Bitcoin Seller to Train Cops in Exchange for Reduced Charge

  • Prosecutors agree to drop money-laundering charge against Reid
  • Pascal Reid sold undercover agent $25,000 of Bitcoins

One of two men accused of money laundering after selling bitcoins to an undercover agent agreed to train law enforcement officials about the cybercurrency in exchange for a reduced charge.

Pascal Reid, 30, pleaded guilty in Miami state court to the less serious charge of operating an unlicensed money-transmitting business as part of the plea agreement. Prosecutors dropped a second money-laundering charge earlier.

“I regret not recognizing that my actions, without keeping records and complying with reporting and licensing laws, could benefit criminals,” Reid said in a statement to Bloomberg News. “I hope that my experience and knowledge of the bitcoin world and practices can now help law enforcement uncover and prevent criminal activity.”

Reid and Michel Abner Espinoza, 31, were arrested in February 2014 in what prosecutors said was the first state-level prosecution of money laundering involving bitcoins.

90 Days

Reid was sentenced by Circuit Judge Diane Ward to 90 days in jail, with credit for the five weeks he has already spent behind bars, which had been part of the plea deal. He agreed to conduct 20 training seminars on bitcoin for law enforcement and financial professionals as a part of his five years of probation.

Bitcoins, 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 because money can be transferred anonymously.

Ross William Ulbricht was sentenced to life in prison in May for running an online bazaar called Silk Road, where anonymous users used bitcoins to buy drugs, hacking tools and fake identification. He is appealing his conviction and the sentence.

In the Miami case, a Miami Beach police officer and a Secret Service agent bought $1,500 of bitcoins from Espinoza and another $1,500 from Reid in separate transactions, according to arrest affidavits filed in the case.

The officers found Espinoza and Reid on the bitcoin exchange site LocalBitcoins, where Espinoza went by MichellHack and Reid used the name proy33, according to the filings. The undercover officers told both men they were using the digital currency to buy stolen credit-card numbers.

In February, Reid sold the Secret Service agent $25,000 worth of bitcoins, police said. The Miami Beach officer tried to purchase $30,000 from Espinoza, but the deal didn’t go through because Espinoza was concerned the cash might be counterfeit, according to the affidavits. Espinoza’s case is pending.

"Mr. Reid ignored the things the officer told him," Ron Lowy, Reid’s
attorney, said after the court hearing. "Had he said, ‘I don’t want to help you if you’re going to commit a crime,’ he never would have been arrested."

The Florida cases are State of Florida v. Espinoza, 14-002923; State of Florida v. Reid,14-002935, Miami-Dade Circuit Court (Miami).

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