IN TIIE CIRCUIT COURT OF THE ELEVENTH JUDICIAL CIRCUIT
IN AND FOR COUNTY, FLORIDA

THE STATE OF FLORIDA, CRIMINAL DIVISION
Plainti?,
CASE NO.: Fl4tl2923
vs.
SECTION: 13
MICHELL ABNER ESPINOZA,
Defendant. JUDGE: TERESA POOLER

 

ORDER GRANTING DEFENDANT9S
MOTION TO DISMISS THE INFORMATION

THIS CAUSE came before the Court on Defendant, MICHELL ABNER
multiple Motions to Dismiss the Information Pursuant to Florida Rule of Criminal
Procedure This Court having reviewed the traverse and responses ?led by the State;
the arrest affidavit, dated February 6, 2014; the search warrant, filed on February 27, 2014; the
deposition of Detective Ricardo Arias, ?led on March 5, 2015; the deposition of Special Agent
Gregory Ponzi, filed on April 8, 2015; Defendant?s Memorandum of Law, ?led on June 14,
2016; State?s Memorandum of Law, filed on June 16, 2016; the court ?le; and having held
multiple hearings, hereby FINDS as follows:

Detective Ricardo Arias is a detective of the Miami Beach Police Department who
Worked in conjunction with the United States Secret Service?s Miami Electronic Crimes Task
Force (hereinafter ?Task Force?). The Task Force is a team led by the Secret Service that is
comprised of state and local agents. Prior to his encounter with the Defendant, Detective Arias
attended a meeting at the United States Secret Service relating to virtual currencies. In his
deposition, Detective Arias stated that he ?became intrigued of the possibility? of initiating a
local investigation into virtual currencies. (Det. Arias Dep. 4:18, Jan. 13, 2015). He therefore
reached out to Special Agent Gregory Ponzi from the United States Secret Service, which led to
the Task orce?s investigation into the purchase and sale of Bitcoin in South Florida.

On December 4, 2013, Detective Arias and Special Agent Ponzi accessed the Internet
website seeking to purchase Bitcoin. Localbitcoinseom is a peer?to~
peer Bitcoin exchange which defines itself as a marketplace where users can purchase and sell
Bitcoin. Users who wish to sell Bitcoin create an advertisement containing the amount of Bitcoin
they are offering and their asking price. Potential buyers browse the site and make arrangements
to purchase Bitcoin with any seller they choose. The transaction can take place online, or, as in
the instant case, the buyer and seller can agree to a local, face?to-face trade.

Detective Arias found multiple sellers of Bitcoin on the website, including the Defendant,
whose u'sername on the website was ?Michelhack.? The Defendant advertised that his contact
hours were anytime and his meeting preferences were a Starbucks coffee store, internet cafe,
restaurant, mall, or bank. The Defendant?s posted advertisement, which Detective Arias found
similar to a Criagslistcom advertisement, stated, ?You will need to bring your wallet and your
smartphone or the address the Bitcoin will be deposited and further specified that interested
buyers will have to pay in cash and in person. (Id. at 612.3379). Based upon Defendant?s
username and advertisement, the Task Force determined that the Defendant might be engaged in
unlawful activity and decided to initiate a Bitcoin trade with him. Although the Task Force
specifically selected to investigate the Defendant, there were no previous reports that the
Defendant was engaged in any illicit criminal activity and it appears that the Defendant was
selected for the investigation based on his username, his 24~hour availability, and his desire to
meet in public places.

On December 4, 2013, Detective Arias, acting in an undercover capacity as an interested
buyer, contacted the Defendant by sending a text message to the Defendant?s listed phone
number. The Defendant responded to Detective Arias and agreed to meet with him the following
day. On December 5, 2013, Detective Arias met with the Defendant at a Nespresso Cafe located
at 1105 Lincoln Road, Miami Beach, Florida 33139. At this meeting, the Defendant agreed to
sell .40322580 Bitcoin to Detective Arias in exchange for five hundred dollars ($500) in cash.
The Defendant also explained to Detective Arias how the Bitcoin market worked, since
Detective Arias claimed to be a new-time purchaser and inquired about the process. The
Defendant explained to Detective Arias how he made a pro?t of eighty-three dollars and sixty~
seven cents ($83.67) on this sale. Defendant further explained that he purchased the Bitcoin at
ten percent under market value and sold the Bitcoin at five percent above market
value. There was no discussion of illegal activity or stolen credit cards at this meeting. Detective
Arias made several comments to the Defendant, none of which amounted to a direct statement
that the Bitcoin were to be used for an illicit purpose. Detective Arias made it clear to the
Defendant that he wanted to remain anonymous, and that the people he engaged in business with
did not accept cash. Thereafter, the Defendant was followed by an undercover surveillance team
to Citibank where he later completed the transaction.

On January 10, 2014, Detective Arias contacted the Defendant to arrange a second
purchase. Detective Arias purchased one (1) Bitcoin in exchange for one thousand dollars
($1,000) at a Haagen~Dazs ice cream store located in Miami, Florida. At this meeting, Detective
Arias told the Defendant that he was in the business of buying stolen credit card numbers from
Russians and the Bitcoin would be used to pay for the stolen credit cards. Detective Arias did not
show the Defendant any stolen credit cards or credit card ntunbers. Detective Arias asked the
Defendant if the Defendant would be willing to accept stolen credit cards numbers as a trade for
Bitcoin in their next transaction and the Defendant allegedly replied that ?he would think about
it.? (Def. Arrest Aff. at 6). Despite the Defendant?s purported indecisive response to Detective
Arias? illicit proposal, there exists no evidence that the Defendant accepted stolen credit card
numbers as payment for- any subsequent Bitcoin transaction between the parties.

On January 30, 2014, Detective Arias again contacted the Defendant through a text
message to arrange a purchase cf more Bitcoin. The entire sale was conducted through text

message communication. Detective Arias purchased five hundred dollars 00) in Bitcoin. The
money was deposited into the Defendant?s bank account. Detective Arias informed the
Defendant through a text message that he wanted to purchase thirty thousand dollars ($30,000)
worth of Bitcoin in the future.

On February 6, 2014, Detective Arias met the Defendant with the intent of conducting a
fourth Bitcoin transaction in the amount of thirty thousand dollars ($30,000) and effectuating an
arrest. The parties met in the lobby of a hotel where the Task Force had a hotel room wired with
cameras that was being used for their operation. After a brief meeting in the lobby, Detective
Arias brought the Defendant to the hotel room in order to complete the transaction and make the
arrest. The meeting in the hotel room was filmed. At this meeting, Detective Arias and the
Defendant discussed the illicit credit card operation that Detective Arias had fabricated as part of
his cover for the investigation. Detective Arias explained to the Defendant that he was engaged
in the activity of buying stolen credit cards wholesale to resell at a higher price. Detective Arias
also produced a ?flash roll? of hundred dollar bills purportedly containing the thirty thousand
dollar ($30,000) payment. The money was in fact undercover funds that were counterfeit. The
Defendant inspected the currency and immediately became concerned that the money was
counterfeit. The Defendant told Detective Arias he had to take the money to five different banks
because he purchased the Bitcoin from five different sellers. According to Detective Arias?
deposition, the Defendant wanted to bring portions of the money to the bank ?a little at a time? in
order to verify its authenticity. The Defendant never took possession of the counterfeit money
and was subsequently arrested.

The Defendant was charged with one (1) count of unlawfully engaging in business as a
money services business, to wit, a money transmitter, in violation of Fla. Stat.
(Count and two (2) counts of money laundering, in violation of and 
Fla. Stat. (Counts II and HI). -

On September 17, 2015, the Defendant filed his initial Motion to Dismiss the Information
Pursuant to Florida Rule of Criminal Procedure (hereinafter ?Defendant?s MotiOn to
Dismiss?). On October 22, 2015, the State filed its Motion to Strike the Defendant?s Motion to
Dismiss, and on December 4, 2015, the State filed its Second Motion to Strike Defendant?s
Motion to Dismiss. On December 15, 2015, the Defendant ?led his First Amended Motion to
Dismiss, and on January 20, 2016, the Defendant filed his Second Amended Motion to Dismiss.
On March 3, 2016, the State filed both a Third Motion to Strike Defendant?s Motion to Dismiss
and a Traverse as to Defendant?s Motion to Dismiss?Count One. Both parties submitted
Memorandums of Law, filed on June 14th and 16, 2016 respectively.

I. UNAUTHORIZED MONEY TRANSMITTER

In Count I, the Defendant was charged with violating Fla. Stat. Section
560.125( 1), and states, in pertinent part, as follows:

(1) A person may not engage in the business of a money services business or deferred
presentment provider in- this state unless the person is licensed or exempted from
licensure under this 

(5) A person who violates this section, if the violation involves:

Currency or payment instruments exceeding $3 00 but less than $20,000 in any 12v-

month period, commits a felony of the third degree, punishable as provided in s. 
775.082, 3. 775.083, or s. 775084.

Currency or payment instruments totaling or exceeding $20,000 but less than
$100,000 in any 12~month period, commits a felony of the second degree, punishable

as provided in s. 775.082, 5. 775.083, or s. 775.084.

560.125, Fla. Stat. (Emphasis added).

The State contends that the Defendant is operating as an unlicensed ?money services
business.? Section la. Stat, defmes ?money services bltSii'Ze'SS? as a person ?who
.acts as a payment instrument seller, foreign currency exchanger, check. casher, or money
transmitter.? (Emphasis added). The term ?money transmitter? means ?a corporation, limited
liability company, limited liability partnership, or foreign entity qualified to do business in this
state which receives currency, monetary value, or payment instruments for the purpose of
transmitting the same by any means, including transmission by wire, facsimile, electronic
transfer, courier, the Internet, or through bill payment services or other businesses that facilitate
such transfer within this countiy, or to or from this country.? Fla. Stat.

Initially, the State charged the Defendant as operating a ?money services business, to wit
a money transmitter.? During the course of the last hearing, however, the State orally amended
the Information to include a ?payment instrument seller.? A ?payment instrument seller? is
defined as ?a corporation, limited liability company, limited liability partnership, or foreign
entity quali?ed to do business in this state which sells a payment instrumen 
Fla. Stat. A ?payment instrument? means ?a check, draft, warrant, money order, travelers check,
electronic instrument, or other instrument, payment of money, or monetary value whether or not
negotiable. The term does not include an instrument that is redeemable by the issuer in
merchandise or service, a credit card voucher, or a letter of credit.? Fla. Stat.

When construing the meaning of a statute, the courts must first look to its plain language.
Defendant?s sale of Bitcoin does not fall under the plain meaning of Section of the
Florida Statutes. the Defendant did not receive currency for the purpose of transmitting
same to a third party. If one goes by the plain meaning of Section 560.125, Fla. Stat, a ?money
transmitter? would operate much like a middleman in a financial transaction. The term
?transmit? means ?to send or transfer (a thing) from one person or place to another.? Black?s
Law Dictionary (10th ed. 2014). Defendant?s actions do not meet the de?nition of ?transmit.?
Defendant was not a middleman. A money?transmitting business, such as Western Union, ?ts the
definition of ?money services business.? For example, Western Union takes money from person
A, and at the direction of person A, transmits it to person or entity B. See, US. v. Elfgeeh,
515 F.3d 100, 108 (2d Cir. 2008) (where an FBI agent?s testimony in court compared a Hawala
to a Western Union because ?it?s a money transfer operation. . . business used to send money
from one location to another.?)

In this case, the Defendant was a seller. According to the Arrest Affidavit, the Defendant
told Detective Arias that he purchases Bitcoin for ten percent under market value and sells
them for five percent over market value. (Def. Arrest Aff. at 6). The Defendant explained

4

to Detective Arias that this fifteen percent spread is the method by which the Defendant
yields a profit on his Bitcoin transactions. (Det. Arias Dep. 22:68, Jan. 13, 2015). The
Defendant purchases Bitcoin low and sells them high, the equivalent of a day trader in the stock
market, presumably intending to make a profit.

Secondly, the Defendant does not fall under the de?nition of ?payment instrument seller?
found in Fla. Stat. because Bitcoin does not fall under the statutory de?nition of
?payment instrument.? The federal government, for example, has decided to treat virtual
currency as property for federal tax purposes (See IRS. Notice 20l4=21,
?Virtual Currency? is not currently included in -
the statutory definition of a ?payment instrument,? nor does Bitcoin fit into one of the defined
categories listed.

Thirdly, the State alleges that the Defendant charged a commission or fee for the Bitcoin
transaction, and therefore, the Defendant?s actions meet the definition of a ?money transmitter.?
Case law requires that a fee must be charged to meet all the elements of being a money
transmitting business. money transmitting business receives money from a customer and
then, for a fee paid by the customer, transmits that money to a United States v.
Velastegut, 199 F.3d 590, 592 (2d Cir.l999). (Emphasis added). In the case at bar, the Defendant
did not charge a fee for the transaction. The Defendant solely made a profit. In his deposition,
Special Agent Ponzi acknowledged as much, noting that the the Defendant made a profit of
$83.67 on the $500 Bitcoin sale. (Ponzi Dep. 1624?25, March 12, 2015). ?Commission? is
de?ned as ?an amount of money paid to an employee for selling something.? Merriam-Webster?s
Dictionary. (11th ed. 2016). The Defendant was not selling the Bitcoin for an employer. The
Defendant was selling his personal property. The difference in the price he purchased the Bitooin
for and what he sold it for is the difference between cost and expenses, the widely aCcepted
definition of pro?t.

Nothing in our frame of references allows us to accurately define or describe Bitcoin. In
2008 a paper was posted on the internet under the name Satoshi Nakamoto (thought to be a
pseudonym for a person or group of people) which described a way to create a peer?to?peer
network for electronic transaction which did not rely on trust. Satoshi Nakamoto, A Peer~t0~
Peer Electronic Cash System (2008). The network came into existence in 2009 when this
network created the first block of Bitco'm. Subsequent Bitcoins are created by a process called
?mining,? essentially a record keeping process. To accrue Bitcoins, the miner must use open
source software which allows their computer processors to catch and record peer?to?peer
transactions. Bitcoins are bits of data that the miner receives in exchange for the use of their
computer processor.

Bitcoin may have some attributes in common with what we commonly refer to as money,
but differ in many important aspects. While Bitcoin can be exchanged for items of value, they
are not a commonly used means of exchange. They are accepted by some but not by all
merchants or service providers. The value of Bitcoin ?uctuates wildly and has been estimated to
be eighteen times greater than the US. dollar. Their high volatility is explained by scholars as
due to their insuf?cient liquidity, the uncertainty of future value, and the lack of a stabilization

mechanism. With such volatility they have a limited ability to act as a store of value, another
important attribute of money.

Bitcoin is a decentralized system. It does not have any central authority, such as a central
reserve, and Bitcoins are not backed by anything. They are certainly not tangible wealth and
cannot be hidden under a mattress like cash and gold bars.

This Court is not an expert in economics, however, it is very clear, even to someone with
limited knowledge in the area, that Bitcoin has a long way to go before it is the equivalent of
money.

The Florida Legislature may choose to adopt statutes regulating virtual currency in the
future. At this time, however, attempting to fit the sale of Bitcoin into a statutory scheme
regulating money services businesses is like ?tting a square peg in a round hole. This Court finds
that the Defendant?s sale of Bitcoin to Detective Arias does not constitute a ?money services
business? for all the reasons stated above. The Motion to Dismiss is granted as to Count I.

H. MONEY LAUNDERING

In Counts II and Defendant is charged with money laundering in violation of
Fla. Stat. ?Money laundering? is commonly understood to be the method by
which proceeds from illicit activity (?dirty money?) becomes legitimized. There are numerous
ways through which this can occur, but it generally begins with money that is ?dirty.? The
portion of the money laundering statute which the Defendant is charged under is not so
straightforward. Section Florida Statutes, makes it illegal for an individual to
conduct or attempt to conduct a financial transaction involving property or proceeds that a law
enforcement office has represented came from, or are being used to conduct or facilitate a
specified unlawful activity, when the person?s conduct is undertaken with the intent to: (1)
promote the carrying on of speci?ed unlawful illicit activity; (2) to control or disguise the illicit
proceeds, or (3) to avoid reporting requirements. Fla. Stat. (2016).

The Defendant argues that the money laundering counts should be dismissed because the
sale of Bitcoin does not meet the de?nition of ??nancial transaction? or ?monetary instruments?
under and Fla. Stat. ?Monetary instrument? is defined as ?coin or currency
of the United States or any other country, travelers? checks, personal checks, bank checks,
money orders, investment securities in bearer form or otherwise in such form that title thereto
passes upon delivery, and negotiable instruments in bearer form or otherwise such form that title
thereto passes upon delivery.? Fla. Stat. (2016). ?Virtual currency? is not
separately included as a category in that de?nition, nor does Bitcoin fall under any of the
existing categories listed.

The definition of ??nancial transaction? is found in Fla. Stat. A
??nancial transaction? is a involving one or more monetary instruments, which
in any way or degree affects commerce. . If the statute is read to mean that in the transaction,
the Defendant must be the party who uses the monetary instruments then the money laundering

statute would not apply in this case, because Bitcoins, as previously discussed, are net monetary
instniments.

The more likely interpretation of the statute is that as long as one party to the transaction,
in this case the law enforcement of?cer, is using a monetary instrument, a ?nancial transaction
has occurred. Therefore, any sale of property for cash is a financial transaction. Potentially any
sale of property for cash could be a violation of the money laundering statute.

In this case, Detective Arias did not represent that the cash was the proceeds of an illegal
transaction. Detective Arias did represent to the Defendant, in so many words, that he was
planning to trade what he was buying from the Defendant (Bitcoin) for stolen credit card
numbers. The statute requires that the officer as buyer merely make the representation that what
was in this case, legally purchased Bitcoin is being used to facilitate or conduct illegal activity; it
does not require any af?rmative acknowledgement or action from the seller. Presumably the
officer/buyer would be using the stolen credit cards to further engage in some kind of identity
theft or fraudulent purchases, though they did not make this clear.

The statute does go on to require that the Defendant charged under this statute undertake
the transaction with the intent to promote the carrying on of the illegal activity (Sections and
do not apply here). Fla. Stat. (2016). The usage of the word ?promote? in 
is troublingly vague. It is not clear to this Court what conduct is prescribed and
what conduct is permitted. The term ?jiromoz?er? is de?ned in Black?s Law Dictionary as
?someone who encourages or incites.? Black?s Law Dictionary 1333 (10th ed. 2014-). The term
?incite? is defmed in Merriam?Webster Dictionary as ?to cause (someone) to act in an angry,
harmful, or violent way.? Merriam?Webster?s Dictionary (11th ed. 2016). The term ?encourage?
is de?ned as ?to make (something) more appealing or more likely to happen.? Id. Is it criminal
activity for a person merely to sell their property to another, when the buyer describes a
nefarious reason for wanting the property? Does ?promoting? require that there be more of an
af?rmative act or does the mere act of selling constitute promoting? Has a seller crossed into the
realm of ?promoting? by Virtue of simply hearing the illicit manner in which the buyer intends to
use what?s been purchased? There is unquestionably no evidence that the Defendant did
anything wrong, other than sell his. Bitcoin to an investigator who wanted to make a case.
Hopefully, the Florida legislature or an appellate court will de?ne ?promote? so individuals who
believe their conduct is legal are not arrested.

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
?nding a singular meaning. Without legislative action geared towards a much needed update to
the particular language within this statute, this Court ?nds that there is insuf?cient evidence as a
matter of law that this Defendant committed any of the crimes as charged, and is, therefore,
compelled to grant Defendant?s Motion to Dismiss as to Counts II and 

WHEREFORE, it is ORDERED AND ABJUDGEB that the Motion to Dismiss the
Information is hereby GRANTED.

DGNE AND at Miami, Miami-Bade County, Florida, this   day of July,
2016.

   

an?

POOLER
Circuit Court Judge

Copies Furnished; to:

Frank Andrew Prieto, Esq., Attorneyfor the Defendant il/[ichell Abner Espinoza, 1 Northeast
2nd Avenue, Suite 200, Miami, Florida 33132 7

Mr. Thomas Haggert'y, Esq, Assistant State Attorney, State Attorney?s Of?ce, 1350 NW. 12th
Avenue, Miami, Florida 33136