Document Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Desc Main Page 1 of 50 - Bky No. 15-42460 . Chaptet 7 .m :1 Daniel M. McDermott, United States Trustee, 13,12; :21 a, .. . . f-{l Plamfl??: 4.. ADV No. 16?04035 v. Paul Hansmeier, Defendant. NOTICE OF HEARING AND MOTION FOR A STAY Paul Hansmeier requests that the Bankruptcy Court issue an order entering a stay of this adversary proceeding pending the resolution of a criminal trial, which is calendared for September ll, 2017. l. The hearing will be held on March 30, 2017, at 2:00 pm. before the United States Bankruptcy Court, Courtroom 8 West, United States Courthouse, 300 South Fourth Street, Minneapolis, Minnesota. 2. Any response to this motion must be ?led and delivered not later than March 25, 2017, which is ?ve days before the time set for the hearing. Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Desc Main Document Page 2 of 50 UNLESS A RESPONSE OPPOSING THE MOTION IS TIMELY FILED, THE COURT MAY GRANT THE MOTION WITHOUT A HEARING. 3. The United States Trustee ?led a complaint seeking denial of Hansmeier?s discharge in bankruptcy case 135-42460 on March 24, 2016. Among the allegations in the complaint is that Hansm?eier concealed his interest in Prenda Law, Inc. Dkt. 1. 4. On December 14, 2017, Hansrneier was indicted for 16 counts of mail/wire fraud, one count of money laundering, and one count of perjury. A major theme of the indictment is that Hansmeier concealed and/or lied about his interest in Prenda Law, Inc. (Hansmeier Decl., Ex. 1.) 5. Hansmeier recently learned that the US. Attorney?s of?ce is actively investigating this case to determine whether bankruptcy fraud charges are warranted. (Hansmeier Decl. "ll 3.) 6. On February 1, 2017, the Trustee sent an electronic e-mail to Hansrneier noting that pendency of the indictment would likely force Hansrneier to ?invoke the Fifth Amendment to avoid testifying at trial in this case,? which would allow this Court to ?draw numerous adverse inferences against? him. (Hansmeier Decl., Ex. 2.) 7. Due to these facts, the Court should exercise its discretion to stay this case until the resolution of Hansmeier?s criminal matter. Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Desc Main Document Page 3 of 50 Respectfully submitted, March 13, 2017 Paul R. Hansmeier 3749 Sunbury Alcove Woodbury, MN 55125 '1 WM Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Desc Main Document Page 4 of 50 UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA In re Bky No. 15-42460 Paul Hansmeier, Chapter 7 Debtor. Daniel M. McDermott, United States Trustee, Plaintiff ADV No. 16?04035 v. Paul Hansmeier, Defendant. UNSWORN DECLARATION OF PAUL HANSMEIER 1. I am the defendant in the above-captioned adversary proceeding. 2. True and correct copies of the following documents are attached to this declaration. Exhibit 1: Indictment against Paul Hansmeier dated December 14, 2016. Exhibit 2: E-mail from Colin Kreuziger dated February 1, 2017. 3. I was recently informed by my criminal attorneys that the US. Attorney?s of?ce is actively investigating bankruptcy fraud charges. Dated: March 13, 2017 19. .Fi-Ied 03/13/17 Entered'03/13/17 15:46:40 Desc Main D?ocument CASE oocumeariiEi5 l9iie5cPlZ/14/16 Page 1 of 36 UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA catcss+swehuwMJ UNITED STATES OF AMERICA, INDICTMENT 18 U.S.C. 1349 18 U.S.C. 1341 18 U.S.C. 1343 . Plaintiff, i 18U.S.C. 1956(h) V. 18 U.S.C. 371 18 USC. 2 PAUL R. HANSMEIER and JOHN L. STEELE, Defendants. THE UNITED STATES GRAND JURY CHARGES: 1. uBetween 2011 and 2014, defendants Paul R. IIANSMEIER and John L. STEELE orchestrated an elaborate scheme to fraudulently obtain millions of dollars in I copyright lawsuit settlements by deceiving state and federal courts throughout the country. In order to carry out the scheme, the defendants used sham entities to obtain copyrights to pornographic movies?some of which they ?lmed themselveswand then uploaded those movies to ?le-sharing websites in order to lure people to download the movies. To learn the identities of the people caught in the trap they constructed, HANSMEIER and STEELE ?led specious copyright infringement lawsuits and fraudulently procured permission from courts to send subpoenas to interact service providers for subscriber information associated with the IP addresses used to download their pornographic movies. After receiving this information, the defendahts?through extortionate letters and phone the subscribers with enormous ?nancial penalties and public embarrassment unless the DEC-1 z, 2015 Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Desc Main CASE 6t3le%012/14/16 Page 2 of 36 U.S. v. Paul Hansmeier et al. subscribers agreed to pay a settlement, allthe while concealing their collusion in the alleged copyright infringement. When courts restricted their ability to sue multiple individuals in the same lawsuit, the defendants yshifted tactics. They ?led lawsuits falsely alleging that computer systems purportedly belonging to their sham clients had been in?ltrated by hackers, and then recruited ruse defendants against Whom they brought these illusory ?hacking? lawsuits. Finally, when courts became suSpicious of the defendants? tactics and motives, the defendants began a long process of lies and deceit designed to conceal the truth and de?ect responsibility from themselves. In total, the defendants obtained approximatelyl$6,000,000 made possible by the fraudulent copyright lawsuits they peddled to courts throughout-the country. . INTRODUCTION At times relevant to this Indictment: 2. Defendant Paul HANSMEIER was an attorney licensed to practice law in the State of Minnesota. . 3. Defendant John L. STEELE was an attorney licensed to practice law in the State of Illinois. 4. Under both the Minnesota and ?Illinois rules of professional conduct governing attorneys, HANSMEIER and STEELE owed a duty of ?candor? to the court not to make false statements or cause false statements to be made to any court, and to correct any false statements that had already been made. In an ex parte proceeding?where only 2 Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Desc Main . Do'cument CASE 953312114/16 Page 3 of 36 U.S. U. Haul Hansmeier et al, one of the parties to a lawsuit are communicating with a and I STEELE were obligated-to advise the court of all material facts, whether or not the facts were adverse to their position. i 5. a lawsuit, parties generally participate in a ?discovery? process whereby 1they are able to obtain potentially relevant information and documents from the Opposing party as well as third parties. Under certain circumstances, a party to a lawsuit may be able to obtain ?early? discovery?before it would normally be available to the partye? through an ex parte proceeding in order to obtain evidence necessary to allow the lawsuit to proceed, such as the identity of the Opposing party. If the evidence is in the possession of a third party, the person seeking early discovery must obtain permission from the court to send a ?subpoena? to the third party, which compels the third party to turn over the evidence. BitTorrent 6. BitTorrent websites, including a website named the Pirate Bay, allow users to share movies or other copyrighted files with one another without paying any fees to the copyright holder. Many BitTorrent websites store their servers in foreign countries, allow users to participate anonymously (only requiring a user-generated screen-name), and take other measures to cloak the activities taking place on the website. - 7. Under the ?BitTorrent? protocol, an initial ?seeder? uses BitTorrent software to divide a video (or other ?le) into small pieces and creates a ?torrent? ?le, which contains 3 03/13/17 15:46:40 Main Document Pa 8 5 CASE Documelgii 1 File812/14/16 Page 4 of 36 U.S. v. Paul Hansmeicr et ai. metadata about the file and about the computeriserver that coordinates distribution of the file, which is referred to as the ?tracker.? The ?seeder? then uploads the torrent ?le to a file-sharing website such as Pirate Bay, and makes the partitioned video available to other A users. Individualsvinterested in obtaining the video?Inferred to as ?peers? or ?users?? ?rst download the torrent file from the ?le-sharing website and open the torrent ?le with BitTorrent' software on their computers. Upon opening the torrent ?le, BitTorrenti software contacts the tracker to find out what computers are online, and then seeks individual pieces of the video'from those other computers. Initially, the pieces will be downloaded by peers directly from the seeder, but as more peers obtain pieces of the video, they will share those pieces 'with one another. Thus, the ?seeder? does not actually ?upload? the video to a website, but rather uploads a torrent ?le that makes it possible for individuals to obtain the video from the seeder and others: Defendants Entities and Assbciates 8. Steele Hansmeier PLLC was a law firm controlled and operated .by defendants HANSMEIER and STEELE. Beginning no later than in or about 2010 and continuing at least until in or about November 2011, the defendants utilized Steele i Hansmeier PLLC to bring copyright infringement lawsuits on behalf of purported clients. 9. Prenda Law Inc. was a law 'firm nominally owned by an Illinois lawyer named P.D., but was in fact substantially controlled and bene?cially-OWned by defendants HANSMEIER and STEELE. Beginning in or about November 201 1, and continuing until 4 Case 16-04035. Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Desc Main Document Pa 9 5 CASE Docume 1 File812/14I16 PageSof 36 US. v. Paul Hansmeier et al. 2013, defendants HANSMEIER and STEELE used Prenda Law to cause copyright infringement lawsuits to be ?led and collect settlements on behalf of purported clients. w10. AntinPirac?y Law Group was a law ?rm nominally owned by P.D., but in fact substantially controlled and bene?cially owned by defendants HANSMEIER and STEELE. In or about 2013, defendants HANSMEIER and STEELE used Anti-Piracy I Law Group to cause copyright infringement lawsuits to be ?led and collect settlements on behalf of purported clients. 11. ML. worked for I-IANSMEIER and STEELE. M.L. was paid a salary at various times by Steele Hansmeier PLLC and Prenda Law. M.L. generally worked as a paralegal whose duties included making phone calls and sending letters to purported copyright infringers threatening legal action unless they paid a settlement fee.? worked in of?ces located in Chicago, Las Vegas, and Miami with STEELE, and general}: took direction from STEELE. I 12. worked for I-IANSMEIER and STEELE. RH. at times received payment from the defendants through entities named Media Copyright Group and ?6881 Forensics. P.H. generally worked as a computer forensic consultant who monitored ?le-sharing websites and attempted to track IP addresses that downloaded or attempted to download certain pornographic movies associated with purported clients of Steele Hansmeier PLLC, Prenda Law, and Anti-Piracy Law Group. P.H. also assisted in the preparation of legal documents, such as af?davits supporting requests for early Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 10 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 11 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 12 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 13 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 14 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 15 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 16 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 17 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 18 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 19 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 20 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 21 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 22 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 23 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 24 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 25 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 26 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 27 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 28 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 29 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 30 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 31 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 32 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 33 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 34 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 35 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 36 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 37 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 38 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 39 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 40 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 41 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 42 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 43 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 44 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 45 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 46 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 47 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 48 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 49 of 50 Desc Main Case 16-04035 Doc 19 Filed 03/13/17 Entered 03/13/17 15:46:40 Document Page 50 of 50 Desc Main