Cryptocurrency exchange BitMEX has pleaded guilty to violating the Bank Secrecy Act (BSA) by failing to implement a robust Anti-Money Laundering (AML) program. This admission comes after the exchange’s co-founders, Arthur Hayes, Benjamin Delo, and Samuel Reed, faced similar charges in 2022 and received probation.
Details of the Guilty Plea
On July 10, US Attorney Damian Williams announced that BitMEX willfully neglected to establish, implement, and maintain an adequate AML program from 2015 to 2020. The lack of compliance became apparent during the 2022 criminal proceedings against some of BitMEX’s founders and employees. Williams stated, “BitMEX opened itself up as a vehicle for large-scale money laundering and sanctions evasion schemes, posing a serious threat to the integrity of the financial system.”
Violations and Consequences
BitMEX, incorporated as HDR Global Trading Limited in the Republic of Seychelles, allegedly flouted AML requirements by only requiring users to provide an email address, thus avoiding comprehensive Know Your Customer (KYC) standards. The founders were aware that this affected US-based users, thus violating federal law. As a result, responsible parties at BitMEX could face up to five years in prison and fines.
In 2022, a court ordered Hayes, Delo, and Reed to pay a combined $30 million civil penalty in a case brought by the US Commodity Futures Trading Commission (CFTC). The trio were sentenced to probation after pleading guilty to violating AML requirements under the BSA.
Broader Implications
The BitMEX case underscores the necessity for cryptocurrency companies to comply with US laws if they wish to operate in the US market. Attorney Williams emphasized the importance of adherence to legal standards to maintain the financial system’s integrity.
Related Legal Proceedings
US courts are also preparing to sentence individuals connected to the now-defunct cryptocurrency exchange FTX and Alameda Research following guilty pleas. Starting in October, Judge Lewis Kaplan in the Southern District of New York will consider whether to send FTX co-founder Gary Wang and former engineering director Nishad Singh to prison. Former CEO Sam Bankman-Fried is serving a 25-year sentence following his trial and conviction.
