Florida Cops Bust 2 High-Volume Bitcoin Sellers Using LocalBitcoins.com

Florida Cops Bust 2 High-Volume Bitcoin Sellers Using LocalBitcoins.com Authorities in South Florida have arrested two users of LocalBitcoins.com, charging them with  money laundering and felony violations of Florida’s law against unlicensed money transmitters.
This could be the first case in which bitcoin vendors have been prosecuted under state anti-money laundering laws tied to unlicensed money transmitters, according to security blogger Brian Krebs, who broke the story.
The prosecutions may have a chilling effect on LocalBitcoins and other peer-to-peer sites involving the trading of bitcoins in the U.S.
Headquartered in Finland, LocalBitcoins.com is a person-to-person trading website, which facilitates trades both online and in person.
Michell Abner Espinoza, of Miami Beach, was arrested after a sting operation in which a federal undercover agent engaged him in a fake transaction to convert $30,000 worth of cash into bitcoins. The U.S. Secret Service’s Miami Electronic Crimes Task Force assisted local police.
Espinoza was one of the users of localbitcoins.com who was contacted by undercover authorities. Espinoza used the nickname “Michelhack” on the site.
According to court documents reported by Krebs, an undercover agent told “Michelhack” that he wanted to use the bitcoins to purchase stolen credit cards online.
“After that trust-building transaction, Michelhack allegedly agreed to handle a much larger deal: Converting $30,000 in cash into Bitcoins,” Krebs writes.
Espinoza is charged with felony violations of Florida law that targets unlicensed money transmitters. It prohibits “currency or payment instruments exceeding $300 but less than $20,000 in any 12-month period” — and Florida’s anti-money laundering statutes, which prohibit the trade or business in currency of more than $10,000.
According to his profile, Michelhack has at least 100 confirmed trades in the past six months, adding up to more than 150 Bitcoins (more than $110,000 in today’s value), and a 99 percent positive “feedback” score on the marketplace, Krebs reported.
Police also conducted a search warrant on Espinoza’s residence that targeted computer systems and digital media.
Also arrested Thursday and charged with violating both Florida laws is Pascal Reid, 29, a Canadian citizen who was living in Miramar, Fla. Reid allegedly operated as “proy33” on localbitcoins.com. Reid was arrested while meeting with an undercover agent to finalize a deal to sell $30,000 worth of Bitcoins.
Krebs: “Documents obtained from the Florida state court system show that investigators believe Reid had 403 Bitcoins in his on-phone Bitcoin wallet alone — which at the time was the equivalent of approximately USD $316,000. Those same documents show that the undercover agent told Reid he wanted to use the Bitcoins to buy credit cards stolen in the Target breach.”

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