BitMEX Pleads Guilty to Bank Secrecy Act Violations: Details

Officials from the US Department of Justice announced that the cryptocurrency exchange BitMEX has pleaded guilty to violating the Bank Secrecy Act (BSA) by operating without a substantial Anti-Money Laundering (AML) program. 

BitMEX Failed to Implement BSA

US Attorney Damian Williams revealed in a notice on July 10 that BitMEX “willfully failed to establish, implement, and maintain” an adequate AML program from 2015 to 2020. This action is tied to the 2022 criminal proceedings against several of the exchange’s founders and employees. 

“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,” said Williams. “Today’s guilty plea underscores the necessity for cryptocurrency companies to adhere to US law if they wish to operate in the US market.”

Disregard for AML Policies

The crux of the charges is BitMEX’s deliberate disregard for AML regulations. Instead of implementing an AML program with Know Your Customer (KYC) standards, the exchange merely required users to provide an email address. This lax approach allowed for significant loopholes, especially for US-based users, which was in clear violation of federal law. Founders Arthur Hayes, Benjamin Delo, and Samuel Reed were aware of the implications of their actions, contributing to the severity of the charges.

BitMEX, officially known as HDR Global Trading Limited, is incorporated in the Republic of Seychelles. The responsible individuals at the exchange could face up to five years in prison and a substantial fine. 

BitMEX Co-Founders also Pleaded Guilty

In a related case in 2022, a court ordered Hayes, Delo, and Reed to collectively pay a $30 million civil penalty following a lawsuit by the US Commodity Futures Trading Commission. After pleading guilty to violating AML requirements under the BSA, the trio were each sentenced to probation.

The BitMEX case is not an isolated incident. US courts are gearing up to sentence individuals connected to the now-defunct cryptocurrency exchange FTX and Alameda Research. Starting in October, Judge Lewis Kaplan in the Southern District of New York will decide whether to imprison FTX co-founder Gary Wang and former engineering director Nishad Singh, following their guilty pleas. Additionally, former FTX CEO Sam Bankman-Fried is currently serving a 25-year sentence following his conviction.