Rebecca Campbell Sep. 7, 2016, 8:34pm


MIAMI – The appeal by the state of Florida against a recent court decision that saw a judge dismiss charges in relation to a local bitcoin seller are not surprising, according to an attorney.

In 2014, the Florida v. Michell Espinoza case was filed where the Florida-based bitcoin seller was brought up on charges for unlicensed money transmission and money laundering.

However, the judge presiding over the case, Judge Teresa Mary Pooler, sided with Espinoza’s attorney by finding that bitcoin doesn’t qualify as money. At the time of her decision, she explained that it is difficult to “accurately define or describe bitcoin.”

While the appeal won’t deal with the decision, one attorney, who is often cited for his work on technology-related issues such as digital currencies like bitcoin, says that the news isn’t a surprise.

Attorney Andrew Hinkes from Berger Singerman told the Florida Record that the standard of review on appeal is de novo, meaning that the appellate court will review the evidentiary record and rule on evidence and matters of law without regard to the trial court’s rulings.

“The appeal to the 3rd District Court of Appeal is a free 'second bite at the apple' for the state,” Hinkes said.

Hinkes added that the decisions were not surprising as much as they highlight the contradictions in various rulings and guidance issued by various courts and governmental entities.

While initial briefs have yet to be filed, the appeal is likely to focus on three areas: the monetary value of bitcoin, its transmission and the use of money laundering.

By concluding that bitcoin is property, the trial court’s order was consistent with the Florida Office of Financial Regulation opinion in In Re: Moon Inc. and with the Internal Revenue Service guidance; however, it was inconsistent with the Financial Crimes Enforcement Network (FinCEN)’s guidance and cases such as In Re: Shavers and In Re: Ulbricht, which treated bitcoin like a currency or currency substitute, which would support the conclusion that bitcoin is a medium of exchange.

The court also ruled that Espinoza did not transmit anything because he was not a middleman to any transaction in the same way that traditional money transmitters like Western Union send value from one customer to another.

Hinkes says that it remains to be seen whether the state is able to convince the 3rd District Court of Appeal to side with FinCEN’s definition and find that Espinoza’s activity was transmission.

As to money laundering, Espinoza argued that bitcoin was not a financial transaction or monetary instrument. The trial court avoided the issue by determining that because cash was paid for bitcoin, it was a financial transaction and that “any sale of property or cash could be a violation of the money laundering statute.” According to Hinkes, this interpretation is favorable to the state because it expands the scope state’s money laundering statute to any transaction of any kind using U.S. dollars.

If bitcoin is classified as property, it will be seen as a positive move.

“Suggesting that bitcoin is property would be a net positive for bitcoin and other cryptocurrencies,” said Hinkes. “However, the ruling will be limited to interpretation of Florida’s laws, so the impact will be localized by the state.”

Hinkes added that even though Sen. Dorothy Hukill is working on draft legislature, the appeal may provide needed clarity as to Florida’s laws, or simplify/clarify issues for the legislature.

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Florida 3rd District Court of Appeal
2001 Southwest 117th Avenue
Miami, FL 33175

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