Second Circuit Reaffirms Judge-Found, Preponderance-Based Criminal Forfeiture and Rejects Excessive Fines Challenge in a Crypto Money-Laundering Case

Case: United States v. Mizrahi, No. 24-2507-cr (2d Cir. Nov. 7, 2025) (summary order)

Panel: Kearse, Jacobs, and Kahn, JJ.

Disposition: Affirmed (convictions, sentence, forfeiture order, and fine)

Note: This is a “Summary Order” and, under Second Circuit rules, does not have precedential effect. It may be cited consistent with Fed. R. App. P. 32.1 and Local Rule 32.1.1.

Introduction

United States v. Mizrahi arises from a multi-faceted fraud and money laundering conspiracy that blended traditional bank and wire fraud with crypto-based laundering of both fraud proceeds and cartel-linked narcotics proceeds. The government proved that Martin “Marty” Mizrahi, through his company LV.Net LLC, converted large volumes of bulk cash into Bitcoin for co-conspirators Joel Zubaid and David Goran, who, among other things, diverted funds from a nonprofit via an email compromise of the nonprofit’s CFO and picked up cash from sources tied to a Mexican drug cartel. A jury convicted Mizrahi of conspiracy and substantive counts of bank and wire fraud, money laundering, aggravated identity theft, and conspiracy to operate an unlicensed money transmitting business. The district court imposed a 60-month sentence (on a calculated Guidelines range of 212–259 months), a $50,000 fine, and a criminal forfeiture money judgment of $4,545,704, with specific forfeitures of $690,000 in an LV.Net bank account and $81,284.03 from an IOLTA account.

On appeal, Mizrahi challenged the forfeiture order and fine and, by implication, aspects of the sentence, arguing: (1) forfeiture facts must be found by a jury beyond a reasonable doubt; (2) the jury did not specifically convict him of laundering narcotics proceeds; (3) he did not knowingly launder drug proceeds; and (4) the forfeiture and fine are unconstitutional under the Eighth Amendment’s Excessive Fines Clause. The Second Circuit rejected each contention and affirmed.

Summary of the Opinion

The court reaffirmed settled Second Circuit law that criminal forfeiture determinations do not require jury findings beyond a reasonable doubt; the district judge may find forfeiture facts by a preponderance of the evidence and must order forfeiture of property with the requisite nexus to the offense. See Fed. R. Crim. P. 32.2(b)(1)(A); 18 U.S.C. § 982(a)(1).
The panel rejected any assertion that a special jury finding on the specific predicate crime (bank fraud, wire fraud, or drug trafficking) was necessary to sustain forfeiture tied to the money laundering convictions or to the jury instruction that allowed any of the listed predicates.
On the merits, the record supported the district court’s factual finding that Mizrahi knowingly laundered narcotics proceeds: cooperators testified they told him he was laundering cartel money; he received forwarded communications with a cartel member; photos showed stacks of cash in his home; and cartel retaliation pressure followed a theft of funds that Mizrahi recovered.
The forfeiture and $50,000 fine were not “grossly disproportional” under the Eighth Amendment. Applying the Bajakajian/Viloski framework, the court emphasized the prolonged, multi-scheme laundering conduct, the fit between Mizrahi’s conduct and the core aim of the money-laundering statute, the large statutory maximum (twice the value of the property involved), and the harm of concealing criminal proceeds through conversion to Bitcoin.

Analysis

Precedents Cited and Their Role in the Decision

Libretti v. United States, 516 U.S. 29 (1995): The Supreme Court held that criminal forfeiture is part of the sentence and not a separate substantive offense requiring jury findings. The panel relied on Libretti to confirm that the Fifth and Sixth Amendments do not require jury determination of forfeiture facts.
United States v. Fruchter, 411 F.3d 377 (2d Cir. 2005): Reaffirmed in the Second Circuit that the Apprendi line does not impose a jury-finding requirement for criminal forfeiture. The panel cited Fruchter to underscore the Circuit’s consistency on this point.
United States v. Stevenson, 834 F.3d 80 (2d Cir. 2016): Further confirmation that forfeiture does not implicate the Fifth and Sixth Amendments’ jury-trial requirements. The opinion aggregated these authorities to reject Mizrahi’s jury-demand argument.
United States v. Capoccia, 503 F.3d 103 (2d Cir. 2007): Establishes the preponderance-of-the-evidence burden for criminal forfeiture and the judge’s role in finding whether property has the “requisite nexus” to the offense. The panel applied this standard to uphold the forfeiture on the narcotics-proceeds theory.
United States v. Treacy, 639 F.3d 32 (2d Cir. 2011): Provides the standard of review: legal conclusions de novo; factual findings for clear error. The panel applied this to review the forfeiture orders.
United States v. Pastore and United States v. McIntosh (both Second Circuit summary orders): Although nonprecedential, these decisions align with Stevenson/Fruchter, reinforcing that forfeiture facts need not be proven to a jury beyond a reasonable doubt.
United States v. Weissman, 195 F.3d 96 (2d Cir. 1999) (quoting Donato v. Plainview-Old Bethpage CSD, 96 F.3d 623 (2d Cir. 1996)): Appellate courts give “great deference” to trial-level credibility determinations. The panel leaned on this principle in upholding the district court’s crediting of government witnesses over Mizrahi’s testimony.
von Hofe v. United States, 492 F.3d 175 (2d Cir. 2007): Sets the standard of review for Eighth Amendment excessiveness challenges—de novo on the constitutional issue, but bound by factual findings unless clearly erroneous.
United States v. Bajakajian, 524 U.S. 321 (1998): The touchstone for Excessive Fines analysis—whether the forfeiture is “grossly disproportional to the gravity of the offense.” The panel applied Bajakajian’s proportionality inquiry.
United States v. Viloski, 814 F.3d 104 (2d Cir. 2016): Articulates the Second Circuit’s four-factor Bajakajian framework for proportionality in forfeiture: (1) essence of the crime and relation to other criminal activity; (2) whether the defendant is within the class the statute targets; (3) the maximum statutory penalties; and (4) the harm caused. The panel walked through this framework to reject Mizrahi’s Eighth Amendment challenge.
United States v. George, 779 F.3d 113 (2d Cir. 2015): Quoted for the four-factor test that Viloski applies.
United States v. Napoli, 179 F.3d 1 (2d Cir. 1999): Cited to underscore the distinctive harm in money laundering—concealment of sources from law enforcement—amplified here by conversion of cash into Bitcoin to obfuscate the provenance of drug proceeds.

Legal Reasoning

1) Forfeiture Findings: No Jury, Preponderance Standard, “Requisite Nexus”

The court began by restating the core forfeiture principles in the Second Circuit: criminal forfeiture is part of sentencing; it does not trigger the constitutional requirement for jury factfinding; and the government must prove forfeiture facts by a preponderance of the evidence to the court, not beyond a reasonable doubt to the jury. Fed. R. Crim. P. 32.2(b)(1)(A) tasks the judge with determining whether property bears the “requisite nexus” to the offense. Under 18 U.S.C. § 982(a)(1), once the judge so finds, the court “shall order” forfeiture of “any property, real or personal, involved in [the] offense, or any property traceable to such property.”

Against that backdrop, the panel rejected Mizrahi’s argument that a jury must decide forfeiture facts beyond a reasonable doubt and that a specific jury finding was needed to sustain forfeiture tied to narcotics proceeds. The court also rebuffed the derivative challenge to the jury instruction that allowed the money laundering predicate to be bank fraud, wire fraud, or drug trafficking; a special verdict on which predicate applied was not required to sustain the forfeiture determination under governing law.

2) Knowing Laundering of Narcotics Proceeds: Sufficiency and Credibility

The district court found—and the panel concluded the record supported—that Mizrahi knew he was laundering drug proceeds for a cartel. The evidence included:

Testimony by co-conspirators Zubaid and Goran that they explicitly told Mizrahi he was laundering cartel drug money;
Photos of large stacks of cash taken in Mizrahi’s residence;
Forwarded communications between Zubaid and a cartel member that were sent to Mizrahi;
Evidence of cartel pressure after an associate stole some of the cash; Zubaid told Mizrahi he had “protected” him from those seeking to visit Mizrahi’s home or office, and Mizrahi then recovered the funds.

Although Mizrahi testified that he tended not to engage in illegal conduct, the district court and jury credited the government’s witnesses and corroborating exhibits. Under the deferential standard accorded to credibility determinations, the panel found no clear error in the district court’s factual findings that supported forfeiture and related sentencing enhancements (as noted in the opinion’s footnote).

3) Eighth Amendment: No “Gross Disproportionality”

Applying Bajakajian through Viloski, the panel concluded that neither the $4,545,704 forfeiture nor the $50,000 fine was constitutionally excessive:

Essence of the crime and relation to other criminal activity: Mizrahi participated in a lengthy, multi-scheme conspiracy involving bulk cash pickups, conversion to Bitcoin, and concealment of fraudulent and narcotics proceeds.
Class of persons targeted by the statute: By “seek[ing] to conceal or disguise the nature of the proceeds of the fraud,” Mizrahi fell squarely within the core conduct that Congress aimed at with the money-laundering statutes.
Maximum penalties: Under 18 U.S.C. § 1956(a)(1), the statutory maximum forfeiture can be up to “twice the value of the property involved in the transaction.” Here, that threshold was over $9 million—well above the forfeiture imposed.
Harm caused: The conversion of cash narcotics proceeds to Bitcoin directly facilitated concealment of criminal proceeds from law enforcement investigation, a harm the Second Circuit has long recognized as significant in Napoli.

On these metrics, the forfeiture and fine were not “grossly disproportional” to the gravity of the offenses and thus did not violate the Excessive Fines Clause.

Impact and Practical Significance

While the disposition is a nonprecedential summary order, it reinforces several important currents in Second Circuit practice:

Forfeiture Factfinding Remains with the Judge: The court reaffirms that forfeiture is a sentencing matter decided by the court by a preponderance, not by a jury beyond a reasonable doubt. Litigants should tailor their proof and objections accordingly, focusing on the Rule 32.2 “requisite nexus” inquiry and the scope of § 982(a)(1).
No Special Verdict Requirement on Specified Unlawful Activity for Forfeiture: Challenges premised on the absence of a specific jury finding identifying which predicate offense underlay a money-laundering count are unlikely to unsettle forfeiture, given the judge’s independent role in making forfeiture findings.
Crypto as a Concealment Tool: The court’s analysis treats the conversion of bulk cash to Bitcoin as classic concealment within the heartland of money laundering harms. Expect continued alignment of crypto conversion with “property involved in” and facilitating concealment under § 982(a)(1).
Eighth Amendment Challenges Remain Steep: Under the Bajakajian/Viloski framework, multi-scheme, high-dollar laundering—especially involving narcotics proceeds—will generally support substantial forfeitures well under the statutory maximum of twice the property involved.
Credibility Deference: The opinion underscores that where the district court credits cooperators and corroborating documentary evidence, appellate reversal on “knowledge” or similar fact-intensive elements is unlikely.
Sentencing Enhancements Tethered to Forfeiture Facts: The panel’s footnote indicates that sentencing enhancements premised on the same factual findings as forfeiture will stand where the forfeiture record is robust under a preponderance standard.

Complex Concepts Simplified

Criminal Forfeiture: A penalty imposed as part of sentencing that compels a defendant to forfeit property “involved in” certain offenses (like money laundering) or “traceable to” those offenses. It is mandatory when the statutory standard is met.
Requisite Nexus (Rule 32.2(b)(1)(A)): The government must show a sufficient connection between the property and the crime—for example, that the funds were laundered, or that a bank account or wallet was used to facilitate transactions.
Property “Involved in” vs. “Traceable to”: “Involved in” can include laundered funds and facilitating property used to commit or conceal the offense. “Traceable to” means proceeds or property derived from the offense.
Standard of Proof: For convictions, the government must prove guilt beyond a reasonable doubt. For forfeiture, the judge determines the facts by a preponderance of the evidence (more likely than not).
Standards of Review on Appeal: Legal rulings are reviewed “de novo” (fresh look); factual findings are reviewed for “clear error” (the appellate court defers unless the lower court clearly got the facts wrong); Excessive Fines issues are reviewed de novo but anchored to the trial court’s factual findings unless clearly erroneous.
Excessive Fines Clause (Bajakajian): A forfeiture or fine is unconstitutional only if “grossly disproportional” to the gravity of the offense. The Second Circuit considers four factors: the essence of the crime, whether the defendant is the target class of the statute, the statutory maximum penalties, and the harm caused.
Specified Unlawful Activity (SUA): The underlying criminal activity that generates the proceeds in a money-laundering case (e.g., drug trafficking, bank fraud, wire fraud). While SUA is an element at trial, a special jury finding identifying a single SUA is not required to support forfeiture.

Conclusion

The Second Circuit’s summary order in United States v. Mizrahi solidifies, within the Circuit’s well-settled framework, three core propositions. First, criminal forfeiture is a matter for the court at sentencing, determined by a preponderance of the evidence, not by a jury beyond a reasonable doubt. Second, where the record robustly supports that a defendant knew he was laundering narcotics proceeds—especially through modern concealment tools like cryptocurrency—the “requisite nexus” to money laundering is satisfied. Third, under the Bajakajian/Viloski proportionality test, forfeitures tied to multi-scheme, high-dollar laundering that facilitate concealment will rarely be excessive, particularly when they fall well below the statutory maximum of twice the property involved.

Although this decision is nonprecedential, it is a clear, up-to-date guidepost in crypto-laundering prosecutions and forfeiture practice in the Second Circuit: judges make forfeiture findings; special jury verdicts on the predicate crime are unnecessary to sustain forfeiture; and Eighth Amendment excessiveness challenges face a high bar when concealment of drug and fraud proceeds is proven.