United States v. Murgio

• Decision Date: 19 September 2016
• Docket Number: 15-cr-769 (AJN)
• Citation: 209 F.Supp.3d 698
• Parties: UNITED STATES of America, v. Anthony R. MURGIO, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

209 F.Supp.3d 698

UNITED STATES of America,

v.Anthony R. MURGIO, et al., Defendants.

15-cr-769 (AJN)

United States District Court, S.D. New York.

Signed September 19, 2016

Eun Young Choi, Won S. Shin, Catherine Elaine Geddes, Daniel Scott Noble, United States Attorney's Office, New York, NY, for Plaintiff.

Gregory William Kehoe, Greenberg Traurig, P.A., Tampa, FL, Robert A. Soloway, Rothman, Schneider, Soloway & Stern, LLP, Eric M. Creizman, Caroline Johnston Polisi, Melissa Madrigal, Creizman PLLC, New York, NY, Brian Edward Klein, Baker Marquart LLP, Los Angeles, CA, Kristen Marie Santillo, Krovatin Klingeman LLC, Newark, NJ, Stuart Neal Kaplan, Joseph G. Sconzo, Kaplan Sconzo & Parker, P.A., Palm Beach Gardens, FL, for Defendants.

MEMORANDUM & ORDER

ALISON J. NATHAN, District Judge:

Defendants Anthony Murgio ("Murgio"), Yuri Lebedev, Trevon Gross, and Michael Murgio—Anthony's father—are charged in a nine-count superseding indictment ("the Indictment"). United States v. Murgio, No. 15-CR-769 (AJN) (S.D.N.Y. Apr. 21, 2016) ("S3 Indictment"), Dkt. No. 87. The allegations in the Indictment stem from Murgio's alleged operation, with Lebedev's assistance, of Coin.mx, a website that the Government characterizes as an unlawful Bitcoin¹ exchange, and from an alleged scheme to bribe Gross, the chairman of the board of a federal credit union, in order to obscure the illegal nature of Coin.mx. Id. ¶¶ 3, 4, 10. Before the Court are various pre-trial motions brought by the Defendants. In broad terms, the motions challenge the sufficiency and wording of the Indictment, seek particulars from the Government, request disclosure of certain information in advance of trial, and, in one case, seek a severance. For the reasons that follow, the Court grants several of the requests for a bill of particulars, but otherwise denies the Defendants' motions.

I. BACKGROUND

A grand jury returned the third superseding indictment in this case on April 14, 2016. See S3 Indictment at 22. Murgio is charged in eight of the Indictment's nine counts. The first two counts charge Murgio with operating, and conspiring to operate, Coin.mx as an unlicensed money transmitting business. Id. ¶¶ 11-15. The Government alleges that Murgio and his co-conspirators attempted to shield the true nature of his Bitcoin exchange business by operating through several front companies, including one known as "Collectables Club," to convince financial institutions that Coin.mx was just a members-only association of individuals interested in collectable items, like stamps and sports memorabilia. Id. ¶ 5. Counts Six and Seven of the Indictment charge Murgio with committing, and conspiring to commit, wire fraud by virtue of making material misrepresentations to the financial institutions he was allegedly attempting to deceive. Id. ¶¶ 24-28. In Counts Eight and Nine, he is charged with engaging in, and conspiring to engage in, money laundering. Id. ¶¶ 29-33.

Counts Three through Five of the Indictment pertain to what the Government labels the "bribery scheme," an alleged effort to acquire control of HOPE FCU, a federal credit union in New Jersey with primarily low-income members. Id. ¶ 10. Counts three and four charge Murgio, Lebedev, and Michael Murgio with bribing, and conspiring to bribe, Gross, the Chairman of the Board of HOPE FCU. Id. ¶¶ 16-21. Count Five charges Gross with accepting those bribes. Id. ¶¶ 22-23. All told, Murgio and his co-conspirators allegedly paid more than $150,000 to bank accounts under Gross's control. Id. ¶ 10. In return, Gross allegedly assisted Murgio in installing co-conspirators, including Lebedev, on HOPE FCU's board and in transferring Coin.mx's banking operations to HOPE FCU. Id.

Three of the Defendants filed pre-trial motions. First, Murgio filed a motion to dismiss Counts One and Two of the Indictment, as well as a series of omnibus pre-trial motions. Dkt. Nos. 130, 132. Second, Gross filed a motion to dismiss Count Five of the Indictment and a motion for a bill of particulars. Dkt. No. 138. And third, Lebedev filed a series of omnibus pre-trial motions.² Dkt. No. 134. Michael Murgio did not separately file any motions, but he seeks leave to join several of the motions of his co-defendants—a request made by Murgio and Gross as well. Dkt. Nos. 141, 147, and 148. Those requests are granted.

II. MURGIO'S MOTION TO DISMISS COUNTS ONE AND TWO

Murgio moves to dismiss Counts One and Two of the Indictment, pursuant to Federal Rule of Criminal Procedure 12(b)(3)(B), on the grounds that those counts fail to state an offense. Because "federal crimes are solely creatures of statute, a federal indictment can be challenged on the ground that it fails to allege a crime within the terms of the applicable statute." United States v. Aleynikov, 676 F.3d 71, 75–76 (2d Cir.2012) (internal quotation marks and citations omitted). An indictment can also be challenged on the grounds that it lacks required specificity.

Fed. R. Crim. P. 12(b)(3)(B)(iii). An indictment must contain "a plain, concise, and definite written statement of the essential facts constituting the offense charged." Fed. R. Crim. P. 7(c)(1). But in order "to satisfy the pleading requirements of Rule 7(c)(1), an indictment need do little more than to track the language of the statute charged and state the time and place (in approximate terms) of the alleged crime." United States v. Stringer, 730 F.3d 120, 124 (2d Cir.2013) (internal quotation marks and citation omitted). Put differently, "the indictment need only allege the ‘core of criminality’ the Government intends to prove at trial, since the indictment is ‘read ... to include facts which are necessarily implied by the specific allegations made.’ " United States v. Budovsky, No. 13–CR–368 (DLC), 2015 WL 5602853, at *3 (S.D.N.Y. Sept. 23, 2015) (alteration in original) (quoting United States v. Rigas, 490 F.3d 208, 229 (2d Cir.2007) ). In evaluating a motion to dismiss, the Court "accept[s] as true all of the allegations of the indictment." United States v. Goldberg, 756 F.2d 949, 950 (2d Cir.1985).

Count One of the Indictment charges Murgio with conspiring to commit an offense against the United States, in violation of 18 U.S.C. § 371. The object of that alleged conspiracy is the operation of an unlicensed money transmitting business, in violation of 18 U.S.C. § 1960. This underlying substantive offense, which Murgio is charged with in Count Two, is the focus of Murgio's motion to dismiss.

Section 1960 makes it a crime to "knowingly conduct[ ], control[ ], manage [ ], supervise[ ], direct[ ], or own[ ] all or part of an unlicensed money transmitting business." 18 U.S.C. § 1960(a). The key phrase in § 1960, for purposes of this motion, is "unlicensed money transmitting business." Breaking that phrase down into its component parts, first, the statute defines "money transmitting" to include "transferring funds on behalf of the public by any and all means including but not limited to transfers within this country or to locations abroad by wire, check, draft, facsimile, or courier." Id. § 1960(b)(2). Whether Coin.mx handled "funds," and if so, whether it "transferr [ed]" them on behalf of the public, are key questions here.

Next, the statute does not provide a particularized definition of "business," other than to specify that a "money transmitting business" must "affect [ ] interstate or foreign commerce" in order to fall within § 1960. Id. § 1960(b)(1).

Finally, the statute lists three ways in which a "money transmitting business" can be deemed "unlicensed." First, a money transmitting business is unlicensed if it "is operated without an appropriate money transmitting license in a State where such operation is punishable as a misdemeanor or a felony." Id. § 1960(b)(1)(A). Second, such a business is unlicensed if it fails to comply with federal "money transmitting business registration requirements." Id. § 1960(b)(1)(B). And third, a money transmitting business is unlicensed if it "involves the transportation or transmission of funds that are known to the defendant to have been derived from a criminal offense or are intended to be used to promote or support unlawful activity." Id. § 1960(b)(1)(C).

In sum, to qualify as an "unlicensed money transmitting business" under § 1960, a business must a) transfer, on behalf of the public, b) funds, and c) do so in violation of state or federal licensing and registration requirements, or with knowledge that the funds were derived from a criminal offense.

Murgio raises three principal arguments in support of dismissing Counts One and Two of the Indictment. First, he argues that bitcoins do not qualify as "funds" under § 1960. Second, he claims that the Indictment fails to allege that Coin.mx transferred funds so as to be a "money transmitting business" under § 1960. And third, he contends that the Indictment inadequately alleges that Coin.mx failed to comply with state and federal licensing and registration requirements. For the reasons that follow, the Court rejects each of these arguments.

A. Bitcoins Are "Funds" Under § 1960

Section 1960 does not specify what counts as "money" that is "transmitted," other than to note that it "includes ... funds." 18 U.S.C. § 1960(b)(2). This raises the question of whether bitcoins are "funds" under the statute. The Court concludes that they are.

"When a term goes undefined in a statute," courts give the term "its ordinary meaning." Taniguchi v. Kan Pac. Saipan, Ltd., 566 U.S. 560, 132 S.Ct. 1997, 2002, 182 L.Ed.2d 903 (2012). The ordinary meaning of "funds," according to Webster's Dictionary, is "available pecuniary resources." Webster's Third New International Dictionary 921 (2002). "Pecuniary" is defined as "taking the form of or consisting of money." Id. at 1663. And "money," in turn, is defined as "something generally accepted as a medium of exchange, a measure of value, or a means of payment." Id. at 1458. This definition of "funds," and the corresponding definition of "money,"...