Florida Sting Nabs Alleged Bitcoin Money Launderers

Florida undercover agents posed as fraudsters seeking to convert cash -- supposedly from stolen credit cards -- into the anonymous, cryptographic currency.

Two men were arrested February 6 in what Florida authorities said was the first state-level money-laundering case in the country that involves bitcoins.
In separate cases, police arrested Pascal Reid (proy33) and Michel Abner Espinoza (michelhack) on money-laundering charges after they allegedly offered to turn criminal proceeds into bitcoins for police officers and US Secret Service agents, working undercover, who posed as fraudsters seeking to convert cash obtained by using stolen credit card numbers.
Criminals are always seeking new ways to make their activities profitable, said Floridas state attorney, Katherine Fernandez Rundle, in a statement. Bitcoins are just a new tool in the cybercriminals toolkit.
Bitcoins are a cryptographic currency thats seeing increased use by a number of legitimate businesses, both in the United States and abroad, something the Florida state attorneys charging documents against the two men emphasizes. But those same documents also highlight how the anonymity offered by bitcoins makes them ideally suited for illegal purchases, because its virtually impossible to trace bitcoin transactions to the owner of the bitcoin address.
[Learn from the Target breach. See
Target Breach Takeaway: Secure Your Remote Access
.]
Accordingly, authorities appear to be targeting people who facilitate the buying and selling of bitcoins for anyone engaged in criminal activities.
In these two cases, authorities said they located both men via an online directory of bitcoin buyers and sellers called www.localbitcoins.com, through which Reid, using the handle proy33 and Esponoza, using the handle michelhack, allegedly posted listings. In the listing posted by proy33, for example, the seller offered to meet anytime to exchange bitcoins, saying he preferred to meet in public places such as Starbucks, an Internet cafe, a restaurant, a mall, or a bank, and posted a cellphone number where he could be reached.
According to court documents, on December 10, a Secret Service agent working undercover -- and named in the documents only as Kramer -- met proy33 at a Starbucks in Sunny Isles, Fla. The man converted $600 into bitcoins for Kramer, taking a commission of 20% above the bitcoins market value. Authorities said that as part of a surveillance operation they followed proy33 to his home, then identified him as being Reid, whos Canadian.
According to court documents, Kramer again met Reid on January 5, this time asking to convert $1,000 into bitcoins. The undercover agent also claimed to be in the business of selling stolen credit card numbers, and offered to sell some to Reid, who allegedly declined. But Reid allegedly didnt balk at continuing to offer bitcoin exchange services, as well as to break deposits up into multiple transactions, to help evade banks anti-money-laundering controls.
According to court documents, the two men met again on February 4, with Kramer telling Reid that he wanted to convert $30,000 that he claimed to have earned by using credit card numbers obtained via the
Target breach
into bitcoins.
At that point, Reid pulled out his Chrome (brand) laptop computer in order to observe the current bitcoin exchange rates, according to the charging documents, after which Kramer showed him a flash roll of $30,000 -- composed of $100 bills -- which Reid inspected for authenticity, before selling Kramer $25,000 in bitcoins, minus about $5,000 for his 20% commission. Reid allegedly also expressed interest in purchasing fake US passports and Florida drivers licenses from Kramer. Reid was arrested two days later.
According to court documents, Espinozas bust went down the same way, with a Miami detective posing as the buyer, except that the suspect didnt believe the proffered roll of $100 bills was real. Instead, he requested that the buyer return with $20 bills. But the detective allegedly talked Espinoza into agreeing that if a Bank of America ATM accepted $2,400 of the cash for deposit into an account to which Espinoza had access, then he would convert the $30,000 into bitcoins. Less than an hour after first meeting the detective, Espinoza was arrested.
Both Reid and Espinoza face two money-laundering charges, as well as one charge of running an unlicensed money service business.
The state angle aside, this isnt the first case to involve bitcoins and money laundering charges. Last month, for example, Robert M. Faiella (a.k.a. BTCKing) was
charged with offering Bitcoin exchange services
to users of
Silk Road
, a notorious dark net site -- reachable only via the Tor anonymizing network -- that reportedly facilitated that sale of illegal narcotics. Faiella reportedly sold the bitcoins at a 9% markup.
As part of that case, Charlie Shrem, formerly the CEO and compliance officer of Bitcoin exchange company BitInstant -- which closed shop in October 2013 -- was charged with helping Faiella launder more than $1 million in profits by processing the trades via BitInstant. Prosecutors accused Shrem of allowing people to swap cash anonymously for bitcoins without verifying their identities, as is required by federal law for any transaction that involves $3,000 or more.
InformationWeek Conference
is an exclusive two-day event taking place at Interop where you will join fellow technology leaders and CIOs for a schedule packed with learning, information sharing, professional networking, and celebration. Come learn from each other and honor the nations leading digital businesses at our InformationWeek Elite 100 Awards Ceremony and Gala.
You can find out more information and register here
. In Las Vegas, March 31 to April 1, 2014.

Last News
▸ ArcSight prepares for future at user conference post HP acquisition. ◂ Discovered: 07/01/2025 Category: security	▸ Samsung Epic 4G: First To Use Media Hub ◂ Discovered: 07/01/2025 Category: security	▸ Many third-party software fails security tests ◂ Discovered: 07/01/2025 Category: security

**Cyber Security Categories**
Google Dorks Database	Exploits Vulnerability	Exploit Shellcodes

CVE List

Tools/Apps

News/Aarticles

Phishing Database

Deepfake Detection

Trends/Statistics & Live Infos

Tags:
Florida Sting Nabs Alleged Bitcoin Money Launderers