A web designer from Miami Beach is facing prosecution in the Third District Court for selling bitcoin to Ricardo Arias, an undercover detective. Michell Espinoza, aged 35, was charged with taking part in illegal transmitting and laundering of bitcoin worth $1,500.
Detectives began to pursue Espinoza in 2014 when he was advertising himself as a bitcoin seller through the crypto-exchange site, LocalBitcoins.com. He would ask clients to meet him at a restaurant, bank, mall, or internet café where he would sell the bitcoins and charge a fee for his services.
Just before his arrest, Espinoza went to a coffee shop on Lincoln Road to meet a client, unaware that the client was Detective Arias. He sold bitcoins worth $416.12 at a price of $500, earning him $83.18. A second meeting between the two earned Espinoza a profit of $167.56 for bitcoins worth $1,000. After two additional transactions, the police arrested Espinoza and another man, Pascal Reid, at a Miami Beach Hotel. Reid pleaded guilty to being an unlicensed broker and was put on probation.
Espinoza’s case was heard in Miami by Circuit Judge Teresa Mary Pooler in 2016. The charges against him were later dismissed, with Pooler stating that bitcoins are like poker chips which people are willing to buy and sell and that it will be long before bitcoin is equated to money. Recently, the appeal court ruled that it was wrong for the Miami judge to dismiss the weight of the felony charges against Espinoza.
According to the court, prosecuting him would enable the law enforcement in Florida to catch those buying and selling digital currencies in unregulated arrangements. The court added that Espinoza made a profit in his business which meant that he was performing an unregulated and illegal business as he should have registered first with the Office of Financial Regulation in Florida.
The jury agreed that he was not just selling his bitcoins but that he was carrying out a money services business similar to those carried out by money-wiring companies like Western Union. According to Florida Law, carrying out such a business required him to be registered as a money transmitter and payment instrument seller.
Espinoza’s defense lawyer stated that the charges were not necessary since bitcoin is not considered an actual currency under the laws of Florida and that it is only used for bartering. At the end of the proceedings, a final ruling had not been made, and so he was ordered to return to court at a date that is yet to be set. The jury states that it still needs to decide whether Espinoza should be convicted for money laundering.
John Londot, a lawyer from Tallahassee, filed a brief statement on Espinoza’s case. Londot, who works with the Digital Currency and Ledger Defence Coalition stated in his brief that most people in Florida dealing in bitcoins are documented as money transmitters. Charles Evans, an economics professor from Barry University and a defence witness in Espinoza’s case, disagreed with the registration process. He, however, stated that this was a sign that virtual currencies were growing and slowly becoming assimilated into society. He further said that prosecutors and regulators were trying to bring order to all the chaos that comes with unregulated bitcoin trading.
U.S. authorities are struggling to find out how laws and regulations can be applied to bitcoin and other digital currencies. This is because most people who engage in virtual currencies trade wish to avoid banking systems and the scrutiny of currency regulators and law enforcement. The currencies also allow them to buy items and services without involving third-party agencies such as credit card companies. This has led to the recent surge in the number of cryptocurrency users and consequently a reduction in the value of bitcoin by over 80% since its last peak in late 2017.
Most of these are law offenders, such as drug traffickers or hackers, who want to clean their illegally earned cash, thereby avoiding authorities. A recent case involving cryptocurrencies is of a man from South Florida who received a 10-year prison sentence after purchasing synthetic heroin from China using bitcoin.
The concern of law enforcement is that private users are trading the currencies without involving bitcoin regulatory services such CoinBase. Many illicit activities also involve the use of the currency, causing an upsurge in the crime rate.