BitMEX pleads guilty to violating the U.S. Bank Secrecy Act

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As a researcher with extensive experience in the field of financial regulation and cryptocurrencies, I find the ongoing legal issues surrounding BitMEX particularly concerning. The guilty plea by the exchange to violating the Bank Secrecy Act is just the latest in a series of troubling developments.

Cryptocurrency exchange BitMEX has pleaded guilty to violating the Bank Secrecy Act.

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As a crypto investor, I’ve come across the news that BitMEX allegedly neglected their responsibilities in implementing effective anti-money laundering (AML) measures. According to Attorney Damian Williams, they failed to establish, implement, and maintain an adequate AML program intentionally.

BitMEX, established in 2014, boasts a significant clientele base of American traders due to its extensive history of catering to their needs. Functioning through local offices, it is obligated to register with the Commodity Futures Trading Commission (CFTC) and adhere to anti-money laundering (AML) policies.

“BitMEX emerged as a potential tool for major money laundering and evasion of financial sanctions, endangering the security of the financial system.”

Damian Williams, U.S. Attorney

Expert: Christie M. Curtis, FBI Assistant Director, stated that BitMEX’s management disregarded the law in order to boost their platform’s earnings. Despite being obligated to establish an Anti-Money Laundering (AML) program with Know Your Customer (KYC) verification, they only requested users to provide their email addresses instead.

As a financial analyst, I would rephrase it as follows: “I discovered that BitMEX deliberately disregarded the mandatory anti-money laundering protocols intended to safeguard US financial systems from suspicious actors and transactions. This deliberate noncompliance was carried out with the primary intent of boosting the business’s income.”

Christie M. Curtis, FBI Assistant Director

eginning of the problems

In October 2020, the Commodity Futures Trading Commission (CFTC) in the United States accused the management of BitMEX of running an unlicensed cryptocurrency trading platform and breaking its regulations. Specifically, they were charged with failing to adhere to anti-money laundering and customer identification protocols.

The US Department of Justice leveled charges against Arthur Hayes, Benjamin Delo, Samuel Reed, and Gregory Dwyer, co-founders of BitMEX, for allegedly breaching the Bank Secrecy Act (BSA). Reed, previously serving as the CTO, was taken into custody.

In 2022, the platform encountered greater legal issues. Authorities sought a prison term of one year for Dwyer from the court due to his breach of the Bonding, Licensing, and Discipline Act (BSA).

Reed struck a deal with American law enforcement and admitted to breaking the Computer Fraud and Abuse Act (BSA). According to the terms of his agreement with the authorities, he was obligated to pay a $10 million fine – an amount determined by the Ministry of Justice as representing his ill-gotten gains.

After admitting guilt, Hayes was given a six-month term of home confinement, whereas the possible imprisonment duration for breaking the Biological Sciences Act reaches as long as five years.

After facing lawsuits, BitMEX’s co-founders stepped down from their roles within the company. The exchange then paid out around $100 million collectively to the Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN). Moreover, the founders admitted guilt and consented to pay a fine of $10 million apiece.

BitMEX price manipulation

In April 2020, a number of users initiated a class action lawsuit against Hayes, Reed, and Delo. The complainants alleged that these businessmen had devised a system leading them to unfairly reap advantages. As stated in the filing, the exchange’s founders allegedly misused their access to customer accounts and employed a manipulation strategy to illegally generate profits.

In the spring of 2024, Judge Andrew Carter declared that Delo had orchestrated and carried out the deceitful plan.

Other exchanges are also facing pressure from U.S. authorities

Crypto exchanges and their leaders have previously faced accusations of not adhering to U.S. laws. In April, Binance‘s founder and ex-CEO, Changpeng Zhao, was given a four-month sentence for neglecting Anti-Money Laundering (AML) regulations. Although this penalty was much lighter than the three years the federal prosecutors proposed. Following his conviction, Zhao expressed regret for his actions and assumed full responsibility.

The court is set to hand down sentences for individuals linked to the notorious FTX crypto platform’s illicit activities. Reportedly, this includes Gary Wang, a co-founder of FTX, and Nishad Singh, its former CTO. They stand to serve significant prison terms due to their involvement in a massive fraud worth billions of dollars.

The Ministry of Finance disowned the crypto regulation from the SEC and CFTC

As a crypto investor, I’d like to clarify that during Janet Yellen’s testimony before the Financial Services Committee of the U.S. House of Representatives, she explicitly stated that she did not issue instructions or coordinate actions between the SEC and CFTC to regulate cryptocurrencies personally.

In her appearance before the House Financial Services Committee, U.S. Treasury Secretary Janet Yellen clarified that she does not act as the main point of contact or coordinate efforts between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) regarding the regulation of cryptocurrencies.

— Eleanor Terrett (@EleanorTerrett) July 9, 2024

The Treasury Secretary’s comments were made during an ongoing dispute regarding the regulatory oversight of the rapidly expanding digital currency sector. Yellen’s statement implies that she had no involvement in orchestrating the actions taken by the two regulatory bodies.

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2024-07-11 17:46