Crypto Exchange BitMEX Pleads Guilty to Violating the Bank Secrecy Act

On Wednesday, the US Department of Justice (DOJ) announced that BitMEX has pleaded guilty to violating the Bank Secrecy Act (BSA).

According to newly released court documents, the exchange failed to implement an adequate know-your-customer (KYC) and anti-money laundering (AML) program between September 2015 and September 2020.

BitMEX’s guilty plea

During this period, the Commodity Futures Trading Commission (CFTC) took the platform to task for offering US customers illicit crypto derivatives trading services. In addition, the DOJ charged four of the exchange’s employees with violating the BSA.

US Attorney Damian Williams stated: “As BitMEX’s founders and longtime employee admitted in federal court in 2022, the company, one of the world’s leading cryptocurrency derivatives platforms from 2015 to 2020, operated in the United States without any anti-money laundering program, as required by federal law.”

Williams explained that this made BitMEX a tool for large-scale money laundering and sanction evasion schemes, which posed a serious threat to the integrity of the financial system.

In a similar sentiment, Acting Deputy Director of the FBI, Christie M. Curtis, stated: “By mandating only lax service access credentials, BitMEX not only violated national anti-money laundering procedures designed to protect the financial markets of the United States from illicit actors. and transactions, but did so knowingly to increase the business’s income.”

BitMEX was founded in 2014 by Arthur Hayes, Benjamin Delo and Samuel Reed. Gregory Dwyer joined as the first employee and later became Head of Business Development in 2015.

The charges brought against the three co-founders and Dwyer in 2020, all of which they previously pleaded guilty to, are nearly identical to the charge BitMEX has pleaded guilty to and involve the company’s activities during the same time period.

The prosecution will be handled by the United States Attorney’s Office’s Illicit Finance and Money Laundering Unit, and the company’s co-founders face a possible five-year prison sentence.

Regulatory violations

According to court filings and filings, BitMEX, which served and solicited business from US traders and operated through US offices, was required to register with the CFTC and establish an adequate AML program. These programs are essential to prevent financial institutions from being illegally exploited.

Court documents reveal that BitMEX executives took specific actions to avoid the application of US laws, such as AML and KYC requirements, despite knowing they were necessary. The company only required an email address for customers to access its services.

Senior executives were also fully aware that US residents continued to use BitMEX’s trading platform at least into 2018, and that existing policies to prevent such trading were ineffective and easily circumvented.

The company also misled a bank about the purpose of a subsidiary, facilitating the transfer of millions of dollars through the US financial system.

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