BitMEX pleads guilty over bank secrecy violation

BitMEX pleaded guilty to violating the Bank Secrecy Act on Wednesday after failing to implement anti-money laundering (AML) and Know Your Customer (KYC) programs on its platform.

BitMEX co-founders could face jail time after pleading guilty to charges

Damian Williams, the US Attorney for the Southern District of New York, disclosed on Wednesday that crypto exchange BitMEX pleaded guilty to flouting the Bank Secrecy Act.

The exchange refused to implement robust AML protection and KYC verification processes on its platform. This made it vulnerable to "large-scale money laundering and sanctions evasion schemes, posing a serious threat to the integrity of the financial system."

The report states that BitMEX co-founders Arthur Hayes, Benjamin Delo, and Samuel Reed willfully failed to comply with the law, knowing that anti-money laundering programs are a requirement for crypto companies.

"The company and its executives knew that because BITMEX operated in the United States, including by serving US customers, it was required to implement an AML program that included a "know your customer" ("KYC") component but chose to flout those requirements, requiring only that customers provide an email address to use BITMEX's services," the report stated.

The company also allegedly lied to a bank regarding the purpose of a subsidiary. This enabled it to move millions of dollars through the US financial system.

BitMEX's clash with US courts dates back to 2020 when the Commodity Futures Trading Commission (CFTC) charged the exchange with violating regulations regarding AML. The case resulted in BitMEX paying a fine of $100 million. 

"The BSA charge is old news [...] We have accepted the charge, will seek an expedited sentencing hearing, and argue that no further fine should be imposed, given the substantial amounts already paid by our founders under the BSA charges brought against them, and under our no admission/no denial settlements with the CFTC and FinCEN in 2021," said BitMEX in an official statement.

"Our users, partners and regulatory stakeholders have long recognised that BitMEX’s compliance standards and activities have changed immeasurably since the period subject to the BSA charge. This charge has no impact on our business operations," said BitMEX.

The US Attorney's Office's Illicit Finance and Money Laundering Unit will handle the prosecution, and the company's co-founders may face a five-year prison sentence.