Miami Bitcoin Arrests May Be First State Case

Bloomberg

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Two South Florida men were arrested last week on what a local prosecutor said may be the first state law charges over the use of Bitcoin virtual currency as part of an alleged money laundering scheme.

Pascal Reid, 29, and Michel Abner Espinoza, 30, face two counts of money laundering and one count of engaging in an unlicensed money servicing business, according to court filings in Miami state court. Both men were arrested Thursday and are being held in Miami-Dade County jails.

"The use of Bitcoins in the transactions is a new technological flourish to this very old crime," Miami-Dade State Attorney Katherine Fernandez Rundle said in a statement. The "arrests may be the first state prosecutions involving the use of Bitcoins in money laundering operations."

Federal prosecutors in New York have filed a series of charges tied to Bitcoin since October. Ross William Ulbricht, known as the "Dread Pirate Roberts," was arrested for allegedly operating the billion-dollar Silk Road website, where customers used Bitcoins to buy and sell drugs. He has pleaded not guilty and faces trial Nov. 3 in Manhattan.

Bitcoin, introduced in 2008 by a programmer or group of programmers under the name Satoshi Nakamoto, has no central issuing authority and uses a public ledger to verify encrypted transactions. It has gained traction with merchants selling legitimate products but also has been used to facilitate illegal transactions.

Undercover Officers

In the Miami case, undercover police officers sought out "individuals engaged in high volume Bitcoin activity," Fernandez Rundle said. Her office didn't disclose additional facts about the case.

"Bitcoins are neither good nor bad," her office said in a statement. "Buying Bitcoins allows money to be anonymously moved around the world with a click of a computer mouse. Improperly used, Bitcoins are often seen as a perfect means of laundering dirty money or for buying and selling illegal goods, such as drugs or stolen credit card information."

Both defendants have been appointed defense counsel, according to court records. They are awaiting bond hearings.

Lyda Torres, attorney for Espinoza, didn't immediately return an e-mail seeking comment. Reid's attorney couldn't be immediately reached for comment.

'Voluminous' Evidence

U.S. prosecutors in New York said last week that the government had amassed "voluminous" amounts of evidence against Silk Road's Ulbricht, including a number of computer servers. Ulbricht, 29, was indicted on four counts—operating a narcotics trafficking scheme, money laundering conspiracy, computer hacking and operating a continuing criminal enterprise.

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