- BitMEX admitted to violating the Bank Secrecy Act
- Founders received probation and $10M fines
- BitMEX restructured to comply with US regulations
On Wednesday, the crypto exchange and derivatives platform BitMEX admitted to violating the Bank Secrecy Act.
The Bank Secrecy Act (BSA), also known as the Currency and Foreign Transactions Reporting Act, is a law in the United States dating back to 1970. Its main objective is to combat money laundering from illegal activities such as drug trafficking and terrorist financing and other forms of financial crime.
BitMEX Failed to Implement Adequate Anti-Money Laundering Program
According to the U.S. Attorney’s Office for the Southern District of New York, BitMEX failed to implement an adequate anti-money laundering (AML) program, violating U.S. regulations.
This has potentially allowed the platform to be used for illegal activities such as money laundering and penalty evasion.
U.S. Attorney Damian Williams stated:
“BitMEX’s founders and longtime employees admitted in federal court in 2022 that the company operated in the United States without a meaningful anti-money laundering program as required by federal law.”
Legal Troubles for BitMEX Executives and Founders
Since 2022, BitMEX has been dealing with some pretty serious legal issues in the United States.
Towards the end of 2022, prosecutors were looking for a 12-month probation sentence for Greg Dwyer, who used to be the head of business development. He was accused of breaking the U.S. Bank Secrecy Act.
Earlier that year, Arthur Hayes, a founder of BitMEX, pleaded guilty and was sentenced to six months of house arrest. Another founder, Ben Delo, was sentenced to 30 months of probation.
As part of the plea agreement, each co-founder was required to pay a $10 million fine, which corresponds to the financial gains made through their crime.
BitMEX’s Evasion of AML and KYC Regulations
The Justice Department stated that BitMEX and its executives were required to establish an anti-money laundering (AML) program with a Know-Your-Customer (KYC) component for their operations in the United States.
However, the company and its managers deliberately ignored these requirements. They required only an e-mail from customers to access the exchange’s services.
The complaint states that BitMEX continued to serve thousands of customers in the United States from November 2014 until at least September 2020. This was even after the company reportedly exited the U.S. market in September 2015 to evade compliance with U.S. laws.
In addition, according to the complaint, executives were aware that BitMEX’s policies to prevent users from accessing the platform were ineffective or easily circumvented to increase revenue from the U.S. market while ignoring criminal laws.
To avoid anti-money laundering laws, BitMEX changed a branch’s statement of purpose and nature, making it appear to be a bank. In this way it could move millions of dollars through the financial system.
The BitMEX exchange is still waiting for a ruling. U.S. District Judge John G. Koeltl in the Southern District of New York (SDNY) is handling the case.
