In 2016, a Florida judge dismissed money laundering and illegal money transmission charges against a bitcoin trader, arguing that bitcoin wasn’t covered by state statutes. Today, an appeals court reversed that decision.
From January through February of 2014, Michell Espinoza was unknowingly selling bitcoin to undercover agents with the Miami Police Department, which was working with the US Secret Service. Though one of the undercover detectives with Miami PD had implied that the bitcoin would be used to buy stolen credit card numbers, Espinoza continued with the sales, charging transaction fees for the privilege. He was subsequently charged with money laundering and illegal money transmission.
But in July 2016, Judge Teresa Mary Pooler of the Eleventh Judicial Circuit of Florida dismissed those charges. Espinoza, she indicated in her ruling, couldn’t be punished under existing Florida statutes because bitcoin isn’t legally money:
“Bitcoin may have some attributes in common with what we commonly refer to as money, but differ in many important aspects. While Bitcoin can be exchanged for items of value, they are not a commonly used means of exchange … Their high volatility is explained by scholars as due to their insufficient liquidity, the uncertainty of future value, and the lack of a stabilization mechanism. With such volatility they have a limited ability to act as a store of value, another important attribute of money.”
“[I]t is very clear, even to someone with limited knowledge in the area, that Bitcoin has a long way to go before it is the equivalent of money.”
Moreover, she put the onus on the legislature to create statues that more specifically address bitcoin and other virtual currencies:
“The Florida Legislature may choose 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.”
Perhaps unsurprisingly, the state appealed the decision. In an opinion filed today, January 30, Florida’s Third District Court of Appeal reversed Pooler’s ruling on Espinoza’s motion to dismiss, stating:
“The trial court erred in dismission Count 1 [illegal money transmission] because Espinoza acted as both a money transmitter and a payment instrument seller and, as such, was required to register with the State of Florida as a money services business.”
Additionally, the appellate court stated that the trial court should not have thrown out two additional accounts related to money laundering because “intent, or lack thereof, is a factual issue that should not have been resolved at the pleading stage.” The state, according to the appellate court, is “only required to provide sufficient facts to demonstrate that a reasonable jury could rule in its favor.”
Regarding the first count, the appellate court took issue with Pooler’s characterization of existing statutes as vague. Pointing to chapter 560 of the Florida Statutes, it explained that the state defines “money transmitter” as “a corporation, limited liability company, limited liability partnership, or foreign entity qualified to do business in this state which receives currency, monetary value, or payment instruments for the purpose of transmitting the same by any means, including transmission by wire, facsimile, electronic transfer, courier, the Internet, or though bill payment services or other businesses that facilitate such transfer within this country, or to or from this country.”
Bitcoin, it finds, is a payment instrument:
“[B]ased on the undisputed facts, Espinoza was acting as a payment instrument seller or engaging in the business of a money transmitter, either of which require registration as a money services business under Florida law. Given the plain language of the Florida statutes governing money service businesses and the nature of Bitcoin and how it functions, Espinoza was acting as both.”
Because the charges against Espinoza were dismissed before ever going to trial, the reversal means that the trial court must now hear the case.
Jeff Benson is Managing Editor of ETHNews. He’s worked as a writer and editor everywhere from Sudan to Reno. He holds a bachelor’s in politics from Willamette University and a master’s in nationalism studies from University of Edinburgh. When he’s not in the newsroom, he trots the globe and writes about it. He holds a bit of value in ETH.
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