Bank

BitMex co-founders plead guilty to violating US bank secrecy law

Key ideas:

  • BitMEX co-founders Delo and Hayes plead guilty to breaking bank secrecy law
  • In 2021, crypto derivatives trading platform BitMEX paid a $100 million fine for violating US laws
  • Increased regulatory scrutiny will likely lead to steeper fines on the horizon

Co-founders Arthur Hayes, Ben Delo and Samuel Reed created BitMEX, a P2P crypto trading platform in 2014. The platform supports crypto derivatives trading, including futures and trading on margin.

BitMEX co-founders plead guilty

Overnight, the US Department of Justice announced that BitMEX co-founders Delo and Hayes had pleaded guilty to violating US bank secrecy law. “Hayes and Delo each agreed to pay a criminal penalty of $10 million representing pecuniary gain from the violation.”

In 2020, co-founders Hayes, Delo and Reed were accused of operating an unregistered trading platform. The Commodities Futures Trading Commission (CFTC) accused Hayes, Delo and Reed of violating CFTC rules which included anti-money laundering and KYC regulations.

For evading anti-money laundering requirements, co-founders Hayes, Delo and Reed, as well as Greg Dwyer (head of business development), were also charged with breaching bank secrecy law.

BitMEX pays $100 million fine

In August 2021, US federal courts issued a consent order against 5 companies charged with operating the BitMEX crypto derivatives trading platform.

The order required the five entities to pay a $100 million fine in addition to barring BitMEX from further violations of the Commodities Exchange Act (CEA) and CFTC regulations.

According to the order, BitMex operated as a joint venture from at least November 2014 until October 2020. The platform would have offered leveraged crypto derivatives trading to retail and institutional clients. BitMEX was aware of US customer access to the platform.

In the United States, BitMEX violated CEA rules by allowing swaps to be traded or processed without approval as a Designated Contract Market (DCM) or Swap Execution Facility (SEF).

Regulatory review keeps focus on trading

Since late last year, regulators have increased scrutiny of the crypto market. This month, BlockFi paid a $100 million penalty as part of an SEC settlement. In November 2021, the SEC alleged that BlockFi’s high yield accounts were unregistered securities.

While the BlockFi case was concluded quickly, the SEC case against Ripple Lab (XRP) has been ongoing since late 2020.

Other exchanges that have recently undergone US regulatory scrutiny include Coinbase (COIN) and Binance (BNB).