Former BitMEX CEO Arthur Hayes has reportedly surrendered himself to U.S. authorities in Hawaii, to face charges of failing to implement money laundering protections at the exchange. The Commodity Futures Trading Commission (CFTC) and U.S. Department of Justice announced the charges in October 2020.
Hayes appeared in a Honolulu court on Tuesday and was released on a US$10 million bond, Bloomberg reported. He faces further court proceedings in New York.
Hayes’ legal team issued a statement saying “Arthur Hayes is a self-made entrepreneur who has been wrongly accused of crimes that he did not commit. Mr Hayes voluntarily appeared in court and looks forward to fighting these unwarranted charges.”
Hayes, 35, is reportedly a Singapore resident and married to a Singapore citizen. Before founding BitMEX, he worked as an equities trader at Citigroup in Hong Kong.
CoinGeek reported last October that Hayes (along with BitMEX CTO Samuel Reed, co-founder Ben Delo, and Head of Business Development Greg Dwyer) resigned from their roles at BitMEX’s holding company 100x group in October 2020. U.S. authorities arrested Reed in Massachusetts immediately following the charges’ unveiling, and Delo surrendered in March 2020. Both were also released on bond after pleading not guilty. Dwyer’s lawyers said they had notified the government of their client’s location.
At the time, BitMEX’s leadership disagreed with the charges, calling them “heavy handed” and promising “to defend the allegations vigorously.” BitMEX, they said, had from its early days “always sought to comply with applicable U.S. laws, as those laws were understood at the time and based on available guidance.”
BitMEX allowed U.S. users, performed inadequate crime-prevention, say prosecutors
The U.S. charges, each of which carries a maximum five-year prison sentence, stem from accusations that Seychelles-registered BitMEX and its leadership knowingly allowed U.S. residents to open accounts and trade on the platform. Though the company had always declared itself unavailable to U.S. customers on its sign-up pages, it allegedly structured its operations to avoid compliance with U.S. regulations and had not implemented proper KYC procedures that would have identified U.S.-based users.
The CFTC and DOJ announced charges after fierce Bitcoin critic Nouriel Roubini made claims in July 2019 that BitMEX was involved in illegal activities.
Serving U.S. customers would put BitMEX within the CFTC’s jurisdiction, and would have required it to register with the agency and implement stricter anti-money laundering prevention measures. Prosecutors said its leadership team not only failed to perform those actions, but had at times “bragged” about avoiding U.S. regulations in the past.
BitMEX, which is short for Bitcoin Mercantile Exchange, was one of the first, if not the first, exchange platforms to offer Bitcoin and digital asset-based derivative products. It launched in 2015 after winning the Hong Kong leg of the Slush Startup Challenge in October 2014.
Since the resignations of the leadership team facing charges, the company has continued to trade and is still open for business.
U.S. authorities have, in recent years, been more actively investigating claims that digital asset exchanges have turned a blind eye to rampant illegal activities on their platforms, such as money laundering and receiving stolen property. They have also accused exchanges of not performing adequate KYC procedures and/or deliberately basing their operations in lightly-regulated jurisdictions while serving customers in more tightly-regulated ones.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple and
Ethereum—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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