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Arthur Hayes, co-founder/former CEO of the BitMEX cryptocurrency exchange, won’t see the inside of a prison despite allowing customers to use the platform to circumvent U.S. anti-money laundering rules.
In February, Hayes and fellow BitMEX CFO/co-founder Benjamin Delo pled guilty to violating the U.S. Bank Secrecy Act (BSA). The U.S. Attorney’s Office for the Southern District of New York found that the pair were guilty of “willfully failing to establish, implement, and maintain an anti-money laundering (AML) program at BitMEX.”
At the time, each man agreed to separately ante up a $10 million penalty—reportedly representing the profits earned via their criminal behavior—but the length of a possible incarceration period was to be determined at a later date.
While each man faced a possible five years behind bars for their crimes, media reports at the time claimed Hayes had worked out a deal to serve a maximum of six-to-12 months. Hayes later requested probation in lieu of a custodial sentence based on the argument that (we’re paraphrasing here) facilitating money laundering was just what all the cool kids were doing.
Prosecutors weren’t amused, pressing the court to impose “a significant sentence of incarceration” above 12 months, noting that Hayes had “routinely criticized and mocked [Know Your Customer] requirements, and made it clear that he had no interest in complying with them.”
However, on Friday U.S. District Judge John G. Koeltl cut Hayes a break, sentencing him to two years’ probation, the first six months of which must be served at his home while wearing an ankle bracelet. Koeltl opted against putting Hayes in stripes despite noting that Hayes’ criminal behavior “was more than a simple regulatory oversight.”
Earlier this month, BitMEX’s third co-founder/CTO Samuel Reed was similarly fined $10 million for his role in the shenanigans. The company previously reached a $100 million settlement with the U.S. Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN) for offering investment products to consumers without having the licenses to do so.
Delo and Reed are expected to have their own reckoning with Judge Koeltl any week now while Greg Dwyer, the exchange’s former head of operations, still has time to reach his own plea deal ahead of a scheduled October trial date.
Hayes was the most blatant of the three co-founders in promoting BitMEX to credulous U.S. investors through TV appearances and ‘marketing stunts,’ such as parking rented Lamborghinis outside crypto conferences in U.S. cities to give attendees something to aspire toward.
BitMEX has attempted to ride out this years-long wave of bad publicity, recently adding spot trading to its mainstay derivatives business. However, the company laid off around one-quarter of its workforce at the end of April after its failed bid to acquire Bankhaus von der Heydt, a private German bank.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
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