Feds And CFTC Go After BitMex CEO Arthur Hayes For Illegal Crypto Trading And Money-Laundering

Feds And CFTC Go After BitMex CEO Arthur Hayes For Illegal Crypto Trading And Money-Laundering

Feds And CFTC Go After BitMex CEO Arthur Hayes For Illegal Crypto Trading And Money-Laundering (Photo: CoinDesk archives)

The federal government and the Commodity Futures Trading Commission (CFTC) have brought criminal charges against the owners of Black-owned fintech company BitMEX, a leading Bitcoin exchange.

The Hong Kong-based BitMEX is one of the world’s biggest cryptocurrency trading exchanges and has claimed that it processes more than $1.7 billion in daily derivatives transactions, Inside Cryptocurrency reported.

The feds are accusing BitMEX of making itself a haven for hackers and illegal transactions, helping clients to launder money.

Federal prosecutors in Manhattan indicted Arthur Hayes, CEO BitMEX, and three co-owners, Benjamin Delo, Samuel Reed, and Gregory Dwyer. Reed was arrested in Massachusetts on Oct. 1, while the other three men remain at large, authorities said.

Also listed in the indictment were corporate entities HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited and HDR Global Services (Bermuda) Limited. They allegedly offered U.S. customers illicit crypto derivative trading services, CoinDesk reported.

“BitMEX made itself available as a vehicle for money laundering and sanctions violations,” the indictment said.

Audrey Strauss, the acting U.S. Attorney for the Southern District of New York announced that Hayes, Delo, Reed, and Gregory Dwyer (BitMEX’s first employee) were being charged with conspiracy to violate and violating the Bank Secrecy Act.

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“One defendant went as far as to brag the company incorporated in a jurisdiction outside the U.S. because bribing regulators in that jurisdiction cost just ‘a coconut,’” Assistant FBI Director William Sweeney Jr. said in a statement. “Thanks to the diligent work of our agents, analysts, and partners with the CFTC, they will soon learn the price of their alleged crimes will not be paid with tropical fruit, but rather could result in fines, restitution, and federal prison time.”

According to a filing, the Commodity Futures Trading Commission has charged BitMEX with processing futures transactions on an unregistered board, offering illegal options, failing to register as a futures commission merchant, failing to register as a designated contract market, failing to implement proper know-your-customer rules, and other counts, according to a CFTC press release.

BitMEX was founded in 2014 and became popular by allowing traders to buy and sell contracts tied to the value of bitcoin with fewer restrictions and rules than other exchanges, The New York Times reported.

BitMEX allows up-to-100 times leverage when buying and selling cryptocurrency derivatives.

The company has been reported to be under investigation by U.S. authorities for at least a year. 

BitMEX CEO Hayes lives in Hong Kong and was a former trader for Deutsche Bank and Citibank’s Exchange Traded Fund. Delo, a British mathematician, computer programmer, and entrepreneur is Britain’s youngest self-made billionaire, according to The Sunday Times. Samuel served as CTO of two technology companies — Tixelated and Global Brand Solutions of Hong Kong, according to CrunchBase.

The news triggered swift reaction on Twitter.

“People acting like the recent BitMex drama isn’t a big deal are underestimating the situation I think,” tweeted cryptocurrency analyst, trader and investor Don Alt. “High profile members of an industry possibly going to jail for something that almost everyone else in the industry also practices is unlikely to be a nothing burger IMO.”

Others remarked that BitMEX might have been targeted because it’s Black-owned.

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“The fact that bunch of old white guys at CFTC and FBI just shut down the most successful Black owned fintech in the world for violating the “Bank Secrecy Act” has finally made me a believer in institutional racism First we had #fakenews now we have #fakecrime” David Bailey @DavidFBailey tweeted.

Attorneys for Dwyer, one of the people charged, sent a statement to CoinDesk saying they would contest the charges, adding that their client had complied with the CFTC investigation “and was never so much as invited to speak with prosecutors in the United States Attorney’s Office in Manhattan.”

Dwyer “always worked in good faith to comply with all applicable regulations and requirements,” the statement said.