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Miami Money-Laundering Case May Define Whether Bitcoin Is Really Money (ibtimes.com) 121

David Gilbert, reporting for IBTimes: Michell Espinoza, a 32-year-old computer programmer, was arrested for attempted money-laundering in 2014 when he sold $1,500 worth of bitcoin to undercover FBI agents who said they were going to use them to buy stolen credit cards. Now in a Florida courtroom, Espinoza and his lawyers are trying to get the charges dismissed on the grounds that bitcoin, under Florida law, should not be defined as actual money. (Editor's note: the source has annoying auto-playing videos. Alternatively you can use the link below.) This is thought to be the first case of its kind and the ruling by Miami-Dade Circuit Judge Teresa Mary Pooler will be watched with great interest not only in the U.S., but around the world. "This is the most fascinating thing I've heard in this courtroom in a long time," Pooler said on Friday. A ruling is not expected for several weeks yet.The report also cites the take of Charles Evans, Associate Professor of Finance and Economics at Barry University, who provided evidence on behalf of the defense and told the court that bitcoin, in his opinion, is not money. He said, "Basically, it's poker chips that people are willing to buy from you." Miami Herald has more details.
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Miami Money-Laundering Case May Define Whether Bitcoin Is Really Money

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  • by ArmoredDragon ( 3450605 ) on Monday May 30, 2016 @10:31AM (#52210825)

    At the end of the day, any fiat currency is only worth whatever you think it's worth. So you can really identify any money as poker chips.

    • by Kjella ( 173770 ) on Monday May 30, 2016 @10:44AM (#52210881) Homepage

      At the end of the day, any fiat currency is only worth whatever you think it's worth.

      I wish. Unfortunately my money is only worth what other people think it's worth.

      • by Anonymous Coward

        You think it is worth what other people worth.

        It is recursive thinking it is worth what it is worth all the way down.

        A good salesman could make any thing or currency worth what he thinks it it worth, within reason. Going too far would likely fall into fraud territory.

        • by Hylandr ( 813770 )

          Money is only worth what the landlord and utilities companies can accept as payment to pay their own bills with.

          • by WarJolt ( 990309 ) on Monday May 30, 2016 @02:56PM (#52212417)

            Your landlord could easily exchange gold for rent. At some point your landlord needs to pay taxes. It's really more about taxes. We all pay them. We all benefit in some way from taxes. The government uses dollars to cover it's debts. Think of a dollar like an IOU. The government collects these IOUs in taxes everytime you have economic activity and in turn the government provides an environment for you to carry out economic activity. They have to issue IOUs to provide services that create an fair environment to conduct business. For example judges, police and prison keep you from robbing a bank. Fiat currencies value is derived from the amount of trust everyone has in the system. It's a bit more complicated than how I "feel" about a currency since trust is a little bit more objective than feelings are despite feelings playing a huge roll in the value of a currency. If you do the numbers you can figure out if a currency is undervalued or overvalued.

      • I wish. Unfortunately my money is only worth what other people think it's worth.

        Well, not exactly. That really depends if you're the buyer or the seller.

        Suppose you wanted to sell a pair of shoes. How much money would you accept for them? That's what money is worth to you.

    • As a medium of exchange, nothing has intrinsic value. It is always based on what somebody thinks it is worth.

    • At the end of the day, any fiat currency is only worth whatever you think it's worth. So you can really identify any money as poker chips.

      Not true. U.S. currency, for instance, (and most legal currencies, in fact) is considered "legal tender". That means it can be used to pay your debts to the government. The government doesn't have to accept Bitcoin or anything else other than U.S. dollars when you pay your taxes.

  • The question is ultimately what is money? The OED defines money as "Any generally accepted medium of exchange which enables a society to trade goods without the need for barter; any objects or tokens regarded as a store of value and used as a medium of exchange." Therefore bitcoins are money. Government definitions are usually somewhat less flexible. I would expect that this might go to SCOTUS regardless of the ruling.
  • Bitcoin being currency really doesn't make a whole lot of sense. The only reason Bitcoin has value to anyone is because it can be exchanged for real currency - if it were not for the exchanges, Bitcoin would be totally worthless. I really don't see how this is any different from, say, the supposed credit card thieves buying $1500 of precious metals or stocks or baseball cards from someone while making the claim that they're going to use the metals/stocks/baseball cards to purchase stolen credit cards - and

    • By that logic, all other crypto-currencies would be worth something but most of them are, as you say, totally worthless.

      At the time I'm writing this comment, one Bitcoin is worth USD$533 but one Dogecoin is only worth USD$0.00023079, i.e. practically worthless.

      • by WarJolt ( 990309 )

        What gives a crypto currency value is trust. People pay for this trust through bitcoin mining and transaction fees. The more miners the more trust you have because it takes more to manipulate the currency.

    • by Rhipf ( 525263 )

      Paper being currency really doesn't make sense either. The only reason paper (currency) has value is because it can be exchanged for goods that people want. If it were not for this exchange paper (currency) would be totally worthless.

      I would actually argue that precious metals and stocks are currency (stocks maybe not as much but definitely precious metals). The only way this isn't money laundering is that using that currency to purchase stolen goods doesn't really clean the currency (the whole point of mon

      • Precious metals and stocks are valuable, but they aren't currency. Currency is what I buy stuff with, and I don't shop anywhere that will take gold or silver or 3M stock as payment. I shop lots of places that take US dollars (and occasionally one that takes pounds or euros or something like that). There are places that take Bitcoin, but so far I personally haven't noticed stores setting prices in Bitcoin, as opposed to offering to sell for Bitcoin of the value of some amount of dollars or euros or whate

  • by __aaclcg7560 ( 824291 ) on Monday May 30, 2016 @10:56AM (#52210933)

    "Basically, it's poker chips that people are willing to buy from you."

    Daddy Trump bought $3M in poker chips to bail out The Donald when a bond payment was due.

    In December 1990, a lawyer for Fred Trump walked into Trump Castle in Atlantic City and, according to reports at the time, deposited a check with the casino for $3.36 million in exchange for chips. Instead of using the chips to play in the casino, the lawyer left.

    The result: an interest-free loan to Trump from "Daddy-O."

    The same day that Fred Trump made his chip purchase, The Donald stunned the gaming world and his creditors by making a scheduled bond payment.

    https://www.buzzfeed.com/andrewkaczynski/you-can-rely-on-the-old-mans-money [buzzfeed.com]

    • Daddy Trump bought $3M in poker chips to bail out The Donald when a bond payment was due.

      After reading this, I actually went looking to see what he got arrested for...

      Going to get a coffee now.

      • After reading this, I actually went looking to see what he got arrested for...

        Daddy Trump got arrested after a 1927 KKK riot in Queens.

        On Memorial Day 1927, brawls erupted in New York led by sympathizers of the Italian fascist movement and the Ku Klux Klan. In the fascist brawl, which took place in the Bronx, two Italian men were killed by anti-fascists. In Queens, 1,000 white-robed Klansmen marched through the Jamaica neighborhood, eventually spurring an all-out brawl in which seven men were arrested.

        One of those arrested was Fred Trump of 175-24 Devonshire Rd. in Jamaica.

        https://www.washingtonpost.com/news/the-fix/wp/2016/02/28/in-1927-donald-trumps-father-was-arrested-after-a-klan-riot-in-queens/ [washingtonpost.com]

        • Daddy Trump got arrested after a 1927 KKK riot in Queens.

          Really? One of Trump's ancestors got arrested 90 years ago? For brawling?

          You know what's glaringly obvious? That you're not reporting that he was convicted.

          What else you got?

          • That you're not reporting that he was convicted.

            You need to learn how to read. The previous poster asked what Daddy Trump got arrested for. I provided a link to an article.

            What else you got?

            You don't know how to Google? I'm not your personal research assistant.

  • compensation for illegal activity, even if by redeemable poker chips, is still breaking the law.

    • by bsolar ( 1176767 )
      It's definitely relevant: his bitcoin sale might still be illegal for other reasons but this doesn't mean the money laundering charge is appropriate. If you steal an apple you are breaking the law, but this doesn't mean you should be charged with arson...
      • sad news for you, it's still money laundering which even includes using other things than money to disguise and/or transfer proceedings from criminal activity

        could have been vouchers for free marshmallows instead of bitcoin, still money laundering

        • by bsolar ( 1176767 )
          Then why is the prosecutor not using that argument to support his charge? The prosecutor is countering the defense's attempt by arguing that bitcoins *are* money instead. Also, of the 2 charges the money laundering one seems to be pretty weak anyway: the other charge is "dealing in currency without a money transmitter license" and I guess it's where the legal status of bitcoins actually matters.
    • by PPH ( 736903 )

      Espinoza is not accused of having done anything illegal other than selling the Bitcoin. He may have earned it in some perfectly legal enterprise. The only question is whether a person has a responsibility to refuse a transaction if they become aware of potential illegal activities occurring as a result. In other words, are citizens expected to play cop?

    • by Kjella ( 173770 )

      may not be money but that's irrelevant (...) compensation for illegal activity, even if by redeemable poker chips, is still breaking the law.

      If you sell guns and crossbows and you're charged with selling a crossbow in violation of gun laws it very much matters how "projectile weapon" is defined. That's for the specific money laundering charge, but he might also be in general trouble because they wanted his assistance in an illegal act which makes him an accessory before the fact. If a person told you he's going to kill his wife it doesn't matter if you sell him a gun or crossbow or knife, it's providing a murder weapon. But the gun laws can't ap

  • What exactly did this guy do wrong? Let's swap "bitcoin" with "money orders" just so we can sidestep that aspect of it. In what way is it his business what anyone does with the money order after he sells it?
    • In what way is it his business what anyone does with the money order after he sells it?

      Selling a money order to a third-party could be construed as money laundering.

    • It becomes your business when the buyers tell you they are going to use the money orders to purchase stolen credit card numbers. http://www.int-comp.org/career... [int-comp.org] By that definition, it's also irrelevant whether the exchange is of currency, products, or services.
      • It becomes your business when the buyers tell you they are going to use the money orders to purchase stolen credit card numbers.

        http://www.int-comp.org/career... [int-comp.org]

        By that definition, it's also irrelevant whether the exchange is of currency, products, or services.

        But they were lying. They were not going to buy credit card numbers.

    • by hey! ( 33014 )

      What exactly did this guy do wrong? Let's swap "bitcoin" with "money orders" just so we can sidestep that aspect of it. In what way is it his business what anyone does with the money order after he sells it?

      A couple years ago a guy tried laundering $98K in cocaine and heroin money by dividing it up into 54 money orders of roughly $1800 each -- each well under the $2000 reporting limit. The thing is that splitting up a transaction that's mandatory to report into smaller chunks doesn't magically make it OK not to report it. It's still a $98K transaction, you're just trying to hide it.

      If money laundering regs could be evaded just be restructuring the transaction so it doesn't trigger any scrutiny, then they'd be

    • by Anonymous Coward

      It's a stupid trap. If you offer bitcoins or anything else, and anybody mentions illegal shit in your vicinity, take your wares and bugger off. No sale for you. Either it's real crims being incredibly stupid, or it's feds fishing with a stupid-on-its-face trap.

      Because if you sell bitcoin and the customers are (undercover feds) that loudly declare "WE WILL DO ILLEGAL SHIT WITH THIS DONCHAKNOW", and you don't break off the transaction, you end up in court. Amazingly, this tends to stick in USoA kangaroo kourt

      • by Cederic ( 9623 )

        In the UK if you tell the bank cashier that you're planning to break the law with the funds you're withdrawing, they're breaking the law if they don't report it.

        Usually the bank has a named MLRO (money laundering reporting officer) that the report will go to, that will then inform the relevant authorities.

        It's the law. Whether you think it's a good one or not, people get imprisoned for breaking it.

  • There is no difference between poker chips and "real" money. The real question here is that if he had offered poker chips instead, would it still be a crime?

    • by JcMorin ( 930466 )
      Agree, the funny part about Bitcoin is that they change the definition of it when they can to their own profit. Sometimes it's a currency, other a commodity or just a payment channel... http://www.bloomberg.com/news/... [bloomberg.com]
    • Exactly. The headline:
      Miami Money-Laundering Case May Define Whether Bitcoin Is Really Money
      should be:
      Miami Money-Laundering Case May Define Whether Bitcoin Is Legally Money (for the purposes of money laundering statutes)

      Last I checked, the courts don't determine reality by judicial fiat....

      • Anyone who isn't retarded already knows that court cases decide legal issues not philosophical/physical/mathematical issues and thus your extra verbiage is unnecessary (anyone who know what "laundering statutes" means already knows that courts do).

    • There is no difference between poker chips and "real" money. The real question here is that if he had offered poker chips instead, would it still be a crime?

      That's a good question....I think they'd treat it as a crime since poker chips can be exchanged 1-for-1 with dollars. It's a gray area, but I would expect the government to treat it as any kind of exchangeable property with a known value.

      If he had offered stamps instead of bitcoin, for example, they'd probably consider it to be a crime, just with a different form of exchange. It's not exactly the same, but it's similar. I suppose he could have offered chickens or candy bars and they'd still class it as a cr

  • by DatbeDank ( 4580343 ) on Monday May 30, 2016 @11:08AM (#52211003)

    The IRS already defines Bitcoin as "property" and not currency.They seem to have tied an arm behind themselves. From this nifty press release: https://www.irs.gov/uac/newsro... [irs.gov]

    I give it another year or so before gold, silver, and "bitcoin" have a special designation that closes this loophole.

    • by Agripa ( 139780 )

      The DoJ argued that Obamacare was a tax and not a tax as circumstances required. Contradictions in court are no impediment.

  • ""This is the most fascinating thing I've heard in this courtroom in a long time," Pooler said on Friday.

    This just clicked with me in the way that judges are portrayed in The Good Wife.

    Are judges really as bored, biased and even sometimes childish as so portrayed?

  • It doesn't matter what tokens you are carrying --- poker chips, playing cards, a pocketful of dice ---- once it becomes obvious that money is being moved along with them.
  • Would trading a car, or laundry soap* for stolen credit cards still be some kind of crime?

    *There was a time a few years ago when the large orange container liquid laundry soap was being used as currency by drug dealers.

  • So either bitcoin IS money and should be treated as such, or it ISN'T money and should be viewed with a very, very skeptical eye.

    Which is it?

    If it is, expect the Feds to jump on it with both feet and screw with people for using it, and if it's not, expect some new laws redefining it as "currency" with all the attendant legal repercussions.

  • by swm ( 171547 ) <swmcd@world.std.com> on Monday May 30, 2016 @12:50PM (#52211547) Homepage

    I have a real problem with this case.

    Suppose it was an undercover drug deal. The cops sell him X grams of cocaine in exchange for $1500 in bitcoins. Then they charge him with buying drugs. When it comes to trial, he pleads that he didn't know they were cops; he never would have bought the drugs if he knew they were cops. Does this matter? Not at all. Buying drugs is illegal. It doesn't matter who he bought them from, or whether he knew they were cops.

    Now suppose his attorney say OK, let's see the drugs. And the cops dutifully produce a bag of white powder, and they send it out to be tested, and the test shows that it is 100% primo Dominos 10X confectioner's sugar. And his lawyer says, "Hey! He's charged with buying drugs; where are the drugs?" And the cops say, "Oh, you know, it's such a hassle checking out drugs from the evidence locker; all this paper work; all these forms; god help you if it comes back a gram light... We just went down to store and bought some powdered sugar. But it doesn't matter: we told him it was drugs; he obviously thought it was drugs or he wouldn't have paid $1500 for it." Does this matter? Absolutely. It doesn't matter what he thought: he did not do the illegal thing that he is charged with: he did not buy drugs. He walks.

    Now look at this case. The cops paid him $1500 cash for bitcoins. They told him they were going to buy stolen credit cards with the bitcoins. Now maybe, if they had actually bought stolen credit cards with the bitcoins, they could have charged him with being some kind of accessory to that crime. But they didn't. There was no crime. There were never any credit cards. There wasn't even a bag of white powder. All they've got is a story. A story that he believed. Or not. Maybe he didn't know whether it was true. Maybe he didn't care. Sure, sure, you guys want to be leet haxorz buying credit cards? You got $1500 cash you can be James Bond, you can be Tony Stark, whatever.

    I do not understand how this guy gets charged in connection with a crime that did not occur.

    • by fred911 ( 83970 )

      "Now look at this case. The cops paid him $1500 cash for bitcoins."

        Yes, this story or case stinks. Did the cops offer way over the current market pricing? Why didn't they just buy the coins from Coinbase or any of the other spot based services? Where's "the rest of the story"?

    • If it's the FBI who suggested the crime, if they only knew Reid and Espinoza as Bitcoin traders with no known criminal activities, then like you I've got a real problem with this case.

    • by bws111 ( 1216812 )

      Eh, no. The crime that did not occur was buying stolen credit cards. He is not charged with that crime. The crime he is charged with is money laundering, which is trying to hide transactions. If the money laundering law is written such that engaging in any transaction when you have reason to believe the purpose of the transaction is to hide illegal activity, then he has done that.

      Similarly, for your 'drug buy', the actual law will not be merely 'buying or selling drugs'. The law will be something like

  • Surely it was the 1500 US dollars that was getting laundered, right?

    I can't see how this defense wasn't laughed out of court. If he'd been taking illegal proceeds, buying real estate with it, and then selling the real estate, could he have defended himself on the grounds that "real estate isn't money"? Of course not. What am I missing?

    • What illegal proceeds was he taking by selling them his bitcoins for their dollars? Their dollars were illegal proceeds? No, this wasn't a case of individuals with past illegal proceeds trying to cover this up by selling their dollars for bitcoins. IANAL, but money laundering generally refers to the process of making illegally obtained money look as if it was obtained legally. This isn't that. This transaction may well have involved legally earned dollars and legally earned bitcoins, unless proven otherwise

  • The only thing the programmer did is perform a currency exchange. Hardly illegal, banks perform it all the time.

    If I go to a bank and change 1000.00 dollars Canadian to US currency and I tell the bank teller I'm going to buy stolen credit cards, then is the bank money laundering? No. The bank customer is obviously.

    Same for this guy, the FBI is exchanging their money for bit coins, and they are saying they will use the bit coins for an illegal purpose. From my point of view the currency exchange performed

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