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Our Civil Asset Forfeiture Nightmare
What Happened to us can happen to anyone
The Raid of the Krassenstein Residences
7:02 A.M, September 20th, 2016, a moment we will never forget. The knock at the door still echoes in my head and the very thought of what happened next gives us both anxiety to this day.
As I answered the door, wearing nothing but my gym shorts, with my 8-month pregnant wife and dog following behind, two police officers asked me to step outside. At the exact same time, 6 houses down at my twin brother Ed Krassenstein‘s residence, the exact same script was playing out. Ed, his 4-month pregnant wife and their 3-year-old son were being escorted out of their home by men and women with assault rifles.
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Within 2 minutes, each home was littered with, at minimum, 15 officers — either agents from the Department of Homeland Security or police from both our county and a county 1,400 miles away. Within 3 minutes, I had noticed a helicopter hovering over the area, and within 4 minutes a true sense of panic had set in for my brother, both of our pregnant wives, and myself. We sat outside as agents rummaged through our newly built homes, refusing to answer even the most innocent questions, such as, “what the hell is going on?” As we sat outside in a state of shock and confusion, agents continued to ignore our questions, until finally after what seemed like 6 hours, but was probably closer to 10 minutes, a search warrant was handed to me. Thinking that the warrant would enlighten us as to why the government had accidentally raided our homes, we were quite disappointed when we actually read it. The only information we could glean off of the legal jargon within this document was the fact that the Department of Homeland Security was searching the residences of Ed and Brian Krassenstein for information related to wire fraud, conspiracy to commit wire fraud and money laundering, as well as business records stemming all the way back to 2004 when we were still in college.
Agents informed us that we were not being arrested or charged with a crime at this time, and that the five of us were permitted to leave our homes together and return once the raid was complete. Before leaving, however, agents watched as both ourselves and our wives changed out of our pajamas and into our clothing. They also informed us that we’d have to turn over our smartphones and unlock them.
We were now without phones and unable to call our attorneys, but we did have a car to hunt one down with, which is exactly what we did before aimlessly driving around for a few hours.
Once we returned to our homes, we found agents still sifting through each and every room. They seized every single electronic device that was present, along with cash, the majority of the documents found in our offices and precious metal found in both homes which we had had for over 13 years. We were now allowed back into our homes, but were confined to a single room. If we had to use the restroom, an agent would follow us there. If we had to grab a drink of water, an agent would also follow. We sat there in shock as we heard the home being torn apart. Every crevice was searched, every drawer was opened, every picture taken off the wall and cut open from the back, as they searched for ‘evidence’, until at last, the first inning of this extra-inning nightmare had been completed.
Assets Seized As We Are Left In The Dark For 6 Months
Approximately 48 hours had past since the raid. We were now in constant communication with two of the best criminal defense attorneys in the State of Florida, but still had no real understanding of what the government thought we had done, or what evidence they presented to a judge as ‘probable cause’ in order to obtain the search warrant.
As we sat numb in our homes, our businesses paralyzed and our offices gutted, our attorneys called. I optimistically answered the phone, thinking perhaps they had gotten to the bottom of it all, but no, it was more bad news. The government was seizing both of our newly built homes, along with a rental property, an empty lot and another home we owned which was currently on the market. Along with this property, they were also seizing our investments we had made in precious metals, located in a safe deposit box. While our bank accounts weren’t touched for the time being, our attorneys warned us that they were likely next.
What started out as a sense of optimism, since we both knew we hadn’t broken any laws, quickly turned into the type of nightmare that we all read about but never imagine could happen to us and our families. Over the next 6 months, as our attorney bills began to resemble the salary of a crappy Major League Baseball player, both of our wives gave birth to incredibly handsome little boys, and the government still refused to relinquish any substantial information in regards to what they thought we had done to warrant the seizure of the majority of our assets.
It’s hard for me to convey what 6 months really feels like when at any moment you know you could be arrested, taken away from your newborn child and wife, while at the same time having spent $100,000+ on legal bills, having the majority of your assets frozen and no clue why any of this was happening. I’ve never been depressed prior to this, but I can imagine that this was exactly what a deep deep depression felt like. It felt as if every bit of oxygen on the planet had been removed, and now we had to climb Mount Everest with two broken ankles. A Nightmare!!
Laying in bed at night, I would stare at the ceiling for hours, trying to remember every little thing I did for the past 13 years, to see if perhaps something could have been considered illegal. Drawing a blank every single time, I would then try my best to manifest a crime that I committed in my head. I probably did this in order to justify these actions by the government and to make my situation at least seem slightly warranted, so that I wouldn’t have to feel sorry for myself any longer. When that consistently failed, my nightly solution became two doses of NyQuil.
The Government’s Claims
At last, the government was ready to talk. By this time, both Ed and I had spent hundreds and hundreds of hours rummaging through old emails, files and business contacts, searching for even an inkling of evidence which the government could use to claim we did something illegal. It literally became our full-time jobs to obsess over solving a mystery which, in our minds, didn’t exist. There simply wasn’t anything illegal there. We had, by this time, convinced ourselves that everything would be ok.
Boy were we wrong!
Over the past 13 years we had both been in the business of launching internet message boards pertaining to an assortment of topics. These topics included subjects such as 3D printing, technology, internet investing, video games, science, and much more. In fact, over the years we had run probably close to 80 different websites, building up traffic to these sites before monetizing them with ads, and then either selling them off or keeping them as a means to a passive income.
Two of the message boards were in the investing niche. Moneymakergroup.com and Talkgold.com were their names. These sites discussed a variety of topics including, stocks, bonds, search engine optimization, foreign exchange trading, running websites for a profit, how to effectively promote websites, multi-level marking programs (MLMs), high yield investment programs (HYIP) and more. We owned these two sites for 13 years and 9 years respectively, and in that time had sold ads to over 2,500 clients worldwide.
The prosecutors had called our attorneys and they were now ready to talk. While still remaining vague over the phone, they made us aware that they were pressing forward in their investigation, which ‘was much larger than just us,’ and we were still viewed as subjects of their investigation. Now, however, they believed that we could help them. The prosecutors claimed that we had sold ads to companies which were scams on two of our 80 websites over the past 13 years. We were told that they were going to seize every dime we had ever made from both sites, and possibly charge us with conspiracy to commit wire fraud and money laundering for whatever the amount of money these companies stole from their clients. For instance, they claimed that if, out of the 2,500 ads we sold since 2004, 10 of them were to be scams, which had stolen $3 million each from investors, then we could be charged with 10 counts of conspiring to commit wire fraud in the amount of $30 million. With the amount of money we were talking, that could literally amount to decades in prison with current sentencing guidelines.
It was almost as if they had no clue that the First Amendment and Section 230 of the Communications Decency Act protected internet publishers like ourselves from liability should a 3rd party, who published an ad on our site, were to commit a crime. These are the very same types of laws which protect newspapers (classified ads) and companies like Google and Facebook from liability, should one of their clients defraud someone from a post or an ad published on their sites. In fact, the same types of ads that we sold, including ads for some of the exact companies that the government was accusing us of selling ads to, were also published on, and still appear on Google and Facebook to this day.
Despite our attorneys explaining to prosecutors that they had no case, the government asked us to fly out to the West Coast and meet for a proffer. A proffer, for those of you unaware, is basically a meeting with prosecutors and investigators, in which they promise not to use anything we say, as evidence against us, unless of course we lie. It would also be our opportunity to explain our side of the story and to gather additional insight into what the government may have on us in regards to their claim.
Over the course of the next several weeks, we spent hours upon hours with our attorneys, going over every single detail of our business, and preparing for the proffer on the West coast, which would consume 3 full days of travel and meetings. As our legal fees were now approaching $300,000, we began to have a little bit of hope, as we knew we were not in the wrong.
The Proffer (What The Hell???):
To say that we weren’t nervous to a point of nausea would be a lie. It is incredibly intimidating to walk into a Homeland Security building, get led to a table with 2 federal prosecutors, 3 investigators and 2 state attorneys, while being warned that any false information we provide could amount to 5 years in federal prison. What we were about to find out though, shocked the nerves right out of us.
The government was actually in the process of investigating a $500 million fraud ring being run by an organized crime syndicate in Russia, and they believed that we were a key player working with the group to defraud investors by promoting their scams on these two websites. There were a group of close to 17 companies who had purchased banner ads on our sites over a span of 13 years, but what we didn’t know was that these companies were all actually run by one international criminal organization.
A few years prior, we had been the target of a schemer who impersonated our company and contacted our advertisers in order to defraud them by selling them fake ads on our site. When we found out about this scheme we decided to set up our own little sting operation. We did this by pretending to be one of our advertisers and then baited the schemer into telling us who they were, via email. The advertiser who we pretended to portray, however, was actually a scammer themselves. The government had obtained one of these emails that we sent years ago, pretending to be this advertiser. To them, it appeared as if we were running one of the 17 scams connected to this Russian organized crime syndicate. OH BOY!! Homeland Security now was suggesting that we were part of an international organized crime syndicate responsible for hundreds of millions of dollars in illicit activity.
Counter to what you’d probably believe, all the stress and worry had suddenly vanished. I had to actually hold back laughter, assuming that we’d explain our way out of this situation with ease. Well, we did explain our way out of the situation, but the government still would not let up. They then turned it on us in another way. They continued to claim that by selling ads to companies which scammed investors, we were still both criminally and civilly responsible for their crimes. Using such claims as leverage, prosecutors then offered up the idea that we could help our cause significantly if we were to voluntarily cooperate with them.
We both thought to ourselves, “why not.” That’s until they actually explained what ‘cooperation’ may mean. The government was trying to climb the ladder and arrest the criminal at the very top of the international conspiracy. Their problem, however, was that many of these individuals lived in nations which did not have extradition treaties or agreements with the United States. Basically they could indict those individuals, but their crimes would go unpunished unless these alleged criminals were to step onto US soil or the soil of a nation who does have an extradition treaty or agreement with the United States. They wanted us to lure foreign mobsters living in a nation without an extradition treaty with the U.S. to a more favorable location so that U.S. officials could make an arrest.
Now, call us crazy, but if a group of organized criminals had defrauded investors of $500,000,000, what on earth is stopping them from paying someone $1 million to kill us both if we were to take such an agreement and ultimately testify against them? We expressed these concerns to prosecutors, and pointed out that such an agreement doesn’t seem like it’s in our best interest. We left the meeting about as confused as when we arrived, and as we flew home to be with our families, we still didn’t know if the government would try and have us arrested or if we’d see any of our assets ever returned.
Why We Were Right!
Don’t get me wrong, whenever you are the subject of a federal investigation, no matter how innocent you know you are, the very fact that the federal government is spending hundreds of thousands of dollars investigating you, certainly will make you feel as if you are actually guilty. I’m not going to lie. We both felt like bad people even though we knew we weren’t.
We did in fact sell banner ads to companies which ended up being scams. What we didn’t do, however, is knowingly sell banner ads to companies which were scams. Did we know that companies which advertised on our sites could end up being scams? Absolutely! After all, there was no way for us to verify the claims of any advertiser, whether they spent $17 for an ad or $17,000 for an ad. That’s why there has NEVER been a federal case in which any website has ever been criminally charged for publishing ads to a third party’s site. If the government actually did prosecute us, it would have been a landmark case, as there is no precedence for any case like it on the books.
We did everything possible to not only try and help users avoid scams, but our sites were known as the websites to goto in order to do due diligence and find out which online investments actually were scams. The purpose of our sites were to do exactly the opposite of what the government had unofficially accused us of — protect people from scams! Our websites clearly stated that companies partaking in illegal activity could not advertise with us, and we warned all of our users that investing online can be incredibly risky. If any advertiser was ever proven to be a scam, we would immediately remove their ads and cut them off as a client altogether. In fact, we encouraged people to come forward if they found any company advertising with us to be fraudulent.
After we figured out that these two websites were what sparked the investigation, we specifically asked the government what we should do differently. They said “keep running the sites just as you always have been”.
So essentially, for the next 7 months, the government claimed to believe that we were breaking the law, but told us to continue breaking the law. Despite their suggestion, we did not listen to them, and instead of directly selling ads to clients, we used Google Adsense. Adsense basically paid us commission for allowing Google to place ads on our sites. This put the entire process in the hands of Google. Now here’s the hilarious, yet sad part of it all. When we switched the ads over to Adsense, the ads which Google placed on our sites were for online investments that were clearly and blatantly scams. These were ads to sites which we knew for a fact were scams, and sites that we had even emailed Google about in order to have them removed (yet they weren’t removed). Below are numerous examples of high yield investment ads that Google was feeding to our sites (note that the government didn’t care about Google or Facebook and told us that Google and Facebook “are legitimate companies” while we were not):
There have been court rulings over the years which have established that the First Amendment protects publishers when publishing the words of someone else. Freedom of speech is at the very core of the U.S. Constitution, and courts have over and over again ruled in favor of this freedom. Additionally, there is a law on the books referred to as Section 230 of the Communications Decency Act (CDA), which is written specifically to prevent website owners from fearing the threat of legal action in regards to publishing third party content.
Section 230 has one caveat, however, and that is a small “*” at the bottom of the legislation which says “doesn’t apply to federal criminal statues”. This is the one caveat that would leave an ultimate decision as to whether or not the federal government could pursue a case against us, to a judge in a federal court room. With this said though, the federal government has never before prosecuted a case going directly against Section 230, regardless of that little “*”. Section 230, however, was written not because law makers thought it would be a good idea to implement for the sake of implementing, but rather because the Communications Decency Act (CDA) was determined to abridge the First Amendment. Section 230 was added later, in order to bring an unconstitutional CDA in-line with the Constitution. Because of this, we fully believe that no federal judge would have allowed a criminal case to move forward against us.
Even though this was our belief, there were a few additional caveats which prevented us from moving forward and simply trying to battle it out in court, besides the mounting legal fees. Most notably was the threat by the government to pursue a civil case against us, in unison with or perhaps separate from, any criminal case, claiming that our property was guilty of a crime, simply because some of our proceeds came from individuals who allegedly committed crimes themselves.
Civil court is scary. Whereas in criminal court, all jurors on your case must believe that you are guilty ‘beyond a reasonable doubt’, in civil court, the burden of proof is a lot lower. When cases are brought to civil trial, only 51% of the jurors need to believe that the government has a better case (greater than 50%) than the defendant. This is what ultimately led us to a decision that was made in order to protect our integrity and our families’ well being.
After over a year of stress, anger, bitterness and confusion, things appeared to be coming to a point of critical decision making. We had left our meeting with prosecutors, but were still unsure of what the final outcome of this huge mess would be.
Now though, we learned from our attorneys that not only were federal prosecutors coming at us with claims which we knew were ridiculous, but they were trying to throw additional fuel on top of the fire as well.
Turning the clock back to right after our homes were raided, and right after they had seized a majority of our personal property, Ed and I had decided that it was in our best interest to sell our stock holdings, so we moved these funds into bank accounts in the names of our wives. We did this so that we would have funds available for further legal fees, and in the case that anything happened to us, our wives would have complete control over our finances.
Now, however, as the prosecutors were trying to put as much fear as they could into our heads, they were claiming that the act of selling our stocks and moving the funds into new bank accounts under our wives’ names, was considered “money laundering” according to them. It doesn’t take a rocket scientist to realize that this legally had no basis for being considered a crime. The bank accounts were opened under real names in major U.S. banks, but like mentioned previously, when the federal government tells you that you are committing a crime, it really makes you question both reality and your own sanity.
In addition to this scare tactic, the government also told us that they could get us on an additional count of money laundering because we moved our Bitcoin, an online cryptocurrency, from our Coinbase account to a paper wallet. For those unfamiliar with cryptocurrencies, think of Coinbase as Paypal and a paper wallet as cold hard cash. Being that the Bitcoin was on a paper wallet, this was the only asset that the government had no way of seizing. When we explained to them that the only reason we moved the Bitcoin was because they issued a subpoena to Coinbase who then forced us to close our account, they all simply shut their mouths. It was slightly sickening to watch as they tried to come up with crimes to threaten us with after finally realizing that they had gotten it all wrong.
Fast forward a couple more weeks, and I was working out at the gym one day when our attorneys called and offered up a settlement agreement from federal prosecutors. The claim from them was that they still wanted practically every dollar that we had earned in the past 13 years. This was in additional to the incredibly high legal fees that we already had taken on.
Our attorneys originally were able to get them to offer us a settlement agreement where we would allow the government to keep the precious metals, the funds from the stocks that we sold, and the home which was on the market but had recently sold.
Ed and I immediately rejected this offer despite the fact that we were emotionally drained and just wanted this entire mess to be over and done with. After several more days of back and forth negotiating, similarly to how you’d negotiate with a seller of a home, our attorneys came back to us with a “final offer” from the federal prosecutors. While we were still outraged over the idea that we would need to pay the government for what we considered was a mistake on their end, what it really came down to was the idea of finally having our lives back for the first time in over a year.
They say that family is the most importantly thing in life, but many people don’t actually realize this until they are forced to look at their lives and see that money really plays no role in the time you have with your kids and wife, and the certainty that you will ultimately be able to continue providing for them.
The final offer was that we would give up a portion of the proceeds from the sale of our property. In exchange, the government would promise to drop the civil case and stop threatening us on the criminal end. We reluctantly took it, feeling a huge sense of relief, while also a sense of guilt for allowing the government to basically blackmail us into handing over money which we knew we were legally entitled to. Ultimately, it would have cost us the same amount in additional legal fees to fight any civil case, so the deal was a no-brainer to us. Unfortunately, the government also knew this and thus was able to force us into unjustly turning over hard-earned money.
Some may think that the financial burden of such an ordeal would be the most difficult. That wasn’t the case for us. The part that was the most upsetting was the fact that we couldn’t talk about what was happening to anyone but our immediate families. This meant that relatives, friends and neighbors were completely in the dark. The raid was all over the local news here. In fact we had news vans parked in front of our home for three straight days, with cameramen jumping in front of our cars as we pulled out of the driveway.
Local news simply reported that our homes had been raided by Homeland Security, which investigates drug, weapon and financial crimes. In fact, one local news channel emailed us and told us that they know that we were 3D printing and selling guns internationally and that they were going to run with the story unless we emailed them back. Of course our attorneys didn’t allow us to contact them to set the record straight. The story ended up airing, with them alluding to the fact that we were involved in 3D printing, as they flashed images of guns on the screen.
Our neighbors likely feared for their lives, most avoiding talking to us, while comments on the Facebook posts made by our local news sounded more like the latest conspiracy theory you’d see on InfoWars. “They were definitely counterfeiting money,” “Drugs, it had to have been drugs,” “These crooks will rot in prison,” wrote random people who had no clue who we even were.
Soon a whole series of fake articles began appearing on the internet as the rumors continued to circulate, yet we were unable to fight back until now. One writer, who works for the Daily Beast, named Lachlan Markay, even took it upon himself to post photos of Ed’s 4-year-old son on Twitter, with disturbing headlines.
Why Civil Forfeiture Laws are so Wrong
We were incredibly lucky. We were able to afford two top-notch attorneys and get ahead of the government before things really got out of control. Civil forfeiture, however, usually affects those who are less well off, people who can’t afford an attorney and certainly can’t afford to fight the heavy hand of the federal government for over 16 months. The government was able to come in and seize the majority of our assets without ever charging either of us with a single crime, much less us being convicted of a crime. How is that fair?
Every single year, approximately $12 billion in assets are seized in the United States. The vast majority of these assets are never returned, nor are they fought for, usually because once the assets are seized the individuals no longer have the money to pay an attorney. Unlike in criminal court, in civil court an attorney will not be appointed to you free of charge if you can not afford one. What does the government do with these seized assets? They are handed directly to the department which seized them. They are used to give raises and purchase new vehicles and equip for the very same agents and officers who seized the assets.
It’s one thing to seize assets after someone has been indicted, or perhaps convicted of a crime, but it’s another thing to seize assets and never even charge a person with a crime, while using the threat of criminal charges as a means to coerce money from that individual. It’s sickening, especially once you’ve lived through it all.
To conclude things here, you may have noticed that I did not mention the names of the investigators, the prosecutors or the actual jurisdiction on the West coast where this all took place. That’s because I don’t blame these individuals one bit for what happened. It’s the system they work within that deserves the blame; the politicians and high-up officials who allow such actions to continue over time regardless of how unjust they are.
Some people ask us if we are bitter, and the answer to that question is “No”. What happened to us was unjust, and in the end led us to realize that what really matters in all this is that we still have those people who are close to us, whether they are friends or family. That’s what really matters in the whole scheme of things.
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