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IN THE THIRD DISTRICT COURT OF'APPE,AL

STATE OF FLORIDA

Case No.: 3D16-1860


Lower Case:14-2923

THE STATE OF FLORIDA,


Appellant,
V.
MICHELL ESPINOZA,
Appellee.

BRIEF OF DIGITAL CURRENCY & LEDGER DEFENSE, COALITION


AS AMICUS CURIAE IN SUPPORT OF'APPE,LLEE

ON Appp¡r IN THE ErBvsNrH JUDICIAL Crnculr


IN AND roR MIavt-Dats Cotnuv, FI-oRna

John K. Londot (FBN 519521)


Michael H. Moody (FBN 66471)
GnesNeBRc TRauRIc, P.A.
101 East College Avenue
Tallahassee, FL 32301
Phone 850-222-6891
londotj@gtlaw.com
moodym@gtlaw.com

Andrew M. Hinkes (FBN 17848)


BpRceR SrNcpnvaN LLP
350 E Las Olas Blvd., Fl. 10
Fort Lauderdale, FL 33301-4211
Phone 954-525-9900
ahinkes@bergersingerman. com

Counsel for Amicus Curíae, Digital


Currency & Ledger Defense Coalition
TABLE OF CONTENTS
Page

TABLE OF AIJTHORITIES

STATEMENT OF'INTEREST 1

SUMMARY OF ARGUMENT 2

a
ARGUMENT J

I. Bitcoin Is a Revolutionary Technology with Vast Potential.................3

A. Bitcoin's Revolutionary Technology J

B. Bitcoin's Promising Present and Vast Potential 7

II. Overzealous Law Enforcement Endangers Innovation .10

A. Bitcoin Is Already Covered by Numerous Federal and


State Regulations........ .12

B. Bitcoin Is Not Money-Laundering Friendly ............ 14

III. This Appeal Is an Example of Overzealous Law Enforcement......... 15

A. The Florida Statutes Did Not Clearly Reach Appellee's


Conduct 15

B. Florida's Rule of Lenity Is Appropriate Where Bitcoin


Transactions Were Not Clearly Covered r6

C The Legislative Change to Section 896.101(2XÐ, Florida


Statutes, Must Be Deemed to Have Meaning 18

CONCLUSION 20

CERTIFICATE OF SERVICE 22

CERTIFICATE OF COMPLIANCE ZJ

I
TABLE OF AUTHORITIES
Page(s)

Cases

Duncan v. Walker,
s33 U.S. 161 (200r) l8
Gadsden v. Jones,
1 Fla. 332,1841 WL 1053 (Fla. 1841) 18

Johnson v. State,
91 So. 2d 185 (Fla. 19s6)........ 18

Kent v. Wood,
235 So.2d60 (Fla. lstDCA 1970) tl
White v. Joltnson,
59 So. 2d 532 (Fla. 1952) 18

Statutes

Fla. Stat. ç775.021 T1

Fla. Stat. $ 77s.021(1) t1

Fla. Stat. $ 896.101(2XÐ. 13,16

Fla. Stat. $ 896.101(2Xt) 13, T6

Other Authorities
Aaron Mak, Bitcoin is Stíll Basically Useless þr Making Payments,
Srarr (Dec. 6,2017),
h :ll sl 1 I lnl till
virtuallv useless for making pavments as steam s decision.html .................8
Aine Cain, l{early 200,000 People Have Started Collecting Ethereum
"CryptoKittíes"-Wích Could Very Well Become Beanie Babíes
of Bloclcchain, BusrNEss INsItnR (Jan. 2, 20 1 8),
http ://www.bu sinessinsider. com/ethereu{n-qryþþkrltl es:
collectible-201 8- 1 .... l0
Another Major Agency Wants to Regulate Bítcoin Because ít's
Growing So Fast, FonrtxB (Dec. I5,20Il),
http.llfortune.com/2}llll2llllbitcoin-police-resulationl ................. 12

Axel Weber: "Bitcoins l{ot Money, " F'NEws (Dec. 17,20Il),


httos //www. finews. com/news/ slis h -news/3 00 1 2-ubs-bitcoin-
:

axel- 9

Black's Law Dictionary, 6th ed .... 16

Cade Metz, Bítcoin Wíll Never Be a Currency-It's Something Way


Weirder, WInBn (Jan. 6,2011),
https ://www.wired. c oml 20 11 I 0 1 /bitcoin-will -never-cuff encv-
s omethi n g-way-weirder/ 8

Callum Jones, "Bitcoin is not money, " THE Tnurs (Dec. 18,20ll),
https //www.thetimes. co.uk/ arti cl e/bitcoin-i s -not-monev-
:

ilhwqmk3i 9

Ch.20Il-155, $ 12, Laws of Fla., House of Representatives' Final


Bill Analysis to H1379 (July 15,2017) 13,16,19

Chris Duckett, Steam Dumps Bítcoín on Back of High Transaction


Fees and Volatílity, ZDNrr (Dec. 6,2011),
http ://www.zdnet. c oml articlelsteam-dumps-bitcoin-on-back-of-
high-transaction-fees-and-volati1ity..... ..................3

CoinDesk, Bitcoin Venture Capital, www. coindesk. com/bitcoin-


venture-c aottall 8

Crimínals Too Stupid to Use Bitcoín and Ethereum, E(J Report Says,
EcoNoTIuns (July 10, 20ll),
http ://www. econotimes. com/Criminal s-Tooétupid-To-Use-
bitco i n-And - E th ereum- EU -Rep orl- S ay s -1 9 37 23 .......... t4

httn ://www.mvfl oridahouse. sov/S ections/Bill s/bi I 1 scletai I . asnx ?Ri II lcl
:59412&Sess ionld:83 19

https://co i nmarketc ao .coml alll v iew s I alll . 10

https : //eetmonero. org/ 9

lll
https://litecoin.org 9

https://www.crwtokitties.co/ ... 10

https ://www. dash.ors/ 9

https:llz.cash/... 9

In the Matter of Coinflíp, Inc., d/b/a Derivabit, and Francisco


Riordan, before the Commodity Futures Trading Commission,
CFTC Docket No. l5-29 (September 17,2015).......... ...... t2

Jeffrey Dorfman, Bítcoín Is an Asset, l{ot a Currency, F'onges (May


17,2017),
https ://www. forbes. com/sites/ ief
is-an-asset-not-a-cu rrencv I #3 cB 459162p5þ .......8

Jorge Luis Borges' The Zahír 10,11

Lawrence Lessig, Code and Other Laws of Cyberspace,Basic Books (1999) ,......,4

Madison Pauly, A DEA Agent Who Helped Take Down Silk Road Is
Goíng to Príson þr Unbelievable Corruptíon, MorHEn Joxss
(Oct. 9, 201 5), http://www.motherjones.com/crime-
usti cel20 I 5/ I 0/silk-road-investi 14

Marc Andreess en, Why Bitcoín Matters, Tus NBw Yom Tn¿ns (Jan.
21,2014)....... 57
") '

Marco Iansiti and Karim R. Lakhani, The Truth about Blockchain,


HARvARD Busnvpss Rsvmw (January-February 2017 issue) 8

Matt O'Brien, The Simple Reason Bítcoin [4/íll Never Be a Currency,


WasnNcroN Posr (Dec. 1 8, 2011) ......... 9

Nate Raymond, Ex-Agent ín Sílk Road Probe Gets More Prison Time
for Bitcoin Theft, REurpRs (Nov. 7,2017)....... 15

Nathaniel Popper, Ethereum, a Digítal Currency, Enables Transactions that


Rival Bitcoin 's, NEW Yom Tnr,tps (March 27,2016)............ 9

IV
Nicholas Godlove, Regilatory Overview of Digital Currency, I0
Okla. J. L. & Tech 11 (2014).......... l4
Peter Van Valkenburgh, Tracking Bítcoin Regulation State by State,
Con rCpNren (June 2, 20Il), www.coincenter.org/entry/tracking-
bitcoin-reeulati -state-bv-state 13

Roger Aitken, Smart Contracts on the Blockchain: Can Businesses


Reap the Benefi¿s? Fonsrs (Nov. 2l,20ll),
httns //www. forbes. com/si
: tkenl2}Il lIIl2ll smafi-
contracts-on-the-blockchain-can-bustnesses- rean-the-
benefits/#3 05f0be4 rw 4 ....... 9

Sarah Meiklejohn, et al., A Fist Full of Bitcoíns: Characterizing


Payments Among Men wíth l{o l'{ame, University of California,
San Diego (Dec. 2013), http://cseweb.ucsd.edu/-smeiklejohn/ ........14

U. S. DBpaRTMENT oF TREASURy-FINANCIAL CRIMES EwponcBMENT


Nprwom, ApTLICATIoN oF FTNCEN's RncULATIoNS To PERSoNS
AnvmrsrpRrNc, ExcunNcING, oR lJsrNc VrRruar CunnsNclns
(March 18,2013), h :l tutes-
re sul ati ons/sui dance/aooli cation-fincens-resulations-Dersons-
administering 12

U.S. INTBRNAL REvBwup SnRvtcn, IRS Noncp2014-21 (March25,


201,4), https ://www.irs. sov/pu b/irs -droo I n- I 4 -2Lo df 13

U.S. SpcuRrrrEs ExcuaNcp CoMMISSIoN, IJ.S. SpcURITIES Laws


Mav Applv tN OFFERS, SALES, axt TnauNc oF INrBRrsrs nt
VIRrual OncaNIzArIoNS (July 25, 20ll),
www. sec. gov/news/press -releasel20l7-131 12

www.dcldc.org

www.ripple.com 9

V
STATEMBNT OF INTEREST
The Digital Cumency and Ledger Defense Coalition ("DCLDC") is a

501(c)(3) non-profiI" organization that protects individual constitutional rights and

civil liberties as they relate to bitcoin, related "altcoins," and their distributed

ledger ("blockchain") technologies. DCLDC members are academics and

attorneys-including former federal prosecutors-with extensive digital currency

and blockchain technology legal experience. The attorneys who make up the

DCLDC come from over 60 law firms that range in size from the largest firms in

the world to prominent local boutiques. These attorneys collectively represent

hundreds of individuals and entities in ventures utilizing blockchain technology.r

The five DCLDC Board members caffy a wide array of experience: representing

entrepreneurs and companies developing new technologies (including criminal

defense representations); testifying before Congress on blockchain technology

issues; and chairing the American Bar Association's digital currency and

blockchain technol ogy conference.'

The DCLDC has a strong interest in the denial of the State of Florida's

appeal due to its interest in protecting the rights of individuals and companies at

'For a complete list of participating attorneys, please visit www.dcldc.org.


tThe DCLDC does not represent or advise Appellee or any of the
interuenors; while its members may represent clients, the DCLDC does not provide
iegal representation.

1
the forefront of technological innovation, and ensuring the fair application of law

to those innovators

SUMMARY OF ARGUMEI\T

Bitcoin is colloquially known as "digital" or "virtual cuffency," although it

is in fact something different: a revolutionary technology that uses an immutable

public ledger (the "blockchain") to document a broad array of relationships where

identification and uniqueness are desirable. Blockchain technology holds vast

potential for innovation in a variety of fields, and thus attracts the attention of a

variety of regulators. The blockchain and bitcoin fields are heavily regulated, and

many of those regulations threaten to stifle the fields. Some of these regulations

take the form of criminal statutes involving money laundering and money

transmitting, as in the case of Appellee's prosecution

The trial court correctly found that Florida's statutes, pafiicularly as written

at the time of Appellee's prosecution, did not reach an individual's bitcoin

transaction. Later, the Florida Legislature acknowledged as much by revising the

statutes at issue to expressly reach bitcoin as a defined "virtual curency."

The State appeals so it can prosecute one individual under a no-longer-

governing statute that does not clearly apply to his conduct, after it revised the

statute to attempt to expressly include that conduct. Meanwhile, numerous other

blockchain technologies have been developed, including "Bitcoin Cash,"

2
specifically because bitcoin is viewed by many working in the field as not usable

as a cuffency. One reason is the tremendously high transaction fees.3 Moreover,

contrary to popular belief, bitcoin is not money-laundering friendly.

The Court should recognize the correctness of the trial court's ruling. To do

otherwise is to reject the clear reasoning of the trial court based on the plain

language of the statutes, the significance of the fact that the Legislature amended

the statutes (as have numerous other jurisdictions), and the rule of lenity.

ARGUMENT
I. Bitcoin Is a Revolutionary Technology with Vast Potential
Bitcoin and the "blockchain" technology on which it relies are
groundbreaking technologies. The industries they foster are exploding with growth

and economic activity. Bitcoin and blockchain technology are creating jobs,

generating new wealth, and fostering innovative economic activity world-wide.

Those square pegs should not be forced into a legal round hole as the State

advocates here.

A. Bitcoin'sRevolutionaryTechnology

Bitcoin is the fiuition of the promise of one of the sub-disciplines of

computer science: encry,ption. Even before bitcoin, the fundamental cryptographic

elernents that would eventually allow for its development were recognized (or

'Suu, e.g., Chris Duckett, Steam Dumps Bitcoin on Baclc of High Trqnsaction
Fees cmd Volatílity, ZDNpr (Dec. 6,2017), http://www.zdnet.corn/article/steam-
dumps-bitcoin-on-back-of-high-trans .

I
J
predicted)-by a lawyer, no less. Almost twenty years ago, and ten years before

the first bitcoin was created, renowned Haruard law Professor Lawrence Lessig

observed:

Here is something that will sound very extreme but is at most, I


think, a slight exaggeration: encryption technologies are the
most important technological breakthrough in the last one
thousand years. No other technological discovery-from
nuclear weapons (I hope) to the internet-will have a more
significant impact on social and political life. Cryptography
will change everything.o

Professor Lessig's message predated the first-issued bitcoin by ten years, but

addressed one of the foundations of bitcoin: public key encryption. In public key

encryption, each user is assigned a public and a private key, similar to a serial

number. The sender encrypts or "scrambles" the information to be transferred; the

receiver unscrambles it using the same public key and a different private key. As

the information travels, it is gibberish. It can only be interpreted by the receiver

with the correct public and private key

But public key encryption existed in 1999. As Lessig observed, it was


already poised to be revolutionary in 1999. Since then, bitcoin's creator merged

public key encryption with two other critical technologies-the blockchain and

proof of work-and bitcoin's groundbreaking nature sparked its meteoric rise.

olawrence Lessig, Code and Other Laws of Cyberspace, Basic Books


(1999), at35-36.

4
Noted Silicon Valley venture capitalist and co-author of the first Internet browser,

Marc Andreessen, observed:

Bitcoin at its most fundamental level is a breakthrough in


computer science-one that builds on 20 years of research into
cryptographic cuffency, and 40 years of research in
cryptography, by thousands of researchers around the world.s

Bitcoin thus emerged in 2009 and has continued to prosper thanks to its ability to

share unique information securely

At its core, bitcoin is simply a public ledger, recording assignments of


quantities of bitcoin to individual users, using peer-to-peer verification as opposed

to a central authority such as a government or bank. ,S¿e Exhibit A (a one-page

infographic showing how the bitcoin network operates). The ledger itself, the so-

called "blockchain," is stored online, distributed in full copy among its users-the

"peers" in bitcoin's peer-to-peer verification system. Only if a proposed


reassignment of a discrete quantity on the blockchain corresponds to the
information contained in a critical number of peers' copies of the ledger will a

transaction be approved and recorded on the ever-expanding blockcharn

Because the peers confirming assignments on the ledger are unaware of the

parlicular transactions they confirm, and unaware of each other's identities, the

opporlunity for a conspiracy of users to falsify or interfere with a transaction or to

tMut. Andreessen, Wy Bitcotn Matters, Tup Ngw Yom TIvtps (Ian. 21,
20 1 4), https ://d ealbook.nyimes. com/20 1 4/0 1 /2 1 /wh]¡-bitcoin-matters/.

5
otherwise threaten the integrity of the blockchain is functionally nil. It is, in fact,
this network itself that makes bitcoin valuable. Any user of the network can verify

a transaction on the blockchain; no one in the network (or outside) can falsify one.

New bitcoins are created through "mining." Miners' computers perform the

complex math that cryptographically validates the authenticity of transactions. In

exchange for their work on these validations-a transaction cost that comprises the

verification process-miners are rewarded for their work with new bitcoins. Once

those bitcoins exist, they have whatever value people give them, and as of recently

can be bought and sold on various exchanges. But bitcoins, despite the catchy

name and the proliferation of associated terms like "cryptocurrency," are not

actually money or currency aîy more than they are actually coins. They are simply

unique addresses on the blockchain that exist only as computer code, and can be

used to support any effort for which unique identification is a favorable

characteristic.

This unique identification characteristic means that while bitcoin usage

allows for a cerlain degree of privacy, it is not anonymous. Bitcoin public keys,

which function like post office boxes, are displayed on the blockchain, and identify

parlies sufficiently to allow them to transact with other parties while not revealing

actual identities. Through relatively simple review of the blockchain,


reassignments of bitcoin can be tracked. When paired with current law

6
enforcement tools, it is possible to gain information about the individuals

transacting in bitcoin

B. Bitcoin's Promising Present and Vast Potential

Bitcoin's great innovation is in the functional unassailability and integrity of

its network, the blockchain, and the history of data stored thereon. Bitcoin solves

the problem "of how to establish trust between otherwise unrelated parties over an

untrusted network like the Internet" through the blockchain technology it employs

to record transactions.6 Solving this problem allows innovators to extend the use

of the blockchain model to track transfers of any type of digital information in a

quick, secure, and verifiable fashion. The ownership and transfer of stock, bonds,

property records, healthcare documents, and other information can be recorded on

the blockchain, eliminating the need for trusted third parties to administer the

records, drastically reducing the expenses and redundancies that plague current

centralized verification and recordation systems, and reducing the potential for

comlption or loss of these critical data sources

Bitcoin and its underlying blockchain technology offer so much promise of a

better world for the future that two Ivy League Business School professors pointed

out

uId.

7
With blockchain, we can imagine a world in which contracts
are embedded in digital code and stored in transparent, shared
databases, where they are protected from deletion, tampering,
and revision. In this world every agreement, every process,
every task, and every payment would have a digital record and
signature that could be identified, validated, stored, and shared.
Intermediaries like lawyers, brokers, and bankers might no
longer be necessary. Individuals, organizations, machines, and
algorithms would freely transact and interact with one another
with little friction. This is the immense potential of blockchain.T

Individuals, companies (including Microsoft, IBM, and NASDAQ), whole

industries, and even governments around the world are therefore racing to build

these applications. Venture capitalists like Andreessen have poured money into

blockchain technology-related companies-more than $2.1 billion since 2012.8

Because bitcoin is often decried as "useless" as cuffency,n so-e of these


applications being built on bitcoin's innovations are expressly intended to function

tMarco Iansiti and Karim R. Lakhani, The Truth about Blockchain,


HARvaRn Busmpss Rnvmw (January-February 2017 issue),
17 I 0 I lthe-truth-about-blockchain.
https ://hb r.or el20
sCoinDesk, Bitcoin Venture Capital, www.coindesk.com/bitcoin-venture-
capitall.
'Sru, e.g., Cade Metz, Bítcoin Will Never Be a Currency-It's Something
Way I4/ei rd er, W tNEn (Jan. 6, 201 7 ), https ://www.wired. com/20 1 7/0 1 /bitcoin-wil1-
never*currency- s omethin g-way-weirder/ ; Jeffrey Dorfman, Bitcoin Is an Asset, Not
a Currency, FoRBES (May 17, 2011),
https://www.forbes.com/sites/ieffrevdorfmanl20LT l05llT lbitcoin-is-an-asset-not-a-
3c8459062e5b Aaron Mak, Bitcoin is
St¡ll Basically (Jseless þr
Making Payments, Slarp (Dec. 6, 20t1),
htto://www.slate.com/bloss/future tense/2 011l12l06lbitcoin is still virtuallv usel
ess for makine payments as steam s decision.html

8
es currency. "Zcash,"to "Monefo,"ll "Dashr"l2 and the bank-conglomerate-

controlled "Ripple"13 seek to operate exclusively as traditional currency


replacements.

Certain spin-offs from bitcoin itself-for example, "Litecoin"la and the

revealingly-named "Bitcoin Cash," a separate product with an independent

blockchain-are expressly designed to play the role of money where it is said


bitcoin cannot.ls Other platforms were created to allow for programmatic transfers

of data using customizable "smafi contracts," such as "Ethereum"l6 and

"Hyperledger."17 Ethereum's blockchain was recently temporarily hobbled by a

to
S generally, https:I I z.cashl .
tt "", generally, https://getmonero.org/.
5"",
t'S"", generally, https://www.dash.org/ ("Dash is digital cash").
ttS"", generally, www.ripple.com (noting that Ripple "enables banks to send
real-time international payments across networks").
I ahttps
//litecoin. org ("the crypto currency for payments").
:

ttsun, €.g., Matt O'Brien, The Simple Reason Bítcoin Will Never Be a
Currency, WASHINGToN Posr (Dec. 18, 2017),
httos ://www.washin stonnost. com/new klwnl20 1 1 I 1 21 1 B/the-simnl e-reason-
bitcoin-will -never-be-a- tm term: .ab6db1 11 f10l : Callum Jones,
"Bitcoin ,s not money, " THE TIn¿es (Dec. 18, 2017),
hffnc' //rx¡u¡'rx¡ thetirrrec en rrL/articl e/bitcoin-is-not- aìîr\11ê\/-1 lh\r/rì mk3 I' Axel Weber
"Bitcoins Not Money, " FINBwS (Dec. lJ, 2017),
httos ://www. fi news. com/news/ensl ish-news/3 00 I 2-ub S -b i tcoi n -ax el -weher-crvnto -
cryptocurrencl es-not-money.
r6Nathaniel Popper, Ethereutn, a Digítat Currency, Enables Transactions
that Rival Bitcoín's, New Yom TIit¡ps (March 2J , 2016),
www. nvtimes. com I 20 1 6 I 03 12 8/bu siness/dealbook/ eth ereum -a-vi ftual -curren cv-
enables-transacti ons-that-rival -bitcoins.h tml
t'suu,
€.g., Roger Aitken, Smart Contracts on the Blockchaín: Can
Businesses Reap the Benefits? Fonnps (Nov. 21, 2017),

9
game, "Cryptokitties."rs While virlual cats could hardly be called money or

cuffency, they are, like bitcoin, electronic information traded among users across a

distributed ledger.

As of today, there more than 1,300 independent "altcoins."1e These

independent blockchains can start as spin-offs of bitcoin (such as Litecoin and

Bitcoin Cash), though they can also be engineered from the ground up (such as

Zcash, Dash, and Ripple).

il. Overzealous Law Bnforcement Endangers fnnovation

The novelty and utility of bitcoin has led to near-obsessive thinking by

many, including in law enforcement and regulation, for whom bitcoin has become

something like the 2T-centavo piece in Jorge Luis Borg es' The Zahir.2o In Borges'

https://www.forbes.com/sites/roeeraitkenl20l.T lIIl2llsmart-contracts-on-the-
blockchain-can-businesses-reap-the-benefi ts/#3 0 5 fObe4 I 074.
t*pr'//nt .òiyptòut,i.r.d; Aine Cain, l{early 200,000 People Have
Started Collecting Etltereum "CryptoKítties"-Wich Could Very Well Become
Beaníe Babies of Blockchain, Busnlsss INsInnn (Jan. 2, 2018),
com/ethereum- kitties-collectible-20 1 8 - 1
ee http s ://coinmarketcao. com/alllview sl alll .
'oIn Thu Zcthir, Borges writes of an object that induces an instant obsession
upon contemplation. While a zahir could be anything, for his narrator, it is a
-suu
simple 2O-cent coin:

The thought struck me that there is no coin that is not the


symbol of all the coins that shine endlessly down throughout
history and fable. I thought of Charon's obolus; the alms that
Belisarius begged; Judas's thirty pieces of silver; the drachmas
of the courtesan Lais; the ancient coin proffered by one of the

10
story, money "is abstract...it is a Proteus more changeable than the Proteus of the

Isle of Pharos." Id. But regulators and prosecutors must avoid the temptation to

overreach and apply statutes regarding money and currency to bitcoin that do not

clearly apply, and criminal law in particular has no room for protean definitions.

For Florida prosecutors and courts, money is particularly defined by our state's

legislature.

The State is therefore misguided in its effort to force the "square peg" of

bitcoin into the "round hole" of Florida's former governing statutes regarding

money laundering and transmitting. Wrestling bitcoin into the reach of the former

statutory language (which governs this case) is to treat bitcoin as so dangerous that

it should overtake the rule of law-and at the devastating expense of innovation.

There is no need to pile on regulation, as the field is already saturated with state

and federal statutes unequivocally applicable to bitcoin. And, ironically, bitcoin is

not particularly friendly to money laundering anyway.

Ephesian sleepers; the bright coins of the wizard in the 1001


Nights. . ..
Perhaps I will succeed in wearing away the Zahir by
thinking and re-thinking about it; perhaps behind the coin is
God.

Jorge Luis Borges, The Zcthir, in The Aleph and Other Storíes (Spanish: El Aleph),
Editorial Losada (1949).

11
A. Bitcoin Is Already Covered by Numerous Federal and State
Regulations

People and companies engaging in bitcoin-related business are already


heavily regulated by a variety of state and federal authorities. The United States

Code has its own criminal statutes governing money laundering and transmitting,

and bitcoin is already regulated by laws issued by numerous federal regulatory

agencies. Examples include

a The Securities and Exchange Commission (SEC), which regulates


so-called "Initial Coin Offerings" as securities issuances.'t

o The Commodities Futures Trading Commission (CFTC), which


regulates bitcoin as a "commodity."22

a U.S. Department of the Treasury-Financial Crimes Enforcement


Network (FinCEN), which regulates many bitcoin businesses as
traditional money seruices businesses.23

o U.S. Depafiment of the Treasury-Internal Revenue Service (IRS),


which regulates bitcoin as "property" for purposes of federal
income tax.2a

''U.S. SpcuRrnps ExcHANcp CovMrssroN, U.S. SpcuzurrBs Laws May


Applv rN OFFERS, SALES, AND TRADTNG oF INrpRpsrs IN VTRTUAL ORcANTzATToNS
(July 25,2017), www.sec. gov/news/press-releasel2}l7 -I3 1 .
22In
the Matter of Coinflíp, Inc., d/b/a Derivabit, and Francísco Ríordan,
before the Commodity Futures Trading Commission, CFTC Docket No. 15-29
(September 17, 2015); and see Another Major Agency Wants to Regulate Bitcotn
Because it's Growing So Fast, FoRruNn (Dec. 15, 2017),
http I I fotu n e. co m/ 20 I 7 I I 2 I I 5 I bitc oin -p o i c e - re gu at i o n/.
: 1 1

t'U.S. DepaRrvsNr oF TnsasuRv-FrNaNcral Cnrups ENpoRcsMENT


NprwoRr, AnrLrcarroN op FTNCEN's RrcuLATroNS To PERSoNS ADMrNrsrERrNc,
ExcHaNGrNc, oR IJsrNc Vrnrunl CuRnpNcrns (March 18, 2013),
htto s //www. fi n c en . so v/re s o u rc e s/s tatu te s - re sul ations/gui dance/appl ication-
:

fïncens-re gu lations-persons-admini sterin g

t2
Thus, within the federal government, and even within the same federal

agency (the Department of the Treasury, for example), bitcoin is classified

differently-as currency, property, commodity, and security-in order to bring it

within the agency's regulatory umbrella.

Similarly, almost every state has its own money laundering and money

transmitting laws, like Florida. Numerous states have considered and enacted

regulations specifically covering bitcoin-related (typically as "virtual currency")

businesses.2s In fact, many states have considered even stricter regulations than

those covering traditional financial services businesses.26

Following Appellee's dismissal, the Florida Legislature recognized that its

statutes did not cover bitcoin and similar assets, and expressly updated the

definition of "monetary instruments" to include "virtual currency," and defined

"virtual currency." See $896.101(2XÐ, (2Xl), Fla. Stat.; Ch.20ll-155, $12, Laws

of Fla.

toU.S.
RrvrNuE SERvrcn, IRS NoucE2014-21 (March 25,2014),
INTERNaT-
h /www.irs ovl b/irs -t4-21.
tPeter Van Valkenburgh, Tracking Bítcoin Regulation State by State,
CorxCsNrnn (June 2, 2017), www.coincenter.org/entry/tracking-bitcoin-
re gul ati on-state-by-state
26See
id.

13
B. Bitcoin Is Not Money-Laundering Friendly

Despite media "h¡rye" to the contrary, the bitcoin system is not anonymous.

Bitcoin transactions can be tracked via the blockchain, the publicly-viewable

ledger.21 In fact, bitcoin transactions can even be reverse-engineered via the


blockchain. Using bitcoin for money laundering or other illicit purposes thus

"does not seem...particularly atlractive."2s The European Union has concluded

that the criminal use of digital cunencies is "quite tare" due to transaction fees and

a lack of sophistication when it comes to the technology tied to using them.2e

Relatively recent federal law enforcement actions in the Northern District of

California powerfully demonstrate that bitcoins are anything but anonymous or

untraceable. On March 25, 2015, two former federal agents were charged with

bitcoin money laundering and wire fraud. They were caught by the use of bitcoin

tracing analysis.3o On. was more recently charged for a second time after it was

discovered that he stole additional bitcoin after he had entered a plea to the first

"Nicholas Godiove, Regulatory Overview of Digitat Currency, 10 Okla. J.


L.8L Tech 7I (2014).
2sSarah
Meiklejohn, et al., A Fist Ftttt of Bitcoins; Characterizing Payments
Among Men wíth ltlo Name, University of California, San Diego (Dec. 2013),
http //cs eweb. ucsd. edu/-smej kl ç i ohn/.
:

2eCrítninals Too
Stupid to Use Bítcoín and Ethereum, E(J Report Says,
EcoNoTtvrs (July 10, 2017), http://www.econotimes.com/Criminals-Too-Stupid-
To-Use-bitcoin-And-Ethereum-EU-Report- S ays -1 937 23 .
'oMadison Pauly, A DEA Agent Who Helped Take Down Sítk Road Is Going
to Príson for Unbelievable Corruptíon, MoTHER JoNps (Oct. 9, 2015),
http I I www. motheri ones. com/crime- ju sttcel 20 1 5/ I 0/silk-road-investi sator-
:

sentenci n g- corru pti on - force/

I4
charge.31 Bitcoin was thus not money-laundering friendly even to a federal law

enforcement agent working on a bitcoin money laundering investigation-twice.

Law enforcement is not in need of further regulatory tools to reach bitcoin

transactions.

ilI. This Appeal Is an Example of Overzealous Law Enforcement

Given the plethora of statutes and regulations covering bitcoin transactions,

and bitcoin's lack of anonymity, the State's effort to force Appellee's transaction

into a statute that does not clearly cover it is perplexing and unnecessary, and

counter-productive to the development of the many opportunities bitcoin presents.

The Court should avoid this result and should recognize the validity of Florida's

legislative revision as meaningful, rather than superfluous.

A. The Florida Statutes Did Not Clearly Reach Appelleeos Conduct

The trial court correctly observed that the term "virtual cumency" was not

included in Florida's definition of "payment instrument" under the "unauthorized

money transmitter" statute, and that under Florida's anti-money laundering statute,

"'virtual currency' [was] not separately included as a category" of "monetary

instruments." Order Granting Defendant's Motion to Dismiss the Information

(R93) at 5, 6 (Fla. 1lth Cir. Ct. July 22, 2016). Nor could the trial courl look to

''Nate Raymond, Ex-Agent in Sitk Roacl Probe Gets More Príson Tíme þr
Bitcoin Theft, RnurpRs (Nov. 7, 2017), h
cyber- silkroad/ex-asent-in- silk-ro ad-pro be- sets-more-orison-time- for-bitcoin-
theft-idUSKBN 1D804H

15
Florida agencies to define "virtual currency" within the framework of the criminal

statutes, as could federal courts in the case of federal agencies and their governing

statutes

Instead, the trial court correctly observed that bitcoin and similar distributed

ledger technologies were just what they seem to be-new-and did not
conveniently fit into existing definitions that were drafted when such revolutionary

technologies were not even contemplated. The Florida Legislature also recognized

this fact. It later added the term "virtual currency" to the list of "monetary

instruments" subject to money laundering provisions and provided an express

definition of "virtual currency" itself. See $896.101(2XÐ, Q)A), Fla. Stat.; Ch

2017 -I55, $ 12, Laws of Fla

The trial court's analysis, especially as it is reinforced by subsequent


remedial enactments by the Florida Legislature, should be honored.

B. Florida's Rule of Lenity Is Appropriate Where Bitcoin


Transactions Were Not Clearly Covered

Where could application of the rule of lenity possibly be more appropriate

than in the face of an innovative, never-before-seen technology, resulting in a frial

court's order of dismissal? Black's Law Dictionary, 6th ed., at 1332 (citations

omitted), defines the "rule of lenity" as a 'Judicial doctrine" that functions as

follows:

t6
Where the intention of Congress is not clear from the act itself
and reasonable minds might differ as to its intention, the court
will adopt the less harsh meaning...in other words, where there
is ambiguity in a criminal statute, doubts are resolved in favor
of defendant. Under "rule of lenity," statute establishing
penalty which is susceptible of more than one meaning should
be construed so as to provide most lenient penalty.

In this case, the rule of lenity is more than a judicial doctrine or a creature of

Black's Law Dictionary: it is a mandate from the Florida Legislature. Section

115.021, Florida Statutes, states as follows:

The provisions of this code and offenses defined by other


statutes shall be strictly construed; when the language is
susceptible of differing constructions, it shall be construed most
favorably to the accused.

ç715.021(1), Fla. Stat; and see Kent v. Wood,235 So. 2d 60,63 (Fla. lst DCA

1970)) (statute that "is penal in nature...must be strictly construed."). Because it is

legislatively enacted, Florida's rule of lenity can only be considered to be stronger

than its common law or judicial predecessors.

Applying the rule under the circumstance of this case is particularly


appropriate. When could language be more "susceptible of differing

constructions" than in the (relatively) sudden emergence of a revolutionary


technology that sparks numerous definitions and re-definitions under numerous

various state and federal laws and rules? Other states and the federal government

have provided legal definitions of "vifiual currency" in support of criminal

prosecutions. At the time of Appellee's anest, no such definitions had been

t7
provided in Florida. Consequently, the trial court's correct observation of the lack

of an appropriate definition in the criminal law should be affirmed not just on its

merits, but as an application of the rule of lenity.

C The Legislative Change to Section 896.101(2)(Ð, Florida Statutes,


Must Be Deemed to Have Meaning
The Florida Legislature's action to redefine the relevant Florida Statutes to

include "virtual curuency" within their scope should be deemed to have meaning,

rather than to have been a superfluous exercise. It is "a cardinal principle of

statutory construction" that "a statute ought, upon the whole, to be so construed

that, if it can be prevented, no clause, sentence, or word shall be superfluous, void,

or insigniftcanl"." Duncan v. Walker,533 U.S. 167, ll4 (2001) (citations omitted);


Gadsden v. Jones,l Fla. 332,385,1841 WL 1053,6 (Fla. 1847) (same) (citation

omitted)

When the Florida Legislature acts or refrains from acting in response to a

courl's construction of a statute, it must be deemed to do so meaningfully. The

Florida Supreme Courl has obser-ved that "failure by the legislature to amend a

statute which had been construed...amounts to a legislative acceptance or approval

of the construction rendered in the earlier case." Johnson v. State,91 So. 2d I85,

187 (Fla. 1956) (quoting [4/hite v. Johnson,59 So. 2d 532 (Fla. 1952)). Similarly,

takíng action must be deemed an acknowledgment that the construction in the

earlier case is not meritless.

1B
Here, the Florida Legislature amended section 896.101(2XÐ to include
"virtual currency" as a "monetary instrument" that could implicate money

laundering. Ch. 2017-155, $12, Laws of Fla. Staff analysis shows that the bill

would "add[] to the definition of monetary instruments to include virtual currency"

and "providef] a specific definition of 'virtual currency' as a 'medium of exchange

in electronic or digital format that is not a coin or cuTrency of the united States or

other country,"' and that "[t]he effect of these changes is that money laundering

using virtual currency is illegal." Ch. 2011-155, $12, Laws of Fla., House of

Representatives'Final Bill Analysis to Hl37g,at 4 (July 15,2017).32

Consequently, to construe the former statutory definition of "monetary

instrument" to include "virtual currency" would be to render the Legislature's

øctual addition of the term superfluous. This interpretation must be rejected. The

alternative is to force the term into a statute where it could have been (as is evident

by all the other usages in federal and state laws and regulations at the time) but was

not included, against the language of the statute, the rule of lenity, the trial court's

ruling, and the legislative amendment. Such an interpretation would render the

subsequent remedial amendment by the Legislature as mere surplusage, in

violation of basic tenets of statutory construction. This would send a strong

message that the rule of law cannot be depended upon in Florida in the case of

32http:llwww.mvfloridahouse.gov/Sections/Bi11s/billsdetail.aspx?BillId:594
72&Sess ionld:83

t9
bitcoin transactions. To interpret the relevant statutes as they existed at the time of

Appellee's amest any other way would be clear effor

CONCLUSION
The trial court's order should therefore not only be affirmed on its reasoning,

but as a legislatively-acknowledged reasonable interpretation of the statutes, in

accordance with the strong Florida rule of lenity.

Bitcoin and blockchain technology stand to change the world for the better

by fostering economlc development and democratizing access to modern

economies. Innovators of this technology in Florida should be assured the rule of

law is applied to them in a way that is predictable, comprehensible, and just. The

trial court's order should be upheld.

Respectfully submitted,

/s/ John K. Londot


John K. Londot (FBN 579521)
Michael H. Moody (FBNI 66471)
GnppxepRc TRauRrc, P.A.
101 East College Avenue
Tallahassee, FL 32301
Phone 850-222-6891
londotj@gtlaw.com
moodym@gtlaw.com
s : tramm ellc@gtlaw.com

s: hoffmanm@gtlaw.com
s: flservice@gtlaw.com

Andrew M. Hinkes (FBN 17848)


Bnncnn SrNcpnvaN LLP
350 E Las Olas Blvd., Fl. 10

20
Fort Lauderdale, FL 33301-421I
Phone 954-525-9900
ahinkes @bergersingennan. com

Counsel for Amicus Curiae, Digital


Currency & Ledger Defense Coalition

21
CERTIFICATE OF SERVICE

I CERTIFY that a copy of the foregoing has been furnished to the following

by email on the 19th day of January,2018

Thomas Haggerty Frank Andrew Prieto


Miami-Dade State Attorney's Office Law Office of Frank Andrew Prieto,
1350 NW 12th Ave P.A.
Miami, FL 33136-2102 I NE 2nd Ave Ste 200
thomasha ggerty @mi ami s ao . c om Miami, FL 33132-2523
fr ank@frankp ri eto I aw. c o m
p co rval an@ frankpri eto I aw. com
Counsel for Appellee, Míchell Espínoza
Jeffrey R. Geldens
Assistant Attorney General
Office of the Attorney General
I S.E. 3rd Avenue, #900
Miami, FL 33 13 I
crimappm ia@my fl,ori d al e gal co m
.

j effrey. geldens@myfl oridalegal. com


Counsel þr Appellant,
State of Florida

/s/ John K. Londot


John K. Londot

22
CERTIFICATE OF COMPLIANCE

I hereby certify that this brief \Mas prepared in Times New Roman, l4-point

font, in compliance with Rule 9.2I0(a)(2) of the Florida Rules of Appellate

Procedure.

/s/ John K. Londot

23
EXHIBIT A