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Bitcoin The Almighty Buck The Courts Communications Crime Government Network Networking The Internet

Bitcoin Not Money, Rules Miami Judge In Dismissing Laundering Charges (miamiherald.com) 150

An anonymous reader quotes a report from Miami Herald: Bitcoin does not actually qualify as money, a Miami-Dade judge ruled Monday in throwing out criminal charges against a Miami Beach man charged with illegally selling the virtual currency. The defendant, Michell Espinoza, was charged with illegally selling and laundering $1,500 worth of Bitcoins to undercover detectives who told him they wanted to use the money to buy stolen credit-card numbers. But Miami-Dade Circuit Judge Teresa Mary Pooler ruled that Bitcoin was not backed by any government or bank, and 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 an eight-page order. The judge also wrote that Florida law -- which says someone can be charged with money laundering if they engage in a financial transaction that will "promote" illegal activity -- is way too vague to apply to Bitcoin. "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. Espinoza's case is believed to be the first money-laundering prosecution involving Bitcoin.
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Bitcoin Not Money, Rules Miami Judge In Dismissing Laundering Charges

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  • whites are whiter brights are brighter says Judge Pooler
  • by mmell ( 832646 ) on Monday July 25, 2016 @05:09PM (#52578501)
    . . . (which I don't, by the way) . . .

    let me get this straight - if someone offers to sell me something of value, if I somehow become aware of intended wrongdoing on their part - say, they've said they're raising money to hire a hit-man, or they're planning on buying a couple kilos of tar opium, whatever - I may not complete my transaction with them despite the legality of our specific transaction because I suspect they may use their gains in an illegal manner? In effect, I must deprive them of their lawful right to seek to do business with me without due process of law.

    Does this mean contributors to political campaigns are lawfully culpable for the potentially illegal actions of the political candidates?

    • by Anonymous Coward

      No. Not only must you know that your transaction will be used to carryout an illegal act you must also intend that it promote that illegal act.

      I guess in your hitman scenario, we'll be general here since there are numerous parts to the statute, buying a item from a person and knowing that they might do something illegal with the proceeds isn't enough. You'd probably be convicted if you were buying the item for $100 and the guy tells you he needs $500 for a hitman and then you say, "here, I'll help you out.

      • by dfghjk ( 711126 )

        I think you missed the point.

        "... was charged with illegally selling and laundering $1,500 worth of Bitcoins to undercover detectives who told him they wanted to use the money to buy stolen credit-card numbers."

        The assumption here by detectives was that merely claiming the proceeds would be used for illegal activity made the transaction money laundering.

    • by Anonymous Coward on Monday July 25, 2016 @06:11PM (#52578887)

      The general thrust is: You can't help people commit crimes.

      In many countries (and I will probably now be disappointed to find that the US isn't one of them) you don't get to just roll up with $5 million of bank notes in a truck and buy something expensive like land or a company. If you do that, and later somebody asks the lawyers "So, what's with the $5M in cash?" and they shrug and say "I didn't ask" they lose their licenses and their offices are crawling with investigators. Even if it turns out you got that $5M through some unlikely but entirely legal means, their failure to ask reasonable questions makes them guilty.

      In my country if you ask the "bank of mum and dad" to help pay for your first house, they need to write a letter explaining who they are, and why this big sum of unexpected money appeared with no strings attached, because otherwise your lender, or your lawyers, or both will freak out and everything stalls while this mysterious money is explained. If instead of "mum and dad" the money comes from "Uncle Albert" who like, isn't actually an uncle but he knew you from when you were a baby, expect that to get crawled over even more. Who is this "Uncle Albert" dude? Does he end up with control over the property in practice despite you owning it on paper? Where did _he_ get the money from?

      Right now in the press you might see fuss about a company called British Home Stores or BHS. The guy who owned it sold it to someone they knew was a fly-by-night terrible business person, so that he could walk away saying it was fine when he left. It collapsed, as he will have known it probably would. Did the politicians say "Oh, well, you sold it, so not your problem" ? No, they're demanding he pay off its pension fund and they're tearing into the other directors, the auditors, and so on. Because all those people had a DUTY not to just say "Oh, whatever, if the owner wants to sell it to some scumbag let him".

      • by vakuona ( 788200 )

        But, can they gift me bitcoins (not money) instead?

      • In my country if you ask the "bank of mum and dad" to help pay for your first house, they need to write a letter explaining who they are, and why this big sum of unexpected money appeared with no strings attached, because otherwise your lender, or your lawyers, or both will freak out and everything stalls while this mysterious money is explained.

        Really? Not my experience.

        Everything had to be aggregated in one place before it was transferred wholesale to the seller. Naturally, the aggregation came from a bun

        • I'm in the USA btw. I didn't have to write a letter, but IIRC had to give a bit more account details upon getting my mortgage since I had recently moved money _between my own accounts_ to make the down payment.

          • Same here - for my most recent mortgage. The underwriters wanted verification of the source of the down payment, even though it was an account in my name.

            That wasn't the case for my previous mortgages, but underwriting has gotten much more strict in the US since 2008.

      • The general thrust is: You can't help people commit crimes.

        In many countries (and I will probably now be disappointed to find that the US isn't one of them) you don't get to just roll up with $5 million of bank notes in a truck and buy something expensive like land or a company. If you do that, and later somebody asks the lawyers "So, what's with the $5M in cash?" and they shrug and say "I didn't ask" they lose their licenses and their offices are crawling with investigators. Even if it turns out you got that $5M through some unlikely but entirely legal means, their failure to ask reasonable questions makes them guilty.

        In my country if you ask the "bank of mum and dad" to help pay for your first house, they need to write a letter explaining who they are, and why this big sum of unexpected money appeared with no strings attached, because otherwise your lender, or your lawyers, or both will freak out and everything stalls while this mysterious money is explained. If instead of "mum and dad" the money comes from "Uncle Albert" who like, isn't actually an uncle but he knew you from when you were a baby, expect that to get crawled over even more. Who is this "Uncle Albert" dude? Does he end up with control over the property in practice despite you owning it on paper? Where did _he_ get the money from?

        Right now in the press you might see fuss about a company called British Home Stores or BHS. The guy who owned it sold it to someone they knew was a fly-by-night terrible business person, so that he could walk away saying it was fine when he left. It collapsed, as he will have known it probably would. Did the politicians say "Oh, well, you sold it, so not your problem" ? No, they're demanding he pay off its pension fund and they're tearing into the other directors, the auditors, and so on. Because all those people had a DUTY not to just say "Oh, whatever, if the owner wants to sell it to some scumbag let him".

        It's not just country (I assume you are not in the US.) My wife and I live in Florida, and when we bought our first home, we had to write letters to the bank (BoA) explaining all our sources of income or wealth, including a generous cash gift we got from our in-laws. And before we got a loan with BoA we were trying to get one via NACA, and that organization had us write regular letters explaining our cash flows (which got annoying at times since we traveled abroad every year to see my in-laws, which incurre

        • by Zygnal ( 658503 )
          You've missed the distinction between
          "we got a loan with BoA"
          and
          "paying a property with cash"

          You're being grilled about sources of income so that BofA can judge how likely you are to be able to make your payments. In particular, without special help from others.

          Either scenario, the seller gets a check for the selling price. Empty-nesters downsizing are often able to pay for a smaller house in full without needing a new loan, so this is hardly rare or crooked.
        • It can get silly. When I was going back to grad school, we bought a house. I had to write letters explaining that I didn't quit my job and go to grad school to get benefits from a housing program, and exactly why, as a two-adult family, we only needed one car.

          I don't think they cared much about our reasons, just that we had some.

      • The general thrust is: You can't help people commit crimes.

        True, but if you do help someone commit a crime, then you should be prosecuted for conspiracy to commit a crime, not money laundering. This guy was prosecuted for money laundering and the judge said "this ain't money laundering". If they want to prosecute him for conspiracy, they may have more luck. My guess is they went with money laundering because they thought it was easier to prove or because it had heftier penalties.

    • Knowledge of a crime without reporting it is called accessory. Even if they tell you about the crime after they've done it you are still an accessory after the fact.

      So yes, if someone tells you've they've committed a crime or are going to commit a crime you are obligated to report it to law enforcement and refuse the transaction. To think otherwise would either make you extremely naive or stupid.

      This is basic common knowledge, you can't help people commit crimes. It's ok to be ignorant of their crime (but y

      • by jon3k ( 691256 ) on Monday July 25, 2016 @06:52PM (#52579097)

        Knowledge of a crime without reporting it is called accessory. Even if they tell you about the crime after they've done it you are still an accessory after the fact.

        Not exactly. You'd have to help conceal the crime to be charged with accessory after the fact.

        http://criminal.findlaw.com/cr... [findlaw.com]

        • Conducting a monetary transaction intended to conceal the proceeds of a crime is the very definition of Accessory after the fact. His question was about a monetary transaction where he's been told that it's the result of a crime.

          As a general rule you are not required in some states to report crimes you are aware of (though in some you are, know your states law!). But if you assist the perpetrators in the crime, such as through concealment or laundering of funds you are an accessory after the fact. Your link

          • by jon3k ( 691256 )
            I think your original post was sufficiently vague as to just be incorrect. I'm just clarifying that it takes more than just being aware of a crime, which your original post stated.

            So yes, if someone tells you've they've committed a crime or are going to commit a crime you are obligated to report it to law enforcement and refuse the transaction.

            That's certainly not universally true.

            • by judoguy ( 534886 )
              I'm ordained clergy. If someone told me in a counseling session that he was going to commit robbery or murder, I have no obligation to report it to anyone and am in fact directed not to. We are not law enforcement.

              Where I live in the U.S., the only things required by law to report are child and dependent adult abuse.

          • by dfghjk ( 711126 )

            "Conducting a monetary transaction intended to conceal the proceeds of a crime..."

            You are assuming that the transaction is money laundering when that condition has not been met.

            "...is the very definition of Accessory after the fact."

            It's the "very definition"!?! Who's being "extremely naive or stupid" now.

            "His question was about a monetary transaction where he's been told that it's the result of a crime."

            You are completely off the deep end here.

      • by BKX ( 5066 )

        You are never obliged to report crimes to the police unless you're a mandatory reporter (basically, doctors, social workers and teachers) and the crime is on the mandatory reporting list (child abuse, and that's about it). If you're not a mandatory reporter, then you don't have to report anything for any reason ever. It's actually constitutional, by the way. It's part of the fifth amendment. Basically, the fifth amendment means you can always keep your mouth shut in case you accidentally say something incri

        • and the crime is on the mandatory reporting list (child abuse, and that's about it)

          There are lots of things, multiple lists, but they only apply to certain jobs. In addition to crimes involving children, often elder and disabled abuse. Engineers are required to report certain things that create physical dangers. A lot of types of licensed inspectors or auditors have lists of things they are required to report if they find it. Some types of accountants.

      • by dfghjk ( 711126 )

        "To think otherwise would either make you extremely naive or stupid."

        No it wouldn't, but regardless it wouldn't make you a money launderer.

        "but you need to understand you may have your profits taken away"

        Some more hand waving. Profits?

        "For example, if they'd committed a robbery and killed someone in the progress and you laundered the money you could be charged with murder."

        Just for example ;)

        If you loaned your friend some cash to buy gas for his car and he subsequently drove 30 mph over the speed limit (a

  • by Anonymous Coward on Monday July 25, 2016 @05:10PM (#52578507)

    "The defendant, Michell Espinoza, was charged with illegally selling and laundering $1,500 worth of Bitcoins to undercover detectives who told him they wanted to use the money to buy stolen credit-card numbers. "

    Basically they were giving him cash for bitcoins they could use to buy stolen goods.

    "Laundering" here meaning that the bitcoins would hide/obfuscate the transactions. But laundering money doesn't *mean* that. To launder the money the reverse would've had to have happened, using the stolen credit cards to buy bitcoins to get cash that couldn't be traced back.

    It's like saying he was laundering money because they were going to give him $1000 to convert to Yen that we were going to use to buy stolen goods. I don't see how bitcoin being a real "monetary instrument" or more akin to "poker chips" applies here because anybody who's played Fallout knows that bottlecaps are just as much a monetary instrument - It's whatever a group of people agree on the value of.

  • by avandesande ( 143899 ) on Monday July 25, 2016 @05:10PM (#52578511) Journal
    If someone comes into my store and wants to change a 20$ bill for rolls of quarters and tells me they are going to use them to buy something illegal... do I have some kind of obligation not to make the transaction? It seems like a really shaky and bizarre way to entrap someone.
    • by Creepy ( 93888 ) on Monday July 25, 2016 @06:15PM (#52578915) Journal

      I believe the correct answer is not only do you not change the money, you are obliged to contact the police and report the person. Knowingly changing the money could make you an accessory to a crime (I believe they have to tell you the crime they intend to commit).

      Incidentally, Bitcoin probably can't be considered legal tender - it would violate the Constitution, which allows only Congress to print money and denies states the right to have their own currency. It does fall into a category not thought of by the founding fathers, though, which is non-printed money (so Bitcoin basically is a loophole).

      • I believe the correct answer is not only do you not change the money, you are obliged to contact the police and report the person.

        Yes and no respectively. But if the cops ask you, you have to answer honestly or you're an accessory... unless they're asking about your spouse, then you don't have to answer. Whee!

      • The US Constitution:

        Section. 8.

        The Congress shall have Power...

        To coin Money, regulate the Value thereof, and of foreign Coin...

        Section. 10.

        No State shall ... coin Money; ...; make any Thing but gold and silver Coin a Tender in Payment of Debts....

        My take: The federal government has been granted to power to coin money and make it legal tender, but has not been granted a monopoly. Nothing in the Constitution prevents the People (not the States) from coining money.

        • by Boronx ( 228853 )

          The courts will find that if the states can't print money, then people can't either.

        • Your right, in the sense that the general rule of "The constitution is the rules for the government to follow, not the people" (And the language also appears explicit).

          However for the government to *recognize* the bitcoins as money, it enters a huge grey area where its not US money (because constitution), but whos money IS it?

      • by BKX ( 5066 )

        You are never obliged to report crimes to the police unless you're a mandatory reporter (basically, doctors, social workers and teachers) and the crime is on the mandatory reporting list (child abuse, and that's about it). If you're not a mandatory reporter, then you don't have to report anything for any reason ever. It's actually constitutional, by the way. It's part of the fifth amendment. Basically, the fifth amendment means you can always keep your mouth shut in case you accidentally say something incri

      • Incidentally, Bitcoin probably can't be considered legal tender - it would violate the Constitution, which allows only Congress to print money and denies states the right to have their own currency. It does fall into a category not thought of by the founding fathers, though, which is non-printed money (so Bitcoin basically is a loophole).

        There's always a lot of confusion when the term "legal tender" comes up. "Legal tender" is NOT the same as "valid money" or "valid currency" or whatever. "Legal tender" in the U.S. means precisely one thing -- it must be accepted for all debts, public or private.

        And what that means is -- if you incur debt to someone, they must accept "legal tender" to repay that debt. If you don't pay and they sue you, the court can order payment -- and they must accept dollars.

        Things "legal tender" is NOT: (1) "Lega

  • by steveb3210 ( 962811 ) on Monday July 25, 2016 @05:13PM (#52578531)

    If you take a bitcoin address and print out the hash, you could put that under your mattress and delete the file.

    Only that piece of paper would then enable a person to spend the bitcoins.. If they burned up in a house fire, they would be gone forever assuming certain cryptographic primitives remain secure.

    • by Kjella ( 173770 )

      If you take a bitcoin address and print out the hash, you could put that under your mattress and delete the file.

      Pretty sure you meant to say something else, you can print out the private keys associated with the public hashes but if all you have is the hash you got nothing. You can see the Bitcoins are there, but you can't send them to anyone so they're effectively lost.

  • Why don't the undercover detectives get charged with:
      * Engaging in preparatory acts towards buying stolen credit cards
      * Entrapment

    Or is everything legal now (in the sense that bribing politicians is legal) ?

    • Re: (Score:3, Informative)

      by Anonymous Coward

      1. F.S. Ch. 896.105 grants immunity to law enforcement engaging in a bona fide investigation.

      2. Entrapment only applies when your will is overpowered by law enforcement making you engage in an activity you normally would not do. It is not entrapment that law enforcement offers you the ability to do an illegal act and you willingly do it of your own free will. If an undercover officer asks you if you want to buy cocaine and you say yes it's not entrapment. If an officer asks you to do a buy for them (or tell

      • by guruevi ( 827432 )

        Isn't it obstruction if you prevent an officer from making an arrest? So if you prevent an officer from arresting you because you're not buying his coke voluntarily, it's obstruction but if you do buy the coke voluntarily it's not entrapment?

      • So they are able to subtly encourage you over the line and that's OK.

        I suppose that's how the devil can sleep at night too after a day sat on people's shoulders whispering suggestions to commit misdeeds.

        • Conspiracy charges are even sneakier. If the FBI agent provocateur talks a bunch of morons into making a plan to do something illegal, like rob Fort Knox under cover of a pizza delivery, and one of the morons does something perfectly legal that clearly furthers the plan, time to arrest the guys and charge them with conspiracy to do something illegal.

  • by The_Rook ( 136658 ) on Monday July 25, 2016 @05:28PM (#52578641)

    let's say, instead of bitcoins, the federal agents were trying to buy a 10 ounce bar of gold, which, they told the defendant, they were going to use to make illegal transactions. 10 ounces of gold are not money either. would the transaction be called money laundering or would it be legal?

    • by dk20 ( 914954 ) on Monday July 25, 2016 @05:51PM (#52578775)

      Ownership of Gold was illegal in the US for a time period as well.

      http://www.presidency.ucsb.edu... [ucsb.edu]

      Section 2. All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve Bank or a branch or agency thereof or to any member bank of the Federal Reserve System all gold coin, gold bullion and gold certificates now owned by them or coming into their ownership on or before April 28, 1933, except the following:

      • Now that was definitely government overreach.

        As long as I can find a shovel, there's no way they're gittin' ma hard-dug gold.

    • let's say, instead of bitcoins, the federal agents were trying to buy a 10 ounce bar of gold, which, they told the defendant, they were going to use to make illegal transactions. 10 ounces of gold are not money either. would the transaction be called money laundering or would it be legal?

      Probably not, in that its an exchange of assets not money. The point with the ruling is the laundering laws refer to money not *stuff* and the judge is saying that bitcoin qualifies as *stuff*

  • It's time to release DPR on a technicality, unless he was dumb enough to actually use cash to order those hits... Shesh...
  • by Anonymous Coward

    https://www.irs.gov/uac/newsroom/irs-virtual-currency-guidance

  • Bitcoin Not Money

    Why you skip words? Slashdot not newspaper, not have physical limit on headline length.

  • I don't get this. Most of the monetary value in the world doesn't exist as bills or gold.

    It's just numbers created in bank accounts when bank loan out money that they don't actually have. They only have, what is it, 3%, 10% of it?

    So if my method of money laundering is just moving and splitting this "virtual number money" around among a confusing number of accounts, then by this judge's logic that's not money laundering because, by her logic, mere numbers in accounts are not money?

    Really confused here.

    • by JcMorin ( 930466 )
      By reading what you just wrote, you may be confuse but you still know a lots more than most people do. What bank don't keep all my money in cash in their vault filled with gold bar?
    • by Nutria ( 679911 )

      Those virtual numbers have US$ signs next to them, not BTC.

  • by PPH ( 736903 ) on Monday July 25, 2016 @06:10PM (#52578875)

    ... money is not money either.

  • You can launder money with shit, literally, pieces of turd. Buy manure from a provider and then sell it back to a farmer, and you successfully have layered and integrated the funds as legitimate. Nobody will debate that manure isn't money, and that is not the point. The point is that money of illicit origin has been laundered.
    • Wrong. The money was not of illicit origin. But they told the guy they planned to commit a crime with the BitCoin he gave them. That's what makes this case weird.

  • If it is not a money, then VAT should be paid on it.
  • Several people have already been prosecuted for running an unlicensed money transmitting business and money laundering, including people using the localbitcoins website. If this judge just ruled that Bitcoin isn't money, then how does that affect those other cases?

  • No stolen credit card numbers were going to be bought. Detectives were pretending they were going to buy stolen credit cards. These types of set ups are a waste of taxpayer money.
  • The feds have already declared it a currency.

    https://en.wikipedia.org/wiki/... [wikipedia.org]

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