Crypto Exchange BitMEX Pleads Guilty to Bank Secrecy Act Violations

The US Department of Justice has disclosed that the cryptocurrency exchange BitMEX has admitted guilt in a case involving breaches of the Bank Secrecy Act (BSA).

This offense concerns the exchange’s operations from 2015 to 2020, when it was one of the world’s top venues for bitcoin derivatives, without a substantial Anti-Money Laundering (AML) program.

BitMEX Pleads Guilty to Bank Secrecy Act Violations

US Attorney Damian Williams from the Southern District of New York highlighted the severe implications of BitMEX’s actions, noting that the platform was utilized extensively for substantial money laundering activities and schemes to evade sanctions, thereby endangering the integrity of the financial system.

BitMEX has a noticeably loose approach to AML rules, asking users for only their email address instead of putting in place an AML program that adheres to Know Your Customer guidelines.

The three founders, Arthur Hayes, Benjamin Delo, and Samuel Reed, knew that the lax enforcement of regulations affected US-based customers in violation of federal laws.

The cryptocurrency exchange, which was founded in the Republic of Seychelles and was formerly known as HDR Global Trading Limited, is currently facing significant legal ramifications.

Individuals at fault within the organization may face a maximum sentence of five years in prison in addition to possible penalties. The foundation history of BitMEX from 2014, when it actively pursued business with American traders and operated out of American offices, substantiates this legal position.

At that time, BitMEX was required to register with the Commodities Futures Trading Commission and implement a robust anti-money laundering policy.

Guilty Plea Highlights Ongoing Regulatory Action in Crypto

A specific crime of breaking the Bank Secrecy Act, which carries a potential sentence of five years in prison and a monetary fine, is the subject of the most recent guilty plea. This circumstance brings to light continuing legal action taken by regulators in the cryptocurrency industry.

In the area of cryptocurrencies, there have been other instances of regulatory violations as well. BitMEX is not the biggest or the first exchange to be penalized for breaking American laws.

In a noteworthy parallel, Changpeng Zhao, the former CEO of Binance, the biggest cryptocurrency exchange in the world, just started serving a four-month sentence at a low-security federal prison in California.

Zhao was found guilty in late 2023 as a result of Binance’s inadequate anti-money laundering procedures.

Founders Previously Penalized by CFTC

Additionally, in 2022, a judge ordered Hayes, Delo, and Reed to pay a total of $30 million in civil penalties as part of a lawsuit brought by the US Commodity Futures Trading Commission. They admitted guilt to breaking AML laws under the BSA and were each given a probationary sentence.

The US legal system is nevertheless closely examining the bitcoin market. Following their guilty pleas, those connected to the now-defunct cryptocurrency exchanges FTX and Alameda Research will soon be sentenced.

Judge Lewis Kaplan of the Southern District of New York will make decisions regarding the possible imprisonment of Nishad Singh, the former engineering director of FTX, and co-founder Gary Wang beginning in October. Sam Bankman-Fried, the former CEO, was found guilty at trial and is presently serving a 25-year term.