Prosecutors in the United States have filed criminal charges accusing four founders and executives of BitMEX, one of the world’s largest cryptocurrency derivatives exchanges, of evading rules designed to stop money laundering.
The Department of Justice charged Arthur Hayes, Samuel Reed and Benjamin Delo, who together founded BitMEX in 2014, and Gregory Dwyer, its first employee and later head of business development, with violating the federal Bank Secrecy Act and conspiring to violate that law.
Hayes, 34, of Buffalo, New York, and Hong Kong, is chief executive of BitMEX, while Reed is its chief technology officer.
The Commodity Futures Trading Commission filed a separate civil lawsuit to halt BitMEX’s US commodity derivatives business. BitMEX is short for Bitcoin Mercantile Exchange.
“We strongly disagree with the US government’s heavy-handed decision to bring these charges, and intend to defend the allegations vigorously,” a spokesman for BitMEX’s parent HDR Global Trading Ltd said.
Dwyer’s lawyer, Sean Hecker, said his client will contest the charges. Lawyers for the other individual defendants could not be identified.
An indictment filed in Manhattan federal court said the defendants flouted their obligation to implement an anti-money laundering programme with a “know your customer” requirement, which they knew was needed because BitMEX served US customers.
Bribing with coconuts
Their steps allegedly included incorporating BitMEX in the Seychelles because of its seemingly less stringent regulations, and where Hayes once bragged it would cost less to bribe authorities – just “a coconut” – than in the US.
Prosecutors said BitMEX ultimately made itself a “vehicle” for money laundering and sanctions violations, including claims it was used to launder proceeds of a cryptocurrency hack and that customers from Iran traded on its platform.
The defendants “will soon learn the price of their alleged crimes will not be paid with tropical fruit,” FBI Assistant Director William Sweeney said in a statement.
Each count carries a maximum five-year prison term. Reed was arrested in Massachusetts and the other defendants are at large.
The case is US vs Hayes et al, US District Court, Southern District of New York, No. 20-cr-00500.