The US Attorney's Office opened a criminal case against the founders and heads of the BitMEX crypto exchange. The US Trading Futures Commission also accuses BitMEX of violating various AML and bank secrecy laws.
On October 1, the Commodity Futures Trading Commission (CFTC) announced the filing a enforcement action in the Southern District of New York against the five entities and three individuals that own or operate the BitMEX trading platform. The charges relate to non-compliance with the requirements for registration of the trading platform, violations of the rules for identifying clients, failure to comply with the necessary procedures to combat money laundering and banking secrecy.
The defendants include company owners Arthur Hayes, Ben Delo and Samuel Reed, who operate the BitMEX platform through corporate entities HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited and HDR Global Services (Bermuda) Limited (BitMEX).
In its official statement, CFTC notes that the volume of deposits in bitcoins on BitMEX accounts exceeds $11 billion. The platform earned more than $1 billion in trading fees, with a significant proportion of its business taking place in the US market and with US residents.
The lawsuit alleges that, at least from November 2014 to the present, at the direction of Hayes, Delo and Reed, BitMEX has illegally offered leveraged retail commodity transactions, futures, options, and swaps on cryptocurrencies including bitcoin, ether, and litecoin, allowing traders to use leverage of up to 100 to 1 when entering into transactions on its platform. According to the complaint, BitMEX processed transactions in cryptocurrency derivatives with a combined value of trillions of dollars and earned more than $1 billion in commissions since the beginning of operations in 2014. Moreover, the complaint further charges BitMEX with violating compliance procedures required by financial institutions. CFTC also accuses BitMEX of violating US laws regarding know your customer (KYC) procedures, customer information programs and anti-money laundering procedures.
In addition to the CFTC lawsuit, the US Department of Justice opened criminal cases against the owners and management of BitMEX on two counts of violation of bank secrecy law and conspiracy to violate the BSA (Bank Secrecy Act), which implies about 5 years in prison.
Following this announcement, BitMEX CTO and co-owner Samuel Reed was arrested. A BitMEX spokesman said that the company does not recognize the claims of the American authorities, calling them arbitrary and plans to defend its interests in court.
According to Glassnode, there are 170,000 BTC in BitMEX accounts. Average daily trading volume on BitMEX hovers just below 30,000 BTC.