USA v. Huang, et al.

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
Memorandum and Order
Petitioners Gang Lin and Pei Zhao ask the Court for an ancillary hearing under 21 U.S.C.
§ 853(n) to determine their rights to deposit-account funds forfeited to the United States in this
criminal case. The United States moves to dismiss Lin and Zhao’s petition under Federal Rule
of Criminal Procedure 32.2(c)(1)(A), arguing that Lin and Zhao fail to state a claim to the funds.
Because the Court lacks sufficient information to decide the petition on its merits, the Court
denies the United States’ motion to dismiss, grants Petitioners’ request for an evidentiary
hearing, and orders discovery under Rule 32.2(c)(1)(B).
I. 	Background
A. 	Criminal proceedings
In May 2024, a federal grand jury indicted seven defendants for wire fraud, money
laundering, identity theft, conspiracy to commit fraud, fraudulently effecting transactions, and
running an unlicensed money-transmitting business. Doc. 120. The United States later
dismissed the indictment against one defendant, subject to that defendant’s completing a federal
diversion program. Docs. 295, 297. And the Clerk of Court reassigned another defendant to
fugitive status. The remaining five defendants pleaded guilty to fraud- and money-laundering-
UNITED STATES OF AMERICA,
Plaintiff,
v.
YU-CHIEH HUANG et al.,
Defendants.
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conspiracy charges. See docs. 205, 207, 216, 257, 271. In their guilty-plea agreements, these
five defendants admitted that they engaged in a conspiracy to launder money on behalf of drug-
trafficking organizations and criminal-fraud organizations that targeted elderly adults. See doc.
205 at 4; doc. 207 at 5; doc. 216 at 5–6; doc. 257 at 5–6; doc. 271 at 6 (The Court cites to page
numbers as assigned by CM/ECF.). They further admitted that they served as “money mules”
for a money-laundering organization—that is, they “collect[ed] and disperse[d] the proceeds of
criminal activity in exchange for a set fee or a percentage of the funds collected.” Doc. 205 at 4;
see also doc. 216 at 5; doc. 207 at 5; doc. 257 at 5; doc. 271 at 5–6.
Four defendants also admitted that they used their personal financial accounts and
identifying information to “convert the illegal proceeds into cashier’s checks made payable to
Chinese nationals residing in the United States.” Doc. 205 at 5; see also doc. 207 at 6; doc. 216
at 7; doc. 257 at 5. For example, one defendant, Tsz Kan, admitted that, in June 2022, he
converted illegal proceeds into a cashier’s check for $170,000 and deposited it into a Bank of
America account ending in 8660. Doc. 216 at 7. And another defendant, Jiacheng Chen,
admitted that he made similar deposits into the same bank account (totaling $615,000) between
March and April of 2023. Doc. 257 at 6–7.
Defendants admitted that the purpose of providing these cashier’s checks to Chinese
nationals was to assist them in evading Chinese currency restrictions. See doc. 205 at 3; doc. 207
at 4; doc. 216 at 5, 7; doc. 257 at 4–5; doc. 271 at 5. The People’s Republic of China limits the
amount of currency its citizens may transfer outside of China. Doc. 205 at 3; doc. 207 at 4; doc.
216 at 5; doc. 257 at 4; doc. 271 at 5. So, some Chinese nationals in the United States enter into
agreements where they accept deposits of U.S. dollars in their U.S. bank accounts. Doc. 205 at
3; doc. 207 at 4; doc. 216 at 5; doc. 257 at 4–5; doc. 271 at 5. And in return, these Chinese
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nationals exchange equivalent amounts of Chinese currency (known as “yuan,” “renminbi,” or
“RMB”) from their Chinese bank accounts to other accounts in mainland China. Doc. 205 at 3;
doc. 207 at 4; doc. 216 at 5, 7; doc. 257 at 4–5; doc. 271 at 5.
During the investigation of this case, the United States asserts that it obtained federal
seizure warrants and seized several bank accounts that allegedly contained proceeds of
Defendants’ money-laundering activity. Doc. 344 at 2; see also doc. 120 at 14. The seized
property included the following:
a. 	$327,602.30 in funds seized from Bank of America account ending in #8860;
b. 	$2,035,326.31 in funds seized from Bank of America account ending in #7416;
c. 	$134,431.76 in funds seized from Bank of America account ending in #6209;
d. 	$2,912,201.61 in funds seized from Bank of America Private Bank account ending
in #1831;
e. 	$60,000.00 in funds seized from JP Morgan Chase Bank account ending in #8620;
f. 	$349,904.90 in funds seized from East West Bank account ending in #4400; and
g. 	$1,029,032.53 in funds seized from JP Morgan Securities account ending in #1141.
Doc. 216 at 2; see also doc. 257 at 2; doc. 271 at 2.
In their guilty-plea agreements, Defendants Kan, Chen, and Kaiyu Wen admitted that
these funds were subject to criminal forfeiture. See doc. 216 at 2; doc. 257 at 2; doc. 271 at 2.
Thus, United States District Judge Matthew T. Schelp entered three Preliminary Orders of
Forfeiture for these funds. Docs. 264, 277, 281. The orders stated that the account funds (except
those in account #6209) were forfeited to the United States under 18 U.S.C. § 981(a)(1)(C) and
28 U.S.C. § 2461 as proceeds traceable to the money-laundering- and fraud-conspiracy charges.
See doc. 264 at 1–2; doc. 277 at 1–2; doc. 281 at 2.
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After Judge Schelp entered the orders of forfeiture, the United States mailed a copy of
this order to Petitioners Gang (“Gavin”) Lin and Pei (“Linda”) Zhao (the purported owners of
accounts #8860, #1831, #7416, and #1141) on May 14, 2025. See doc. 321-3; doc. 321 at ¶¶ 1,
17, 19. On June 13, 2025, Petitioners timely filed a verified petition for an ancillary hearing
under 21 U.S.C. § 853(n) and Federal Rule of Criminal Procedure 32.2. Doc. 321. About one
month later, the United States filed a “Motion to Dismiss Petition or, in the Alternative, to Permit
Discovery.” Doc. 344. Petitioners filed their response in opposition to the United States’
motion, doc. 364, and the United States did not file a reply. Thus, the petition and motion are
ripe for the Court’s review.
B. 	Petition for ancillary hearing
In their petition, Petitioners Lin and Zhao allege the following facts, which the Court
accepts as true for the purposes of the United States’ motion to dismiss. See Fed. R. Crim. P.
32.2(c)(1)(A).
Petitioner Zhao is a naturalized United States citizen. Doc. 321 at ¶ 5. Her husband,
Petitioner Lin, is a permanent resident of the United States in the process of obtaining his
citizenship. Id. In 2019, Lin and Zhao immigrated to the United States from China on an EB-5
visa. Id. They are native Mandarin speakers with limited English-language skills. Id. They
currently reside in Southern California, where there is “a sizable Chinese and Chinese American
immigrant community.” Id.
Over a decade ago, while Lin and Zhao still lived in China, they invested in real estate
and private equity funds. Id. at ¶ 6. These investments “have resulted in profitable returns” for
Lin and Zhao and “continue to be a source of income” for them. Id. They hold the “vast
majority” of their wealth in Chinese financial institutions and private funds. Id. Despite this,
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Lin and Zhao “have continuously paid U.S. income tax on the income derived from their assets
located in China.” Id.
Lin and Zhao needed to access additional funds from their Chinese bank accounts to pay
for “family living expenses” for themselves, their young children, and their elderly mother. Id.
at ¶ 7. One way to access these funds is to “informally exchange Chinese RMB for United States
Dollars.” Id. According to Petitioners, this informal exchange “is extremely common within the
Chinese community due to the Chinese Government’s capital control regimes,” id., which
restrict foreign currency exchanges to $50,000 per year per adult, id. at ¶¶ 3, 9.
In 2021, Lin met Jianying (“Bill”) Lu. Id. at ¶ 8. The following year, Lu told Lin that he
could help Lin exchange his Chinese currency for United States Dollars, as he had done for
others. Id. Petitioners reiterate that informal banking services like Lu’s (known as “piaohaos”)
are “extremely common within the Chinese community due to the Chinese Government’s
restrictive capital control schemes.” Id. at ¶ 9.
Petitioners state that Lu was Lin’s exclusive contact for exchanging his Chinese RMB for
United States Dollars. Id. at ¶ 10. And, as is normal for such transactions, “Petitioners do not
know and have never met any of the counterparties to the transactions,” including the defendants
in this case. Id. And based on information and belief, Petitioners assert that the criminal
defendants have no idea who Petitioners are, either. Id. Nor, they assert, does the United States
have evidence that Petitioners participated in any criminal conduct. Id.
Once Lin discovered that the United States seized his funds because they were connected
to a criminal case, he “voluntarily reached out” to the United States. Id. at ¶ 11. He explained to
the United States “the circumstances involving the piaohaos” and “his lack of knowledge and
involvement with respect to the underlying conduct in the criminal case.” Id. And when
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Petitioners told the United States that some of the seized account funds “had no relation to any
currency exchange transactions,” the United States “acquiesced and released approximately $2.7
million from account ending in #1831.” Id.
II. 	Legal standards and applicable law
A. 	Ancillary proceeding under 21 U.S.C. § 853(n)
Section 853 of the Controlled Substances Act mandates that anyone convicted of a felony
drug offense forfeit to the United States “any property constituting, or derived from, any
proceeds the person obtained, directly or indirectly, as a result of [the] violation.” 21 U.S.C.
§ 853(a)(1); see also 28 U.S.C. § 2461(c) (noting that the procedures in section 853 “apply to all
stages of a criminal forfeiture proceeding”). Section 853 also specifies the procedures third
parties may use to assert their interest in property forfeited to the United States in a criminal
proceeding. 21 U.S.C. § 853(n). Specifically, any person (other than the defendant) who
“assert[s] a legal interest in property which has been ordered forfeited to the United States” may
“petition the court for a hearing to adjudicate the validity of his alleged interest in the property.”
21 U.S.C. § 853(n)(2); see also Fed. R. Crim. P. 32.2(c)(1) (noting that a court “must conduct an
ancillary proceeding” if a third party “files a petition asserting an interest in the property to be
forfeited”).
To prevail on a third-party claim under section 853, a petitioner must do three things.
First, the petitioner must satisfy the pleading requirements under section 853(n)(3). Specifically,
he must (1) sign the petition under penalty of perjury, (2) explain the nature and extent of his
interest in the property, (3) discuss the time and circumstances surrounding his acquisition of that
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interest, (4) supply any additional facts supporting his claim, and (5) specify the relief he seeks.
21 U.S.C. § 853(n)(3).
Second, the petitioner must satisfy both constitutional and statutory standing
requirements. United States v. Timley, 507 F.3d 1125, 1129 (8th Cir. 2007). For constitutional
standing, the petitioner must demonstrate “an ownership or possessory interest in the seized
property.” Id. (citation omitted); see also United States v. One Lincoln Navigator 1998, 328 F.3d
1011, 1013 (8th Cir. 2003) (explaining that, to establish constitutional standing, a claimant “need
only show a colorable interest in the property, redressable, at least in part, by a return of the
property”). He can establish such an interest through “actual possession, control, title, and
financial stake.” United States v. White, 675 F.3d 1073, 1078 (8th Cir. 2012) (quoting United
States v. Premises Known as 7725 Unity Ave. N., 294 F.3d 954, 956 (8th Cir. 2002)). And for
statutory standing, the petitioner “must have a legal interest.” Timley, 507 F.3d at 1129.
Importantly, a legal interest “encompasses only legally protected rights, not equitable rights.” Id.
To determine whether a petitioner has a valid interest, the court must “look to the law of the
jurisdiction that created the property right.” Id. at 1129–30.
Third, the petitioner must succeed on the merits at the ancillary hearing. See id. at 1130.
He does this by showing, by a preponderance of the evidence, either (1) that he has priority of
ownership over the subject property, or (2) that he was a bona fide purchaser for value of the
subject property. See 21 U.S.C. § 853(n)(6)(A)–(B); Timley, 507 F.3d at 1130.
The priority-of-ownership ground under section 853(n)(6)(A) “embodies the relation-
back doctrine,” whereby “title to the forfeited property vests in the United States at the time of
the defendant’s criminal act.” Timley, 507 F.3d at 1130. So, a party prevails on this ground only
if “he had an interest in the property before the [United States’] interest vested.” Id. Notably, a
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petitioner’s claim of superior title will fail if the subject property constitutes proceeds of a
criminal offense. Id. This is because “the proceeds of an offense do not exist before the offense
is committed, and when they come into existence, the [United States’] interest under the relation-
back doctrine immediately vests.” Id. (citing United States v. Hooper, 229 F.3d 818, 821–22
(9th Cir. 2000)).
In contrast, the bona-fide-purchaser ground under section 853(n)(6)(B) is “an exception
to the relation-back doctrine.” Id. To prevail on this ground, the claimant must show that:
(1) he has “a legal interest in the forfeited property,” (2) he acquired such interest as a “bona fide
purchaser for value,” and (3) he acquired the interest at a time when he was “reasonably without
cause to believe that the property was subject to forfeiture.” Id. at 1130–31.
If the petitioner satisfies all three requirements, “the court must enter a final order of
forfeiture by amending the preliminary order as necessary to account for any third-party rights.”
Fed. R. Crim. P. 32.2(c)(2); see also 21 U.S.C. § 853(n)(6). Otherwise, he merits no relief, and
the United States has full and clear title to the forfeited property. See 21 U.S.C. § 853(n)(7).
B. 	Motion to dismiss under Rule 32.2(c)(1)(A)
On motion, the Court may dismiss a third-party forfeiture petition “for lack of standing,
for failure to state a claim, or for any other lawful reason.” Fed. R. Crim. P. 32.2(c)(1)(A); see
also White, 675 F.3d at 1077. The Court treats a motion to dismiss a third-party petition like a
motion under Federal Rule of Civil Procedure 12(b). See Pacheco v. Serendensky, 393 F.3d 348,
352 (2d Cir. 2004); United States v. Sigillito, 938 F. Supp. 2d 877, 883 (E.D. Mo. 2013). Thus,
the Court must assume as true the facts set forth in the petition. Fed. R. Crim. P. 32.2(c)(1)(A);
White, 675 F.3d at 1077. And the Court must determine whether the complaint “contain[s]
sufficient factual matter . . . to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
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Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“If a third party fails to allege in its petition all elements necessary for recovery, including those
related to standing, the court may dismiss the petition without providing a hearing.” White, 675
F.3d at 1077 (quoting United States v. BCCI Holdings (Lux.) S.A. (Petitions of Gen. Creditors),
919 F. Supp. 31, 36 (D.D.C. 1996)).
III. 	Discussion
Lin and Zhao assert various grounds on which they claim the Court should exclude the
deposit-account funds from forfeiture: (i) the United States lacked probable cause to seize the
property; (ii) the United States’ seizure of their entire deposit accounts was improper; (iii) Lin is
a bona fide purchaser for value; and (iv) Zhao has superior right, title, and interest in the
accounts. Doc. 321 at ¶ 23. The United States argues that the Court should dismiss the petition
because Petitioners fail to state a valid claim. Doc. 344 at 8–9. The Court discusses each of
these arguments in turn. Because the United States does not dispute that Petitioners satisfy the
threshold pleading requirements of section 853(n)(3), see generally doc. 344, the Court first
discusses whether Petitioners have standing.
A. 	Standing
To determine standing at this stage, the Court reviews the Petitioners’ allegations, which
it must accept as true. Fed. R. Crim. P. 32.2(c)(1)(A). Petitioners first allege that they have
standing to contest the forfeiture of the deposit-account funds. They state that they are “the
owner, named account holder, or authorized trustee of each of the deposit accounts.” Doc. 321 at
¶ 19; see also doc. 321-4. They also assert that they have a legally protectable interest under the
laws of California (where they reside), because they exercised “dominion” over the deposit-
account funds. Id. at ¶ 20. Accepting these allegations as true, the Court finds that Petitioners
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have alleged a “financial stake” to create a “colorable interest” in the property at issue. See
White, 675 F.3d at 1078; One Lincoln Navigator, 328 F.3d at 1013. And this alleged interest, if
proven, would likely be valid under state law. See United States v. JP Morgan Chase Bank Acct.
No. Ending 8215 in the Name of Ladislao V. Samaniego, VL: $446,377.36, 835 F.3d 1159,
1165–66 (9th Cir. 2016) (defining a “possessory interest” as “the exercise of dominion over
property”); United States v. $223,000.00 in U.S. Currency, 692 F. Supp. 3d 933, 1000 (C.D. Cal.
2023) (noting same); Possessory Interest, Black’s Law Dictionary (12th ed. 2024) (defining
“possessory interest” as “[t]he present right to control property”).
Zhao also asserts that she has “an undivided one-half interest in community property”
under California law. See doc. 321 at ¶ 39. Accepting this allegation as true, the Court finds that
Zhao has alleged a “financial stake” in the deposit-account funds, thus creating a “colorable
interest” in the property at issue. See White, 675 F.3d at 1078; One Lincoln Navigator, 328 F.3d
at 1013. And this alleged interest, if proven, also appears valid under California law. True, the
Eighth Circuit has held that “[d]ivorce law does not govern a spouse’s claimed interest in
forfeited property.” United States v. Cochenour, 441 F.3d 599, 601 (8th Cir. 2006). But
California community property law creates a present and undivided interest that spouses enjoy
during their marriage—in other words, this interest vests before divorce. See Cal. Fam. Code
§ 751 (West 2025) (“The respective interests of each spouse in community property during
continuance of the marriage relation are present, existing, and equal interests.”); Cal. Fam. Code.
§ 760 (“Except as otherwise provided by statute, all property . . . acquired by a married person
during the marriage while domiciled in this state is community property.”); United States v.
Lester, 85 F.3d 1409, 1412–13 (9th Cir. 1996) (holding that defendant’s wife had a
nonforfeitable vested undivided half interest in community property under California law for
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purposes of section 853(n) proceeding). Satisfied that Petitioners have properly alleged standing,
the Court now turns to the merits of their petition.
B. 	Merits
1. 	Probable cause for seizure of entire deposit accounts
Lin and Zhao first assert that the United States lacked probable cause to seize the entirety
of their deposit accounts. Doc. 321 at ¶¶ 25–30. They argue that, because the United States has
not provided them a copy of the seizure warrants and supporting affidavits, they “cannot assess
the validity of the seizure” and therefore “have been deprived of their basic due process rights.”
Id. at ¶ 25. They also argue that the United States improperly seized their deposit accounts
because it did so “indiscriminately, and without identifying which specific fund(s) within the
deposit accounts” resulted from illegal activity. Id. at ¶ 29.
The United States counters that section 853 “does not permit Petitioners to challenge the
legality of the forfeiture in this ancillary proceeding.” Doc. 344 at 8. But Petitioners respond
that they are not merely “relitigating the forfeitability” of Defendants’ interest in the subject
property. Doc. 364 at 5. Rather, they are challenging “when, and to what extent, the [United
States’] alleged interest in the seized property vested.” Id. at 6 (emphasis in original). This, they
argue, is relevant to their claim of superior title to the subject property. Id.
The Court notes that, in the initial forfeiture proceedings, Judge Schelp determined that a
“requisite nexus” existed between the subject property and the Defendants’ offenses to justify
forfeiture in this case. See doc. 264 at 1–2; doc. 277 at 1–2; doc. 281 at 1–2. And the Eighth
Circuit has made clear that Petitioners may not relitigate the outcome of those proceedings. See
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White, 675 F.3d at 1077–78 (noting that an ancillary proceeding does not allow a third party “to
relitigate the nexus between the criminal acts of [the defendant] and the forfeited proceeds”).
Nor may they challenge the seizure of the property under the Fourth Amendment. In
United States v. Porchay, the Eighth Circuit held that “[s]ection 853(n) does not give a third
party the right to challenge the legality of the seizure.” 533 F.3d 704, 710 (8th Cir. 2008).
Instead, “the plain language of the subsection indicates that its purpose is to ensure that the
property is not taken from someone with a right to the property that is superior to the defendant.”
Id. So, to the extent Petitioners seek to challenge the seizure and initial forfeiture of the deposit
accounts, the record before the Court shows that they lack standing to do so. Id.; see also 21
U.S.C. § 853(k) (stating that a party may not challenge the forfeiture of the subject property
except as provided in subsection (n)).
The Court notes, however, that the seizure warrants and affidavits in support may be
relevant to Petitioners’ claim of superior title under section 853(n)(6)(A), which the Court
declines to dismiss for the reasons stated below. Thus, the Court declines to dismiss the petition
on improper-seizure grounds as well.
2. 	Bona fide purchaser for value
Lin claims that he is a “bona fide purchaser for value” under section 853(n)(6)(B). Doc.
321 at ¶ 32; see also id. at ¶¶ 3, 21. As discussed, to prevail under this section, a petitioner must
show that (1) he has “a legal interest in the forfeited property”; (2) that he acquired this interest
“as a bona fide purchaser for value”; and (3) that, at the time he acquired his interest, he was
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“reasonably without cause to believe that the property was subject to forfeiture.” Timley, 507
F.3d at 1130–31; see also 21 U.S.C. § 853(n)(6)(B).
“Federal law controls whether a party qualifies as a [bona fide purchaser]” under section
853(n)(6)(B). United States v. Huntington Nat’l Bank, 682 F.3d 429, 433 (6th Cir. 2012). While
this section does not define the term “bona fide purchaser for value,” courts have found that the
bona-fide-purchaser exception stems from “hornbook commercial law” and reflects “the
common-law rule that an innocent purchaser for valuable consideration must be protected.” Id.
at 434 (citation modified); see also United States v. Lavin, 942 F.2d 177, 185 (3d Cir. 1991);
United States v. Petters, 857 F. Supp. 2d 841, 846 (D. Minn. 2012).
Courts also look to state commercial law for “persuasive guidance” on the meaning of
this term. Huntington, 682 F.3d at 435–36; see Petters, 857 F. Supp. at 846–47. And under
California law, a “bona fide purchaser” is one who takes “in good faith and without notice.” See
Cal. Cured Fruit Ass’n v. Stelling, 75 P. 320, 321 (Cal. 1904); Deutsche Bank Nat’l Trust Co. v.
Pyle, 220 Cal. Rptr. 3d 691, 697 (Cal. Ct. App. 2017); Sw. Adm’rs, Inc. v. Rozay’s Transfer, 791
F.2d 769, 774 (9th Cir. 1986). With this in mind, the Court turns to the merits of Lin’s bona-
fide-purchaser claim.
a. 	Legal interest
Lin asserts that he has a legal interest in the subject property because he is “the owner,
account holder, or authorized trustee for each of the bank accounts” that compose the subject
property. Doc. 321 at ¶ 33. As stated above, the Court finds that Lin has adequately pleaded his
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ownership of the deposit accounts and his possessory interest over the deposit-account funds. He
has therefore properly pleaded a legal interest in the subject property.
b. 	Bona fide purchaser
Lin argues that he obtained his legal interest in the deposit-account funds as a bona fide
purchaser, because for each deposit of United States dollars that he received, he “sent equivalent
outbound payments in Chinese RMB” from his bank accounts in China. Doc. 321 at ¶ 35; see
also doc. 321-6, 321-7. He also states that the funds in his deposit accounts “are entirely derived
from lawful income,” because he “has duly reported and paid U.S. taxes on his income earned in
China.” Id. at ¶ 36.
The United States counters that Lin does not qualify as a bona fide purchaser for several
reasons. First, it argues that “the operation of an unlicensed money transmitting service is in
violation of federal law, and Petitioner Lin describes his use of such an illegal money remitting
network.” Doc. 344 at 11 (citing 18 U.S.C. § 1960(b)(1)(B)). Second, it posits that the bona fide
purchaser exception “generally only protects claimants who have purchased ‘tangible property,’
not funds in a financial account.” Id. at 12 (citing United States v. BCCI Holdings (Lux.) S.A.,
980 F. Supp. 2, 9 (D.D.C. 1997)). Finally, it asserts that “a claimant who obtains their interest in
property as the result of an illegal contract cannot claim to be a bona fide purchaser.” Id. (citing
S.E.C. v. Elmas Trading Corp., 683 F. Supp. 743, 753 (D. Nev. 1987)).
At the outset, the Court dispenses with the United States’ argument that the
bona-fide-purchaser exception protects only those who have purchased “tangible property.” See
doc. 344 at 12 (citing BCCI, 980 F. Supp. at 9). Indeed, other courts have held that the exception
“appl[ies] to interests in both tangible and intangible property.” Huntington, 682 F.3d at 435.
And this approach is supported by the text of section 853, which defines the term “property” in
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part to include “tangible and intangible personal property.” 21 U.S.C. § 853(b) (emphasis
added); see also Huntington, 682 F.3d at 435.
Second, the Court lacks sufficient evidence to find that Lin used an illegal currency
exchange. Although the guilty-plea agreements discuss how Defendants lacked the licenses and
registration necessary to engage in a money-transmitting business under federal law, see doc.
205 at 4; doc. 207 at 5; doc. 271 at 7, the United States did not obtain convictions for this
conduct under 18 U.S.C. § 1960. Instead, Defendants pleaded guilty to fraud- and money-
laundering conspiracy charges. See docs. 205, 207, 216, 257, 271. But even if the United States
had obtained convictions for use of an unlicensed money-transmitting business under section
1960, the Court would still require more information about Lin’s interactions with Lu (who was
not a defendant in this case) to determine the nature of the currency exchange. Indeed, the only
information the Court has about Lin and Lu’s interactions comes from their WeChat and
iMessage conversations. See docs. 321-1, 321-2. The Court cannot ascertain the meaning of
these messages, however, because they are in Mandarin, rather than English. See docs. 321-1,
321-2. The Court therefore finds that an ancillary hearing is necessary on this issue and declines
to dismiss the petition on this ground.
c. 	Reasonably without cause
Lastly, Lin states that he was “reasonably without cause” to believe the deposit accounts
were subject to forfeiture. Doc. 321 at ¶ 37. He argues that he “lacked actual knowledge that
certain funds deposited into his bank accounts [were] allegedly tied to illegal criminal activity.”
Id. And he alleges that he reasonably believed the United States currency he received was not
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subject to forfeiture because the informal exchange of currency “is extremely common within the
Chinese community.” Id. at ¶ 38.
The United States counters that Lin was not without cause to believe these funds could be
forfeited, because he admitted that he “was using an unlicensed money transmitting network to
acquire money in violation of Chinese law.” Doc. 344 at 13. It also posits that “a claimant
cannot make the necessary showing of lack of knowledge based on willful blindness or by
showing that he did not have actual notice that property was subject to forfeiture.” Id. (citing
United States v. Medina Cuartes, 155 F. Supp. 2d 1338, 1343 (S.D. Fla. 2001)).
Lin responds that he was reasonably without cause to believe his funds were forfeitable,
because he received “official certified cashier’s checks issued by highly regulated financial
institutions.” Doc. 364 at 12. Further, he argues that factual issues exist regarding (1) whether
exchanging his Chinese currency for United States Dollars renders his United States Dollars
subject to forfeiture, (2) his “inquiries to Mr. Bill Lu concerning the legitimacy of exchanging
his funds,” and (3) his “state of mind, cultural heritage, and the common nature of informal
foreign exchange transactions.” Id.
In determining whether a petitioner was reasonably without cause to believe that the
subject property was forfeitable, “the standard is one of objective reasonableness.” Petters, 857
F. Supp. 2d at 848. And while the Court agrees that this standard precludes “willful blindness”
on the part of the petitioner and “imposes a duty of reasonable inquiry,” Medina Cuartes, 155 F.
Supp. 2d at 1343, the Court again finds that it lacks sufficient information to make this
determination. As stated above, the Court requires additional information regarding Lin’s
interactions with Lu and other circumstances surrounding the exchange of Lin’s Chinese assets
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for United States currency. The Court therefore finds that an ancillary hearing is necessary on
this issue and declines to dismiss the petition on this ground.
3. 	Superior title
Finally, Zhao asserts that she has superior right, title, and interest in the subject bank
accounts because, under California law, she has “an undivided one-half interest in the
community property.” Doc. 321 at ¶ 39; see also id. at ¶¶ 3, 22. The United States, however,
argues that Zhao’s claim of superior title fails because Judge Schelp determined, based on the
guilty-plea agreements, that the subject property “constitutes or was derived from criminal
proceeds.” Doc. 344 at 9. Therefore, under Timley, the United States argues, Zhao “can never
have a successful claim under § 853(n)(6)(A).” Timley, 507 F.3d at 1130; doc. 344 at 9. Zhao
agrees that she has no superior interest vis-à-vis the United States in criminal proceeds; however,
she argues that “factual issues exist as to the [United States’] purported interest in the entirety of
the seized accounts.” Doc. 364 at 13 (emphasis added). Put differently, Zhao alleges that not all
of the seized funds constitute criminal proceeds, and that she has a superior interest in any
untainted funds.
The Court finds that a factual dispute exists regarding Zhao’s claim of superior title to the
deposit-account funds. This is especially true given that, after the United States and Petitioners
held discussions in January 2025, the United States returned over $2.7 million from account
#1831 to Petitioners. See doc. 321-5; see also doc. 321 at ¶ 11; doc. 344 at 6; doc. 364 at 6.
Thus, it is unclear to the Court whether the entirety of the remaining seized funds constitute
criminal proceeds. The Court therefore finds that a hearing is necessary on this issue and
declines to dismiss the petition on this ground.
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In sum, the Court finds that it cannot dismiss Lin and Zhao’s petition on this record, so it
denies the United States’ motion to dismiss. Doc. 344. Consequently, the Court grants Lin and
Zhao’s request for an ancillary hearing. Doc. 321. The Court also notes that both sides have
requested that, in the event of a hearing, the Court permit discovery under Federal Rule of
Criminal Procedure 32.2(c)(1)(B). See doc. 344 at 14; doc. 364 at 14–15. As previously stated,
the Court finds that additional evidence is necessary to determine Lin and Zhao’s rights to the
deposit-account funds. The Court therefore grants the parties’ request for discovery.
C. 	Conclusion
Accordingly, the Court grants Petitioners’ [321] motion for an ancillary hearing. The
Court denies the United States’ [344] motion to dismiss the verified petition but grants, in the
alternative, the United States’ [344] request to permit discovery under Federal Rule of Criminal
Procedure 32.2(c)(1)(B) and 32.2(b)(3). The Court sets a status conference in this matter for
January 28, 2026 at 10:00 a.m. in Courtroom 14-North. Counsel for both the United States and
Petitioners must attend. No later than January 21, 2026, the United States and Petitioners must
submit a joint proposed scheduling plan that includes the following:
(a) 	a discovery plan that includes:
(i) 	any agreed-upon provisions for disclosure or discovery of electronically
stored information;
(ii) 	any agreements the parties reach for asserting claims of privilege or of
protection;
(iii) 	a date or dates by which the parties will disclose information and exchange
documents pursuant to Federal Rule of Civil Procedure 26(a)(1);
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(iv) 	whether the parties should conduct discovery in phases or limit discovery
to certain issues;
(v) 	dates by which each party must disclose its expert witnesses’ identities and
reports, and whether serial or simultaneous disclosure is appropriate in the
case, and dates by which each party must make its expert witnesses
available for deposition;
(vi) 	whether the presumptive limits of 10 depositions per side—as set forth in
Federal Rule of Civil Procedure 30(a)(2)(A)—and 25 interrogatories per
party—as set forth in Federal Rule of Civil Procedure 33(a)—should apply
in this case, and if not, the reasons for the variance from the rules;
(vii) 	a date by which the parties will complete discovery; and
(viii) 	any other matters pertinent to the completion of discovery.
(b) 	dates for filing any motions to dismiss, motions for summary judgment, and
motions under Federal Rules of Evidence 702 or 703 (colloquially referred to as
Daubert motions);
(c) 	the earliest date by which this case should reasonably be expected to be ready for
hearing; and
(d) 	any other matters counsel deem appropriate for inclusion in the joint proposed
scheduling plan.
So ordered this 5th day of January 2026.
STEPHEN R. CLARK
CHIEF UNITED STATES DISTRICT JUDGE
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