Judge Rachel P. Kovner of the Eastern District of New York rejected claims by nine alleged fraud victims seeking to contest the civil forfeiture of 127,271 Bitcoin held in U.S. government custody. In a Sept. 25 ruling, the court determined that the claimants failed to establish Article III standing because their filings could not directly connect their lost funds to the specific seized cryptocurrency wallets.
Key Takeaways
- 127,271 Bitcoin remains subject to U.S. government civil forfeiture tied to Prince Holding Group and chairman Chen Zhi.
- Judge Rachel P. Kovner struck claims from Ath Leepinyo and Connie Wilson, while denying seven other late filings due to a lack of Article III standing.
- Victims failed to show proprietary rights to specific wallets, placing them in the position of general unsecured creditors.
- Claimants must now rely on the Department of Justice's official remission process under 28 CFR 9.8 if the forfeiture succeeds.
Court Rules Fraud Victims Lack Article III Standing
The civil forfeiture case originated from an Oct. 14, 2025 complaint filed by the U.S. Department of Justice (DOJ). Federal prosecutors alleged that the 127,271 Bitcoin was tied to extensive fraud and money laundering schemes involving Prince Holding Group, a prominent Cambodian conglomerate, and its chairman, Chen Zhi.
In her order, Judge Kovner struck the timely claims of Ath Leepinyo and Connie Wilson and rejected permission for seven additional claimants to submit late filings. The court explained that while a constructive trust can grant an equitable ownership interest, none of the individuals provided factual proof tracing their stolen funds into the seized addresses. For instance, claimant Lawrence D. Van Dyn Hoven cited an investigator's belief that his lost assets were included in the seizure, but Kovner noted that the filing contained no supporting facts to substantiate that assertion. Consequently, the court classified the group as general unsecured creditors rather than specific property owners.
The DOJ Remission Process Under 28 CFR 9.8
Although the ruling prevents these nine individuals from contesting the forfeiture directly, Judge Kovner noted that victims may still seek compensation through the federal remission process if the government wins the case. Managed by the DOJ under federal regulation 28 CFR 9.8, remission allows verified victims to petition for recovery from forfeited property without holding a pre-existing ownership interest in the specific assets.
To qualify under 28 CFR 9.8, petitioners must demonstrate a specific financial loss directly caused by the underlying criminal offense. Additionally, applicants must prove they had no knowing involvement or willful blindness regarding the illegal activities, have not received prior compensation, and lack reasonably available alternative assets for recovery. Because remission payments are capped at the net proceeds of the forfeited property, affected parties are not guaranteed full financial restitution even with high-value crypto seizures.
Why It Matters
This ruling highlights the stringent legal burden fraud victims face when attempting to claim direct ownership over crypto assets recovered in broad law enforcement operations. While law enforcement actions frequently target money laundering routes to impound illicit wealth, victims cannot bypass standard civil forfeiture procedures without direct on-chain tracing proof. Moving forward, market participants and scam victims should monitor how the DOJ handles discretionary remission petitions, as it represents the primary remaining legal mechanism for victim restitution in massive federal asset seizures.
