HONG KONG, Oct 8 (Reuters)Top executives at BitMEX, one of the world’s largest cryptocurrency derivatives exchanges, will step back from their roles, the company said on Thursday, a week after U.S. prosecutors filed criminal charges against them.

The company said last week it would “vigorously” fight the allegations after the U.S Department of Justice charged the exchange’s three founders, Arthur Hayes, Samuel Reed and Benjamin Delo with violating the federal Bank Secrecy Act. Gregory Dwyer, its first employee, was also charged.

Prosecutors said BitMEX had made itself a “vehicle” for money laundering and sanctions violations.

BitMEX said Hayes and Reed have “stepped back from all executive management responsibilities for their respective CEO and CTO roles with immediate effect,” adding they and Delo would not hold executive positions and that Dwyer would take a leave of absence from his role as head of business development.

Chief Operating Officer Vivien Khoo, will take over as chief executive. She previously held roles at Goldman Sachs and Hong Kong’s markets watchdog.

The statement said the management changes had been made with the “full approval” of the founders.

“These changes to our executive leadership mean we can focus on our core business of offering superior trading opportunities for all our clients,” David Wong, chairman of 100x Group, BitMEX’s parent, said in the statement.

Hayes and Delo did not immediately respond to requests for comment sent via their social media profiles and Reed could not be reached for comment. Dwyer’s lawyer, Sean Hecker, who earlier said his client would contest the charges, did not immediately respond to an emailed request for comment.

BitMEX is one of the world’s largest bitcoin futures trading platforms, popular for its high liquidity and compliance requirements that are seen as less onerous than those for futures venues regulated in

What’s hot in crypto this week? 

BitMEX — it’s a peer-to-peer cryptocurrency exchange and derivatives trading website dealing in bitcoin. It was founded in 2014 in Hong Kong, but is currently based in the Seychelles. BitMEX offers a variety of trading services, including margin trading with up to 100-times leverage. That means a deposit of $1,000 will result in a trader having the ability to trade $100,000 worth of BTC and futures trading, allowing investors to bet on the future prices of BTC. 

The platform only handles prices in bitcoin, rather than fiat currencies, meaning that all gains and losses are in BTC. In 2016, BitMEX became the first Bitcoin denominated futures contract on a Chinese A Share index.

Why? 

On Oct. 1, the U.S. Attorney’s Office for the Southern District of New York unsealed a criminal indictment against several BitMEX executives, including the chief technology officers, alleging they failed to comply with the Bank Secrecy Act before allowing U.S. residents to trade funds on the platform. Specifically, the authorities said the exchange did not conduct know-your-customer checks, which opened the door for potential criminal activity. The U.S. Attorney even alleges that BitMEX failed to register with the Commodity Futures Trading Commission, or CFTC.

This is a big deal. BitMEX, which has objected to the charges, is one of the industry’s largest trading platforms. In 2016, it introduced a derivative known as perpetual swaps (futures that don’t expire) to the market, with up to 100-times leverage, and for many years it was the market leader by derivative volume and open interest. 

“BitMEX touts itself as the world’s largest cryptocurrency derivatives platform in the world with billions of dollars’ worth of trading each day. Much of this trading volume and its profitability derives from its extensive access to United States markets

KEY POINTS

  • BitMEX’s CEO Arthur Hayes and three others were charged with violation of the Bank Secrecy Act
  • The Commodity Futures Trading Commission alleged the company executed derivatives transactions on an unregistered board
  • FBI Assistant Director William F. Sweeney Jr. said the four defendants willfully evaded anti-money laundering requirements

Authorities have filed charges against the owners of derivatives cryptocurrency exchange BitMEX for allowing money laundering to thrive on the platform.

BitMEX’s CEO Arthur Hayes, company executives Samuel Reed and  Ben Delo, and its first employee Gergory Dwyer were charged with violation of the Bank Secrecy Act and conspiring to violate the act, the Department of Justice announced Thursday. 

Reed was arrested in Massachusetts while the others were still at large, said the New York Times.

The Commodity Futures Trading Commission (CFTC) alleged that the Hong Kong-based company executed derivatives transactions such as futures and options on an unregistered board. The regulator accused the company of failing to implement strict anti-money laundering (AML) and know-your-customer (KYC) features, which made Bitmex available as a vehicle for money laundering and sanctions violations, the indictment stated.

FBI Assistant Director William F. Sweeney Jr. said the four defendants willfully violated the Bank Secrecy Act by evading U.S. anti-money laundering requirements. The DOJ alleged that BitMEX and the founders knew too well that they were servicing U.S. customers but chose not to implement the AML and KYC requirements. Even if some measures were put in place to prevent U.S. customers from accessing the website, these measures could easily be overridden by, for example, the use of VPN.  

“For example, the defendants caused BitMEX and its parent corporations formally to incorporate in the Seychelles, a jurisdiction they believed had less stringent regulation and from which they could still serve U.S. customers without performing AML and KYC,” the

BitMEX, a cryptocurrency exchange that allows you to trade digital assets with up to 100x times leverage, has been charged with failing to prevent money laundering and offering U.S. customers crypto illicit derivative trading services.

Arthur Hayes, 34, Ben Delo, 36, and Samuel Reed, 31, as well as it’s first employee Gregory Dwyer, 37, have been charged with violating the Bank Secrecy Act and conspiracy to violate the act by “willfully failing to establish, implement, and maintain an adequate anti-money laundering (“AML”) program.” According to the statement by the United States Office of Southern District of New York, Reed has been arrested while Hayes, Delo and Dwyer remain at large. Each charge carries a maximum penalty of five years in prison.

According to Acting Manhattan U.S. Attorney Audrey Strauss, “these defendants flouted that obligation and undertook to operate a purportedly ‘off-shore’ crypto exchange while willfully failing to implement and maintain even basic anti-money laundering policies.”

FBI Assistant Director William F. Sweeney Jr. added that,

“One defendant went as far as to brag the company incorporated in a jurisdiction outside the U.S. because bribing regulators in that jurisdiction cost just ‘a coconut.’” 

The parent company for BitMEX is incorporated in the Seychelles.

In a related civil action, the U.S. Commodity Future Trading Commission named Hayes, Delo, and Reed, and the five BitMEX-related companies HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited, and HDR Global Services (Bermuda) Limited (BitMEX) for “operating an unregistered trading platform and violating multiple CFTC regulations, including