Regulation
Crypto Exchange BitMEX Pleads Guilty to Violations of Bank Secrecy Act
The U.S. Department of Justice has announced that cryptocurrency exchange BitMEX has pleaded guilty to a case involving violations of the Bank Secrecy Act (BSA).
This crime concerns the exchange’s operations from 2015 to 2020, when it was one of the world’s leading venues for bitcoin derivatives, without a substantive anti-money laundering (AML) program.
BitMEX Pleads Guilty to Violations of Bank Secrecy Act
U.S. Attorney Damian Williams of the Southern District of New York highlighted the serious implications of BitMEX’s actions, noting that the platform has been widely used for major money laundering activities and to evade sanctions, thereby jeopardizing the integrity of the financial system.
BitMEX has a remarkably flexible approach to AML regulations, asking users only for their email address rather than implementing an AML program that complies with Know Your Customer guidelines.
Source: U.S. Department of Justice
The three founders, Arthur Hayes, Benjamin Delo and Samuel Reed, knew that poor enforcement was affecting customers residing in the United States, violating federal laws.
The cryptocurrency exchange, founded in the Republic of Seychelles and formerly known as HDR Global Trading Limited, is currently facing major legal consequences.
Guilty individuals within the organization could face a maximum sentence of five years in prison in addition to possible fines. BitMEX’s history of founding since 2014, when it actively pursued business with American traders and operated from American offices, supports this legal position.
At that time, BitMEX was required to register with the Commodities Futures Trading Commission and implement a robust anti-money laundering policy.
Guilty plea highlights ongoing regulatory action in cryptocurrency industry
A specific offense of violating the Bank Secrecy Act, which carries a potential five-year prison sentence and a fine, is the subject of the most recent guilty plea. This brings to light the ongoing legal action taken by regulators in the cryptocurrency industry.
In the cryptocurrency space, there have also been other cases of regulatory violations. BitMEX is not the largest or the first exchange to be penalized for breaking US laws.
In a notable parallel, Changpeng Zhao, the former CEO of Binance, the world’s largest cryptocurrency exchange, he just started serving a four-month sentence in a low-security federal prison in California.
Zhao was found guilty in late 2023 due to Binance’s inadequate anti-money laundering procedures.
The founders have previously been penalized by the CFTC
Additionally, in 2022, a judge ordered Hayes, Delo, and Reed to pay a total of $30 million in civil penalties as part of a lawsuit filed by the U.S. Commodity Futures Trading Commission. They pleaded guilty to violating AML laws under the BSA and received probation.
The US legal system is still scrutinizing the bitcoin market. Those associated with now-defunct cryptocurrency exchanges FTX and Alameda Research will soon be sentenced after their guilty pleas.
Southern District of New York Judge Lewis Kaplan will decide whether to incarcerate Nishad Singh, FTX’s former CTO, and co-founder Gary Wang starting in October. Former CEO Sam Bankman-Fried was found guilty at trial and is currently serving a 25-year sentence.