BitMEX pleads guilty to violating the U.S. Bank Secrecy Act
Cryptocurrency exchange BitMEX has pleaded guilty to violating the Bank Secrecy Act.
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According to Attorney Damian Williams, BitMEX intentionally failed to “establish, implement, and maintain an adequate anti-money laundering (AML) program.”
He explained that BitMEX, founded in 2014, had a long history of serving and attracting American traders. Operating through local offices, it was required to register with the Commodity Futures Trading Commission (CFTC) and comply with the AML policy.
“BitMEX opened itself up as a vehicle for large-scale money laundering and sanctions evasion schemes, posing a serious threat to the integrity of the financial system.”
Damian Williams, U.S. Attorney
FBI Assistant Director Christie M. Curtis added that BitMEX management violated the law to increase the firm’s revenue. The cryptocurrency platform was required to implement an AML program that needed KYC verification but ignored these demands. Instead, it only asked customers to provide an email.
“BitMEX not only failed to comply with nationally required anti-money laundering procedures designed to protect the US financial markets from illicit actors and transactions, but knowingly did so to increase the business’s revenue.”
Christie M. Curtis, FBI Assistant Director
Beginning of the problems
In October 2020, U.S. authorities charged BitMEX management. The CFTC alleged that they operated an unregistered trading platform and violated its rules, including anti-money laundering and customer verification.
The U.S. Department of Justice also accused BitMEX co-founders Arthur Hayes, Benjamin Delo, Samuel Reed, and platform’s head of business development Gregory Dwyer of violating the Bank Secrecy Act (BSA). Reed, who held the position of CTO of the exchange, was arrested.
In 2022, the platform faced more legal problems. Prosecutors asked the court to sentence Dwyer to 12 months in prison for violating the BSA.
Reed made a deal with U.S. authorities and pleaded guilty to violating the BSA. Under the terms of the agreement with the authorities, he was required to pay a fine of $10 million — the amount the Ministry of Justice assessed the criminal income he received.
Hayes received six months of house arrest after pleading guilty, while the maximum sentence for violating the BSA is five years in prison.
Following the lawsuits, the co-founders resigned from their positions at BitMEX, and the exchange paid approximately $100 million to the CFTC and the Financial Crimes Enforcement Network (FinCEN). In addition, the co-founders pleaded guilty to the charges against them and agreed to pay a $10 million fine each.
BitMEX price manipulation
In April 2020, a group of users filed a class action lawsuit against Hayes, Reed, and Delo. The plaintiffs accused businessmen of creating a system that allowed them to receive undue benefits. According to the lawsuit’s authors, the exchange’s co-founders used access to customer accounts and a manipulation scheme to make illegal profits.
In April 2024, Judge Andrew Carter announced that Delo was alleged to be responsible for the fraudulent scheme’s design and implementation.
Other exchanges are also facing pressure from U.S. authorities
This is not the first time a crypto exchange or its executives have been accused of failing to comply with U.S. law. In April, Binance founder and former CEO Changpeng Zhao was sentenced to four months for failing to follow proper AML protocols. However, the sentence was significantly less than the three years federal prosecutors insisted on. Zhao apologized for his poor decisions and took full responsibility for his actions.
In addition, the court will soon sentence persons associated with the activities of the notorious FTX crypto platform. According to the latest information, the court is considering the case of FTX co-founder Gary Wang and the former CTO of the failed company Nishad Singh. They may face decades in prison for their participation in a multibillion-dollar fraud.
The Ministry of Finance disowned the crypto regulation from the SEC and CFTC
At the same time, U.S. Treasury Secretary Janet Yellen previously denied that she gave instructions or coordinated the actions of the SEC and CFTC to regulate cryptocurrencies during her testimony before the Financial Services Committee of the U.S. House of Representatives.
The Treasury Secretary’s remarks come amid ongoing debate over the role of various regulators in overseeing the booming digital currency industry. Yellen’s comment suggests she did not direct or coordinate the actions of the two regulators.
