BitMEX founders Arthur Hayes and Benjamin Delo have pleaded guilty to breaking the Bank Secrecy Act and agreed to cough up $10 million each in fines, according to the Department of Justice (DoJ).
The former BitMEX executives had reached a deal with US prosecutors but could still face up to a year in prison.
Former chief operating officer Delo and ex-chief exec Hayes admitted in Federal Court on Thursday to skirting anti-money laundering (AML) laws.
The BitMEX founders failed to put in place know-your-customer (KYC) or AML verification safeguards. They also knowingly allowed illicit funds to move through their Seychelles-based crypto exchange platform.
Specifically, Hayes was told that BitMEX was being used to launder the proceeds of a cryptocurrency hack but enforced no AML checks in response, noted the DoJ.
But due to failures to implement appropriate safety measures, authorities considered BitMEX “in effect a money-laundering platform.” The DoJ said:
“Unsurprisingly, BitMEX was also a vehicle for sanctions violations: Hayes and Delo both communicated directly with BitMEX customers who self-identified as being based in Iran, an OFAC-sanctioned jurisdiction, but did nothing to implement an AML or KYC program after doing so.”
BitMEX is not exactly en vogue anymore. But in 2015 and 2016, it was one of the ecosystem’s most prominent crypto trading platforms. This made its founders considerably wealthy.
The exchange was the first to offer a type of crypto investment product known as “perpetual futures.” These allowed bets on Bitcoin price exposure leveraged up to 100 times, using BTC as collateral.
BitMEX founder Arthur Hayes ‘accepts responsibility’
Authorities originally arrested Hayes and Delo in 2020, along with former chief tech officer Samuel Reed and first employee Gregory Dwyer.
At the time, they acknowledged allowing US-based crypto traders to use BitMEX despite previously stating they’d been geo-blocked.
A federal court last August ordered BitMEX to pay $100 million for its lax anti-money laundering policies. The company reiterated its promise to prevent US residents from using its services.
According to the Wall Street Journal, a Delo representative noted that the most recent fines, combined with the earlier settlement, made up all profits linked to BitMEX’s US operations.
They went on to say that Delo “regrets” BitMEX’s shoddy customer identification checks.
Hayes’ counsel added (via WSJ) that his client “accepts responsibility for his actions and looks forward to putting this matter behind him.”
Speaking about the pair’s guilty pleas, US Attorney Damian Williams said (our emphasis):
“The opportunities and advantages of operating in the United States are legion, but they carry with them the obligation for those businesses to do their part to help in driving out crime and corruption.”
“[Hayes] and [Delo] built a company designed to flout those obligations; they willfully failed to implement and maintain even basic anti-money laundering policies. They allowed BitMEX to operate as a platform in the shadows of the financial markets.”
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