BitMEX founders fined $10M each for flouting AML rules

Arthur Hayes and Benjamin Delo each pleaded guilty to one count of violating the BSA, which carries a maximum penalty of five years in prison. The two were indicted in the Southern District of New York, along with fellow BitMEX co-founder Samuel Reed and the company’s first employee, Gregory Dwyer, in October 2020.

Reed pleaded guilty to violating the BSA on March 9 and was also fined $10 million.

BitMEX in August agreed to pay $100 million as part of a settlement with the Commodity Futures Trading Commission (CFTC) and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) for violating the BSA. The CFTC is also pursuing litigation against Hayes, Delo, and Reed that is ongoing.

The details: BitMEX is wholly owned and operated by HDR Global Trading Limited, which is incorporated in the Indian Ocean island of Seychelles. The platform operates as a convertible virtual currency derivatives exchange with offices worldwide.

Upon co-founding the company in 2014, Hayes and Delo knew offering services to U.S. users would require the creation of an AML program amid other know your customer (KYC) compliance requirements to meet the country’s regulations. BitMEX repeatedly stated it did not serve U.S. customers, though this was a “sham,” according to the Justice Department. Hayes and Delo knew the platform was accessible to U.S. users and tried to mask it through changing internal tracking information, prosecutors added.

From at least September 2015 through September 2020, BitMEX failed to establish and maintain an AML or KYC program, according to the Justice Department. The company did not file any suspicious activity reports (SARs) during that period. Hayes and Delo willfully caused these violations, according to the Justice Department, as they were aware the platform was being used to launder the proceeds of cryptocurrency hacks in addition to serving customers in Iran in violation of U.S. sanctions.

“The opportunities and advantages of operating in the United States are legion, but they carry with them the obligation for those businesses to do their part to help in driving out crime and corruption,” said U.S. Attorney Damian Williams in a press release. “Arthur Hayes and Benjamin Delo built a company designed to flout those obligations; they willfully failed to implement and maintain even basic anti-money laundering policies. They allowed BitMEX to operate as a platform in the shadows of the financial markets. Today’s guilty pleas reflect this office’s continued commitment to the investigation and prosecution of money laundering in the cryptocurrency sector.”

Upon its agreement with the CFTC and FinCEN, BitMEX said it was pleased to put the matter behind it. “Comprehensive user verification, robust compliance, and anti-money laundering capabilities are not only hallmarks of our business – they are drivers of our long-term success,” said CEO Alexander Höptner in a statement. The company said it has prohibited all U.S. users from accessing its trading platform as part of its remedial actions.

Editor’s note: This story was updated March 10 with the addition of Samuel Reed’s guilty plea and $10 million fine.