1 year ago
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BitMEX’s former head of operations Greg Dwyer has yet to resolve his own charges. Should no plea deals be forthcoming, he is scheduled to go to trial later this year. All four accused additionally faced charges of conspiring to violate the BSA, which also carries a potential maximum five-year prison sentence.
Earlier in February, Arthur Hayes and Benjamin Delo pled guilty in a US federal court and agreed to each pay a $10 million fine. The two co-founders of the controversial crypto derivatives exchange admitted to violating the Bank Secrecy Act’s anti-money-laundering provisions. As part of their plea deals, both men also face a prison term between six months and one year, but they are free to argue for a lesser sentence at their sentencing hearings.
The third founder of crypto exchange BitMEX, Samuel Reed, also pleaded guilty to violating anti-money-laundering rules. Additionally, he reached an agreement with the US authorities to admit his wrongdoing and agreed to pay a fine of $10 million. However, the last ruling for BitMEX’s senior manager will be decided by a federal judge later on.
In 2020, FBI prosecutors indicted BitMEX’s owners and top executives who stood accused of violating the Bank Secrecy Act, evading money laundering regulations and operating an unlicensed business.
The orders stem from a CFTC complaint filed in October 2020 which charged BitMEX and its founders with conducting significant aspects of their business from the US.
US authorities had sued BitMEX with a long list of charges that are focused on whether the pioneering exchange acted as a broker without having regulatory approval. Moreover, the complaint charged the platform with acting as a counterparty to leveraged crypto trades, failing to implement KYC procedures and anti-money laundering procedures.
The CFTC charges involved a referral system which gave a portion of trading fees to clients who introduced new traders to BitMEX. The complaint further claims the exchange created a false ‘shell’ company to trick regulators that it has no California operations or US investors.
However, California was where most of BitMEX’s technology and services are managed, and where almost all of its key personnel live and run operations. In addition, over half of the BitMEX jobs listed on recruitment sites were looking for staff to work in the San Francisco office.
The derivatives regulator estimates that BitMEX has facilitated ‘trillions of dollars’ in cryptocurrency derivatives transactions, received $11 billion in deposits and earned more than $1 billion in fees since beginning the operations in 2014.
When the months-long CFTC probe hit the wires, Hayes said that his company blocks any user who breaks BitMEX rules that bar onboarding US residents and nationals. However, he said some registrants mask their location by using VPNs to assign their computer to a permitted country, tricking filters put in place.
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