BitMEX Announces $ 100 Million CFTC and FinCEN Settlement

The crypto derivatives trading platform BitMEX announced on Tuesday that it had reached a settlement on the civil charges with the US Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN).

BitMEX will pay a fine of $ 100 million to resolve the charges, the company said in a blog post, with $ 50 million going to the CFTC and the rest to FinCEN. The blog post did not address criminal charges filed by the US Department of Justice against former BitMEX CEO Arthur Hayes and other executives.

A consent order in the CFTC case, filed Tuesday, revealed that BitMEX was offering unlicensed, leveraged crypto products to U.S. people – a violation of federal law – between 2014 and 2020. the company were “insufficient” and lacked effective knowledge of your customer. (KYC) and against money laundering (AML), according to the document.

In doing so, BitMEX employees violated bank secrecy law, commodity regulations and CFTC rules, the court found.

In a statement, CFTC Enforcement Director Vincent McGonagle said crypto trading platforms must comply with U.S. laws if they do business in the country.

“This action highlights that the registration requirements and fundamental consumer protections established by Congress for our traditional derivatives market also apply in the growing digital asset market,” he said.

A statement from FinCEN said BitMEX processed more than $ 200 million in transactions for darknet markets or mixing services.

“BitMEX’s rapid growth into one of the largest futures commission merchants offering convertible virtual currency derivatives without a proportionate anti-money laundering program puts the US financial system at risk,” Deputy Director said AnnaLou Tirol.

As part of the settlement, BitMEX will refrain from offering futures or other types of crypto commodity contracts in the United States without registering with the CFTC or operating a swap system. The company is also responsible for ensuring that it has adequate KYC procedures in place in the future.

“Settlement defendants must cooperate with the Commission, including the Commission Enforcement Division, in this action and in any current or future civil or administrative litigation of the Commission relating to or arising out of this action”, added the consent order.

BitMEX also told the CFTC that it no longer maintains any business operations or functions in the United States beyond certain cybersecurity functions.

The CFTC sued BitMEX in October 2020 over allegations it violated bank secrecy law and commodity laws, and sought a permanent injunction against the company.

Closing the deal could lead to additional problems for the troubled former BitMEX CEO Arthur Hayes. Hayes is at the center of a criminal investigation the Justice Department launched in unison with the CFTC’s action last year.

Court documents show that the CFTC has agreed to share a wealth of corporate files, witness interview notes and notes with federal prosecutors. It can also share a range of foreign regulatory documents from authorities in Seychelles, Bermuda and Hong Kong, if their commodity counterparts approve.

A spokesperson for Hayes and his co-founders Ben Delo and Sam Reed told CoinDesk the three were not involved in the settlement.

“As their defense will show, from the early days of the company, the co-founders sought to comply with applicable law as it has developed over time. The actions against Arthur, Ben and Sam by the US authorities are unfounded and amount to unwarranted overbreadth. The co-founders are eager to defend themselves in court, ”the spokesperson said in a statement.

UPDATE (Aug 10, 2021, 19:25 UTC): Adds background and additional statements from CFTC, FinCEN, and a spokesperson for the BitMEX co-founders.