BitMEX Pleads Guilty to Violating Bank Secrecy Act

KEYTAKEAWAYS

TABLE OF CONTENTS

• KEY TAKEAWAYS
• DISCLAIMER
• WRITER’S INTRO

CONTENT

The cryptocurrency exchange admits to failing in its anti-money laundering efforts, facing severe legal repercussions and potential prison sentences for its executives.

On Wednesday, the U.S. Department of Justice (DOJ) announced that BitMEX, a prominent cryptocurrency exchange, has pleaded guilty to violating the Bank Secrecy Act (BSA). This development marks a significant moment in the regulatory landscape for cryptocurrency platforms.

From September 2015 to September 2020, BitMEX failed to implement a robust know-your-customer (KYC) and anti-money laundering (AML) program, according to newly published court documents. This period saw the Commodity Futures Trading Commission (CFTC) charging BitMEX with offering illicit crypto derivative trading services to U.S. customers. Simultaneously, the DOJ charged four of the exchange’s employees with BSA violations.

>>Read more: Best Crypto Trading App: Top 3 Safest and Reliable

U.S. Attorney Damian Williams remarked, “As BitMEX’s founders and long-time employee admitted in federal court in 2022, the company, one of the leading cryptocurrency derivatives platforms globally from 2015 to 2020, operated in the United States without any meaningful anti-money laundering program, as required by federal law.” He further explained that this lapse made BitMEX a conduit for large-scale money laundering and sanctions evasion, posing a severe threat to the integrity of the financial system.

FBI Acting Assistant Director in Charge Christie M. Curtis echoed this sentiment, stating, “By only mandating lax service access credentials, 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.”

Founded in 2014 by Arthur Hayes, Benjamin Delo, and Samuel Reed, with Gregory Dwyer joining as the first employee and later becoming Head of Business Development in 2015, BitMEX quickly rose to prominence. However, the charges brought against the three co-founders and Dwyer in 2020, to which they all previously pleaded guilty, are almost identical to the current charges BitMEX faces and pertain to the company’s activities during the same period.

The prosecution, managed by the U.S. Attorney’s Office’s Illicit Finance and Money Laundering Unit, indicates that the company’s co-founders could face a potential five-year prison sentence.

According to court documents and statements, BitMEX, which serviced and solicited business from U.S. traders and operated through U.S. offices, was required to register with the CFTC and establish an adequate AML program. These programs are essential to prevent financial institutions from being exploited illegally. The documents reveal that BitMEX’s executives took specific actions to avoid applying U.S. laws, such as AML and KYC requirements, despite knowing they were necessary. The company required only an email address for customers to access its services.

Senior executives were also fully aware that U.S. residents continued using BitMEX’s trading platform until at least 2018 and that the existing policies to prevent such trading were ineffective and easily bypassed. The company also misled a bank about a subsidiary’s purpose, facilitating the transfer of millions of dollars through the U.S. financial system.