BitMEX Founders Plead Guilty to Violating the Bank Secrecy Act

BitMEX - at some point the largest derivatives exchange in the crypto market - has had a pretty challenging journey over the past few months. Now, the exchange's embattled former executives are starting to accept their fate.

BitMEX Founders Plead Guilty to Violating the Bank Secrecy Act

To end February, two of BitMEX's former executives officially pleaded guilty to violating the Bank Secrecy Act, bringing an end to months of investigations from financial watchdogs.

A Damning Admission FRom BitMEX's Top Brass

According to a report from the Department of Justice, Arthur Hayes and Benjamin Delo - two former top BitMEX executives - admitted to violating the law following a lengthy litigation process. Both men specifically claimed that they deliberately failed to establish, implement and maintain an Anti-Money Laundering (AML) program" at BitMEX.

The exchange, which is based in Seychelles, became notorious for its derivatives offering, with leverage of up to 100x. However, it did so without conducting any AML or KYC checks on customers while it operated. Essentially, it was the Wild West for trading activities in crypto.

As the Justice Department explained in its announcement, such an egregious lack of laws made BitMEX become a hotbed for money laundering activities. Thus, it began investigating the exchange and eventually brought charges in the latter part of 2020.

Damian Williams, the attorney for the Justice Department, explained that operating such a platform - especially if it is open to customers in the United States - confers an obligation on the developers to maintain proper regulatory checks. Instead, BitMEX chose to operate a platform in the shadows of the financial markets.

Will A Trial Be Necessary?

Hayes and Delo have agreed to pay $10 million in fines as part of their plea deal.

Besides the Bank Secrecy Act violation, the Justice Department had also flagged the executives for allegedly bribing the Seychelles government when the exchange moved to the island nation in 2020. Hayes specifically boasted that the bribery didn't cost him a thing, although the judge eventually dismissed that charge based on inconclusive evidence.

As the judge maintained in the report, Hayes had only made the comment jokingly, and there wasn't actually any proof that he indeed bribed the Seychelles government.

Another major issue for BitMEX was the fact that the exchange had been opening up its services to American users. BitMEX had a base of operations in the United States, but the exchange wasn't registered by the government. This meant that American traders were not allowed on its platform. So, when the Justice Department found that the exchange had been offering services to Americans - while having no AML or KYC checks - it was pretty much game over.

The trial for the executives is set to kick off in March as BitMEX will be hoping to put this entire debacle behind it once and for all. There is no doubt that this entire issue has affected BtMEX so much. From once being among the largest derivatives exchanges in the industry, BitMEX has seen its numbers plunge.

As far back as February 2021 - months after the Justice Department had charged BitMNEX and its executives - open interest on the exchange had been about $3.5 billion. Now, data from CoinGlass shows that the exchange's open interest is just a little over $500 million.

Not Backing Down

Despite the hard times, BitMEX has shown a commitment to being better. In January 2021, the exchange announced that it had completed its user verification program, with all customers on its platform now verified. The exchange added at the time that it had closed all open positions held by unverified users and that its operations had become entirely compliant.

BitMEX has also made a big splash as it looks to expand its services into Europe. In January, BXM Operations AG, a reading platform founded by BitMEX's founder, announced that it would move into Europe. The platform acquired Bankhaus von der Heydt - one of Europe's oldest banks - to create a regulated, all-rounded crypto platform that will serve customers in countries like Switzerland, Germany, and Austria.

Dietrich von Boetticher, Geran bank's owner, has already signed a purchase agreement with BXM. However, the deal remains subject to ratification from Bain - Germany's financial regulator. BXM expects to complete the deal in the middle of the year.

Alexander Höptner, BitMEX's CEO, has touted the two companies and their ability to combine traditional finance and crypto trading expertise. They hope that the expansion into Europe will help BitMEX grow its business and become more solvent, effectively putting its bad reputation behind it for good.


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