State v. Espinoza, 3D16-1860

• Court: Court of Appeal of Florida (US)
• Citation: 264 So.3d 1055
• Docket Number: No. 3D16-1860,3D16-1860
• Parties: The STATE of Florida, Appellant, v. Michell ESPINOZA, Appellee.
• Decision Date: 30 January 2019

264 So.3d 1055

The STATE of Florida, Appellant,
v.
Michell ESPINOZA, Appellee.

No. 3D16-1860

District Court of Appeal of Florida, Third District.

Opinion filed January 30, 2019

Ashley Brooke Moody, Attorney General, and Jeffrey R. Geldens, Assistant Attorney General, for appellant.

Prieto Law Firm, P.A., and Frank Andrew Prieto, Coral Gables, for appellee.

Berger Singerman LLP, and Andrew M. Hinkes (Ft. Lauderdale); Greenberg Traurig P.A., and John K. Londot and Michael H. Moody (Tallahassee), for Digital Currency & Ledger Defense Coalition, as amicus curiae.

Before EMAS, C.J., and SALTER, and LINDSEY, JJ.

LINDSEY, J.

The State of Florida appeals the trial court's order granting Michell Espinoza's motion to dismiss the information charging him with three counts. In Count 1, the State charged Espinoza with unlawfully engaging in the business of a money transmitter and/or a payment instrument seller without being registered with the State of Florida in violation of section 560.125, Florida Statutes (2013), and, in Counts 2 and 3, with money laundering in violation of section 896.101, Florida Statutes (2014). The trial court erred in dismissing Count 1 because Espinoza acted as both a money transmitter and a payment instrument seller and, as such, was required to register with the State of Florida as a money services business. The trial court erred in dismissing Counts 2 and 3 on the basis that Espinoza lacked the requisite intent to be guilty of money laundering. Intent, or lack thereof, is a factual issue that should not have been resolved at the pleading stage. Accordingly, we reverse the trial court's dismissal order and remand for further proceedings consistent with this opinion.

264 So.3d 1058

I. INTRODUCTION

The instant appeal concerns the application of Florida's statutes governing money services businesses and money laundering found in chapters 560 and 896 of the Florida Statutes, respectively, to alleged illicit transactions involving the virtual currency known as Bitcoin. At all times relevant, there was no mention of virtual currency nor of Bitcoin anywhere within the Florida Statutes. Both Espinoza and the State, as well as the amici, cite to various guidelines and regulations promulgated by the United States Department of the Treasury and other federal agencies to argue for or against the application of certain defined terms under section 560.103, Florida Statutes (2014), to virtual currency.

In 2014, the United States Department of the Treasury closely coordinated with the Financial Action Task Force ("FATF"), of which the United States is a leading member nation, to develop common definitions for virtual currency terms. The following definition for "virtual currency," which informs our decision, was proposed in a June 2014 report:

Virtual currency is a digital representation of value that can be digitally traded and functions as (1) a medium of exchange; and/or (2) a unit of account; and/or (3) a store of value, but does not have legal tender status (i.e., when tendered to a creditor is a valid and legal offer of payment) in any jurisdiction.

See Financial Action Task Force, Virtual Currencies: Key Definitions and Potential AML/CFT Risks 4 (2014). The FATF Virtual Currencies Report identified and explained Bitcoin as follows:

Bitcoin, launched in 2009, was the first decentralized convertible virtual currency, and the first cryptocurrency. Bitcoins are units of account composed of unique strings of numbers and letters that constitute units of the currency and have value only because individual users are willing to pay for them. Bitcoins are digitally traded between users with a high degree of anonymity and can be exchanged (purchased or cashed out) into US dollars and other fiat or virtual currencies. Anyone can download the free, open-source software from a website to send, receive, and store bitcoins and monitor Bitcoin transactions. Users can also obtain Bitcoin addresses, which function like accounts, at a Bitcoin exchanger or online wallet service. Transactions (fund flows) are publicly available in a shared transaction register and identified by the Bitcoin address, a string of letters and numbers that is not systematically linked to an individual. Bitcoin is capped at 21 million bitcoins (but each unit could be divided into smaller parts).

Id. This definition comports with that alleged in the arrest affidavit, which specifically stated that Bitcoin is:

an electronic currency with no central authority and is not backed by any government. Bitcoins do not exist as discrete and unique single coins, but rather as balances of Bitcoins and Bitcoin portions. These balances exist as unique internet Bitcoin addresses contained in a public transportation ledger, called the "block chain." This ledger is maintained and verified by computers connected to the internet running the Bitcoin software. New Bitcoins are created at a predetermined rate and distributed to owners of those computers that are maintaining the ledger in a process referred to as "mining." The software is open source and can be installed by anyone who wishes to "mine" Bitcoins.

....

To transfer some amount of Bitcoins, the spender directs that amount to be debited from the balance of his or her

264 So.3d 1059

unique internet Bitcoin address and deposited to the balance of the receiver's unique Bitcoin address. This is frequently done through the use of wallet applications. The transaction is then verified by the miners to confirm that the correct keys were used and then it is added to the block chain. This prevents double spending because once the balance moves to a new unique address, a different private key becomes associated with it.

Bitcoins can be transferred both in person and over the internet and are readily convertible to most world currencies. Exchanges exist that allow people to buy or sell Bitcoins with or for local currencies including United States dollars.

... Bitcoins can also be used to purchase a variety of goods and services directly. Restaurants, coffee shops and cosmetic surgery clinics in Miami-Dade County accept Bitcoins for goods and services.

During the time leading up to the State's filing of the information, Espinoza was operating an unlicensed cash-for-bitcoins business. Espinoza came to the attention of law enforcement by way of an advertisement he posted on the internet for his services under the name "Michelhack." During four separate meetings with an undercover law enforcement agent, Espinoza agreed to trade bitcoins in exchange for cash. During their initial encounter, the undercover agent made clear to Espinoza his desire to remain anonymous. Espinoza agreed to engage in these transactions even though the agent intimated to Espinoza that this cash was derived from engaging in illegal activity and that he was planning to use the bitcoins to engage in further illegal activity. Against this backdrop, we apply the Florida Statutes and rules of procedure as they existed at the time of the alleged conduct to the facts of this case to determine whether the trial court erred in dismissing the information filed against Espinoza.

II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

On December 4, 2013, Detective Arias of the Miami Beach Police Department, working in conjunction with Special Agent Ponzi from the United States Secret Service's Miami Electronic Crimes Task Force ("Task Force"), accessed the Internet website https://localbitcoins.com seeking to purchase Bitcoin. This website is a directory of buyers and sellers of bitcoins and lists the traders closest to the user's location. Users may search for sellers who will sell bitcoins online or in person for United States currency. Detective Arias discovered multiple individuals advertising the sale of bitcoins for United States currency in the Miami-Dade area including a user utilizing the username Michelhack, who was later identified as Espinoza. Michelhack's posting stated:

Contact Hours: anytime

Meeting preferences: Starbucks, internet café, restaurant, mall or bank

You will need to bring your wallet in your smartphone for the address the bitcoins will be deposited to

If you want to have localbitcoins escrow service I will have to add 1% to the final price

You will pay with cash in person

Call or text (XXX) XXX-8649 for further information

I will meet you in person for this transaction

Detective Arias, acting in an undercover capacity as an interested buyer, contacted the number listed in the advertisement for Michelhack via text message and requested a meeting in Miami Beach in order to

264 So.3d 1060

exchange U.S. currency (cash) for bitcoins. The next day, Detective Arias met Espinoza at Nespresso Café located at 1105 Lincoln Road, Miami Beach, FL (the "first transaction"). At this meeting, which was observed and recorded by undercover supporting agents, Detective Arias paid Espinoza $ 500 in cash and received 0.40322580 bitcoins valued at $ 416.12. Espinoza earned a fee or profit of $ 83.67.

During the course of the first transaction, Detective Arias made clear his desire to remain anonymous and implied to Espinoza that he was involved in illicit activity. He made clear to Espinoza that he ...