Court reverses the dismissal of an alleged money launderer 2 years later


Disclaimer: These summaries are provided for educational purposes only by Nelson Rosario [twitter:@nelsonmrosario] and Stephen Palley [twitter:@stephendpalley] . They are not legal advice. These are our opinions only, aren’t authorized by any past, present or future client or employer. Also we might change our minds. We contain multitudes.

[As always, Rosario summaries are “NMR” and Palley summaries are “SDP”]


Crypto accounts necessary to assess net worth?

Read more

State v. Espinoza, 2019 Fla. App. LEXIS 1133 (Fl.Ct.App.3d 2019) [SDP]

The gears of justice (or injustice, depending on your viewpoint) grind slowly sometimes. This case dates back to 2013, and involves questions about whether or not exchanging bitcoin for dollars requires that you register as a Money Servicing Business under Florida law. A trial court said the law didn’t apply to bitcoin in a ruling from two years ago. This new court of appeals opinion reverses this two year old dismissal and reinstates the charges.

At issue here are circa 2013 bitcoin transactions that originated from the defendant’s advertisements on An undercover detective contacted the defendant and exchanged $500 in cash for .40 bitcoin, for which the defendant made a profit of $83.67 dollars. A second transaction involved the purchase of $1,000 worth of bitcoin, for which the defendant made a $167.56 profit. A third transaction involved $500 worth of bitcoin. Following that transaction, the detective “negotiated the transfer of an additional $30,000 worth of bitcoins for a new batch of stolen credit card numbers Detective Arias represented to Espinoza to have been acquired from a recent data breach.”

During a meeting to consummate the fourth transaction, the defendant was arrested. He was charged with violating a Florida law requiring registration as a Money Servicing Business and with two counts of money laundering.

In the trial court, the defendant argued that the money transmission law didn’t apply because (1) Bitcoin isn’t “money” as defined by the statute and (2) Bitcoin isn’t a “monetary instrument” under Florida’s Money Laundering Act. The trial court agreed with the argument that Bitcoin isn’t money under the statute; it disagreed that Bitcoin isn’t a monetary instrument but said that the defendant lacked the required intent to be charged under the statute. On these grounds, the trial court dismissed the charged. The state appealed and nearly two years later the Court of Appeals issued this opinion, reversing the trial court and reinstating the charges.

The Court framed the MSB issue thus: “The issue for our determination under Count 1 is whether, based 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.”

Espinoza argued that while it was true he wasn’t licensed as an MSB, Bitcoin is not “money” or “monetary value” or “funds”, which should be interpreted to mean “currency”, and bitcoin isn’t currency, so registration wasn’t required. The Court said that even though bitcoin didn’t fall expressly within Florida’s definition of “currency”, it is a “payment instrument”, which is defined in part as something with “monetary value.” Monetary value, in term, is defined as a “medium of exchange.” Thus, because bitcoin is a “medium of exchange”, he was required to register.

As another basis for dismissal, the defendant argued that he wasn’t a money transmitter because he didn’t receive anything of value for the purpose of transmission to a third party. The Florida statute doesn’t require third party transmission, unlike the federal definition of money transmitter, which does include a third party transmission argument. As a result, the court didn’t buy this argument.

As to the money laundering counts, the Court of Appeals said (oversimplifying a bit) that the Trial Court was premature in dismissing them, and should have allowed these issues to be decided at trial and (potentially) a motion for judgment of acquittal.

What’s next? Unless the Defendant appeals to a higher court, this case will go back to the trial court and the case will proceed (either to trial, further motion practice or a negotiated plea).

The Block is delighted to bring you expert cryptocurrency legal analysis courtesy of Stephen Palley (@stephendpalley) and Nelson M. Rosario (@nelsonmrosario). They summarize three cryptocurrency-related cases on a weekly basis and have given The Block permission to republish their commentary and analysis in full. Part III of this week’s analysis, Crypto Caselaw Minute, is above.

The post Court reverses the dismissal of an alleged money launderer 2 years later appeared first on The Block.

Court reverses the dismissal of an alleged money launderer 2 years later written by Stephen D. Palley @ February 3, 2019 Stephen D. Palley

Comments are closed.