A decision by a Miami judge has determined that Bitcoin is not actually money. While this decision has only been made in a smaller jurisdiction, the repercussions could echo far and wide.

What is Bitcoin?

Bitcoin is a virtual currency that allows online users to spend money anonymously. It can be bought and sold on exchanges with U.S. dollars and other currencies and has even become accepted in some restaurants across the nation. Still, because it is so vaguely defined, and has also been used in nefarious purchases across the net, there is still a lot of vagueness surrounding it – especially when it comes to writing regulatory laws.

Charges Against Espinoza

Website designer Michel Espinoza was facing felony charges of illegally transmitting and laundering $15,000 worth of Bitcoins to two undercover detectives that told him they had plans to use the online currency to purchases stolen credit-card numbers.

Those charges were thrown out when Circuit Judge Teresa Mary Pooler ruled that since Bitcoin is not backed by any government or bank, the currency Espinoza was using was not “tangible wealth” and “cannot be hidden under a mattress like cash and gold bars.”

“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 her ruling.

Too Vague for Bitcoin

Additionally, the judge ruled that Florida law is too vague to be applied to Bitcoin. That law states someone can be charged with money laundering if the financial transaction they are engaged in promotes illegal activity.

“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 in the statement.

As Espinoza’s attorney expressed, the judge’s order was “beautifully written.”

Bitcoin has been wrapped in controversy since its creation in 2008 as a result of the fact that governments around the world have struggled to understand it and thus regulate it.

“At least it gives the Bitcoin community some guidance that what my client did was not illegal,” Palomino said. “What he basically did was sell his own personal property. Michell Espinoza did not violate the law, plain and simple.”

First Money Laundering Charges Brought for Bitcoin

This case is believed to be the first money-laundering case that has been brought that involves the virtual currency.

During the trial Espinoza’s defense team called to the stand Barry University economics Professor Charles Evans, who testified that Bitcoin was not actually money.

“Basically, it’s poker chips that people are willing to buy from you,” said Evans.

“Bitcoin is perfect for small-scale cross-border transactions and we are international in this area,” Evans said. “If somebody from Venezuela needs a hammer, now that person can send Bitcoin to his cousin in Miami, that cousin can sell the Bitcoin, go buy the hammer and send it to Venezuela.”

As Judge Pooler said in her ruling, the state’s money-laundering law targeting transactions that “promote” illegal activity is in need of a “much-needed update.”

“Hopefully, the Florida Legislature or an appellate court will define ‘promote’ so individuals who believe their conduct is legal are not arrested,” Pooler wrote.

Money Laundering

Money laundering is a crime that involves moving illicit money into legitimate channels in order to disguise the money’s illegal source and avoid tax officials. Some forms of criminal activity, such as drug smuggling, yield large amounts of cash, leaving the criminals with the problem of what to do with the vast amounts of money they earn. One solution is to take this “dirty” money and channel the funds through bank accounts of legitimate businesses. Other money laundering activities include transactions such as bank deposits, withdrawals, fund transfers, wire transfers, payments, and other financial activities. Sophisticated use of current technology creates paper trails in money laundering cases that may not only be more complex; they may also be more difficult to uncover because many financial transactions are completed entirely using anonymous means like bitcoins. Embezzlement and fraud may also be associated with money laundering.

California Money Laundering Laws: Penal Code Section 186.10 PC

Money laundering is a serious federal crime that involves taking money that has been unlawfully obtained and working to integrate it so it may appear to come from a lawful source. A defendant may face money laundering charges brought under federal laws or California state laws. Those charged with money laundering also may face racketeering/RICO charges if they are involved in organized crime.

Penal Code Section 186.10 PC contains the following elements:

1. The defendant completed a transaction or a series of transactions through a financial institution.

2. The total amount of the transaction(s) must be more than $5,000 in a seven day period OR more than $25,000 in a 30 day period

3. The transaction(s) was made with the intent to promote criminal activity or the defendant knew that the funds involved were from the proceeds of criminal activity.

Money Laundering under Penal Code 186.10 PC is a “wobbler,” which means that a prosecutor can file either misdemeanor or felony charges, depending on the factual circumstances and the defendant’s criminal history.

Misappropriation of Funds

As is often the case in many crimes, misappropriation of funds requires that prosecutors must prove to a jury certain number of points or elements of the crime. Misappropriation of funds has four:

1. Control but not ownership. The prosecutor must show that the owner of the property entrusted or gave the money to the defendant, or otherwise allowed the defendant control over it. In short, the defendant rightfully had possession, but not ownership.

2. Intent. First, a person must knowingly misappropriate the money, and cannot commit the crime by making a mistake or error. It can be enough for a prosecutor to show that the accused intended to take any action that results (or would likely result) in the misappropriation of funds.

3. Conversion. In order to commit misappropriation of funds, a person must not only take the money but must use it for his own purposes. Even transfer of money to a bank account or the refusal or failure to hand over the owner’s money when the owner demands it is considered misappropriation.

4. Return. A person who misappropriates funds with the intent to later return the money to the rightful owner is still guilty of misappropriation. It also doesn’t matter if the misappropriation only lasted for a short amount of time.

Working with a Criminal Defense Lawyer

Being accused of a white collar crime like money laundering is not to be taken lightly. While buyers might face penalties if it has been discovered that they have provided false names, the penalties will be far worse if it’s discovered that money laundering has also taken place.

The sooner a Los Angeles white collar crimes defense attorney can get involved in a white collar case, the better. If you have not already been charged with a criminal offense but believe you are the target of an investigation, contact our Los Angeles law office immediately. We may be able to help you avoid being charged with a crime.

If you have been charged with a white collar crime, we may be able to negotiate a resolution to your case with the prosecution in which you pay restitution and either avoid a criminal conviction, plead guilty to a lesser offense, avoid incarceration or significantly limit any time you may be required to serve. As a former prosecutor, Los Angeles white collar crimes attorney Daniel Perlman is highly adept at communicating with prosecutors and understands the critical importance of proactive case management. Finding creative solutions to criminal problems is a hallmark of our firm.

Daniel R. Perlman, Esq.
Law Offices of Daniel R. Perlman