Florida criminals who use bitcoins could now face money-laundering charges

Criminals who use the virtual currency known as Bitcoin can be convicted of money laundering under a Florida measure passed by legislators late Friday.

Both the state House and Senate approved the bill, which now heads to the desk of Gov. Rick Scott for approval.

Lawmakers approved the measure after a Miami judge last year threw out the criminal case against a man accused of selling $1,500 worth of bitcoins he was told was to be used to purchase stolen credit-card numbers online.

“Cyber criminals have taken advantage of our antiquated laws for too long,” said House Rep. Jose Felix Diaz, R-Miami, who sponsored the bill. “Bitcoin bypasses the traditional banking system, and our state’s laws simply had not caught up to the upsurge in criminality in the world of cybercurrency.”

The bill was crafted with help from Miami-Dade cybercrime prosecutors.

 The measure, if signed into law by Scott, adds clarity to how police go after criminals who use virtual currencies to further illegal activities, or disguise ill-gotten money. Nevertheless, Bitcoin advocates said such a new law would have a chilling effect on the use of the virtual currency.

Charles Evans, a Barry University economist and virtual currency expert, has long maintained that Bitcoin — which is not backed by any government authority — is not actually money but nothing more than “poker chips” bought and sold by users, particularly in areas where banking systems are weak.

He criticized Friday’s passage of the bill.

“Before long, we might see coat checks, tickets to Disney World, and discount coupons regulated as money in Florida,” Evans said.

Authorities across the United States have struggled to figure out how laws apply to Bitcoin, which allows some users to spend money anonymously and can also be bought and sold on exchanges with U.S. dollars and other currencies.

Digital currencies allow people to make one-to-one transactions, buy goods and services and exchange money across borders without involving banks, credit-card issuers or other third parties.

Regulated services such as CoinBase, which operates similarly to PayPal, allow people to buy, sell and use bitcoins. But law enforcement has raised concerns about the currency — which can be bought and sold through private users — being used in underworld markets.

Bitcoins can be used to buy legitimate goods and services through websites and even in brick-and-mortar shops and restaurants.

But the currency has also been used to traffic drugs, most notoriously through the Silk Road “dark web” online network. In another prominent example, a South Florida man was sentenced to 10 years in prison after using bitcoins to buy Chinese-made synthetic heroin.

Police say human traffickers and prostitutes have also used Bitcoin to buy ads on Backpage.com, the classified website known as a hub for the sex trade.

Under current Florida law, money laundering can apply to a host of financial transactions designed to hide funds earned through criminal activity, or further that activity. That includes bank deposits, wire transfers and even investments.

If the governor signs the bill into law, “virtual currency” will be added to the definition of “monetary instruments” covered under Florida’s Money Laundering Act, which would then be defined as a “medium of exchange in electronic or digital format that is not a coin or currency of the United States or any other country.”

Prosecutors believed the law was needed after a Miami-Dade judge threw out the case against Michel Espinoza, a website designer who was charged with illegally transmitting and laundering $1,500 worth of bitcoins.

His defense team challenged the prosecution, arguing that Bitcoin is not actually money under Florida law.

At a hearing in May 2016, defense lawyers told a judge that no central government or bank backs Bitcoin, like the United States does the dollar. Government regulation of Bitcoin remains a messy hodgepodge from state to state, country to country, and the IRS considers Bitcoin deals no more than bartering, Evans testified.

Evans, who was paid $3,000 worth of bitcoins for his testimony in Espinoza’s case, likened the currency to nothing more than “poker chips that people are willing to buy from you.”

Circuit Judge Teresa Mary Pooler agreed, saying “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.

http://www.miamiherald.com/news/local/crime/article149028844.html

Photo: Dominic Lipinski AP