US government files charges against crypto exchange BitMEX

The U.S. Department of Justice and the Commodity Futures Trading Commission filed charges today against cryptocurrency exchange BitMEX for allegedly evading U.S. money laundering laws.

BitMEX, registered in Seychelles, is one of the world’s most popular cryptocurrency exchanges. Based on volume alone, it’s the second most popular cryptocurrency exchange in the world, according to data from Nomics.

Despite not being based in the U.S. or operating in the U.S., which has never stopped U.S. authorities before, the claim here is that BitMEX isn’t complying with U.S. “know your customer” laws and hence is allegedly facilitating money laundering.

Named in the CTFC legal action are BitMEX Chief Executive Officer Arthur Hayes, company owners Ben Delo and Samuel Reed, and corporate entities HDR Global Trading Limited, 100x Holding Ltd., ABS Global Trading Ltd., Shine Effort Inc Ltd. and HDR Global Services (Bermuda) Ltd.

Hayes, Delo, Reed and Gregory Dwyer (BitMEX’s first employee) are also being charged with violating the Bank Secrecy Act and conspiracy to violate the act, according to Coindesk. Reed has already been arrested on the charges.

While noting again that BitMEX is not registered in the U.S. and operates legally in a foreign country, the CTFC nonetheless claimed that a foreign entity is bad for the U.S. “For the United States to be a global leader in this space, it is imperative that we root out illegal activity like that alleged in this case,” the CTFC said in a statement. “New and innovative financial products can flourish only if there is market integrity. We can’t allow bad actors that break the law to gain an advantage over exchanges that are doing the right thing by complying with our rules.”

In a separate statement referring to the charges from the Justice Department, U.S. Federal Bureau of Investigation Assistant Director William F. Sweeney Jr. said, “As we allege here today, the four defendants, through their company’s BitMEX crypto-currency trading platform, willfully violated the Bank Secrecy Act by evading U.S. anti-money laundering requirements. 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.’”

Even if it did cost a coconut to register the company in Seychelles, the U.S. is not at war with Seychelles and the country is certainly not hacking or trying to hack the U.S. government. According to the U.S. Department of State, the U.S. and Seychelles have a friendly relationship.

In a statement, BitMEX said that “we strongly disagree with the U.S. government’s heavy-handed decision to bring these charges and intend to defend the allegations vigorously. From our early days as a start-up, we have always sought to comply with applicable U.S. laws, as those laws were understood at the time and based on available guidance.”

The exchange itself has not been affected by the SEC and CTFC action and continues to trade as normal.

Image: Marco Verch/Flickr

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