BitMEX founders to pay $20 million to settle AML violations

abdelaziz Fathi

BitMEX founders Arthur Hayes and Benjamin Delo pled guilty in a US federal court on Thursday and agreed to each pay a $10 million fine.

The two co-founders of the controversial crypto derivatives exchange admitted to violating the Bank Secrecy Act’s anti-money-laundering provisions. As part of their plea deals, both men also face a prison term between six months and one year, but they are free to argue for a lesser sentence at their sentencing hearings.

In 2020, FBI prosecutors indicted BitMEX’s owners and top executives: Arthur Hayes, Benjamin Delo, Samuel Reed, and Gregory Dwyer. The four men stood accused of violating the Bank Secrecy Act, evading money laundering regulations and operating an unlicensed business.

The indicted officials allowed BitMEX to operate as a platform “in the shadows of the financial markets,” the DoJ said.

The above statement was apparently related to BitMex’s former CEO, Arthur Hayes who was captured on a video saying that it just costs ‘a coconut’ to bribe the Seychellois authorities. Hayes surrendered to US authorities back in April 2021 to face trial.

BitMEX paid a heft fine to settle US charges

In August, BitMEX paid $100 million in a settlement with the US authorities over allegations it broke CFTC and FinCEN rules by allowing Americans to trade on the platform.

US authorities had sued BitMEX with a long list of charges that are focused on whether the pioneering exchange acted as a broker without having regulatory approval. Moreover, the complaint charged the platform with acting as a counterparty to leveraged crypto trades, failing to implement KYC procedures and anti-money laundering procedures.

The CFTC charges involved a referral system which gave a portion of trading fees to clients who introduced new traders to BitMEX.

The CFTC estimates that BitMEX has facilitated ‘trillions of dollars’ in cryptocurrency derivatives transactions, received $11 billion in deposits and earned more than $1 billion in fees since beginning the operations in 2014.

The complaint further claims that BitMex created a false ‘shell’ company to trick regulators that it has no California operations or US investors.

However, California was where most of BitMEX’s technology and services are managed, and where almost all of its key personnel live and run operations. In addition, over half of the BitMEX jobs listed on recruitment sites were looking for staff to work in the San Francisco office.

When the months-long CFTC probe hit the wires, Hayes said that his company blocks any user who breaks BitMEX rules that bar onboarding US residents and nationals. However, he said some registrants mask their location by using VPNs to assign their computer to a permitted country, tricking filters put in place.

Interestingly enough, the move by the CFTC came shortly after a heated debate surfaced between BitMex former CEO Hayes and self-proclaimed early investors in the crypto derivatives platform. Four plaintiffs are collectively suing BitMex for $540 million, claiming that they were the first seed investors of BitMex in 2015 and that their $55,000 investment was supposed to have been converted into equity at $10 million post-money valuation.

 

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