Sad Case of Civil Asset Forfeiture in the USA

If we look at the topic of asset protection, we will discover a disturbing trend: people all over the globe start thinking about the protection of their capital when it’s too late to do so. And this applies to all spheres of business and life without exception: from investments abroad to the registration of offshore companies, from inheritance to financial savings. And we are going to tell you about one case when measures should have been taken much earlier to make the whole thing much less painful and stressful.

The story we are going to tell you happened in 2016. Twin brothers, Edward and Brian Krassenstein, were on the verge of having all of their civil assets forfeited and ending up with a serious prison sentence. And this is no criminal story. These law-abiding citizens were not participating in any suspicious offshore schemes or something but earned their living by developing web portals where they placed different ads. Sounds strange? Well, let’s take a look at the real nightmare that they had to go through for no particular reason.

Losing All Your Wealth in a Matter of Seconds

Krassensteins, the twin brothers, came to the attention of United States law enforcement in 2016 when their accounts and property were forfeited without any formal charges. The whole thing happened instantly, and their families were shocked, to say the least.

The brothers’ business was quite a common undertaking that brought decent income, and they started their activities on the world market in 2003. The basic concept was as follows:

• The twins organized dozens of web forums, two of them being dedicated exclusively to the investment theme – TalkGold and MoneyMakerGroup.
• Each customer who wanted to place their advertising on these sites could do so on a paid basis.
• The advertising company did not pass the verification by the platform creators, and the information was available to over a million people.

However, a seemingly simple business led to the forfeiture of the owners’ personal property.

After lengthy investigations and meetings with the U.S. Attorney’s Office, the brothers learned the reason for such close attention on the part of the Department of Justice National Security Division and asset forfeiture. It was related to IT technologies and the development of many separate sites and forums where ads were placed.

Asset Forfeiture and Outcome

One morning, 15 U.S. Homeland Security Department officers and agents knocked on the door and started to search the house. It was an absolutely unexpected event, and the unreality of the situation was emphasized by a police helicopter that arrived on site. At that time, their wives were 8 and 4 months gone with babies, but that didn’t stop the inspectors in any way.

The first shock and panic were followed by many months of investigation that ended in the forfeiture of the brothers’ property and assets, including houses, apartments, and land. The rest of the money was spent on the services of attorneys who tried to do something about the situation.

The Krassenstein brothers had no clue in the first days what they were accused of, and the essence of the claims became more or less clear later on:

• They were accused of being accomplices in the fraudulent schemes that were realized using their web forums.
• The fraudsters who posted their ads were criminals and used this scheme to attract fraudulent investors and launder money.
• The amount that the police said the brothers had received from such an illegal business exceeded several tens of millions of dollars, which was shocking news for Edward and Brian.

As U.S. Department of Justice National Security Division Special Agent, Michael Adams, later explained, some websites were used in fraudulent schemes to promote illegal high-yield investment programs (HYIPs). These were managed by fraudsters, including those from Russia, who received huge profits from their projects.

After long meetings and discussions on the details of what happened, the US authorities offered the brothers to cooperate and provide assistance in the capture of criminals. However, if they agreed to openly participate in such a high-profile investigation, they would be in danger of being killed by the criminals – let alone the lives of their loved ones that would be put under threat, too.

As a result of the investigation which lasted more than a year, the brothers were never formally charged, but their assets were forfeited, and they paid a fortune to attorneys. And we are not even talking about the stress they were under during this time. The best lawyers in America were involved in the case to prove the innocence of the twin brothers. 

In the end, Ed and Brian had to agree to the forfeiture of a part of their assets (totaling $450,000), which was the price of the leased property sale. And it was the final suggestion made by the U.S. Police… It raises a lot of questions as to its legality, but it is still much better than 10 years in prison and the loss of all capital.

Recommendations

Later, the Krassenstein brothers gave a complete account of their “adventure” and their long excruciating wait on their website. As they note, they lost a year of a quiet life and part of their savings. The twins also mentioned the following points:

• There is a U.S. Media Act (First Amendment and Section 230) under which online publishers are not liable for third parties publishing their ads on the site or committing a crime. But if you are dealing with an investigation of international financial crimes in the United States, these rules are unlikely to apply to protect your rights.
• In any scenario, you can argue with the authorities only within the law, and having a good attorney is a must.
• Prepare for long visits to the police where you will have to rely on your strong nerves to prove your innocence throughout the investigation.

This story had a happy ending but left a considerable imprint in the hearts and minds of all of its participants. Edward and Brian Krassenstein managed to walk this path and defend their rights. However, some other people, including oligarchs and investors, failed.

How to Protect your Capital

As you probably understand, the situation in the world has not changed much since that time. Even if there is a law that protects your rights, there are absolutely no guarantees that it will be applied appropriately. The representatives of law enforcement agencies have the right to conduct an investigation, and the suspect will have to prove his innocence (rather than the police that will prove his guilt).

Fortunately, there are jurisdictions like Nevis, Belize, or Panama, and they are traditionally used to protect capital and minimize risks.

Offshore Trust and Nevis LLC

One way of protection against asset forfeiture is offered by the jurisdiction of Nevis where laws are on your side:

• An offshore trust in Nevis allows you to separate the rights of ownership and the capital. You transfer all the rights to the trustee, which makes it harder to determine the ultimate owner and allow the owner to avoid asset forfeiture by the decision of a foreign court.
• An LLC in Nevis can be formed as an independent business or jointly with a trust, which makes the entire structure more flexible and secure. The management of Nevis LLC can be freely transferred to the trust and all property will be managed under the tax-free law.
• In this scenario, offshore accounts have a significant role to play in better asset protection against forfeiture as in the case of the Krassenstein brothers: you can keep your personal and corporate finances on them as a non-resident.

The most important thing about Nevis is that it is almost inaccessible for court decisions from the outside: the proceedings will have to be instituted in Nevis, and a bond of $100,000 has to be paid in advance. It will not be refunded if you lose, so most creditors decide not to proceed. The legislative framework of Nevis is on the owner’s side and it ensures strong confidentiality protection, which helped many wealthy persons to preserve their property from encroachment by third parties.

A Foundation in Panama

Panama Private Foundation is a legal structure that differs a lot from other organizational and legal forms, which increases its importance and demand in protecting property from forfeiture, encroachment of relatives, and losses due to other factors.

A private foundation established under Panamanian law is not a legal entity by analogy with corporations and companies. It does not have any owners, and it is most often established to protect the interests of a particular group of persons, such as a family foundation. Due to this flexible structure, the assets of the Panama Foundation cannot be subject to forfeiture and retention even in serious legal proceedings.

LLC in Belize

Belize Offshore Limited Liability Company can also be classified as one of the convenient instruments used to protect assets from forfeiture and ensure the beneficiary’s security. There are several main benefits to take advantage from the registration of this business:

• the shareholder is liable for taxes only to the extent of his profit and contribution
• his name is closed from outsiders
• no capital gains, inheritance or foreign property taxes are levied

Asset protection by forming an LLC in Belize is an excellent choice, especially if this structure is used in combination with a trust.

Protect your capital from forfeiture by relying on experienced experts of our portal who will help you register an offshore company, open a bank account, and arrange proper tax payments taking into account the beneficiary’s country of residence. Contact us at info@offshore-pro.info