Regulation
Cryptocurrency Exchange BitMEX Pleads Guilty to Bank Secrecy Act Violations
The U.S. Department of Justice has revealed that cryptocurrency exchange BitMEX has pleaded guilty in a case involving violations of the Bank Secrecy Act (BSA).
The breach relates to the exchange’s operations from 2015 to 2020, when it was one of the world’s leading marketplaces for bitcoin derivatives without a substantial anti-money laundering (AML) program.
BitMEX Pleads Guilty to Bank Secrecy Act Violations
U.S. Attorney Damian Williams of the Southern District of New York highlighted the serious implications of BitMEX’s actions, noting that the platform was widely used for substantial money laundering activities and sanctions evasion schemes, thereby endangering the integrity of the financial system.
BitMEX has a noticeably lax approach to AML rules, asking users only for their email address instead of implementing an AML program that adheres to Know Your Customer guidelines.
Source: United States Department of Justice
The three founders, Arthur Hayes, Benjamin Delo and Samuel Reed, knew that lax enforcement of regulations was affecting U.S.-based customers, in violation of federal laws.
The cryptocurrency exchange, founded in the Republic of Seychelles and formerly known as HDR Global Trading Limited, is currently facing significant legal ramifications.
Offenders within the organization face a maximum sentence of five years in prison in addition to possible sanctions. The history of BitMEX’s founding from 2014, when the company actively pursued business with American traders and operated from American offices, justifies this legal position.
At that time, BitMEX was required to register with the Commodities Futures Trading Commission and implement a rigorous anti-money laundering policy.
Guilty plea highlights ongoing regulatory action in cryptocurrency sector
The latest guilty plea is for a specific offense, violating the Bank Secrecy Act, which carries a possible five-year prison sentence and a fine. This circumstance highlights the legal action taken by regulators in the cryptocurrency industry.
In the cryptocurrency space, other cases of regulatory violations have also been reported. BitMEX is not the largest or the first exchange to be penalized for violating US laws.
In a notable parallel, Changpeng Zhao, the former CEO of Binance, the world’s largest cryptocurrency exchange, has just started serving a four-month sentence in a low-security federal prison in California.
Zhao was convicted in late 2023 due to Binance’s inadequate anti-money laundering procedures.
Founders Previously Penalized by CFTC
Additionally, in 2022, a judge ordered Hayes, Delo, and Reed to pay a total of $30 million in civil penalties in a lawsuit brought by the U.S. Commodity Futures Trading Commission. They pleaded guilty to violating anti-money laundering laws under the BSA and were each sentenced to probation.
The American justice system is nevertheless closely scrutinizing the bitcoin market. After pleading guilty, people linked to the now-defunct cryptocurrency exchange platforms FTX and Alameda Research will soon be sentenced.
Southern District of New York Judge Lewis Kaplan will make decisions about whether to incarcerate FTX’s former CTO Nishad Singh and co-founder Gary Wang starting in October. Former CEO Sam Bankman-Fried was convicted at trial and is currently serving a 25-year sentence.