US authorities on Thursday charged the founders of BitMEX, a major cryptocurrency exchange, with wilfully failing to prevent money laundering and operating an unregistered trading platform.
The charges are the latest in a years-long effort by the US to crackdown on a cryptocurrency market that was once largely unregulated but has moved more and more under the purview of governments.
BitMEX, which is owned by a parent entity in the Seychelles, was founded in 2014 by Arthur Hayes, Ben Delo and Samuel Reed. The exchange promises customers the opportunity to trade with up to 100 times leverage.
The Department of Justice brought criminal charges against the trio for violating rules under the Bank Secrecy Act that require financial institutions to maintain anti-money laundering controls. Prosecutors also charged Gregory Dwyer, who was BitMEX’s first employee.
Audrey Strauss, the acting Manhattan US attorney, said the four men “undertook to operate a purportedly ‘offshore’ crypto exchange while wilfully failing to implement and maintain even basic anti-money laundering policies”.
“In so doing, they allegedly allowed BitMEX to operate as a platform in the shadows of the financial markets,” she added.
The Commodity Futures Trading Commission also brought civil charges against Mr Hayes, Mr Delo and Mr Reed, as well as five entities behind BitMEX, for failing to register with the agency and not implementing AML procedures.
The CFTC said BitMEX had taken in $11bn worth of bitcoin in deposits and earned $1bn in fees since its founding. It alleged the exchange had operated in part from the US and solicited American customers.
“New and innovative financial products can flourish only if there is market integrity,” said Heath Tarbert, the CFTC chairman. “We can’t allow bad actors that break the law to gain an advantage over exchanges that are doing the right thing by complying