Miami money-laundering case may define whether Bitcoin is really money

In a Miami money-laundering case that is being closely watched around the world, an economics professor took to the witness stand Friday to offer a tutorial on the widely known, if poorly understood, virtual currency known as Bitcoin.

The takeaway: Bitcoin isn’t really money, professor Charles Evans said.

No central government or bank backs Bitcoinlike the United States does the dollar. Government regulation of Bitcoin remains a messy hodgepodge from state to state, country to country. The IRS considers Bitcoin deals no more than bartering, he said.

“Basically, it’s poker chips that people are willing to buy from you,” said Evans, a Barry University economics professor who, yes, was paid $3,000 worth of Bitcoins for his appearance as a defense witness.

Attorney Frank Andrew Prieto held up a 1966 U.S. quarter. “Is Bitcoin an actual coin?”

“In a sense of a physical piece of base metal?” Evans said. “No.”

The hearing unfolded in the case of Michell Espinoza, who is accused of illegally selling and laundering $1,500 worth of Bitcoins to undercover detectives who claimed they wanted to use them to buy stolen credit card numbers.

His lawyers, Prieto and Rene Palomino, are asking a court to dismiss the case against him, arguing that Bitcoin isn’t technically money under Florida law so laundering charges don’t apply. Miami-Dade Circuit Judge Teresa Mary Pooler won’t decide for a few more weeks, but listened intently Friday, peppering Evans with questions and asking for more time to research.

“This is the most fascinating thing I’ve heard in this courtroom in a long time,” Pooler said.

The prosecution of Espinoza is being watched closely, especially in financial and tech circles, because it is believed to be the first money-laundering case against someone for dealing in Bitcoins. As the currency has gained in popularity, law enforcement has struggled to figure out how it fits into illegal activities.

The controversial virtual currency allows some users to spend money anonymously, and can also be bought and sold on exchanges with U.S. dollars and other currencies. The virtual currency has gained popularity with merchants selling legitimate goods and services.

In Miami, there are a few restaurants that accept the virtual currency, and so does a plastic surgeon, which means someone can get a Bitcoin butt lift.

Regulated services such as CoinBank, which operates similar to PayPal, allow people to buy, sell and use the Bitcoins. But authorities have raised concerns about the currency being used in the anonymous black market.

Most notoriously, Bitcoins were used to traffic drugs in the now shuttered Silk Road network. In an unrelated South Florida case, a Miramar man got 10 years in prison after using Bitcoins to buy Chinese-made synthetic heroin from a Canadian prisoner.

In the Miami case, prosecutors said that Espinoza — who used the moniker MichellHack — illegally sold undercover investigators $1,500 in Bitcoins. Espinoza, 32, designs websites for businesses.

The officers found him through a Bitcoin exchange site,, and told him they were going to use the currency to purchase stolen credit card numbers.

The detectives met with Espinoza three times in person: on Lincoln Road, at an ice-cream shop and at a hotel room.

Espinoza was arrested along with another man, Pascal Reid, who pleaded guilty to acting as an unlicensed money broker and was sentenced to probation. Under his unusual plea deal, he agreed to teach law enforcement about Bitcoin.

Evans was the one doing the teaching in court on Friday.

He said he has been involved in “virtual currencies” since they first began popping up in rudimentary forms in the 1990s, through the boom to the rise in Bitcoins several years ago. He also runs a nonprofit called Conscious Entrepreneurship Foundation, aimed at helping small businesses in developing countries.

Indeed, Bitcoin use is increasing in places such as Africa, where the “banking system is broken,” Evans said. He also said the market for Bitcoin can vary — on Friday, one Bitcoin was worth $473.

He likened Bitcoin worth to how collectors assign values to baseball cards, or comic books.

Prosecutor Tom Haggerty, trying to show that Bitcoins are essentially the same as cash, pointed out that Bitcoins can now be used at some restaurants.

“You don’t purchase a hamburger with a comic book,” Haggerty said. “You usually purchase it with cash, or in this case, a Bitcoin.”


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