Mimesis Law
19 February 2017

Show Us The Money: Miami Criminal Court Rule$ That Bitcoin ≠ Money

July 28, 2016 (Fault Lines) — This week, Miami State Court Judge Teresa Pooler dismissed money laundering charges filed against Michell Espinoza for selling Bitcoins to Miami Beach detectives, who had told Expinoza that the Bitcoins would be used to buy stolen credit card numbers. This case shows that in the world of criminal law, a cigar coin is sometimes not just a coin.  The Miami Herald reports:

A Miami-Dade judge ruled Monday that Bitcoin is not actually money, a decision hailed by proponents of the virtual currency that has become popular across the world.

In a case closely watched in financial and tech circles, the judge threw out the felony charges against website designer Michell Espinoza, who had been charged with illegally transmitting and laundering $1,500 worth of Bitcoins. He sold them to undercover detectives who told him they wanted to use the money to buy stolen credit-card numbers.

But Miami-Dade Circuit Judge Teresa Mary Pooler ruled that Bitcoin was not backed by any government or bank, and was not “tangible wealth” and “cannot be hidden under a mattress like cash and gold bars.”

The tale of this case went as follows: after a few initial exchanges via text and at a café in Miami Beach, an undercover Miami Beach Police Detective met with Espinoza in a wired hotel room in order to buy some Bitcoins.  The detective had previously told Espinoza that he would use the Britcons to buy stolen Russian credit-card numbers.

After selling $1,500.00 worth of Bitcoins to the detective during the initial meetings, Espinoza declined to accept an additional $30,000.00 that the detective brought to the hotel room for more Bitcoins because Espinoza had expressed concern over the currency’s authenticity.  Nonetheless, Espinoza was then charged with two counts of money laundering and one count of “unlawfully engaging in business as a money services business, to wit: a money transmitter.” So far we can all agree that this is not most nefarious money laundering transaction in the history of south Florida.

Before we draw a collective sigh of relief that Espinoza’s conduct was ruled to be non-felonious, that has not always been the case when it comes to Bitcoins.  This month, a Texas man was sentenced in Manhattan Federal Court to 18 months in the federal pen for running a “classic Ponzi scheme” by offering potential investors high interest rates to turn over Bitcoins.  In 2015, Charlie Shrem got two years after pleading to federal charges related to laundering money generated by the “Silk Road” market that used Bitcoin.  “Silk Road” was the (in)famous black market for drugs that was run by Ross Ulbright, a.k.a. “The Dread Pirate Roberts,” the young man who will very likely die in federal prison for his role as the head honcho of the operation (his sentence exceeded what the government  was requesting).

That’s not all for Bitcoin in the federal context.  In 2014, the Internal Revenue Service declared that it would be treated and taxed as property.  And last year, the Commodities and Futures Trading Commission said it would define all virtual currencies as commodities for regulatory purposes.

As in the case of the illegality of marijuana in the federal system versus its legality in some states – a legal conundrum that is the product of a federalist system as governed by the U.S. Supremacy clause, just ask medical marijuana growers — something considered legally kosher  in a locality may land you in the custody of the U.S. Bureau of Prisons for a long time.  It’s the same reason why no responsible defense attorney would advise a marijuana entrepreneur looking to start business in Colorado that she will be completely free of the federal government’s grasp, as marijuana is still considered a Schedule 1 Drug as per the Controlled Substances Act.

Judge Pooler’s Order dismissing the case against Espinoza noted how the Florida money laundering statute used to charge him was too vague when applied to virtual currency like Bitcoin.  She also pointed out how Bitcoin wasn’t “the equivalent of money,” and that it has more in common with property that isn’t backed up by a bank:

“The court is not an expert in economics; however, it is very clear, even to someone with limited knowledge in the area, the Bitcoin has a long way to go before it the equivalent of money,” Pooler wrote in an eight-page order.

The judge also wrote that Florida law — which says someone can be charged with money laundering if they engage in a financial transaction that will “promote” illegal activity — is way too vague to apply to Bitcoin.

“This court is unwilling to punish a man for selling his property to another, when his actions fall under a statute that is so vaguely written that even legal professionals have difficulty finding a singular meaning,” she wrote.

As per the article, the State of Florida has not determined whether it will appeal the order to the Florida Third District Court of Appeals.   But if it chooses to do so, it can give Espinosa an opportunity to win again and create a relevant precedent that may bar or deter some future prosecutions for money laundering when it comes to Bitcoin.  Well, at least when it comes to south Florida’s state courts.

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