BitMEX Pleads Guilty to Bank Secrecy Act Violations, Faces DOJ Scrutiny : UPDATED

BitMEX, the Seychelles-based cryptocurrency exchange, has pleaded guilty to violating the Bank Secrecy Act (BSA), according to an announcement by the U.S. Department of Justice (DOJ) on Wednesday. Court documents reveal that BitMEX willfully neglected to establish adequate know-your-customer (KYC) and anti-money laundering (AML) programs between September 2015 and September 2020.

During this period, the Commodity Futures Trading Commission (CFTC) charged BitMEX with offering illicit crypto derivative trading services to U.S. customers. Concurrently, the DOJ charged four of the exchange’s employees with violating the BSA. The DOJ alleges that until September 2020, BitMEX allowed customers to trade cryptocurrency anonymously without providing any identifying information. The exchange marketed itself as a platform where retail customers could trade without real-name verification, thereby attracting money laundering and sanctions violations.

BitMEX’s founders and first employee admitted in federal court in 2022 that the company operated in the U.S. without a meaningful AML program, as required by federal law. U.S. Attorney Damian Williams emphasized the gravity of the situation in a DOJ press release: “As a result, 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. Today’s guilty plea indicates again the need for cryptocurrency companies to comply with U.S. law if they take advantage of the U.S. market.”

Interestingly, the charges against BitMEX’s co-founders Arthur Hayes, Samuel Reed, Benjamin Delo, and its first employee, Gregory Dwyer, mirror those the exchange itself pleaded guilty to. These executives also previously pleaded guilty. The DOJ’s action raises questions about why the four executives were not charged alongside BitMEX. Historically, the DOJ pursues former executives if wrongdoing is unveiled, which brings into question the consistency of regulatory enforcement in the crypto space.

In 2022 BitMEX’s planned acquisition of Bankhaus von der Heydt, a 268-year-old German private bank, fell through. The deal was subject to approval by the German financial regulator BaFin, might have necessitated compliance with KYC and AML laws, potentially influencing the acquisition’s collapse.

Adding to the legal troubles, BitMEX also pleaded guilty to making false statements to an unnamed international bank. The company and its executives misled the bank to open an account for Shine Effort Inc. Limited, a shell company ultimately controlled by Delo, with BitMEX as the beneficial owner. So this saga may not be over just yet. (refer to update below)

This case underscores the importance of robust compliance measures in the cryptocurrency industry. The BitMEX case serves as a stark reminder that even leading platforms must comply with regulatory standards to foster a trustworthy and secure crypto ecosystem.

Richard Wells
Financial Desk

**UPDATE 7.11.24  13:31**

We never want to furnish information that may be misleading or false, my opinions and views are my own but based on information presented to me, in this case BitMEX contacted me to provide some clarification so that accurate information is presented to the public and I appreciate them doing do, here is the additional information: 

It seems as though BitMEX has accepted the Bank Secrecy Act charge, which only refers to “violating the Bank Secrecy Act by willfully failing to establish, implement, and maintain an adequate anti-money laundering (“AML”) program.”

For additional clarification please refer to their blog for the full official statement,  https://blog.bitmex.com/message-from-bitmex/