Bitcoin Foundation Urges Court to Dismiss Charge in Florida LocalBitcoins Case

The Bitcoin Foundation has submitted a filing in a Florida case it says will help protect local bitcoin traders.

AccessTimeIconAug 1, 2014 at 9:45 p.m. UTC
Updated Apr 10, 2024 at 3:02 a.m. UTC
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The Bitcoin Foundation, the digital currency's chief trade organization, has filed an amicus brief in connection with a Florida state criminal case involving Pascal Reid, a user who was arrested and charged with operating an unauthorized money transmission business and money laundering earlier this year.

An amicus brief, known formally as an amicus curiae, is a legal tool that can be exercised by parties with strong interests in a case who want to ensure an outcome that is consistent with their views.

In this instance, members of the Bitcoin Foundation told CoinDesk, the intent of the filing is to ensure that the broader bitcoin community in Florida isn't subject to laws that put undue restrictions on their ability to transact with the digital currency.

Speaking to CoinDesk, Bitcoin Foundation Global Policy Counsel Jim Harper, stressed this viewpoint, saying that the filing does not mean the organization is supporting the defendant and his actions in the case directly.

Harper explained:

"The case illustrates the need for clarity in bitcoin regulation, both civil and criminal, and that's a reason why we participated."

Reid was arrested in February allegedly during an undercover sting operation in which Florida police officers posed as fraudsters seeking to launder cash by purchasing bitcoin.

Filing details

In particular, the amicus brief seeks to dismiss the charge that Reid was an unauthorized money transmitter under Florida Statute 560.125 because he was operating not as a corporate entity, but as an individual.

Harper told CoinDesk:

"If individuals' bitcoin transactions made them subject to the registration and recordkeeping requirements of businesses, that would be a heavy impediment to bitcoin use. Whether the charges are serious or trivial, the law should be applied accurately and based on its terms."

This viewpoint was further stressed by Brian Klein, of the Foundation's Legal Advocacy Committee, who wrote in a recent blog post:

"The foundation’s position at its core is this: state prosecutors are improperly applying Florida statutes regulating 'money service businesses' to individuals conducting peer-to-peer sales of bitcoins."

Notably, Michell Adbar Espinoza, a Miami Beach native, was also arrested during the sting and charged with illegal money transmission. However, a Bitcoin Foundation spokesperson said that the cases are separate and that only Reid has moved to dismiss the money transmission charge.

The two defendants were allegedly arrested after agreeing to convert $30,000 in laundered money into bitcoin. Espinoza is estimated to have completed more than 150 bitcoin sales via LocalBitcoins during the six months leading up to his arrest.

Both Espinoza and Reid filed to have the money laundering charges dismissed on the grounds that under IRS guidance, bitcoin is not legal money. A similar defense was evoked by the legal representation of Ross Ulbricht, the alleged ringleader behind online black market Silk Road, but the claim has since been struck down by a court judge.

Further arguments

The filing goes on to state the Foundation's belief that the statute does not apply to Reid because Florida's definition of a money transmitter is limited to "a corporation, limited liability company, limited liability partnership or foreign entity qualified to do business in the state".

Further, it advocates that until such time as Florida decides to regulate bitcoin, the state should not apply an "ambiguous criminal statute" and "force its application when that application is uncertain at best". Florida regulators have only thus far issued a consumer bitcoin warning, which was distributed to the public in March.

Harper suggested to CoinDesk that the Bitcoin Foundation may be likely to submit further filings in similar cases that could help define bitcoin laws globally, concluding:

"Early cases are precedent-setters, and the foundation wants to see that the laws are applied well."

Office desk image via Shutterstock


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