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BitMEX Broke the Bank Secrecy Act: Pleads Guilty

Key Takeaways 

  • BitMEX admitted to violating the BSA. 
  • Lacked proper KYC/AML programs from 2015 to 2020. 
  • Allowed anonymous trading, leading to money laundering. 
  • Executives previously pleaded guilty to similar charges. 
  • Misled a foreign bank to open a shell company account. 
  • Case overseen by Judge John G. Koeltl (SDNY). 
  • DOJ emphasizes the importance of compliance for crypto companies. 
BitMEX logo and gavel representing legal implications
Source: https://www.theblock.co/linked/147236/bitmex-launches-spot-market-in-hopes-of-revival

BitMEX, a Seychelles-based crypto exchange, has admitted to violating the Bank Secrecy Act (BSA). The U.S. Department of Justice (DOJ) announced this guilty plea on Wednesday. BitMEX failed to set up proper know-your-customer (KYC) and anti-money laundering (AML) programs. This violation occurred from September 2015 to September 2020. 

During this period, BitMEX allowed customers to trade crypto anonymously. Users didn’t need to provide any identifying information. This lack of verification attracted money laundering and sanctions violations. 

Key Points from the DOJ Announcement 

  • Failure in KYC/AML Programs: 
  • BitMEX did not implement required KYC and AML programs. 
  • This oversight made the platform a hub for illicit activities. 
  • Anonymous Trading: 
  • BitMEX allowed anonymous registration and trading. 
  • Advertised as a platform without real-name verification. 
  • Legal Consequences: 
  • BitMEX’s lax standards led to serious legal issues. 
  • Charged by the Commodity Futures Trading Commission (CFTC) and the DOJ. 
  • Executives’ Guilty Pleas: 
  • Arthur Hayes, Samuel Reed, Benjamin Delo, and Gregory Dwyer were charged. 
  • These executives pleaded guilty to the same charges earlier. 

Table of Events 

Date 

Event 

September 2015 

BitMEX begins violating BSA requirements. 

September 2020 

Charges filed against BitMEX by CFTC and DOJ. 

2022 

BitMEX executives plead guilty. 

July 2024 

BitMEX pleads guilty to BSA violations. 

Detailed Account of Violations 

BitMEX’s founders and a long-time employee admitted in federal court that the company operated in the U.S. without an effective AML program. This operation lasted from 2015 to 2020. BitMEX, a leading crypto derivatives platform, posed a threat to financial system integrity due to its lax standards. U.S. Attorney Damian Williams emphasized the importance of compliance for crypto companies using the U.S. market. 

Similar Charges Against Executives 

The charges against BitMEX’s co-founders and its first employee mirrored those against the company. The executives involved were: 

  • Samuel Reed 
  • Benjamin Delo 
  • Gregory Dwyer 

These charges were related to BitMEX’s activities during the same period. The executives previously admitted guilt for similar violations. 

Misleading a Foreign Bank 

Additionally, BitMEX entered a guilty plea to lying to a foreign bank. The company and its executives deceived the bank to open an account for Shine Effort Inc. Limited, a shell company controlled by Benjamin Delo. BitMEX was the beneficial owner of this account. 

Ongoing Legal Proceedings 

BitMEX has not yet been sentenced. The case is under the supervision of U.S. District Judge of the Southern District of New York (SDNY), John G. Koeltl. The DOJ did not comment on why charges against the company were filed four years after those against its executives. 

Conclusion 

BitMEX’s guilty plea highlights the need for crypto companies to adhere to U.S. laws. The exchange’s failure in implementing KYC and AML programs led to serious legal consequences. This case serves as a reminder for all crypto platforms to maintain compliance with regulatory standards. 

BitMEX’s case is a significant event in the crypto world, reinforcing the importance of regulatory adherence for maintaining market integrity. 

July 14, 2024 at 12:00 pm

Updated July 14, 2024 at 12:00 pm

Disclaimer

Remember, investing in cryptocurrencies involves risks, and it’s important to conduct thorough research and seek professional advice before making any financial decisions. (Please keep in mind that this post is solely for informative purposes and should not be construed as financial or investment advice.)

FAQ

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