Based on his arrest, does it mean that it is illegal to trade bitcoins using USD, face to face?
I don't think so.
No, it is illegal to trade large amounts of bitcoins for USD without proper licenses. Money Transmitter license for that state. Which if you are doing in your state, then it is worth it to protect yourself with one license from your state. If you want all 50 states then it becomes costly and that is for big websites.