Miami Judge dismisses Money Laundering Charges as Bitcoins are not Money

Written 27th July 2016 by Olliers Solicitors

The Miami Herald reports that a Judge dismissed money laundering charges against a man accused of facilitating money laundering using Bitcoins.

What are Bitcoins?

Bitcoin is a form of digital currency, created and held electronically, and does not require the use of banking systems to facilitate payment. Bitcoins are held by individuals and can be used to pay for goods and services, normally via the Internet.

Judge Pooler’s ruling stated:

“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… 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.”

What has been reported is that the case against Michell Espinoza was based on him selling Bitcoins to undercover Police Officers (who apparently told him they intended to use them to pay for stolen credit card details).

Can cases involving Bitcoins constitute Money Laundering?

Defendants in proceedings this side of the Atlantic should not take this judgement as meaning that transactions involving Bitcoins can never be prosecuted in the English Courts as money laundering. It would also seem that Mr. Espinoza’s argument could not have succeeded in the English courts if he had been charged under the relevant terms of the Proceeds of Crime Act 2002.

This is because money laundering charges always involve the concept of “Criminal Property”, defined by s340 POCA 2002.

Proceeds of Crime – Criminal Property

Section 340 (9) POCA 2002 states:

Property is all property wherever situated and includes-

(a) money;

(b) all forms of property, real or personal, heritable or moveable;

(c) things in action and other intangible or incorporeal property.

Could Bitcoins constitute criminal property?

Clearly under the Act Bitcoins could represent criminal property; there is no requirement under English law that property involved in money laundering offences must be money i.e. cash or funds held in a bank account.

We would presume that in this country Mr. Espinoza would have been charged with an offence of entering into an arrangement to facilitate the acquisition of criminal property under section 328 POCA 2002.

The Prosecution would have to prove the existence of criminal property, i.e. property that represents a person’s benefit from criminal conduct. Presumably it would be argued Mr. Espinoza knew or suspected based on the undercover officers’ statements that they were intending to use the Bitcoins he sold to them for criminal activities.

Whilst Mr. Espinoza would not be able to argue that Bitcoins could not represent criminal property, it would certainly have been open to him, on the facts reported, to potentially argue that the undercover officers’ behaviour amounted to entrapment. The “criminality” in Mr. Espinoza’s case appears to be the intended purpose for which the undercover officers told him they needed the Bitcoins for, namely the purchase of stolen credit card details, rather than the actual Bitcoins themselves.

Olliers Solicitors – Specialist Criminal Lawyers

Written by Tom Cawley a Solicitor specialising in financial crime, including all aspects of confiscation and asset recovery. Tom has acted in POCA cases for the past 10 years and has experience at all stages of the court process.

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