Cryptocurrency Exchange BitMEX Pleads Guilty to Bank Secrecy Violations

On Wednesday, July 10, 2024, the U.S. Attorney’s Office, Southern District of New York announced that global cryptocurrency exchange BitMEX pled guilty to violating the Bank Secrecy Act by failing to establish an adequate anti-money laundering program.

Founded in 2014 by Arthur Hayes, Benjamin Delo, and Samuel Reed, with Gregory Dwyer joining as employee #1 in 2015, BitMEX operated one of the largest cryptocurrency derivatives trading platforms in the world for several years. However, the exchange failed to register as a designated contract market with the Commodity Futures Trading Commission despite serving U.S.-based customers.

Federal law requires financial institutions operating within the U.S. to implement know-your-customer protocols and anti-money laundering safeguards to prevent illicit activities like money laundering and sanctions evasion. However, prosecutors say BitMEX did not carry out proper customer identification or due diligence. The exchange only required an email address to trade and did not adequately restrict access for U.S. traders.

Senior executives at BitMEX were aware of the legal obligations to prevent illegal activity but chose not to establish proper anti-money laundering programs. This was partly done to pursue profits from the lucrative U.S. market without complying with regulations. In one instance, the company allegedly made misrepresentations to a bank about a subsidiary to transfer millions of dollars through the financial system.

HDR Global Trading Limited, the legal entity incorporated in Seychelles that operates BitMEX, pled guilty in federal court to one count of willfully violating anti-money laundering laws. The charge carries a maximum sentence of 5 years in prison and fines. Prosecutors praised the FBI for its investigation of BitMEX and said the guilty plea underscores the need for cryptocurrency platforms to obey domestic laws.