U.S. Department of Justice: BitMEX Admits to Violating Bank Secrecy Act, Failing to Implement KYC and AML Measures

The U.S. Department of Justice (DOJ) announced yesterday on the 10th that the cryptocurrency exchange BitMEX has pleaded guilty to violating the Bank Secrecy Act (BSA) by failing to implement robust and effective Know Your Customer (KYC) and Anti-Money Laundering (AML) measures. As a result, the individuals responsible may face up to five years of imprisonment and fines.

BitMEX Admits Violating Bank Secrecy Act

The announcement stated that BitMEX has acknowledged operating without establishing any "meaningful" anti-money laundering measures and has violated the Bank Secrecy Act.

The DOJ accused BitMEX's three co-founders, Arthur Hayes, Samuel Reed, and Benjamin Delo, as well as their first employee Gregory Dwyer, of intentionally not implementing the required KYC and AML measures on the exchange from September 2015 to September 2020:

The company and its executives were aware that they were providing services to U.S. users, therefore requiring the implementation of KYC and AML programs. However, they chose to ignore these regulations and only required users to provide an email to use BitMEX services.

The DOJ emphasized that BitMEX instead engaged in illegal activities, attempting to exclude the company from the scope of U.S. law:

As part of BitMEX's intentional evasion of U.S. anti-money laundering laws, the company even misrepresented the purpose and nature of its subsidiary Shine Effort Inc. Limited to banks in order to transfer millions of dollars within the U.S. financial system.

Additionally, "In reality, the shell company was controlled by Delo."

However, as early as 2020, the U.S. Commodity Futures Trading Commission (CFTC) had filed similar charges against BitMEX and its relevant executives, all of whom pleaded guilty at the time and were ultimately sentenced in 2022 with probation for the three co-founders and a fine of approximately $30 million.

Damian Williams: BitMEX Used as a Large-Scale Money Laundering Tool

Prosecutor Damian Williams stated that BitMEX "intentionally" failed to establish, implement, and enforce effective anti-money laundering programs:

Despite being one of the leading cryptocurrency derivatives platforms globally from 2015 to 2020, as acknowledged by BitMEX's founders and executives in 2022, the company did not implement any meaningful anti-money laundering measures during its operations in the U.S.

He added, "BitMEX thus became a tool for large-scale money laundering and sanctions evasion, posing a serious threat to the integrity of the financial system."

In response, the individuals responsible for BitMEX and its entity HDR Global Trading may face up to five years in prison and fines.

BitMEX: Charges are Old Content, Already Remedied and Compliant

In response to the charges, BitMEX stated that the accusations related to the Bank Secrecy Act are the same as those in 2020, and BitMEX has already accepted and fully remedied them:

We have accepted the Bank Secrecy Act charges and will seek an expedited hearing for judgment, arguing against additional fines as our founders have already paid substantial fines in the "neither admit nor deny" agreements with the CFTC and the Financial Crimes Enforcement Network (FinCEN) previously.

BitMEX also indicated that its compliance standards and activities have undergone significant changes since the period covered by the Bank Secrecy Act charges:

In 2020, we implemented an industry-leading user verification program, audited twice by independent auditors to ensure that U.S. persons cannot trade on BitMEX; and our KYC and AML programs have been independently audited according to the standards of other major financial centers and complex global jurisdictions.

BitMEX emphasized that these charges will not affect the company's business operations, and the BitMEX platform will continue to lead the market as the safest, most professional, trusted, and financially stable cryptocurrency derivatives exchange.

Other Ongoing Lawsuits

Currently, U.S. courts are still hearing lawsuits against individuals related to the now defunct exchange FTX and Alameda Research, including FTX co-founder Gary Wang and former Chief Engineer Nishad Sing, while former CEO SBF is currently serving a sentence.

On the other hand, U.S. courts have also approved most of the SEC's charges against Binance.US, including allegations related to BNB's ICO as securities sales and failure to register as a broker-dealer; former CEO CZ has reported to prison last month to begin a 4-month sentence due to multiple DOJ charges.

Binance Facing Scrutiny? Judge Approves Most SEC Charges, Only BUSD and Earn Services Not Investment Contracts

Previously, Hayes had voiced support for Binance, which was wrongly targeted by U.S. regulators through citing past financial scandals, but now faces regulatory scrutiny as well.

BitMEX Founder Criticizes U.S. Judicial System, Supports Binance and CZ by Recounting Famous Financial Scandals