CFTC Charges BitMEX Owners with Money Laundering Violations


The U.S. CFTC filed money-laundering and related charges against top cryptocurrency exchange BitMEX. The regulatory enforcement agency alleges that BitMEX was illegally operating in the country.

October 1, 2020 | AtoZ Markets – The Commodity Futures Trading Commission (CFTC) Thursday filed money-laundering and other civil charges against BitMEX, for operating illegally in the United States.

In a separate announcement, the Department of Justice charged Arthur Hayes, Samuel Reed, and Benjamin Delo, who together founded BitMEX in 2014, and Gregory Dwyer, its first employee and later head of business development, with violating the federal Bank Secrecy Act and conspiring to violate that law.

CFTC says BitMEX founders failed to impose anti-money laundering procedures

The civil court action, filed in the U.S. District Court for the Southern District of New York charged the owners with operating an unregistered trading platform, and failing to impose anti-money laundering procedures and other violations. Hayes, Delo, and Reed, were named as the owners and cited as operating  “BitMEX’s platform through a maze of corporate entities.”

“Digital assets hold great promise for our derivatives markets and for our economy,” said Chairman Heath P. Tarbert. “For the United States to be a global leader in this space, it is imperative that we root out illegal activity like that alleged in this case.”

The CFTC says the case is brought in connection with the Division of Enforcement’s Digital Asset and Bank Secrecy Act Task Forces.

The lawsuit also mentioned HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited, and HDR Global Services (Bermuda) Limited (BitMEX).

Commenting on the civil court action, Max Rayden, a spokesman on behalf of HDR Global said:

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

Read also: CFTC Fines GAIN Capital $300,000 for Supervision Violations

The scope of the case

According to the CFTC’s claims, BitMEX “received more than $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 said that BitMEX describes itself as the biggest derivatives-trading platform in the world and handles billions of dollars worth of transactions daily.

“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. customers,” the agency claimed. “Nevertheless, BitMEX has failed to register with the CFTC, and has failed to implement key safeguards required by the CEA and CFTC’s regulations designed to protect the U.S. derivatives markets and market participants.”

The complaint

“The charges BitMEX with operating a facility for the trading or processing of swaps without having CFTC approval as a designated contract market or swap execution facility, and operating as a futures commission merchant by soliciting orders for and accepting bitcoin to margin digital asset derivatives transactions, and by acting as a counterparty to leveraged retail commodity transactions. The complaint further charges BitMEX with violating CFTC rules by failing to implement know-your-customer procedures, a customer information program, and anti-money laundering procedures.”

Read also: CFTC Fines JPMorgan $920 Million for Spoofing and Manipulation

“As alleged in the complaint, BitMEX touts itself as the world’s largest cryptocurrency derivatives platform, with billions of dollars’ of trading volume each day. 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. customers, the complaint alleges. Nevertheless, BitMEX has failed to register with the CFTC, and has failed to implement key safeguards required by the CEA and CFTC’s regulations designed to protect the U.S. derivatives markets and market participants.”

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