CFTC sues BitMEX and its founders

The U.S. Commodity Futures Trading Commission (CFTC) has sued the cryptocurrency derivatives exchange BitMEX and its owners, including co-founder and CEO Arthur Hayes. They are accused of operating an unregistered trading platform and violating CFTC rules on KYC/AML procedures.

Defendants also include BitMEX co-founders Ben Delo and Samuel Reed, parent companies HDR Global Trading Limited and 100x Holdings Limited, as well as ABS Global Trading Limited, Shine Effort Inc Limited and HDR Global Services (Bermuda). The suit will be heard in the U.S. District Court for the Southern District of New York.

Additionally, the U.S. Department of Justice charged Hayes, Delo, Reed and BitMEX’s head of Business Development Greg Dwyer with violations of the Bank Secrecy Act.

As representatives of the agency stated, Reed (CTO) was arrested this morning in Massachusetts and will appear in court there. Hayes, Delo and Dwyer remain at large.

“We allege that the four defendants through their company-owned cryptocurrency trading platform BitMEX knowingly violated the Bank Secrecy Act, evading U.S. anti-money-laundering requirements,” said FBI Deputy Director William Sweeney.

Lawyer Jake Chervinsky noted that the DOJ charge is the standout among the filings. The maximum penalty for Hayes and his business partners on the charges is five years in prison.

🚨 The CFTC just charged BitMEX with illegally operating a derivatives trading platform.

But the *much* bigger news: USAO-SDNY has indicted Arthur Hayes & colleagues on criminal charges for Bank Secrecy Act violations. Maximum penalty: 5 years in prison.https://t.co/hSmaC54S5b

— Jake Chervinsky (@jchervinsky) October 1, 2020

In BitMEX, the charges are contested, and the exchange says it is prepared to defend its interests in court. Representatives say they have always complied with U.S. laws and followed regulator instructions.

In response to the U.S. CFTC and DOJ filings, we’ve posted a statement on our blog: https://t.co/TCmF7IvMmn

— BitMEX (@BitMEX) October 1, 2020

For the moment, Bitcoin’s price slid to around $10,500.

Source: BTC/USD chart from Bitstamp on TradingView.

Despite the situation, BitMEX processed withdrawals in normal mode at 17:45 UTC. The exchange said it would process further withdrawals at 8:00 UTC and 13:00 UTC (October 2).

Can confirm: https://t.co/J8BSWJac2j

— Sergej Kotliar (@ziggamon) October 1, 2020

Pretty impressed tbh. Took some risk off MEX, but not all. Still want to make money.

— Crypto_C (@Cryptoc_XBT) October 1, 2020

Per Glassnode, about 170,000 BTC are held on BitMEX’s accounts.

According to our data, around 170,000 $BTC (~$1.8 billion USD) are being held in #BitMEX wallets.

That’s almost 1% of the circulating #Bitcoin supply.https://t.co/avHmJDN1b2 pic.twitter.com/sf6ahcaUUf

— glassnode (@glassnode) October 1, 2020

In May, The Bitcoin Manipulation Abatement LLC (BMA) filed a lawsuit against BitMEX in the United States, accusing the exchange of operating illegally in the United States, manipulating cryptocurrency markets, fraud, unfair business practices, money laundering and improper management of raised funds.

In August, BitMEX introduced new verification rules, under which users must confirm their residential address and provide identity documents. The changes do not apply to corporate clients.

Earlier, the exchange’s parent company underwent restructuring, resulting in the creation of 100x Group to oversee the exchange. The company said its plans extend far beyond BitMEX.

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