Bitcoin Prosecution Lives as Defense Warns of Outlaw Y

A Florida man lost a bid to dismiss money transfer charges in what may be the first state prosecution over the use of Bitcoins, as his lawyer warned a dangerous precedent was being set that could criminalize everything from credit cards to yard sales.

Pascal Reid was charged with selling Bitcoins to an undercover officer in a sting operation. Reid, 29, allegedly sold a Secret Service agent more than $25,000 in Bitcoin last December and January, according to police. He and another South Florida man, Michell Abner Espinoza, were arrested Feb. 6 in what Miami-Dade State Attorney Katherine Fernandez Rundle said was the first state prosecution of a Bitcoin-related crime.

Florida Circuit Judge Fleur Lobree today in Miami rejected Reid’s argument that the state’s money transfer statute only referred to corporations, not individuals. Reid’s attorney, Ron Lowy, said after the hearing he was disappointed Lobree didn’t address his contention that Bitcoin isn’t money. Lowy argued that applying the statute to Bitcoin will have the effect of outlawing everything from garage sales to credit card sales because Bitcoin is merely a “thing of value.”

“The statute was intended for the exchange of money for money,” Lowy said. “If you extend it to anything of value, then any customer using a credit card to buy something, anyone holding a yard sale and accepting cash, is a money transferer.”

Bitcoins have no central issuing authority and use a public ledger and a network of voluntary computers to verify encrypted transactions. It has gained traction with merchants selling legitimate products, and is also used for illegal transactions.

In the Miami case, undercover police officers sought out “individuals engaged in high volume Bitcoin activity,” Rundle said after the two men were arrested.

The case is State of Florida v. Reid, 14-002935, Miami-Dade Circuit Court (Miami).