On June 25, 2016 a judge in Miami, Florida dismissed a money laundering charge against a defendant accused of selling $1,500.00 worth of Bitcoins to undercover police who were, according to their cover story, going to use the virtual currency to then buy stolen credit card data from Russian gangsters. (Read the article here ).
Although the judge granted the Motion to Dismiss on various grounds, key among them was her finding that, at least under pertinent Florida money laundering statutes, the virtual currency Bitcoin did not meet the definition of “money”. Specifically, it did not fall under what Florida considered a “monetary instrument”, nor did the sale or transfer of Bitcoin amount to a “financial transaction” as contemplated by the State.
Would Texas judge reach a similar ruling applying Texas statutes to the same facts? Texas Penal Code Chapter 34 governs all prosecutions for money laundering in this State. Under Section 34.02 of the Texas Penal Code, it is a crime if a person (among other things) “finances or invests or intends to invest funds that the person believes are intended to further the commission of criminal activity.” So a person selling Bitcoin to someone that the seller knows is going to use to commit a crime with, like acquiring stolen credit card numbers, may certainly fall under this prohibition. The key issue becomes, as in the Florida case, is Bitcoin actually “money”?
Again, looking to Texas Penal Code Chapter 34, the Texas statute does not wrangle over “money” or “currency” as such, but instead focuses on the term “funds”, which it defines pretty expansively. “Funds” includes not only coin or paper money designated as legal tender by the United States or another nation, but also various bank drafts, security instruments, certificates of stock, and even gift cards with value stored on them. Most importantly, the Texas legislature (either by accident or design) left themselves a little wiggle room in the definition of “funds” to include “currency or its equivalent”. Those three words – or its equivalent – may be all the statutory fig leaf that a Texas prosecutor may need to justify a Texas prosecution of the Bitcoin scenario that was rejected in Florida. This would mean however, there would need to be expert testimony (from both sides likely) about what exactly Bitcoin is or is not and what it real equivalent value is. Such a showdown would certainly be fascinating to see.