BitMEX Owners Face Criminal Charges For Allowing Money Laundering

Authorities have filed charges against the owners of derivatives cryptocurrency exchange BitMEX for allowing money laundering to thrive on the platform.

BitMEX's CEO Arthur Hayes, company executives Samuel Reed and Ben Delo, and its first employee Gergory Dwyer were charged with violation of the Bank Secrecy Act and conspiring to violate the act, the Department of Justice announced Thursday.

Reed was arrested in Massachusetts while the others were still at large, said the New York Times.

The Commodity Futures Trading Commission (CFTC) alleged that the Hong Kong-based company executed derivatives transactions such as futures and options on an unregistered board. The regulator accused the company of failing to implement strict anti-money laundering (AML) and know-your-customer (KYC) features, which made Bitmex available as a vehicle for money laundering and sanctions violations, the indictment stated.

FBI Assistant Director William F. Sweeney Jr. said the four defendants willfully violated the Bank Secrecy Act by evading U.S. anti-money laundering requirements. The DOJ alleged that BitMEX and the founders knew too well that they were servicing U.S. customers but chose not to implement the AML and KYC requirements. Even if some measures were put in place to prevent U.S. customers from accessing the website, these measures could easily be overridden by, for example, the use of VPN.

"For example, the defendants caused BitMEX and its parent corporations formally to incorporate in the Seychelles, a jurisdiction they believed had less stringent regulation and from which they could still serve U.S. customers without performing AML and KYC," the DOJ statement read.

Sweeney Jr. said one of the defendants, identified as Hayes, bragged that BitMEX was incorporated in a jurisdiction where regulators can be bribed at a cost of "just a coconut".

"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," Sweeney Jr. said.

BitMEX has grown as one of the most popular cryptocurrency derivatives exchanges that allowed investors to leverage their bets by a factor of 100, Bloomberg reported.

BitMEX has released a statement condemning the decision to charge its owners and vowed to defend the allegations vigorously. "From our early days as a start-up, we have always sought to comply with applicable U.S. laws, as those laws were understood at the time and based on available guidance," the statement read.