.
Decl. of Publication, Dkt. 5. No claims were filed in response to the publication before the
deadline of May 20, 2020. See Am. Aff. in Supp. of Default ¶ 8, Dkt. 8; Decl. of Publication.
The government also identified potential claimants of the Defendant Properties using “know
your customer” information that the Exchanges were required to collect, Pl.’s Mot. at 28, and it
sent notice to those potential claimants through email, mail, or both. Id. at 29; Am. Aff. in Supp.
of Default ¶ 5. As of July 10, 2020, no potential claimants had filed a claim to any of the
Defendant Properties. Id. ¶ 8.
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On July 10, 2020, the government filed an affidavit for default, see Am. Aff. in Supp. of
Default, and on July 17, 2020, the Clerk of Court entered default, Dkt. 10. The United States
filed this motion for default judgment on July 27, 2020. See Pl.’s Mot.
II. LEGAL STANDARD
The Federal Rules of Civil Procedure empower district courts to enter default judgment
against a defendant who fails to defend its case. Fed. R. Civ. P. 55(b)(2); Keegel v. Key West &
Caribbean Trading Co., 627 F.2d 372, 375 n.5 (D.C. Cir. 1980). While federal policy generally
favors resolving disputes on the merits, default judgment is appropriate “when the adversary
process has been halted because of an essentially unresponsive party.” Mwani v. bin Laden, 417
F.3d 1, 7 (D.C. Cir. 2005) (internal quotation marks omitted).
Obtaining default judgment is a two-step process. First, the plaintiff must request that the
Clerk of Court enter default against a party who has failed to plead or otherwise defend. Fed. R.
Civ. P. 55(a). The Clerk’s entry of default establishes the defendant’s liability for the well-
pleaded allegations of the complaint. Boland v. Providence Constr. Corp., 304 F.R.D. 31, 35
(D.D.C. 2014). Second, the plaintiff must apply to the court for a default judgment. Fed. R. Civ.
P. 55(b). At the default judgment stage, the plaintiff “must prove his entitlement to the relief
requested using detailed affidavits or documentary evidence on which the court may rely.”
Ventura v. L.A. Howard Constr. Co., 134 F. Supp. 3d 99, 103 (D.D.C. 2015) (internal quotation
marks and alterations omitted). “[T]he defendant’s default notwithstanding, the plaintiff is
entitled to a default judgment only if the complaint states a claim for relief.” Jackson v. Corr.
Corp. of Am., 564 F. Supp. 2d 22, 27 (D.D.C. 2008) (internal quotation marks omitted).
Pleading requirements in civil forfeiture actions are governed by the Supplemental Rules
and by the Federal Rules of Civil Procedure to the extent that they are “not inconsistent with
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the[] Supplemental Rules.” Fed. R. Civ. P. Supp. R. A(2). Supplemental Rule G establishes the
requirements for a complaint in such an action. As relevant here, the complaint must be verified,
state the grounds for jurisdiction, describe the property “with reasonable particularity,” identify
the statute under which the action is brought, and “state sufficiently detailed facts to support a
reasonable belief that the government will be able to meet its burden of proof at trial.” Id. Supp.
R. G(2). Though the government must prove a forfeiture claim by a preponderance of the
evidence to succeed at trial, it need not do so at this stage. See United States v. $1,071,251.44 of
Funds Associated with Mingzheng Int’l Trading Ltd., No. 17-cv-01166, 2018 WL 3949962, at *8
(D.D.C. 2018). However, “[b]efore a default judgment is entered pursuant to a complaint for
forfeiture in rem, the government must also show that it complied with the notice requirements
contained in the Supplemental Rules.” Id. at *5.
III. ANALYSIS
A. Notice
Supplemental Rule G(4) mandates that the government provide two forms of notice in a
forfeiture action in rem: notice to the public via publication and notice to potential claimants via
direct notice. See Fed. R. Civ. P. Supp. R. G(4)(a), (b). Notice by publication must describe the
property, state the time to file a claim and answer, and name the government attorney to be
served with the claim and answer. Id. Supp. R. G(4)(a)(ii). The notice is sufficient if it is
published “on an official internet government forfeiture site for at least 30 consecutive days.” Id.
Supp. R. G(4)(iv)(C). Here, the government posted notice of the forfeiture proceeding on
http://forfeiture.gov for thirty consecutive days, beginning on March 21, 2020 and ending on
April 19, 2020. Am. Aff. in Supp. of Default ¶ 7; Decl. of Publication at 1. The public notice
stated that “[a]ny person claiming a legal interest in the Defendant Propert[ies] must file a
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verified Claim with the court within 60 days from the first day of publication.” Id. at 8. No
claims had been filed in response to the publication by May 20, 2020. Am. Aff. in Supp. of
Default ¶¶ 7–8; see Fed. R. Civ. P. Supp. R. G(5)(a)(ii)(B) (requiring any claim to be filed “no
later than 30 days after final publication of . . . legal notice under Rule G(4)(a)”). Accordingly,
the government has satisfied its obligation to provide notice by publication. See id. Supp. R.
G(4)(a)(iv)(C).
Direct notice must be sent “to any person who reasonably appears to be a potential
claimant” and “by means reasonably calculated to reach the potential claimant.” Id. Supp. R.
G(4)(b)(i), (iii)(A). The government identified and received contact information for potential
claimants using subpoenaed “know-your-customer” information held by the Exchanges as well
as search warrant returns from a related criminal proceeding against the owner and operator of
the Website. See Pl.’s Mot. at 28. On or about April 18, 2020, the government sent notice via
email to 302 known potential claimants whom it had identified. Id. at 28–29. Of these email
notices, 272 were successfully delivered, and twenty-nine “bounced back” as undeliverable. Id.
at 29. With respect to the twenty-nine potential claimants whose email notices were not
delivered, eighteen had provided the Exchanges with their physical address, so the government
sent those potential claimants a second notice by mail on or about June 3, 2020, and of those,
only one was returned as undeliverable. Id. The eleven remaining claimants “provided no
address, and thus could not be contacted.” Id. No potential claimants filed a claim to the
Defendant Properties on or before July 10, 2020. Am. Aff. in Supp. of Default ¶ 8.
The government has satisfied its obligation to take steps “reasonably calculated” to
provide direct notice to potential claimants. See Fed. R. Civ. P. Supp. R. G(4)(b). Adequate
notice requires only “that the government attempt to provide actual notice; it does not require
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that the government demonstrate that it was successful in providing actual notice.”
$1,071,251.44 of Funds Associated with Mingzheng Int’l Trading Ltd., 2018 WL 3949962, at *5
(emphasis added) (quoting Mesa Valderrama v. United States, 417 F.3d 1189, 1197 (11th Cir.
2005); see also Whiting v. United States, 231 F.3d 70, 76 (1st Cir. 2000) (“‘Reasonably
calculated’ means likelihood, not certainty.”). When the government attempts to provide notice
by “means reasonably calculated to reach the potential claimant,” Fed. R. Civ. P. Supp. R.
G(4)(b)(iii)(A), and “hear[s] nothing back indicating that anything ha[s] gone awry,” it is
reasonable to believe the chosen method informed the interested parties, Jones v. Flowers, 547
U.S. 220, 226 (2006).
Under these circumstances, email was an appropriate form of notice because this case
involves potential claimants whose exact location is difficult to pinpoint, and the nature of the
crimes involved indicates that the owners of the Defendant Properties had a high level of cyber-
proficiency. See Philip Morris USA Inc. v. Veles Ltd., No. 06-cv-2988, 2007 WL 725412, at *3
(S.D.N.Y. Mar. 12, 2007) (permitting notice by email where “defendants conduct business
extensively . . . through [the] Internet”); see also Fed. Trade Comm’n v. PCCare247, Inc., No.
12-cv-7189, 2013 WL 841037, at *4 (S.D.N.Y. Mar. 7, 2013) (permitting notice by email where
it was “reasonably calculated to provide defendants with notice”). Because notice by email was
reasonably calculated to reach the potential claimants, see Fed. R. Civ. P. Supp. R. G(4)(b)(i),
the government did not need to take further action to notify potential claimants.
For those potential claimants whose email notices were returned as undeliverable, the
government’s notice by mail was sufficient. Although the government was unable to deliver
email or regular mail notice to twelve potential claimants, see Pl.’s Mot. at 29–30, the
government’s attempts to provide direct notice, coupled with notice via publication, satisfied its
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obligations. “[T]he government may satisfy due process with mere publication of a forfeiture
notice when the government does not know or reasonably cannot discover the claimant’s
whereabouts.” Johnson v. United States, 2004 WL 2538649, at *4 (S.D. Ind. Oct. 22, 2004); see
also Mullane v. Cent. Hanover Bank & Trust, Co., 339 U.S. 306, 317 (1950). Consequently, the
government has met the notice requirements of Supplemental Rule G(4).
B. Adequacy of the Complaint
Supplemental Rule G(2) establishes the requirements for a civil forfeiture complaint. See
Fed. R. Civ. P. Supp. R. G(2). In any action seeking forfeiture in rem under a federal statute,
“the complaint must be verified, state the grounds for jurisdiction and venue, describe the
property with reasonable particularity, identify the statute under which the forfeiture action is
brought, and state sufficiently detailed facts to support a reasonable belief that the government
will be able to meet its burden of proof at trial.” United States v. $6,999,925.00 of Funds
Associated with Velmur Mgmt. Pte, Ltd., 368 F. Supp. 3d 10, 19 (D.D.C. 2019) (internal
quotation marks omitted). The government has met these requirements here.
The government has filed a verified complaint that describes the Defendant Properties in
detail and identifies the statute, 18 U.S.C. § 2254, under which the forfeiture action was
brought.3 See Compl. ¶¶ 54–56; see also Pl.’s Mot. at 32 n.3. This Court has jurisdiction over
“any action or proceeding for the recovery or enforcement of any . . . forfeiture . . . incurred
under any Act of Congress.” 28 U.S.C. § 1355(a). Venue is proper in the District of Columbia
because it is where the “acts . . . giving rise to the forfeiture occurred,” 28 U.S.C.
3
The government also brings this action under 18 U.S.C. § 1467(c), alleging that the Defendant
Properties were used to knowingly transport obscene materials in interstate commerce for the
purpose of sale or distribution, in violation of 18 U.S.C. § 1465. See Pl.’s Mot. at 2, 33–38. The
Court need not address this alternative theory because the Defendant Properties are subject to
forfeiture under 18 U.S.C. § 2254. See Pl.’s Mot. at 32 n.3.
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§ 1355(b)(1)(A), and it is the “judicial district . . . into which [the Defendant Properties] [were]
brought” after seizure, 28 U.S.C. § 1395(c).
Thus, the only remaining issue is whether the complaint “state[s] sufficiently detailed
facts to support a reasonable belief that the government will be able to meet its burden of proof at
trial.” United States v. All Assets Held in Account Number XXXXXXXX, 83 F. Supp. 3d 360, 366
(D.D.C. 2015) (quoting Fed. R. Civ. P. Supp. R. G(2)(f)). The government alleges that the
Defendant Properties were used to promote the commission of violations of 18 U.S.C. §
2252(a)(4)(B)(i), which prohibits individuals from “knowingly possess[ing], or knowingly
access[ing] with intent to view . . . films . . . or other matter which contain[s] any visual
depiction . . . involving the use of a minor engaging in sexually explicit conduct.” The facts
alleged in the complaint support a reasonable belief that the government will be able to prove at
trial that individuals associated with the Defendant Properties knowingly accessed or possessed
child pornography and used the Defendant Properties for those purposes.
As described in the complaint, the Website’s users viewed child pornography on the
Website’s home page. See Compl. ¶ 26; see also Pl.’s Mot. at 33. Users who sought to access
additional child pornography had to either upload new content onto the Website or make a
payment to one of four virtual currency addresses associated with the Website and then send
proof of payment to the Website’s encrypted email address. Compl. ¶¶ 33–35. Only after users
provided proof of payment did the Website send them additional child pornography. Id. ¶¶ 27,
33–35. These necessary affirmative steps provide “more than [a] substantial basis” to furnish a
reasonable belief that “[users] logging into [the Website] did so with the intent to access, view,
and/or distribute child pornography.” United States v. Taylor, 250 F. Supp. 3d 1215, 1230 (N.D.
Ala. 2017). In addition, records obtained from the virtual currency exchanges confirm that each
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of the 303 virtual currency exchange accounts made at least one payment to the Website, see
Compl. ¶ 50, and many appear to have been opened for the sole purpose of transacting with the
Website, id. ¶ 51. Together, these facts support a reasonable belief that the government will be
able to meet its burden of proof at trial.
Forfeiture is authorized under 18 U.S.C. § 2254 if the Defendant Properties were “used or
intended to be used to commit or to promote the commission” of knowingly accessing child
pornography in violation of § 2252. 18 U.S.C. §§ 2253(a)(3), 2254. To “use” is to “convert to
one’s service, to employ, to avail oneself of, and to carry out a purpose or action by means of.”
United States v. Hull, 606 F.3d 524, 528 (8th Cir. 2010) (internal quotation marks omitted).
Here, the two domain names associated with the Website provided the means by which users
could access, view, and download the child pornography on the Website. See Compl. ¶¶ 41, 44–
47. The 303 virtual currency accounts were used to make payments to other virtual currency
accounts controlled by the Website that in turn enabled users to access and download illicit
materials from the Website. See id. ¶¶ 26–27, 33–34. The evidence “show[s] a substantial
connection—not merely an incidental or fortuitous relationship—between the [Defendant
Properties] and the offenses.” Hull, 606 F.3d at 527–28. The verified complaint thus alleges
sufficient facts to support a reasonable belief that the government would be able to show at trial
by a preponderance of the evidence that the Defendant Properties were “used” to commit
violations of 18 U.S.C. § 2252, and are therefore forfeitable pursuant to 18 U.S.C. § 2254.
CONCLUSION
The verified complaint states a claim for forfeiture in rem pursuant to Supplemental Rule
G(2). The government also has complied with the notice requirements of Supplemental Rule
G(4), and no claimant has appeared to contest this matter. Accordingly, the government’s
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motion for default judgment is granted. An order consistent with this decision accompanies this
memorandum opinion.
________________________
DABNEY L. FRIEDRICH
February 19, 2021 United States District Judge
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