{"id":36266,"date":"2025-04-02T10:39:23","date_gmt":"2025-04-02T10:39:23","guid":{"rendered":"https:\/\/www.cdr-news.com\/cdr-essential-intelligence\/fraud-asset-tracing-recovery\/\/"},"modified":"2025-04-04T13:35:42","modified_gmt":"2025-04-04T13:35:42","slug":"usa","status":"publish","type":"product","link":"https:\/\/www.cdr-news.com\/cdr-essential-intelligence\/fraud-asset-tracing-recovery\/usa\/","title":{"rendered":"USA"},"content":{"rendered":"

I\u00a0 Executive summary <\/strong><\/h2>\n

In the U.S., asset tracing and recovery can play a critical role in fraud, insolvency and judgment enforcement matters.\u00a0 Fraud victims can seek compensation through private actions, as well as law enforcement.\u00a0 Victims of cross-border scams can pursue civil actions in the U.S. if the fraudulent conduct or the those who perpetrated the fraud are sufficiently connected to the U.S.\u00a0 Enforcement of foreign money judgments is straightforward.\u00a0 New York and most other states have a simple process for domesticating a foreign judgment.\u00a0 The broad-ranging discovery practices in the U.S. give claimants powerful tools to recover assets.<\/p>\n

II\u00a0 Important legal framework and statutory underpinnings to fraud, asset tracing and recovery schemes <\/strong><\/h2>\n

Civil and criminal remedies<\/strong><\/h3>\n

Common law claims <\/em><\/strong><\/h3>\n

Several common law claims are available to fraud victims to recover stolen or misappropriated assets.\u00a0 Such claims can vary from state to state, but the key elements enumerated below are similar across the U.S.<\/p>\n

Fraud <\/strong><\/h3>\n

The elements of a common law fraud claim are: (1) a misrepresentation or a material omission of fact, that was (2) false and known to be false by the defendant (scienter) and (3) made to induce the other party to rely on it (intent to defraud), (4) on which the victim justifiably relied, and (5) was injured.\u00a0 Under federal and state law, fraud must be pled with particularity, except for information solely within the wrongdoer\u2019s knowledge (i.e., intent).<\/p>\n

Limitation periods for fraud claims vary, but will be generally be tolled until the victim discovers, or should have discovered, the fraud.<\/p>\n

Aiding and abetting fraud <\/strong><\/h3>\n

A fraud victim can assert an aiding and abetting claim against those who assisted the perpetrator.\u00a0 A litigant must allege: (1) the existence of a fraud; (2) the defendant\u2019s knowledge of the fraud; and (3) the defendant\u2019s substantial assistance in the fraud.\u00a0 The claim must be pled with particularity.\u00a0 Damages are similar to those for fraud.<\/p>\n

Civil conspiracy <\/strong><\/h3>\n

Conspiracy is closely related to aiding and abetting and is available in some jurisdictions.\u00a0 Claims for conspiracy and aiding and abetting are predicated on concerted wrongful action.\u00a0 Conspiracy generally requires an agreement and an overt act that causes damage, while aiding and abetting need only be based on assistance.\u00a0 Certain jurisdictions do not recognise the tort of civil conspiracy.\u00a0 For example, the tort exists in California, but not in New York.<\/p>\n

Conversion<\/strong><\/h3>\n

Conversion is the wrongful exercise of dominion over another\u2019s property.\u00a0 The elements of a conversion claim are: (1) plaintiff\u2019s ownership or right to possession of the property at the time of the conversion; (2) defendant\u2019s conversion by a wrongful act or disposition of property rights; and (3) damages.\u00a0 The statute of limitations is generally three years, but periods differ across jurisdictions.<\/p>\n

Unjust enrichment and money had and received <\/strong><\/h3>\n

These equitable claims are available when one party unfairly benefits at another\u2019s expense.\u00a0 They are often asserted as catch-alls when a wrong has been committed, but the conduct does not fall squarely within a cause of action.\u00a0 These claims are restorative in nature, and punitive damages are generally not available.<\/p>\n

The elements of an unjust enrichment claim are: (1) receipt of a benefit; (2) retention of the benefit at the expense of another; and (3) under principles of equity and good conscience, the defendant should not be permitted to keep the money.\u00a0 A claim for money had and received has similar elements.<\/p>\n

The statute of limitations for these claims varies.\u00a0 For example, in California it is three years, and in New York it is six years.<\/p>\n

Duty-based claims<\/strong><\/h3>\n

If it can be established that the defendant has a duty to the plaintiff (e.g., fiduciary duty or duty of care), other claims, such as: breach of fiduciary duty; aiding and abetting breach of fiduciary duty; negligence; and gross negligence, may arise.\u00a0 For most, the elements are a breach of a duty and a resulting injury.\u00a0 For negligence, there must also be causation \u2013 the breach must have been the proximate cause of the aggrieved party\u2019s damages.<\/p>\n

Statutory claims <\/em><\/strong><\/h3>\n

Racketeer Influenced and Corrupt Organizations Act (RICO)<\/strong><\/h3>\n

RICO provides criminal and civil remedies for victims of organised crime and other criminal schemes.\u00a0 RICO claims must meet stringent technical requirements that are beyond the scope of this chapter.\u00a0 It is worth noting that although a criminal scheme may underpin a civil RICO action, a prior criminal conviction is not a necessary element of a civil RICO claim.\u00a0 Accordingly, a plaintiff in a civil RICO case can establish a claim by a preponderance of the evidence, rather than the beyond a reasonable doubt standard that applies in the criminal context.\u00a0 With the chance to recover treble damages, costs and attorneys\u2019 fees, civil RICO actions are appealing to plaintiffs.\u00a0 However, courts are sceptical of attempts to turn business disputes into RICO claims.\u00a0 RICO applies to long-term patterns of criminal activity, not to \u201cevery fraudulent commercial transaction\u201d.\u00a0 Calcasieu Marin Nat\u2019l Bank v. Grant<\/em>, 943 F.2d 1453, 1463 (5th<\/sup> Cir. 1991).\u00a0 Many courts require a RICO plaintiff to file a case statement that is treated as an extension of the complaint which contains a detailed description of the pattern of racketeering activity.\u00a0 To recover under RICO, a foreign entity must show it suffered injury to its business or property in the U.S.<\/p>\n

Fraudulent conveyance <\/strong><\/h3>\n

Most states have adopted the Uniform Fraudulent Transfer Act (UFTA).\u00a0 The Act\u2019s purpose is to prevent debtors from putting assets outside the creditors\u2019 reach and to allow creditors to retrieve fraudulently transferred property from third parties.\u00a0\u00a0 The UFTA provides that when transfers that render the debtor insolvent or undercapitalised are made without fair consideration, they are constructively fraudulent and can be unwound.\u00a0 Alternatively, an aggrieved creditor can demonstrate the transferor\u2019s \u201cintent to defraud, hinder, delay either present or future creditors\u201d.\u00a0 Intent is difficult to prove.\u00a0 In cases of fraud, a creditor may demonstrate fraudulent intent through \u201cbadges of fraud\u201d \u2013 circumstances commonly associated with fraudulent transfers.\u00a0 Those circumstances include:<\/p>\n

    \n
  1. a close relationship between the parties;<\/li>\n
  2. a questionable transfer out of the ordinary course of business;<\/li>\n
  3. inadequate consideration;<\/li>\n
  4. the transferor\u2019s knowledge of the creditor\u2019s claim and the inability to pay it; and<\/li>\n
  5. the transferor retains control of the property after conveying it.<\/li>\n<\/ol>\n

    A transfer made with actual intent to defraud can be unwound regardless of whether fair consideration was paid.\u00a0 In most jurisdictions, the statute of limitations is four years.<\/p>\n

    Banking and money laundering<\/strong><\/h3>\n

    Bank fraud and money laundering are crimes in the U.S. that can be prosecuted by federal and state law enforcement authorities.\u00a0 Recent legislation \u2013 the Anti-Money Laundering Act of 2020 (AMLA) \u2013 is designed to help discover money laundering activity.\u00a0 The AMLA\u2019s key features include expanded rewards and protections for whistleblowers, establishment of a federal \u201cbeneficial ownership\u201d registry to shine light on those who directly or indirectly control shell companies, and introduction of new Bank Secrecy Act violations and increased penalties.\u00a0 The whistleblower provisions are also meant to spur internal compliance officers of financial institutions to use information they obtain in their official capacities to pursue whistleblower rewards.\u00a0 The discretion to file criminal charges for money laundering remains with law enforcement authorities.\u00a0 The AMLA\u2019s measures will presumably lead to the increased exposure of money laundering schemes and the prosecution of those who facilitate such schemes.<\/p>\n

    Criminal penalties for bank fraud and money laundering are provided by statute and can include fines, incarceration, probation and community service.\u00a0 They often do not involve any recovery for victims.\u00a0 Even where restitution is available, it may not fully cover the losses.\u00a0 Hence, bank fraud or money laundering victims can bring civil claims.\u00a0 With a lower burden of proof, a civil claim can succeed where a criminal prosecution cannot.<\/p>\n

    Insolvency<\/strong><\/h3>\n

    Many fraudulent enterprises are exposed when they become insolvent.\u00a0 Under U.S. law, an insolvent person or entity can seek bankruptcy protection.\u00a0 In bankruptcy, the debtor is protected by an automatic stay that halts all actions against the debtor and its property.\u00a0 The stay furthers the Bankruptcy Code\u2019s goal of the fair, orderly treatment of creditors by preventing a rush to seize the property of the debtor\u2019s estate.\u00a0 Most fraud-related bankruptcy proceedings are liquidations under Chapter 7 in which a trustee is assigned to marshal the estate\u2019s assets and distribute the proceeds to creditors equitably and in order of priority provided in the Bankruptcy Code.\u00a0 Members of similarly situated creditor groups must be treated equally.\u00a0 Secured creditors have a higher priority and are paid first.\u00a0 The debtor\u2019s equity holders are given a lower priority and usually paid last.\u00a0 Liquidations are administered under the Bankruptcy Code, Chapter 11 U.S.C. \u00a7\u00a7 101 et seq.<\/em>\u00a0 However, if the bankrupt entity is a securities brokerage, the Securities Investor Protection Corporation (SIPC) winds up the broker-dealer entities.\u00a0 SIPC advances brokerage customers up to US$500,000 to compensate them for their loss.\u00a0 The provisions of the Securities Investor Protection Act (SIPA) add other special protections, including providing that the brokerage\u2019s customers are compensated for their losses before other creditors.<\/p>\n

    A trustee can use claw-back provisions of the Bankruptcy Code and the UFTA to unwind a fraudulent debtor\u2019s transactions.\u00a0 For example, under Chapter 11 U.S.C. \u00a7 547, a trustee can claw back as \u201cpreferences\u201d any transfers the debtor made within a 90-day look-back period before the bankruptcy filing.\u00a0 Transfers to the debtor\u2019s insiders are subject to a one-year look-back period.\u00a0 The trustee can unwind the debtor\u2019s transfers to any party within two years of the bankruptcy if those transfers were intended to defraud creditors.\u00a0 In Ponzi schemes, intent to defraud is presumed.\u00a0 A trustee can recover fraudulently transferred assets from further transferees down the line, provided such transferees are not bona fide<\/em> purchasers for value.\u00a0 The UFTA also has claw-back provisions, with a four-year look-back period.<\/p>\n

    In SIPA cases, SIPA finances a trustee\u2019s efforts so the failed brokerage\u2019s customers can recoup all recovered property.\u00a0 In bankruptcy cases, the trustee\u2019s efforts often need to be financed.\u00a0 If there are sufficient assets available to claw back, the trustee may: (i) proceed on a contingency basis and be paid from the recoveries; (ii) obtain financing from a litigation funder; or (iii) proceed with financing provided by creditors or other stakeholders.\u00a0 This gives creditors some control of the recovery process.<\/p>\n

    Arbitration<\/strong><\/h3>\n

    The Federal Arbitration Act generally governs whether an arbitration clause is valid and enforceable.\u00a0 If the arbitration clause and any rules it incorporates are silent on arbitrability, the courts decide this question.\u00a0 However, even in fraud cases, valid contractual provisions, including arbitration clauses, will be enforced.\u00a0 As a matter of federal law, an arbitration clause is severable from a contract and is enforceable even if the rest of the contract is not.<\/p>\n

    Where parties provide or incorporate rules providing the arbitral tribunal will decide if the dispute is arbitrable, that will be enforced and the tribunal will determine its own jurisdiction.\u00a0 The tribunal\u2019s ruling on these issues will be final and can only be rejected on the grounds in Article V of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention).\u00a0 The question of whether an arbitration clause exists, however, may be reserved for the courts.<\/p>\n

    California Penal Code Section 496<\/strong><\/h3>\n

    California Penal Code Section 496(c) creates a private right of action for \u201cany person who has been injured\u201d by a wrongdoer\u2019s knowing receipt of stolen property.\u00a0 A prevailing plaintiff can recover three times the amount of actual damages, costs of suit and legal fees.\u00a0 In Bell v. Feibush<\/em>, 212 Cal. App. 4th<\/sup> 1041 (2013), the California Court of Appeals reiterated that an injured party can recover treble damages and held that a criminal conviction under Section 496 for receipt of stolen property was not a prerequisite to recovery of treble damages.\u00a0 The statute of limitations for a Section 496 claim is three years.<\/p>\n

    III\u00a0 Main stages of fraud, asset tracing and recovery cases <\/strong><\/h2>\n

    Filing the complaint<\/strong><\/h3>\n

    The first steps in any case are investigating and marshalling evidence.\u00a0 The Hague Evidence Convention and a federal statute entitled Assistance to Foreign and International Tribunals and to Litigants Before Such Tribunals, 28 U.S.C. \u00a7 1782, can be used by non-U.S. litigants to obtain broad pre-complaint discovery.\u00a0 U.S. complaints generally require less detail or evidentiary grounding than those in other countries.\u00a0 Most U.S. jurisdictions require only that a complaint be sufficiently detailed to give the defendant notice of the claims.\u00a0 Fraud cases require more specific pleading, but there is no requirement that each fact alleged in a complaint be based on documents.\u00a0 Allegations can be made on information and belief if they are reasonably grounded in fact and made in good faith.<\/p>\n

    Dispositive motions<\/strong><\/h3>\n

    The most common dispositive motions are motions to dismiss and motions for summary judgment.\u00a0 The Federal Rules of Civil Procedure (FRCP) provide several bases for motions to dismiss.\u00a0 Many states have adopted similar rules.\u00a0 FRCP Rule 12 enumerates these bases, which include lack of subject-matter jurisdiction, lack of personal jurisdiction, improper venue, insufficient process, insufficient service of process, failure to state a claim and failure to join a necessary party.\u00a0 Infirmity in any of these areas should prevent a case or a claim from moving forward and must, with some exceptions, be raised at the beginning of a case.<\/p>\n

    A summary judgment motion seeks judgment before a trial and is usually made after discovery is complete.\u00a0 Summary judgment is proper when there is no genuine dispute of material fact, which means only questions of law remain.\u00a0 If the court finds there is a dispute of material fact, it will deny the motion.<\/p>\n

    Discovery<\/strong><\/h3>\n

    The U.S. takes a broad approach to discovery.\u00a0 Subject to certain limitations (such as recognised privileges and proportionality), a party may seek discovery from parties to the litigation and third parties as long as the information sought is relevant to the claims in the litigation.\u00a0 The information does not need to be admissible in evidence.<\/p>\n

    Discovery is triggered by serving requests, such as document requests, interrogatories (written questions) and deposition (witness examination) notices.\u00a0 The information received does not become part of the official record unless it is later offered and accepted into evidence.\u00a0 The recipient of the discovery requests can object that the material sought is irrelevant, overly burdensome or protected by a privilege.<\/p>\n

    Seeking discovery from third parties is usually obtained by serving a subpoena.\u00a0 An attorney can issue a subpoena without leave of the court.\u00a0 A third party can object to the subpoena on the same grounds as a party can.<\/p>\n

    Trial<\/strong><\/h3>\n

    Cases can be tried to a judge or jury.\u00a0 In a case where money damages are sought, litigants have the right to a jury trial.\u00a0 In a case where non-monetary equitable relief (e.g., an injunction) is sought, there is no right to a jury trial.\u00a0 In equitable cases, the judge is the trier of fact, but can empanel an advisory jury (although this is rare).\u00a0 A trial starts with opening arguments in which the lawyers preview what they plan to prove with evidence at trial.\u00a0 Witnesses are called by each side to testify and documentary evidence can be introduced through the witnesses (evidence can also be introduced by stipulation).\u00a0 Each party has the right to cross-examine the other side\u2019s witnesses.\u00a0 After the witnesses have been called, the lawyers give closing arguments in which they discuss how the evidence introduced at trial supports their client\u2019s position.\u00a0 The judge or the jury then decides the case.\u00a0 There is a right to appeal, but jury verdicts are difficult to overturn.<\/p>\n

    Most cases are not tried because trials can be long, costly and unpredictable.\u00a0 Therefore, most parties opt to settle their cases, often after they finish discovery.<\/p>\n

    Pre-judgment asset restraints<\/strong><\/h3>\n

    Many U.S. jurisdictions have procedures to freeze assets until a dispute is resolved.\u00a0 The main methods are pre-judgment attachments \u2013 court orders that place a lien on property \u2013 and injunctions that restrain a party from disposing of assets.\u00a0 Freezing assets can obviously help a plaintiff enforce a judgment.<\/p>\n

    Though U.S. law does not provide for a worldwide asset freeze, a federal court can use FRCP Rule 64 to issue injunctive relief, including freezing of assets, by incorporating the procedures of the state in which the property is located, provided the state allows for pre-judgment attachment.<\/p>\n

    Whether a defendant must be given notice of attachment and injunction application is subject to local court rules.\u00a0 The trend is for notice to be required except in cases where there is a risk that the defendant would dispose of assets after receiving the notice.\u00a0 After the court renders its decision on an application for an order of attachment, the plaintiff delivers it to a sheriff or other authorised officer, who carries out the levy.\u00a0 The physical seizure of assets is uncommon.\u00a0 The defendant, after being served with the order, remains in possession of the frozen property.\u00a0 A plaintiff is often required to post a bond that acts as security for the defendant against costs and damages resulting from the attachment or injunction if the defendant ultimately wins.<\/p>\n

    Post-judgment asset restraints<\/strong><\/h3>\n

    After the plaintiff obtains a judgment, executing against the debtor\u2019s assets is fairly straightforward.\u00a0 This is done through writs of execution that direct a sheriff or marshal to levy on any non-exempt property in which the judgment debtor has an interest in that jurisdiction, and then sell the property for the benefit of the judgment creditor.\u00a0 The writ of execution creates a lien on the judgment debtor\u2019s personal property.\u00a0 For real property, the local county clerk must docket the judgment.\u00a0 For property in the possession of third parties, like bank accounts, the sheriff delivers the execution to the third party (called a \u201cgarnishee\u201d).<\/p>\n

    For added protection, as soon as judgment is entered, the plaintiff can serve a restraining notice on anyone the plaintiff believes may have relevant information about the judgment debtor\u2019s assets, income or financial affairs.\u00a0 Upon service, the restraining notice prevents the recipient from transferring, selling, assigning or interfering with the restrained property.<\/p>\n

    Some jurisdictions permit a judgment creditor to obtain a turnover order from a court that compels the judgment debtor to turn over property.\u00a0 A creditor can also obtain a turnover judgment against a third party, compelling that party to turn over the debtor\u2019s property in its possession.\u00a0 Turnover orders are used in cases where the property is not readily accessible, or if it is located outside of the state.\u00a0 Otherwise, it is easier to rely on the writ of execution.<\/p>\n

    A judgment creditor can serve discovery on the existence and location of the debtor\u2019s assets.\u00a0 A party can also obtain evidence in the U.S. in aid of a foreign proceeding, as discussed below.<\/p>\n

    IV\u00a0 Parallel proceedings: a combined civil and criminal approach <\/strong><\/h2>\n

    Parallel civil and criminal proceedings are not common.\u00a0 While there are no restrictions that preclude civil cases from advancing in parallel with criminal proceedings, civil cases can be judicially stayed or postponed in favour of criminal proceedings.\u00a0 Managing parallel proceedings can pose challenges.\u00a0 For example, a witness\u2019s assertion of Fifth Amendment privileges against self-incrimination can delay civil proceedings.<\/p>\n

    This does not mean that civil litigants must wait to commence civil proceedings if there is a criminal case.\u00a0 A delay can result in the statute of limitations expiring.\u00a0 Further, if the debtor is ordered to pay restitution in the criminal case, there is no guarantee victims will be fully compensated or receive as much as they would through civil litigation.\u00a0 And the burden of proof is lower in a civil proceeding than a criminal proceeding.<\/p>\n

    V\u00a0 Key challenges <\/strong><\/h2>\n

    The U.S. differs from other jurisdictions in various respects.\u00a0 For example, proceedings are open in most instances.\u00a0 The courts generally disfavour filing under seal, and a party seeking to prevent a filing from being open to the public must typically obtain the court\u2019s permission to do so and show good cause.\u00a0 Even when a court grants such a motion, the case docket is open, allowing the public to see certain details, like the type of filing, the name of the document and the date on which it was filed.<\/p>\n

    Attorneys\u2019 fees are not recoverable in most cases, which has an effect on the dynamic of the litigation.\u00a0 Among other things, it can cause the parties to seek an early settlement, even when they have real doubts as to the merits of the other side\u2019s case.<\/p>\n

    Although discovery can provide plaintiffs broad insight into defendant\u2019s affairs, it can be costly.\u00a0 Discovery disputes are common and costly.\u00a0 Defendants also have difficulty getting cases dismissed on jurisdictional grounds, which in the U.S. is subject to an expansive standard.\u00a0 However, the strategy of choosing not to participate is generally not advisable, because default judgments can be enforced in the U.S.<\/p>\n

    VI\u00a0 Cross-jurisdictional mechanisms: issues and solutions in recent times <\/strong><\/h2>\n

    Collection of evidence in support of proceedings abroad<\/p>\n

    As noted above, a party can petition a U.S. federal district court for discovery in aid of litigation before \u201cforeign and international tribunals\u201d under 28 U.S.C. \u00a7 1782.<\/p>\n

    Section 1782 requests can be initiated in one of two ways:<\/p>\n

      \n
    1. a letter rogatory issued from a non-U.S. tribunal may be delivered directly to the district court (usually included as part of an application prepared by a party or other interested person); or<\/li>\n
    2. a party or other interested person may make an application, without a letter rogatory, directly to the district court.<\/li>\n<\/ol>\n

      To obtain discovery under 28 U.S.C. \u00a7 1782, an application must satisfy three threshold requirements:<\/p>\n

        \n
      • the target of the requested discovery is a person \u201cfound\u201d in the federal judicial district;<\/li>\n
      • eligible proceedings exist (or are within reasonable contemplation) before a foreign tribunal and the applicant\u2019s discovery request is for use in aid of those proceedings; and<\/li>\n
      • the applicant is interested in those proceedings.<\/li>\n<\/ul>\n

        A person\u2019s physical presence in the district can be sufficient to compel his deposition.\u00a0 However, the federal courts are divided on whether they can require disclosure of documents located outside the U.S., even when the person from whom discovery is sought is located in the relevant federal judicial district.\u00a0 A business will likely be \u201cfound\u201d in a district for purposes of Section 1782 if the business would be subject to personal jurisdiction in that district by virtue of its systematic and continuous activities there, even if its headquarters or place of incorporation are located elsewhere.<\/p>\n

        FRCP Rule 69(2) is another discovery option for domestic and foreign actions. It allows a party with a foreign or domestic money judgment to take discovery from \u201cany person\u201d in aid of executing on the judgment.<\/p>\n

        Enforcement of judgments granted abroad in relation to fraud claims<\/strong><\/h3>\n

        Foreign money judgments are broadly enforceable in the U.S.\u00a0 It is best to bring the action in a jurisdiction where the judgment creditor believes assets are located because once recognised by the U.S. court, a foreign money judgment is on equal footing with a domestic judgment.\u00a0 Execution on the judgment and recovery of assets can follow if the court has jurisdiction over the assets or the judgment debtor.<\/p>\n

        Many states have adopted a version of the Uniform Foreign Money Judgments Recognition Act.\u00a0 For a foreign country judgment to be recognised, it generally must be \u201cfinal, conclusive, and enforceable\u201d.\u00a0 The enforceability of a judgment is also dependent on the proper exercise of personal jurisdiction by the foreign court over the defendant.<\/p>\n

        VII\u00a0 Using technology to aid asset recovery <\/strong><\/h2>\n

        Asset tracing is now largely a high-tech process.\u00a0 Technologies like artificial intelligence, blockchain analysis and digital forensics have given parties the ability to quickly mine massive amounts of data, trace the flow of funds and predict outcomes, making asset tracing more efficient.\u00a0 This increased efficiency permits parties to obtain more useful information regarding whether to bring a suit and how to collect on judgments already issued.\u00a0 Like asset concealment, today\u2019s tracing technology can easily cross geographic and jurisdictional boundaries, which means it can be possible for assets to be traced from anywhere by anyone.\u00a0 Hence, technology plays an increasingly vital role in financial fraud-related and other asset-related investigations.<\/p>\n

        VIII\u00a0 Highlighting the influence of digital currencies: is this a game changer?<\/strong><\/h2>\n

        Technology has also brought challenges to asset recovery.\u00a0 The law has struggled to keep pace with digital currencies and their ongoing vulnerabilities.\u00a0 In the U.S., there is no uniform definition of \u201ccryptocurrency\u201d, and the current regulatory landscape is a patchwork of different laws, interpretations and guidance.\u00a0 At the same time, given their anonymity, digital currencies have allowed illicit activity to flourish.\u00a0 The crypto markets\u2019 volatility has led to an increase in lawsuits from investors eager to recoup their funds.\u00a0 By the spring of 2022, more than 200 individual and class action lawsuits were filed in the U.S., which was a 50% increase since the start of 2020.\u00a0 Crypto-related arbitrations also increased.\u00a0 So far, New York and California are the most popular jurisdictions for crypto litigation, and almost half of suits brought are class actions.\u00a0 Securities-related allegations are the most common, but tort and fraud cases also account for a significant number of suits.<\/p>\n

        Whether the U.S. will enact cohesive crypto regulations across agencies remains to be seen.\u00a0 Regardless, crypto-related lawsuits will increase, and courts will be left to deal with the difficult task of parsing their complexity without the help of existing precedent.\u00a0 Quantifying damages and tracing assets in such cases will inevitably pose increased challenges.<\/p>\n

        IX\u00a0 Recent developments and other impacting factors <\/strong><\/h2>\n

        On June 22, 2023, in Yegiazaryan v. Smagin, et al.<\/em>, the U.S. Supreme Court held that a non-resident plaintiff suffered a domestic injury for the purposes of bringing a civil RICO claim even though the actions causing the injury largely took place outside the U.S., and the victim was a Russian national (599 U.S. 533 (2023)).\u00a0 The case involved the defendant\u2019s attempt to foil enforcement of a foreign arbitral award in California by moving assets to a series of offshore entities.\u00a0 This decision resolved a split between the Third and Ninth Circuits on the one hand and the Seventh Circuit on the other, the latter of which applied a strict domestic residency requirement for RICO injuries to intangible property.\u00a0 In so holding, the Supreme Court found that the question of \u201cdomesticity\u201d required a fact-intensive inquiry focused on the totality of the circumstances.<\/p>\n

        In 2014, Smagin obtained an US$84 million arbitral award against Yegiazaryan.\u00a0 To collect, Smagin filed an enforcement action in the Central District Court of California under the New York Convention.\u00a0 The California court issued a temporary protective order, followed by a preliminary injunction to freeze Yeghiazaryan\u2019s assets in California (see generally<\/em>, 9 U.S.C. \u00a7\u00a7 201\u2013208).\u00a0 In May 2015, Yegiazaryan obtained a US$198 million settlement.\u00a0 To avoid the court\u2019s asset freeze and obstruct collection, Yegiazaryan, among other things, concealed money in several offshore shell companies.\u00a0 Smagin then sued in the Central District of California, alleging that Yeghiazaryan had engaged in a pattern of criminal activity to prevent collection of Smagin\u2019s judgment in violation of Section 1964(c) of the RICO Act.\u00a0 The district court dismissed Smagin\u2019s complaint for failure to allege a \u201cdomestic injury\u201d, reasoning that the alleged scheme was aimed at evading a foreign arbitral award owed to a foreign creditor (Smagin v. Compagnie Monegasque De Banque<\/em>, 2:20-cv-11236-RGK-PLA, 2021 WL 2124254, at *1 (C.D. Cal. May 5, 2021)).<\/p>\n

        The Ninth Circuit reversed, finding that the case involved a domestic injury because Smagin\u2019s efforts to collect on a California judgment against a California resident were foiled by a pattern of racketeering which largely \u201coccurred in, or was targeted at, California\u201d and was designed to subvert collection of a California judgment (Smagin v. Yegiazaryan<\/em>, 37 F.4th<\/sup> 562, 567 (9th<\/sup> Cir. 2022)).<\/p>\n

        In addressing the question of the injury\u2019s \u201cdomesticity\u201d, the Supreme Court directed \u201ccourts to look to the circumstances surrounding the injury to see if those circumstances sufficiently ground the injury in the United States\u201d (599 U.S. at 535).\u00a0 The Court found that Yegiazaryan\u2019s injurious conduct was sufficiently grounded in the U.S. to be a \u201cdomestic injury\u201d because his actions were devised and executed towards Los Angeles County to frustrate the enforcement of Smagin\u2019s California judgment.<\/p>\n

        This decision could have a significant impact on a number of cases where the claims at issue have a \u201cdomestic injury\u201d requirement.<\/p>\n","protected":false},"excerpt":{"rendered":"

        I\u00a0 Executive summary In the U.S., asset tracing and recovery can play a critical role in fraud, insolvency and judgment enforcement matters.\u00a0 Fraud victims can seek compensation through private actions, as well as law enforcement.\u00a0 Victims of cross-border scams can pursue civil actions in the U.S. if the fraudulent conduct or the those who perpetrated […]<\/p>\n","protected":false},"featured_media":0,"parent":36179,"template":"","meta":{"inline_featured_image":false},"product_brand":[],"product_cat":[3223],"product_tag":[],"class_list":{"0":"post-36266","1":"product","2":"type-product","3":"status-publish","5":"product_cat-fraud-asset-tracing-and-recovery","7":"first","8":"instock","9":"downloadable","10":"virtual","11":"taxable","12":"purchasable","13":"product-type-simple"},"yoast_head":"\nFraud, Asset Tracing & Recovery 2025 | USA<\/title>\n<meta name=\"description\" content=\"This article discusses fraud in the USA, covering legal frameworks, 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