On a Tuesday morning in February 2025, federal agents descended upon Ayala's Mini Market, a convenience store in Glendale, Arizona, that offered check cashing, money transfer, shipping, and cellphone repair services along with standard items such as groceries, snacks, sodas, and cigarettes. The agents, who worked for the Internal Revenue Service (IRS) and the Department of Homeland Security (DHS), seized three computers, five cellphones, and business records, plus about $460,000 in cash and checks. They did not say why.
Twenty months later, the store's owner, Mario Ayala, still has not received a definitive answer to that question. Nor has the government told him what it plans to do with his property or how he can try to get it back. That Kafkaesque situation is unconstitutional, Ayala's lawyers at the Institute for Justice argue in a motion and memorandum they filed on Tuesday in the U.S. District Court for the District of Arizona. The motion seeks the return of the property seized from Ayala's business, saying there is no legitimate reason for the government to keep it.
"The government can't take your stuff, disappear, and then never explain itself," says Institute for Justice attorney Betsy Sanz. "For over a year and a half, the government has been holding Mario's money and property. This prolonged seizure violates the Fourth Amendment and federal law. The government cannot hold onto your property indefinitely without explanation so it can eventually take it permanently using civil forfeiture."
The raid on Ayala's store happened while he was visiting his ailing father in Mexico, who died a couple of months later. After Ayala's wife and son called to tell him what had happened, he rushed back to Arizona, where he tried to figure out why his business had been targeted by the IRS and the DHS. That was harder than you might think.
Ayala "has heard nothing from the government since they raided his business and seized his property," Sanz and her colleagues note in their memorandum. When the agents left, they told Ayala's son that "the business would receive a letter within thirty days," the memorandum says, but "no letter came," and the government "has not told Mario why it took his property or why it refuses to return it."
The agents left a one-page inventory of the property they took, including the computers, cellphones (two of which belonged to Ayala's customers), documents, and currency, although it did not specify the amount of money. They also left the first page of a warrant signed by a federal magistrate judge, which contained no information about the crime they were investigating or the property they were authorized to seize. It referred to attachments that might have clarified those points, but the attachments were missing.
Ayala still has not seen those attachments. But on the same day the agents raided his store, they also searched 18 other businesses in the Phoenix area, all of which offered money services. Judging from the warrants served on three of those other businesses, which were signed by the same magistrate judge at the same time on the same day as the warrant for Ayala's Mini Market, the legal justification for the searches was suspected violations of 31 USC 5324, which makes it a felony to "structure" a financial transaction with the intent of "evading" federal reporting requirements.
The Bank Secrecy Act requires that financial institutions report cash transactions involving more than $10,000 to the Financial Crimes Enforcement Network (FinCEN). Although that mandate is aimed at money laundering, someone can be guilty of structuring even without evidence of any other crime if he deliberately tries to avoid triggering a FinCEN report by breaking up a transaction into amounts below the threshold. As far as Ayala can tell, the search of his store was based on nothing more than suspicion of structuring.
If so, Ayala's lawyers argue, the IRS agents who participated in the raid violated a 2019 federal law that bars the agency from seizing money when structuring is the only suspected crime. Congress passed that law in response to IRS forfeiture abuses highlighted by the Institute for Justice. "For the IRS to legally seize property based on a structuring offense, it must also have an added suspicion of some other criminal act," Sanz et al. note. "Yet the IRS seized Mario's property, apparently on the sole suspicion of a structuring violation."
That is not the only legal problem with the seizure. Assuming the government plans to seek forfeiture of Ayala's money based on an alleged connection to criminal activity, it missed a crucial deadline. The Civil Asset Forfeiture Reform Act (CAFRA) requires the federal government to notify property owners of attempted forfeitures within 60 days of the seizure. That deadline passed a year and a half ago, and Ayala still has received no such notice.
"This notice is crucial because it informs a property owner that the government intends to forfeit his property and triggers his ability to respond by filing a claim or administrative petition," Ayala's lawyers note. If the government fails to meet that requirement, CAFRA says, it "shall return the property."
The government can seek extensions of the CAFRA deadline "only if there is reason to believe that notice may have an adverse result," such as "endangering the life or physical safety of an individual," "flight from prosecution," "destruction of or tampering with evidence," "intimidation of potential witnesses," or "otherwise seriously jeopardizing an investigation or unduly delaying a trial." None of those conditions applies in this case, Sanz et al. say, and their client "is unaware of the government seeking any such extension here."
Another possible rationale for keeping Ayala's property is that the government needs it as evidence in a criminal investigation. But his lawyers argue that the seized items "have no independent evidentiary value."
The government "cannot claim that it is holding the cash as evidence of the suspected structuring offense, because the government—in the usual course—does not continue to hold the physical cash it seizes but rather promptly deposits it," the memorandum says. "To prove the suspected offense here, the government would present evidence documenting the amounts and frequency of transactions and evidence that the defendant intentionally evaded reporting requirements. No fact the government must prove to establish a structuring offense becomes more or less provable by the government's continued possession of Mario's money."
Although "the checks and business documents that the government seized from Mario may at first have had some evidentiary value," Sanz et al. say, it could have long since returned the originals and kept copies. As for the computers and cellphones, "the government has had ample time to extract and copy" any relevant information.
While the benefits of keeping Ayala's property seem highly dubious, the cost to him has been severe. The seizure of the checks and currency wreaked havoc with his business model, which relies on money received for transfers to cash checks, which in turn are scanned and used to pay the companies that handle the transfers.
"The search and seizure of Mario's property upended his business," the memorandum says. "He had to keep his business closed until March 1, 2025, to replace the seized computers and to figure out how they could keep the business open. He took $50,000 of his own money out of the bank so that he could keep cashing customers' checks. When that ran out, the business had to stop cashing checks for a long time, losing customers."
Ayala "also had to come up with $112,097.20 to pay the money transmitters to cover the balance that had accrued while he was away," his lawyers add. "Since all the cash and cashed-but-unscanned checks had been seized, Mario needed to pay this money to the transmitters on his own. Though he did ultimately pay back all the money transmitters over the following month, the consequences of the raid damaged Mario's business relationship with one of the money transmitters he had formerly worked with, InterMex. Today, the business can no longer offer InterMex as an option for money transfers."
Ayala's business "is now finally stable, but it is still not doing as well as it was before the raid," Sanz et al. say. "Mario has changed the way he runs his business because of the raid. He now scans every customer's cashed check to send it to the money transmitters as soon as it is cashed, rather than collecting [checks] and scanning them together as they previously did. He constantly worries that his business will be targeted again."
In the 20 months since the raid, the government has not filed a forfeiture action or even notified Ayala that it intends to do so. Nor has it filed any criminal charges related to the seizure, as far as Ayala knows. "The government has no lawful reason to retain
Mario's property," his lawyers say, "and this Court should exercise its equitable jurisdiction to order its return."
The motion relies on Federal Rule of Criminal Procedure 41(g), which says "a person aggrieved by an unlawful search and seizure of property or by the deprivation of property may move for the property's return." The U.S. Court of Appeals for the 9th Circuit, which includes Arizona, has adopted four criteria for granting such a motion: whether the government "displayed a callous disregard for the constitutional rights of the movant," whether "the movant has an individual interest in and need for the property he wants returned," whether "the movant would be irreparably injured by denying return of the property," and whether "the movant has an adequate remedy at law for the redress of his grievance."
All of those factors count in Ayala's favor, Sanz et al. argue. Ayala's interest in the property and the injury he is suffering are clear, as is the absence of any other remedy. As for the first criterion, "the government can neither forfeit Mario's property nor justify holding it as evidence, so its continued retention is unreasonable under the Fourth Amendment," the memorandum says. "And its nearly 20 months of silence, without any notice or any forum in which to contest the seizure, offends due process. At every turn, the government has 'callous[ly] disregarded' Mario's constitutional rights."
Ayala immigrated to the United States from Mexico in 1991 and struggled for years to make a go of his business, which was successful enough at the time of the raid that he planned to open a new location devoted to cellphone repair. That plan is now on hold because of the financial difficulties caused by the seizure.
"This business is my American Dream, and the government took years of my hard work without telling me what I did," Ayala says. "This raid hurt me and my family. I hope this lawsuit gets my money back and helps make sure this doesn't happen to anyone else."
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