BitMEX co-founder and Bitcoin billionaire pleads not guilty after surrendering in New York

• Former BitMEX executive Ben Delo surrenders in New York and pleads not guilty to all charges against him.
• Delo has been released on a $20 million bail bond and is allowed to return to the U.K. to await trial.
• Two out of the four defendants who were accused of violating the Bank Secrecy Act by the Department of Justice and the CFTC are still at large.

Ben Delo, one of the founders and former executives of BitMEX — once the largest crypto derivatives exchange — has pleaded not guilty after surrendering to U.S. authorities in New York. Delo was arraigned remotely on Monday before Magistrate Judge Sarah L. Cave. After having pled not guilty to all charges, his bail terms would allow him to return to the U.K. to await trial after being released on a $20 million bail bond.

Wanted by the DoJ and the CFTC

Former BitMEX executives, including Ben Delo, Arthur Hayes, Sam Reed, and first hire Gregory Dwyer, were accused of violating and conspiring to violate the Bank Secrecy Act by the U.S. Department of Justice and the Commodity Futures Trading Commission, "by willfully failing to establish, implement, and maintain an adequate anti-money-laundering (AML) program." 

Each count carries a maximum penalty of five years in prison.

The Oxford-educated mathematician and programmer — Delo, who is a Hong Kong resident, was in the U.K. at the time the indictment was unsealed. Rachel Miller, a spokesperson for Delo told Bloomberg:

The charges against Ben are unfounded and represent unwarranted overreach by the U.S. authorities. Ben intends to defend himself against the charges and clear his name in court.

The rise and fall of the world's largest crypto derivatives exchange

BitMEX was originally incorporated in Seychelles, which conveniently minimized its tax exposure. While regulators were still trying to understand the world of crypto derivatives, BitMEX co-founder Arthur Hayes saw an opportunity. 

After a year of its launch, BitMEX's business was flat until late 2015, where the company offered 100x leverage, following Brexit and Donald Trump's election as the U.S. President that year. 

The firm quickly expanded in 2017, and BitMEX hired 30 employees for its business expansion. 

In 2018, BitMEX was declared the world's largest cryptocurrency exchange, and Delo was dubbed the youngest self-made billionaire in the U.K. Shortly after, BitMEX leased one of the most expensive real estate in Hong Kong, next to institutions such as Goldman Sachs, Barclays, and Bloomberg. 

NYU economics professor Nouriel Roubini went into a heated debate with Hayes at the Asia Blockchain Summit in 2019, saying that at BitMEX, "everybody gets rekt," except the firm's founders — who reaped commissions, fees, and profited off of people losing massive amounts of money. 

Roubini later revealed in an op-ed, "The Great Crypto Heist," that: 

BitMEX insiders revealed to me that this exchange is also used daily for money laundering on a massive scale by terrorists and other criminals from Russia, Iran, and elsewhere; the exchange does nothing to stop this, as it profits from these transactions. 

The NYU professor further shamed regulators who have been "asleep at the wheel as the crypto cancer has metastasized."

A civil suit was also filed against BitMEX and its founders on October 1, 2020, by the CFTC, for operating an unregistered trading platform while also failing to implement required AML procedures. The regulatory agency did not believe BitMEX's narrative about the business being off-limits to U.S. citizens. According to a civil filing, the derivatives exchange's volume and fees were largely from American customers. 

Prosecutors added that the trading platform allowed customers to open accounts with an anonymous email and password and could deposit Bitcoin straight away without verifying the vast majority of its users' identity or location. 

Crypto community outraged at the double standards

The charges against BitMEX's founders have angered many in the crypto community, as large institutions such as HSBC have not had any officials indicted even after admitting to money laundering. 

HSBC revealed that it had laundered almost one billion dollars for the Sinaloa cartel and moved money for sanctioned customers in countries including Myanmar, Iran, Cuba, and Sudan. 

The Justice Department decided not to indict the bank or its officials but instead to have the institution pay a $1.92 billion fine and employ the addition of a court-appointed compliance monitor. 

HSBC was not the only institution — Standard Chartered, Barclays, Credit Suisse, ING, Deutsche Bank, and others have also paid fines for mishaps that included money laundering and tax fraud. 

BitMEX to stay out of legal troubles

BitMEX has been making massive efforts to become compliant after the DoJ and the CFTC sued the company. 

The founders have officially stepped down from their roles at the firm after their illegal conduct charges. Moreover, all BitMEX users must verify their identity before they could deposit, trade, or withdraw funds since December 2020. According to BitMEX's official announcement, 100% of the platform's volume is now fully verified. 

The Chief Compliance Officer of the 100x Group, Malcolm Wright, said:

We are now one of the few crypto derivatives exchanges outside the U.S. to be implementing know-your-customer requirements before a user can complete their initial deposit and first trade. This significant achievement is the result of years of work to develop a robust compliance function to meet international standards. BitMEX has long been known for having world-class security, technology, and product innovation. With all users on the BitMEX platform verified, we are demonstrating our commitment to being a compliance standout as well.

The completion of the user verification program has become a major milestone in the journey of BitMEX while marking a bright start for the exchange in 2021.