CFTC and DOJ charge BitMEX founders with Money Laundering offences

Arthur Hayes and others from BitMEX were charged for violating the Bank Secrecy Act and money laundering practices.

By · Oct 3, 2020 . 7min read

BitMEX Money Laundering case news
Source : IStock

CFTC and DOJ have charged founders of BitMEX, a crypto derivatives platform for running illegal cryptocurrency exchange and offering U.S. citizens illicit derivatives trading services.

As well, U.S. Attorney for the District of New York indicted Hayes, Delo, and Reed, alongside Gregory Dwyer, for violating the Bank Secrecy Act and conspiracy to violate the Bank Secrecy Act. According to the indictment document, these are federal charges. Hayes and others may be facing five years in prison for this alone.

According to the press release statement, BitMEX operates under several entities, mainly offshore. HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited, and HDR Global Services (Bermuda) Limited (BitMEX) are among the entities listed as defendants in the prosecution.

Arthur Hayes, who is CEO of BitMEX, has once bragged that about BitMEX incorporation in Seychelles saying authorities could be bribed with “just a coconut”. Assistant FBI Director William Sweeney Jr. while giving a statement as regards the indictment said

“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.”

BitMEX dominated the Crypto Derivative market with lax anti-money laundering rules.

Hayes and his co-founders established BitMEX in 2014. Traders buy and sell contracts tied to the value of Bitcoin, which in turn called Derivatives or Futures. The exchange has facilitated trade volumes in trillions of dollars earning up to a billion-dollar in fees. However, as the indictment document claims, BitMEX failed to implement strict know-your-customer procedures. Additionally, CFTC and DOJ said,

Much of this volume, and related transaction fees, derives from the operation of the platform from the U.S. and its extensive solicitation of and access to U.S.

Consequently, BitMEX exchange spokesperson in a statement said,

“We strongly disagree with the U.S. government’s heavy-handed decision to bring these charges, and intend to defend the allegations vigorously,”

However, to demonstrate the grievousness in the offence, prosecutors have already arrested Reed in Massachusetts on Thursday. Hayes and the rest remain at large according to the prosecuting counsel.

While the CFTC and DOJ go all out to clip Hayes and other BitMEX co-founders wings, some pattern emerges. Interestingly, this is coming exactly seven years when a Federal Jury sentenced Ross Ulbricht of Silk Road.

CFTC and DOJ charges BitMEX founders with Money Laundering offences
Source: Glassnode

As expected, the market reacted to the BitMEX news with Bitcoin falling by 4% which it has since recouped. Also, traders have withdrawn more than 32,000 out of the 170,000 BTC in BitMEX’s vaults since the story broke. 

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