Bitcoin

Florida Judge Says Bitcoin Not Money, Selling it Can't Make You Violate a Money Transmitter Statute

Also throws out money laundering charges against Miami man Michell Espinoza, who was arrested for selling bitcoin to a cop.

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One judge in Florida believes that if bitcoin isn't money, as the federal government says it is not via the IRS, then selling it can't mean you are an illegal money transmitter or, in the case she was considering, a money launderer.

In this ruling from Florida Circuit Court Judge Teresa Pooler, Judge Pooler finds that defendant Michell Espinoza is not guilty of charges relating to his arrest for selling bitcoin to a cop who claimed he was going to use them to buy credit card numbers online.

scottks1/Foter

Miami Beach Detective Ricardo Arias along with Secret Service Special Agent Gregory Ponzi had entrapped Mr. Espinoza, via the website localbitcoins.com, into meeting Arias at a Nespresso Cafe in Miami Beach to receive $500 cash in exchange for an amount of bitcoin. Later, Arias arranged another meeting, at a Haagen-Dazs store, and bought a thousand dollars worth of bitcoin.

At that second meet, Arias told Espinoza he intended to use the bitcoin to buy stolen credit card numbers from Russians.

At a fourth meet, Arias was supposed to buy $30,000 worth of bitcoin, and also intended to arrest Espinoza. Though Espinoza never took possession of the alleged money—which was counterfeit—he was arrested on one count of unlawfully engaging in business as a money services business, to wit, a money transmitter, and two counts of money laundering. (These events all happened in December 2013 and January 2014.)

Espinoza tried to get the case dismissed, and for now he has succeeded.

Pooler decided that in fact "the Defendant did not receive currency for the purpose of transmitting same to a third party" as per the money transmitter charge. He was not a middleman, like Western Union.

Moreover, in Pooler's opinion, bitcoin does not "fall under the statutory definition of a 'payment instrument.'" Pooler calls on the IRS's own decision that bitcoin is property, not money.

When I wrote about that IRS decision that bitcoin was not money as far as it was concerned, but just property, back in 2014, a representative of U.S. Treasury Department's Financial Crime Enforcement Network (FinCEN), Steve Hudak, nonetheless said that (in paraphrase, not direct word for word quote from Hudak):

Bitcoiners who think they've caught the feds in a contradiction–with the IRS saying Bitcoin's not a currency but FinCEN regulating exchanges as "money transmitting businesses"–are mistaken. FinCEN does not consider Bitcoin money either. But if you are in the business of turning anything into U.S. cash money and moving that cash around the nation or world, that makes you a regulatable money transmitter.

Judge Pooler seems to disagree, at least as it applies to people doing direct person-to-person bitcoin-for-money sales.

"The Florida Legislature may choose," Pooler wrote, "to adopt statutes regulating virtual currency in the future. At this time, however, attempting to fit the sale of Bitcoin into a statutory scheme regulating money services businesses is like fitting a square peg in a round hole."

As far as the money laundering charges go, Pooler does agree, sort of, with Hudak of FinCEN that the fact that one side of the transaction was actually money makes it potentially fall under the statute.

But given that the statute under which Espinoza was charged requires a certain level of awareness of the illicit nature of the money for the "laundering" to apply, that the person receiving the money is intending to promote some illegal action, she ultimately decides that "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."

Thus, Pooler dismissed all the charges against Espinoza.

The Miami Herald reports the Miami-Dade State Attorney's Office says it is "presently reviewing the court order to determine whether we will be appealing this decision."

CoinCenter.org has a very informative chart about how various states have so far decided to regulate bitcoin.

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  1. Florida Judge Says Bitcoin Not Money, Selling it Can’t Make You Violate a Money Transmitter Statute

    Interesting. Liberty takes a step forward by the government refusing to recognize, license and stamp something?

    1. A judge just refusing to do so without a statute explicitly telling him to. That’s something at least.

  2. Miami Beach Detective Ricardo Arias along with Secret Service Special Agent Gregory Ponzi had entrapped Mr. Espinoza

    Was it a? Ponzi scheme?

    1. *sustained applause*

    2. Dammit, there has to be a joke in there for singing, Arias, AAAGH. Can’t come up with it.

      1. And then Mr. Espinoza realized that everything was predetermined and that God is in everything, even his Bitcoins, and he knew there was no point in getting upset.

  3. Thank god we have these brave cops risking their very lives to get these bitcoin dealers off the streets! Everyone knows once you get that first micropayment you’re hooked for life.

    1. Ice, are you on the filthy lucre?

  4. My friend just told me about this easiest method of freelancing. I’ve just tried it and now I am getting paid 17000usd monthly without spending too much time. you can also do this..

    Go to the web>>>>>>>> http://www.NetNote20.com

  5. GODDAMIT and I just bought a new woodchipper.

    Woodchippers for sale! Get yer shiny new woodchippers here! Will sell for bitcoin or cash! Not a scam!

    Perfect for threatening to chip up the next government official that rules properly on a law that you said nothing about when it was enacted but now find highly objectionable after it was used in a way you could have easily anticipated if you had half a brain!

    1. Don’t worry, you’ll still find lots of use for it.

  6. …when his actions fall under a statute that is so vaguely written that even legal professionals have difficulty finding a singular meaning.

    If only this was the standard.

  7. … if you are in the business of turning anything into U.S. cash money and moving that cash around the nation or world, that makes you a regulatable money transmitter.

    Wait, what? So, say my baby momma needs $50 to buy the boy some shoes, but I don’t have any money, so I sell my watch at the pawn shop and wire her the money, that would meet that criteria.
    So would every eBay and Amazon seller who uses proceeds from sales to buy new inventory.

  8. But if you are in the business of turning anything into U.S. cash money and moving that cash around the nation or world, that makes you a regulatable money transmitter.

    Except Mr. Law Man has got it entirely backwards. Someone who sells bitcoin is not transmitting US cash money around the world. He puts the cash in his pocket. The buyer of the bitcoin transmits the bitcoins around the world.

    Still not a regulatable money transmitter, by his own criteria given above.

    Of course, eventually the all purpose BFYTW criteria will be applied, which transforms all actions into crime, and sellers of bitcoin will be declared money transmitters. Why? See previous criteria.

  9. ” But if you are in the business of turning anything into U.S. cash money…”

    The IRS says this is unpossible.

  10. No doubt this sorry excuse for a judge considers that Paper and Digital Money created by the government IS True Money even though it is not backed by anything except the “faith of the people” and cannot be weighted or measured.
    Did not this dufus Florida Circuit Court Judge Teresa Pooler, swear a sacred oath to the whole U.S. Constitution that includes, Article 1, Section 8, Clause 5, “The Congress shall have the Power…. To coin Money, and fix the Standard of Weights and Measures?”
    So Bitcoin does not violate a “Money Transmitter Statute” because as the judge said it is, considered “property” not “money” … But, never mind the fact that the U.S. government money (or should I say “property”?) created out of thin air violates an Article mandate within the U.S. Constitution.

  11. Bitcoin isn’t money according to the IRS and so, illicit transactions involving bitcoin can’t be deemed, well… illicit. Fair on the part of the judge to go by the rule book, which needs a lot of tweaking. Thankfully for those on the wrong end of this drama have good news coming. At least in this case, the culprit was out in the open but what about those who do not come out in the open? While authorities fight of the confusion, bad guys continue to get away with all of this. But there’s a silver bullet amidst all of this. The anonymity abuse of bitcoin could soon be put to an end with researchers who assisted in the encryption and deployment of software systems of Bitcoin are now aiding law authorities to tackle the criminals, as mentioned here https://cyware.co/journal/bitcoins-cyber-crimes/
    But the sad part at least for now is that despite all the efforts to curb, criminals could still get away.

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