BitMEX ‘Attempted to Evade’ US Regulations, CFTC ChargesOctober 1, 2020
The U.S. Commodity Futures Trading Commission (CFTC) and federal prosecutors are charging crypto trading platform BitMEX with facilitating unregistered trading and other violations.
The CFTC announced Thursday that BitMEX, CEO Arthur Hayes, company owners Ben Delo and Samuel Reed, and corporate entities HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited and HDR Global Services (Bermuda) Limited allegedly offered U.S. customers illicit crypto derivative trading services.
Similarly, Audrey Strauss, the acting U.S. Attorney for the Southern District of New York announced that Hayes, Delo, Reed and Gregory Dwyer (BitMEX’s first employee) were being charged with violating the Bank Secrecy Act and conspiracy to violate the act. Reed has already been arrested; the others remain at large, an SDNY press release said.
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“One defendant went as far as to brag the company incorporated in a jurisdiction outside the U.S. because bribing regulators in that jurisdiction cost just ‘a coconut,’” said Assistant FBI Director William Sweeney Jr. in a statement. “Thanks to the diligent work of our agents, analysts, and partners with the CFTC, they will soon learn the price of their alleged crimes will not be paid with tropical fruit, but rather could result in fines, restitution, and federal prison time.”
In a press release, the CFTC alleged that BitMEX received some $11 billion in bitcoin deposits and made more than $1 billion in fees, “while conducting significant aspects of its business from the U.S. and accepting orders and funds from U.S. customers.”
The CFTC charged BitMEX with executing futures transactions on an unregistered board, offering illegal options, failing to register as a futures commission merchant, failing to register as a designated contract market, failing to implement proper know-your-customer rules and other counts, according to an attached legal filing.
BitMEX, which has reportedly been under investigation by the CFTC since at least July 2019, implemented mandatory KYC in April of this year.
“BitMEX touts itself as the world’s largest cryptocurrency derivatives platform in the world with billions of dollars’ worth of trading each day. Much of this trading volume and its profitability derives from its extensive access to United States markets and customers,” the filing said. “Nevertheless, BitMEX has never been registered with the CFTC in any capacity and has not complied with the laws and regulations that are essential to the integrity and vitality of the U.S. markets.”
The CFTC is looking for a permanent injunction prohibiting the defendants from entering into any transactions “involving ‘commodity interests,’” soliciting funds for purchasing or selling commodity interests and applying for registration with the CFTC.
In addition, the agency wants the defendants to disgorge profits; provide full restitution to its customers; pay civil penalties; and rescind “all contracts and agreements” with any customers if those agreements violate the law.
“As a derivatives market regulator that supports innovation and ingenuity, it is imperative that we actively police trading platform activity and remove the bad apples so that legitimate, law-abiding marketplaces can flourish,” said CFTC Commissioner Brian Quintenz in a statement. “We will not stand for any participant brazenly flouting our rules. I look forward to the successful resolution of this matter and the beneficial impact it will have in this market by holding those who deliberately ignore the law accountable.”
BitMEX was not immediately available for comment.
Read the full CFTC complaint below:
Read the full SDNY indictment below:
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