Former CEO Arthur Hayes and co-founders still facing criminal charges for allowing no-ID sign-ups on the once-hot derivatives exchange.
Five companies associated with the BitMEX derivatives exchange have agreed to a $100 million fine to settle civil charges
that they violated anti-money laundering rules of the Bank Secrecy Act and the Commodity Exchange Act.
Former CEO Arthur Hayes and his BitMEX co-founders Samuel Reed and Benjamin Delo, along with former head of business development Gregory Dwyer, still face criminal charges
related to violating the Bank Secrecy Act that carry a jail term of up to 10 years.
The charges stem from an October 1, 2020, action in which the Commodity Futures Trading Commission (CFTC) and U.S. Department of Justice simultaneously charged the Bermuda-based cryptocurrency derivatives exchange with ignoring requirements that they collect personal identification information
from U.S. clients, and with failing to report suspicious transactions.
While the exchange banned U.S. citizens, accounts could be opened with nothing more than an email address between 2014 and 2020.
The settlement was announced on August 10 by the CFTC and the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
“BitMEX’s rapid growth into one of the largest futures commission merchants offering convertible virtual currency derivatives without a commensurate anti-money laundering program put the U.S. financial system at meaningful risk,” said
AnnaLou Tirol, Deputy Director of FinCEN. “It is critical that platforms build in financial integrity from the start, so that financial innovation and opportunity are protected from vulnerabilities and exploitation.”
Falling Into Line
On January 7 BitMEX announced
an aggressive know-your-customer (KYC) and anti-money-laundering
(AML) program. As part of the agreement, BitMEX also agreed to avoid further violations of the Commodity Exchange Act (CEA) and CFTC’s regulations.
“This case reinforces the expectation that the digital assets industry, as it continues to touch a broader pool of market participants, takes seriously its responsibilities in the regulated financial industry and its duties to develop and adhere to a culture of compliance,” said Acting CFTC Chairman Rostin Behnam, in a statement
“Cryptocurrency trading platforms conducting business in the U.S. must obtain the appropriate registration, and must implement robust Know-Your-Customer and Anti-Money Laundering procedures,” added CFTC Acting Director of Enforcement Vincent McGonagle.
The action comes as international banking and financial regulators are cracking down
on virtual asset service providers and forging uniform regulation of the industry through the Financial Action Task Force
, an international body that recommends AML and countering the financing of terrorism (CFT) policy.
As part of the settlement, it also agreed to “engage an independent consultant to conduct two reviews, including relevant testing, to ensure that appropriate policies, procedures, and controls are in place that are effective and reasonably designed and implemented to ensure that BitMEX is not operating wholly or in substantial part in the United States,” FinCEN said.