Former CEO Arthur Hayes and other executives at the firm are still likely to face charges on alleged violations of the Bank Secrecy Act.
Crypto derivatives exchange BitMEX has agreed to pay up to $100 million to resolve a case from the United States Commodity Futures Trading Commission, or CFTC, and the Financial Crimes Enforcement Network, or FinCEN.
In a Tuesday announcement, the Commodity Futures Trading Commission said the U.S. District Court for the Southern District of New York had entered a consent order for HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited and HDR Global Services Limited to be charged with illegally operating the BitMEX platform.
As part of the settlement with both the CFTC and FinCEN, BitMEX will pay a $100 million civil monetary penalty “for illegally operating a cryptocurrency trading platform and anti-money laundering violations.” In addition, the company will be required to hire an independent consultant to conduct a historical analysis of its transactions to determine if it failed to properly report suspicious activity.
“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 chair Rostin Behnam. “The CFTC will take prompt action when activities impacting CFTC jurisdictional markets raise customer and consumer protection concerns.”
Though the CFTC announcement mentioned that the settlement stemmed from the case against former CEO Arthur Hayes and other executives at the firm, the individuals are still likely to face charges on alleged violations of the Bank Secrecy Act. According to a spokesperson for the BitMEX co-founders, Hayes, Ben Delo and Sam Reed were not parties to the CFTC and FinCEN settlement. Hayes has been free on a $10 million bail since surrendering to U.S. authorities in April, while the trial of some of the former executives is scheduled to begin in March 2022.
“BitMEX allowed customers to access its platform and conduct derivative trading without appropriate customer due diligence — collecting only an email address and failing to verify customer identity,” said the Financial Crimes Enforcement Network. “Despite BitMEX’s public representation that its platform was not conducting business with U.S. persons, FinCEN found that BitMEX failed to implement appropriate policies, procedures and internal controls to screen for customers that use a virtual private network to access the trading platform and circumvent internet protocol monitoring.”
According to FinCEN, BitMEX failed to maintain adequate Anti-Money Laundering safeguards and report 588 instances of suspicious activity to the government agency for more than six years. FinCEN alleged that the exchange conducted at least $209 million in transactions with “known darknet markets or unregistered money services businesses providing mixing services.”
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Following the charges first brought in October 2020, BitMEX announced plans to shore up its Anti-Money Laundering and trade surveillance protocols. As of January, the exchange said it had improved its Know Your Customer capabilities, reporting that all previously open positions held by unverified accounts had been closed.
“We are very glad to put this behind us,” said BitMEX CEO Alexander Höptner. “We take our responsibilities extremely seriously, and will continue to actively engage with regulators around the world to ensure that we play a positive role in helping to shape the future of this extraordinary asset class.”
