Arrested Bitcoin exchanger Michel Espinoza interview
Michel Espinoza was arrested in February of 2014 after a very public and elaborate sting operation in Miami Florida. Michel's arrest came after the North ...
What's up, party people? Chris DeRose here. I'm in downtown Miami. We're doing something a little different on this episode. Here in Miami we have an infamous Michel Espinoza and his attorney Rene who are here to share this time with us. You may know Michel from a little incident that he had back in, what was that now? July 6. No, I'm sorry.
February 6. February 6 of 2014? Yeah. On February 6 of 2014, you probably all remember seeing on our bitcoin the man in South Florida who had federal agents storm his, was it an apartment, I think, you were in? A hotel, pretty much. Well, we'll here the story. It's to say he's infamous here in South Florida. The blockchain community knows who he is, and we're very sympathetic to his needs.
So, we're putting this video together that really sheds some light on what happened. Here he is speaking publicly for the first time. Introduce yourself and tell us the story. Hi, my name is Michel Espinoza. I guess I'm quite infamous now that this whole bitcoin thing started. Since this case, I see my name more than ever, but I started doing bitcoins way before this, though.
I have bitcoins from 2012. So, before we get into any of the details of your case, I think even Rene you're going to shed some light on that even, but let's go into your history with bitcoin. Why don't you tell everybody how did you hear about bitcoin for the first time? What brought you into bitcoin? Well, I was just researching for alternatives to PayPal back in those days. I heard about bitcoins just by Googling it or something. I don't remember. Maybe I read it on a forum or something.
What was the time, roughly, that you heard about this? September of 2012, something like that. Maybe September. Before or after that time. So, I learn about it. Well, I had a history of trading before that. I used to trade forex, and pretty much anything that can be commodities I will be trading it.
Not directly, but as a programmer. I will be developing software for traders, which will be used for their own trade strategies. I learned a lot of stuff in that during that time. So, when it came to bitcoin at that moment, I just started looking at the charts, and I was, "Yes, this is going to shoot up in time." So, I started buying. I called everybody that I knew.
I started to gather as much money that I could back in those days. I called my family. I called my friends. My family helped me out with most of the money, and some of my friends didn't believe it was going to happen. They were just, "No, this is not gonna happen. This is not real.
" We get into it. I bought about as much as I could, probably around $10,000 to $12,000 back in the day. Yeah, we just hold. I hold. Okay. So, yeah, you got into it September 2012.
Was that before the Schumacher stuff? Do you remember that? Was that early 2012, or was that early 2013? 2012. Early '12, so it was after that era. Right, and so then I guess you got into it at a pretty early time, and you really invested in it at that point. Yeah. If you saw the chart, it looked like a nice squeeze pattern. I figured you go back through trading and that happens for a very long time, and something that's that good is going to cool off eventually.
So, I was like, "Yeah, let's stock it." When did you come down to South Florida? Were you in South Florida back then, or not? I don't believe you were. I was pretty much in Ohio for 11 years in Columbus. My family used to live in Columbus. They still live in Columbus. I moved from Columbus to Ohio University, where I studied there for four years, and then I moved to Miami.
Tell me, do you like living in Miami? Are you pretty happy here? It's a lot of fun. Yeah, it's fun. Despite with the recent events, I was hoping that. Yeah, it's still kind of fun here. Yeah. What are your favorite parts of Miami? Well, I came for the nightlife, but I'm staying more for the weather.
Pretty much a lot of stuff. You're a software developer, no? Yeah. What do you think about the development community down here? Pretty happy with the way it is, or do you think it could improve? I don't work specifically with bitcoins, specifically. I work with trading algorithms more, let's say. That field is not broad. Actually, there are very few people that do that.
All right, let's start. Let's get more into what happened then, I guess, with your case. Were you active in the trading community out here locally? Rene, you want to take over here? Yeah. I don't want him getting into specifics as to what happened in this case, but as his attorney, there's no issues as far as me commenting on it. Basically what I'm commenting on is public information. If you go down to the courthouse and start digging through the files, you'll be able to find out this information.
Basically, this whole case started off when the investigators went to a local bitcoin convention that was going on down here on South Beach. So, hold on a second. You're telling me that you think a lot of this happened from - I think the NABC was the convention that was happening down here in early 2013. Right around January. Does that sound about right to you? Yeah, they've started hearing about bitcoins, but they had not decided to launch any sort of investigation or do anything. In fact, they were just wanting to learn about bitcoins.
That's when they went ahead and they went to this local bitcoins convention that they had. The bitcoin convention. Yeah, and then they there saw how it could be used for shady purposes like anything else in life. Yeah. The number one currency that's used for illegal purposes in the world in the U.S.
dollar. That doesn't mean that everybody who possess U.S. dollars is committing some sort of illegal act. Otherwise, we'd all be guilty. Right.
So, they decided they were basically going to go on a fishing expedition. That's what this case is about. It's a fishing expedition. Something they are trying out to see how it goes, okay. They went onto the local bitcoin website, and they happened to run into his website. It could have been anybody else's website.
They were not specifically targeting Michel Espinoza. Right. They were just throwing it up there to see what sticks. Do you think he was one of the most active traders out here and that's why? Or, they were just targeting whoever knows? Just pick them out randomly. They chose him and they chose the other individual, Pascal Reid. There probably were looking into more people.
Yeah. You're not representing him are you? No, he's being represented by someone else, and his case is somewhat different. Even though the charges are basically the same from a factual point of view, the case is different greatly, especially when it comes to Michel's participation in the case. That's how they started. They looked them up. They called him.
They set up a meeting on the beach, and those transactions were all recorded, video tape, audio tape. There's no misunderstanding what was said, okay. That first meeting all he did was explain to the agents how bitcoin works. I believe he sold them $500 worth of bitcoin. Listen, I've been a criminal defense attorney in Miami for 32 years. When people get involved in illegal activity, it's to make quick, great sums of money.
You've seen actual illegal money laundering? When you're talking about real money launderings, you're talking about getting involved in transactions where you make hundreds of thousands, if not millions, of dollars, okay. People do not get involved in any sort of criminal activity to make a whopping $65 or $160 transaction that he made. The most he was going to make was going to be that last transaction where he was going to sell them $30,000 worth of bitcoins, and that transaction never consummated, never happened. Look, I'm going to say this on camera, and I want to speak for all bitcoiners, if you've been doing bitcoin you have given somebody bitcoin for dollars at some point in your time as a bitcoiner. I've done $1 million with this transaction, you've done $10 here or $100 there, even $1,000. I've done that.
I'm sure everybody whose watching this has done that. You do that for the same reason that you spot a buddy $20 at the bar, or something like that. It's just a minor thing, so I'm sure that the audience knows. Well, under the eyes of the state of Florida, the county-state attorney's office, you have all committed a crime. Right, and that's why were here. That's really the big thing is we know that you are taking one for the team right now, and he's got lucky.
It could have been any of us. It could have simply been anybody who owns bitcoins and wanted to sell the bitcoins. This is the problem with the case. He's charged under a currency statute. That statute was created in the state of Florida many, many, many years ago, way before bitcoins ever came into existence. They're trying to apply a currency statute to the bitcoin situation, okay.
From what I've seen so far the definition of bitcoins does not fall under the definition of currency. It is not backed up by any foreign government or by any country at all. In fact, it's quite the contrary. The IRS, at this point in time, considers it personal property, a commodity. It's more like a commodity than it is as far as currency is concerned. If Michel had done gold instead of bitcoins.
.. We wouldn't be here right now. This interview would not be taking place, because he never would have been arrested. So, if it was gold instead, that would have been not worth their time. Not worth their time.
He's selling his gold, his personal property. Everybody knows that gold is personal property. Part of my platform is that bitcoin is a commodity, and, so, that makes perfect sense to me. Does the state make a distinction in terms of currency as being within the realm of the state to issue? Or, does it not really get into that? If so, it would seem very open and shut to me. When they first started this, there was actually no definition of what a bitcoin was considered, even by the IRS. Months later is when the IRS came out with their definition considering it personal property for tax purposes.
Now other states, for example New Jersey, now considers it personal property. Texas considers it personal property. It tends to be going in the direction that it is personal property. It is not currency. That's why right now we are in the process of preparing and filing a motion to dismiss that count, the currency count, which I think we have a very good chance at. We're bringing in Dr.
Evans to educate the judge on what bitcoins are, because, again, this is something that most of the people do not know what it is. I didn't know what it was until I met Michel. For the audience who don't know yet, Charles Evans is another esteemed colleague here in the Blockchain Beach, South Florida community, and he's written a number of articles. He's really one of the original money punks of the '90s, and he used to live around here. Now, you hooked up with Charles for this purpose, I think, of providing an expert witness? Charles is going to be used as an expert witness in his case, both at the pre-trial stage and at the trial stage. Right now, this case is specially set to go to trial on June 15th.
June 15th, everybody. Watch that date and see what transpires. Are we going to get news out of the actual trial at that time? I'm sure the press is going to be covering it, because I get calls all the time from the press, "When is this going to trial?" I'm going to let them know and get the word out. In fact, you're the first people to know that this is specially set now to go to trial on June 15th. The judge already told us, "You're specially set. That means you are number one on my calendar.
" We anticipate it getting it resolved. We have a plea date set for, I believe, it's the 19th or 30th, something like that. Something like that, about next month. Yeah, next month, but I don't expect much to be resolved there. Can you get me through the heads of the people here that are processing this, because it seems like if I had invented some new type of soap and he was selling that, obviously they wouldn't have gone after it. So, do you think somebody's trying to make a career for themselves out of this case? Or, what's going on with that? I wouldn't say somebody's trying to make a career out of it.
I think that they have good intentions, but they don't have the tools to do this type of prosecution, because they don't have the statutes created yet to deal with bitcoins and control bitcoins. Until you do that, you're going to have a very difficult time in accusing anybody or prosecuting anyone. The constitution in this country says you have to be put on notice on what is legal and what is illegal before they can prosecute you for anything. Right now, we're not put on notice on anything regarding bitcoins, because there is no law specifically addressing bitcoins, only currency. They've taken a position that it's currency, and I don't think right now that's where it's headed. Clearly, that's not where it's headed.
So, when the jury goes into the jury room, are they going to be deliberating you think on whether or not bitcoin is a currency? Is that the question that you think they'll be thinking? Well, if the judge grants the motion to dismiss, that charge will not go to the jury. If the judge denies the motion to dismiss, that count will go to the jury. Then, from a factual point of view, because jurors decide what the facts are on a trial not the judge, from a factual point of view the state has to prove beyond and to the exclusion of every reasonable doubt that a bitcoin is, in fact, currency. So, that's really, really interesting, because I don't think we've had anything like that in the history of our country as a far as a case going to trial. This is a case of first impression here in South Florida. We have the Silk Road trial, I think, and then there's also the Charlie Shrem trial.
Do we have parallels there in this specific right? There's more criminal, actual criminal activity involved in those cases. That was real design, what I considered hard-core criminal activity. Here, we got an individual on his own trying to sell his bitcoins. That's it! Not trying to make tremendous sums of money out of it or anything, just get rid of his personal property, put some extra cash into his pocket to maintain himself, to maintain his living. He didn't live off of just bitcoins. He's a computer programmer.
That's where he makes his bread and butter. This a hobby, which he was using, and making some extra money on the side. Let's go over that real quick, too, because the prosecutors have been hanging their hats, I think, on this notion that Michel knew that this was going to be used for nefarious purposes. What's the deal with that? This is what happened here. In order to give it that flare, in order to try to get him involved in other illegal activity, they threw a net out there saying, "You know what? My people want to use bitcoins to purchase stolen credit cards," because that's what they're dealing in. That was the extent of it.
Period. He was never introduced to any undercover people acting as Russians, because he said there were these Russian people who were posing themselves as dealing with stolen credit cards. Had they done that, well, it gives them more credibility to it. Had they shown him a stack of stolen credit cards, gives them a little bit more credibility to it. Had they shown him, let's say, a computer laptop with hundreds of thousands of stolen credit card numbers on there, fine. That adds more credibility to it, but it never got to that point.
It was just this agent trying to bolster himself as a bad guy so that Michel wouldn't try to take advantage of him, or try to pull a quick one over him. That's all it was. Real quickly, audience, I got give you the self-story of my life. I've done some shady things with some shady people down here. We've got that reputation, that is true. I saw the video, and the first thing I thought was, "When you're sitting in a very small space with a guy who tells you he's a criminal, that's not the time to tell him no.
At that point, you do what you're asked, you get the hell out of the situation, you get safe, and then you decide what to do." All the transactions took place in an open, public area, with the exception of the last transaction. That was the last transaction where they tried to rope him in as far as the issue of money laundering was concerned. That's when they started talking more about, "My people who want this. My people who want that." Michel did not believe one iota of this agent telling him that he was involved in some stolen credit cards.
There was never any proof presented to him of that, only the guy just bolstered himself, and he was doing it to act like a bad-ass so Michel wouldn't try to pull one over on him, because he didn't who Michel was. He didn't trust Michel. Well I don't even know what the interview as supposed to be, exactly. What if that guy had a gun and was an actual bad guy? Exactly, and the transaction took place at a hotel room, not his, the hotel of the undercover agent. They had cameras set up in there and you clearly see how reluctant Michel is in accepting the money. You clearly see the agent pushing the money towards Michel, and Michel pushing the money back.
He didn't want to take it. He tells him, "You know what? I feel very uncomfortable. Let's go do this at a bank out in the open public." They think, well, he was worried that the money wasn't real money. Nonsense! He was worried that if he grabs that money and walks out that door there's a couple of thugs out there waiting to put a gun to his head and God knows what. That's where the concern was, not whether it was good money or weird money.
He didn't feel he was doing anything wrong. He was just selling bitcoins, but when it got to such a large amount, that concerned him. He goes, "Maybe I'm not doing it in the proper environment. Maybe it is safer if we go and do this at a bank." That's what he was thinking. That's what he suggested.
Who does money laundering out in the open in a bank. You have bank officials involved to go into a court of law that testify against you. That's absurd! Might as well put a gun to your head and pull the trigger. There's a saying, I think, that 'Ignorance of the law is not excuse for breaking the law', but there is no law here either, right? There is no law! It's kind of you can't win on that. What's he breaking? All he thinks is he's selling his personal property, and just because someone is saying, "I'm going to do this. I'm going to do that.
" Like I told you, what about if you're selling your car and all of a sudden the guy that you're selling your car to starts talking like, "You know, I think I'm going to go speed racing down the street with this car. I'm going to use it in a bank robbery," or something like that. Are you responsible if that man goes out and robs a bank with that car you just sold him? Are they going to accuse you of being involved in a bank robbery because of that? Nonsense! Same thing here with the money laundering. Just to clear up the air, too. Michel, do you have any prior convictions on your record? No. Do you have any sort of dirtier past that makes you a danger to society? Or previous criminal history or anything like that? No.
Okay, so they really picked off somebody that seems you're really the right here. Probably, in some respects, you're probably the perfect person to do this trial, because if we wanted some kind of regulatory clarity for some criminal mischief guidance or something like that, you're a good candidate to prove the pro-bitcoin case, because you have nothing to hide, is what it seems like to me. Yeah, I was using my name, I was using my nickname, which is Michelhack, which is a name that I use everywhere. I use it on many websites, forums. You can Google Michelhack in you will find me there. One of my goals in bringing attention to this issue is, I don't like to give the audience some answers, but I know that you're not exactly a wealthy person.
You were maybe well into bitcoin, but the money comes and goes. It was big at that time, like I was telling you. Right, and this whole case has probably cleaned most of your finances. Yes. So, what I want to do is put a QR code here at the bottom at some point and I wanted to maybe show an address We don't know exactly how far this is going to go. We're at the last stages right now in this trial preparation, and I'll be honest, we've run out of money.
We're run out of money. We would like to be able to raise some more money between now and the 15th to give us that final push. What we need, if we get it, fine. If we don't get it, I'm on board no matter what. My partner, another lawyer, is on board no matter what. We're not letting the prosecution roll over Michel.
It's not right. It's not fair. What's going on here is very un-American. I'm sorry. We have to be put on notice if we are violating a law. What law are we violating? I haven't seen it yet.
It has not been created yet, and it's a very dangerous situation, because Michel could have been Anne, could have been Mary, could have been Joe. Could have been anybody, anybody. What are the actual punishments he could be looking at here? Let's say this just goes terribly South, and he's convicted. What's the maximum? State prison time. Do we know how much roughly? The maximum for the currency is five years, and the maximum on the money laundering, if I'm not mistaking, is 15 years. So, technically speaking, we're exposed at about a 20 year sentence here.
One of the things, too, is that in Florida I happen to know that the regulations are so unclear that if you wanted to sell bitcoins right now, I don't know that there's anything you could do if you wanted to sell bitcoins in terms of regulatory permission. I'm seeing that they're not illegal. How does that fit in? There's nobody to ask permission for. How do I do this? There is no guidance. So, he had no options, even if there were some pretexts that he needed the right to sell, there would have actually been no options for him to pursue anyways. None whatsoever.
It's one complete blank. Now, that it's coming up of age people are starting to recognize it. It won't be long until we start seeing regulations. It's coming. Yeah. It's whether the bitcoin community likes it or not, it's only a matter of time.
I have no problem with it. I think probably Michel has no problem with it. If we had some regulatory, clarity we wouldn't be here right now. Exactly. It's like the Wild West. If you want to sell, sell.
Buy, buy. I think the perception in America is that if there's no rule saying you can't sell something, you can sell something. There's no rules that make selling blankets for people. At least to my knowledge. What's the difference? There's certain things that you know just by looking at them, like drugs, cocaine, etc., that it's illegal.
You can't sell it. It's stated many places, commonly known. Bitcoin? Hello? Somehow, too, there's numbers. Is there any real pretense for an illegal number or something like that? It's a little dicey, right? The law has not caught up with bitcoins. That's it. It's a pretty good place to probably end this interview, but what else do you guys want to offer? Is there anything else we haven't covered? Is there something you like to add, or are we about to wrap it up? I would just appreciate everyone's support.
Not just financially, but morally too. Michel's been through Hell and back. If you've never been in a jail before, it's not a pleasant place to be. His bond was extremely high. $150,000 bond for this type of conduct. How much time did you spend in jail? Three months.
Three months in the hoosegow. Three months in jail. Not three days. Not three hours. Three months waiting to bond out, to try to come up with the money to bond out on a charge like this. Come on.
It's ridiculous. Right. He's a young guy, highly educated, contributor to society, and they put him in there with a bunch of people who do not have any of those qualities. Bottom line, Michel Espinoza is not a criminal. Michel Espinoza never intended to violate any laws of the state of Florida or of the United States. Plain and simple.
All right. I think that's that, guys. We're going to wrap up this interview. I appreciate your time today. I certainly hope that you're on his side, we all are down here in South Florida, Blockchain Beach. If you want regular updates on the cases, I have them.
I'm sure you'll see this trial gaining a lot of steam here coming up, and let's follow it together. Let's see where it takes us, and I'll put some notes before the comments below about how we can maybe support Michel. Certainly, if you liked this video and you want to see some more videos, check out the rest of my channel. Subscribe, and later party people! That's a cut!