On May 10, 2017, the district court ruled on the defendants’ motion for summary judgment. We will focus here on the court’s analysis of three of the defendants’ claims, with particular attention paid to the issue of extraterritoriality.Extraterritorial Reach of the U.S. Criminal Law The civil complaint alleged a money laundering offense based on the underlying Specified Unlawful Activity, or SUA, of the transportation of property stolen or taken by fraud, in violation of 18 U.S.C. § 2314. The underlying SUA involved four transfers of funds allegedly processed in part through correspondent bank accounts in the U.S. The defense sought summary judgment as to the money laundering count because the alleged conduct lacked a sufficient nexus to the United States.

United States v. Aleynikov, 676 F.3d 71 (2d Cir. 2012)The defendant, a computer programmer, developed sophisticated “source codes” for the high frequency trading system used by Goldman Sachs. He was offered another job and took the source code with him. He was charged with economic espionage (18 USC § 1832(a)) and a violation of the National Stolen Property Act (18 USC § 2314). The Second Circuit reversed the conviction on both counts.

[6] Id. at *2–3. [7] 18 U.S.C. § 2314. [8] 18 U.S.C. § 1832. [9] The District Court did, however, dismiss a third charge against Aleynikov, under the Computer Fraud and Abuse Act, 18 U.S.C. § 1030. See United States v. Aleynikov, 737 F. Supp. 2d 173 (S.D.N.Y. 2010).

At least where the US banks were used “as a clearinghouse” for conduct illegal under US law, the Court found the forfeiture statute properly applicable. The Court then considered the underlying violation of 18 USC 2314, which as relevant here prohibits certain transfers of funds obtained through fraud, and concluded that the provision gave no intent that it should be applied extraterritorially. That said, the second question under the RJR Nabisco analysis is whether sufficient US conduct occurred in connection with the “focus” of the statute that the alleged violation should be considered US “domestic.”

According to the DOJ’s press release, “Thwarting trade in smuggled goods by seizing and forfeiting an ancient artifact shows the department’s dedication to using all available tools, including forfeiture, to ensure justice.” The amended complaint here relied on some relatively esoteric statutes – but which may become more common: the DOJ sought forfeiture “pursuant to 19 U.S.C. § 1595(c)(1)(A), as stolen Iraqi property that was introduced or attempted to be introduced into the United States contrary to 18 U.S.C. §§ 545 and 2314; and pursuant to 19 U.S.C. § 2609 as designated archaeological or ethnological material or an article of cultural property exported from Iraq contrary to 19 U.S.C. § 2606.”The imposition of mandatory BSA obligations, along with the threat of forfeiture, may place antiquities dealers in precarious positions. Presumably, they will now monitor for transactions indicating potentially illegal activity.

[1] For more details on Mr. Aleynikov’s conduct and prosecutions, please see the Patent Docs posts "Another Aleynikov Trade Secrets Case Ends with Narrower Statute" and "Aleynikov Conviction Reinstated by New York Appellate Court," as well as the Snippets article "New York v. Aleynikov: New York State's Penal Code (Like Federal Criminal Law) Does Not Cover Electronic Reproduction of Source Code."[2] The Economic Espionage Act is found at 18 U.S.C. § 1832 and the National Stolen Property Act is found at 18 U.S.C. § 2314.[3]United States v. Aleynikov, 676 F.3d 71, 76-79 (2d Cir. 2012).

Aleynikov was initially charged by a federal grand jury for violation of a federal law – the National Stolen Property Act –in February 2010related to his alleged misappropriationand found guilty in December 2010. (Clickhereto access the relevant law at 18 U.S.C. § 2314.)However, the federal appeals court in New York overturned Mr. Aleynikov’s conviction in April 2012, concluding that source code was intangible property and not a good, and thus a theft of computer code could not involve the “taking of a physical thing” – a necessary requirement for a violation under the relevant law.

Upon their departure, U.S. customs agents found upwards of 79 grams of seeds in the delegation’s luggage. Zhang was convicted in 2017 of conspiracy to steal trade secrets (18 U.S.C. § 1832(a)(5)), conspiracy to commit interstate transportation of stolen property (18 U.S.C. § 371), and interstate transportation of stolen property (18 U.S.C. § 2314 and 2). Last week, against the backdrop of increasing trade tensions between the United States and China, Zhang was sentenced to 121 months in federal prison for trade-secret theft.

The complaint alleges that the proceeds of those illicitly awarded contracts were then laundered in and through the U.S. and used to purchase various assets subject to seizure and forfeiture, including a $50 million condominium located in one of Manhattan’s most expensive buildings – 157 W. 57th Street – and the Galactica Star, an $80 million yacht. More specifically, the complaint alleges in part that the assets at issue are subject to forfeiture because they constitute or are derived from proceeds traceable to the following “specified unlawful activity” under the criminal money laundering statutes: foreign offenses involving “the misappropriation, theft, or embezzlement of public funds by or for the benefit of a public official;” foreign offenses involving bribery of a public official; interstate transportation of stolen or fraudulently obtained property, in violation of 18 U.S.C. § 2314; interstate receipt of stolen property, in violation of 18 U.S.C. § 2315; wire fraud, in violation of 18 U.S.C. § 1343; and a felony violation of the Foreign Corrupt Practices Act, in violation of 15 U.S.C. § 78dd-1 et seq. Continued Expansive Claims of Extraterritorial Application of U.S. Law The civil complaint has a distinctly international flair.

For example, all shipments arriving by international mail must include a customs declaration and an invoice or bill of sale that give a full and accurate description of the contents, as well as the purchase price and value of the merchandise.3Forfeiture Provisions: Forfeiture provisions can be administrative, civil, or criminal.4 The civil forfeiture in Hobby Lobby occurred under 19 U.S.C. § 1595a(c)(1)(A), which provides that “[m]erchandise which is introduced or attempted to be introduced into the United States contrary to law . . . shall be seized and forfeited if it . . . is stolen, smuggled, or clandestinely imported or introduced.” Merchandise is deemed “smuggled, or clandestinely imported or introduced” if it was, among other things, imported by means of fraudulent or false statements, or with an intent to defraud.5The National Stolen Property Act: The National Stolen Property Act (“NSPA”), 18 U.S.C. §§ 2314-15, makes it a felony to knowingly transport, in interstate or foreign commerce, or to knowingly purchase for resale, any stolen goods worth $5,000 or more. The property need not be stolen in the United States, and neither the defendant nor property owner need be a US national;6 rather, it is enough that the transaction or stolen goods in question have a connection to the United States.7 Violating the NSPA can result in jail time or high fines.US Regulations Barring Importation of Certain Iraqi Cultural Property: Certain regulations address cultural property originating from specific countries of origin.