DOJ: Crypto Exchange BitMEX Pleads Guilty to Bank Secrecy Act Offense, BitMEX Says Its Old News

Global cryptocurrency exchange BitMEX has pleaded guilty to a Bank Secrecy Act offense, according to the US Department of Justice (DOJ).

BitMEX willfully “flouted” U.S. Anti-Money Laundering (AML) laws, claims the DOJ.

Damian Williams, the United States Attorney for the Southern District of New York, and Christie M. Curtis, the Acting Assistant Director in Charge of the New York Field Office of the Federal Bureau of Investigation (FBI), announced that HDR GLOBAL TRADING LIMITED, aka Bitcoin Mercantile Exchange or BitMEX, pled guilty today to violating the Bank Secrecy Act “by willfully failing to establish, implement, and maintain an adequate anti-money laundering (AML) program.”

The case has been assigned to U.S. District Judge John G. Koeltl.

U.S. Attorney Williams said:

“As BitMEX’s founders and long-time employee admitted in federal court in 2022, the company, one of the leading cryptocurrency derivatives platforms in the world from 2015 to 2020, operated in the United States without any meaningful anti-money laundering program, as required by federal law. 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.”

FBI Acting Assistant Director in Charge Curtis stated:

“By only mandating lax service access credentials, BitMEX not only failed to comply with nationally required anti-money laundering procedures designed to protect the US financial markets from illicit actors and transactions, but knowingly did so to increase the business’s revenue. Today’s plea represents the FBI’s steadfast dedication to ensuring adherence to all U.S. financial laws, protecting the U.S. financial system, and holding accountable those who attempt to establish a workaround for profits.”

According to the allegations in the Information and other filings and statements made in court:

Arthur Hayes, Benjamin Delo, and Samuel Reed founded BitMEX in “or about 2014, and Gregory Dwyer became BitMEX’s first employee in 2015 and later its Head of Business Development.”

BitMEX, which has long serviced and solicited business from U.S. traders and also operated through U.S. offices, was “required to register with the Commodity Futures Trading Commission (CFTC) and to establish and maintain an adequate AML program.”

AML programs ensure that financial institutions, “such as BitMEX, are not exploited for illicit purposes and serve to protect the integrity of the U.S. financial system and national security, more broadly.”

The company and its executives knew “that because BitMEX operated in the United States, including by serving U.S. customers, it was required to implement an AML program that included a ‘know your customer’ (KYC) component but chose to flaunt those requirements, requiring only that customers provide an email address to use BitMEX’s services.”

Indeed, senior executives each knew that customers “residing in the United States continued to access BitMEX’s trading platform through at least in or about 2018 and that BitMEX policies nominally in place to prevent such trading were toothless or easily overridden to serve BitMEX’s bottom line goal of obtaining revenue through the U.S. market without regard to U.S. criminal laws.”

Corporate executives took affirmative steps “purportedly designed to exempt BitMEX from the application of U.S. laws like AML and KYC requirements, despite knowing of BitMEX’s obligation to implement such programs by operating in the United States.”

The DOJ claims that BitMEX willfully evaded U.S. AML laws by lying to a bank about the purpose and nature of a subsidiary, allowing the company to pump millions of dollars through the U.S. financial system.

HDR GLOBAL TRADING LIMITED, an entity “incorporated in the Republic of Seychelles, pled guilty to one count of violating the Bank Secrecy Act, which carries a maximum sentence of five years in prison and a fine.”

The maximum potential sentence in this case “is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.”

The prosecution is being “handled by the Office’s Illicit Finance and Money Laundering Unit.”

In response to the U.S. Department of Justice’s decision to file a charge of Bank Secrecy Act (BSA) violation against HDR Global Trading Limited (HDR), the entity owning and operating BitMEX, the crypto exchange shared the following statement:

The BSA charge is “old news – this is the same charge brought in 2020 against their founders relating to BitMEX’s operations up to September 2020.”

The founders accepted this and “were sentenced back in 2022.”

BitMEX has long since fully “remediated its operations, and there is nothing new in this charge.”

The firm added:

“We have accepted the BSA charge, will seek an expedited sentencing hearing, and argue that no further fine should be imposed, given the substantial amounts already paid by our founders under the BSA charges brought against them, and under our no admission/no denial settlements with the CFTC and FinCEN in 2021. Our users, partners and regulatory stakeholders have long recognized that BitMEX’s compliance standards and activities have changed immeasurably since the period subject to the BSA charge.”

The firm also noted:

“In 2020 we implemented a … user verification program that has been verified twice by an independent auditor in respect of ensuring US Persons cannot trade on BitMEX. The development of this user verification program was built on top of existing KYC systems and controls that had been progressively implemented since the launch of the platform in 2014. Our KYC and AML programs have also been independently audited against the AML regimes of other major financial centers and sophisticated jurisdictions across the world.”

BitMEX claims:

“Needless to say, this charge has no impact on our business operations. The BitMEX platform will continue to lead the market as the safest, most trusted, financially-stable, and professionally operated crypto derivatives exchange, employing new products and innovations month by month to many satisfied users.”

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