Crypto Exchange BitMEX Found Guilty of Violating Bank Secrecy Act

Crypto exchange BitMEX has been found guilty of violating the Bank Secrecy Act (BSA), the U.S. Department of Justice (DOJ) announced yesterday.

According to court documents, the Commodity Futures Trading Commission (CFTC) accused the exchange of offering illegal crypto derivatives trading services to U.S. customers. The exchange willfully failed to establish adequate know-your-customer (KYC) and anti-money laundering (AML) programs between September 2015 and September 2020, when the DOJ charged four of the exchange’s employees with violating the BSA.

According to the DOJ, BitMEX allowed customers to register and trade cryptocurrency anonymously without providing any identifying information or documentation until September 2020. It also promoted itself as a place where retail customers could trade without real-name verification. Prosecutors said BitMEX became a target for money laundering and sanctions violations due to its failure to maintain adequate AML/KYC standards.

“As BitMEX’s founders and longtime employees admitted in a 2022 federal court filing, from 2015 to 2020, the company, one of the world’s leading crypto derivatives platforms, demonstrated its lack of an anti-money laundering program as required by federal law. As a result, BitMEX used itself as a vehicle for large-scale money laundering and sanctions evasion schemes and posed a serious threat to the integrity of the financial system. Today’s criminal complaint demonstrates once again that cryptocurrency companies must comply with U.S. law if they want to benefit from the U.S. market,” U.S. Attorney Damian Williams said in a press release.

The 2020 charges against BitMEX’s three co-founders, Arthur Hayes, Samuel Reed, and Benjamin Delo, as well as the company’s first employee, Gregory Dwyer, parallel the investigation into the company today and target the same period. All of the executives have previously pleaded guilty.

As part of its BSA violations, BitMEX was also found guilty of lying to a foreign bank. According to court documents, BitMEX made false statements to an unnamed international bank to persuade the bank to open a bank account for a shell company called Shine Effort Inc. Limited, which is controlled by Delo, which is the beneficial owner of BitMEX.

A Justice Department spokesperson declined to answer questions about why the allegations against executives four years ago were being investigated across BitMEX today.

BitMEX’s penalty has not yet been decided. The case is being overseen by U.S. District Judge John G. Koeltl of the Southern District of New York (SDNY).

A BitMEX representative did not respond to CoinDesk’s request for comment.