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BitMEX Cryptocurrency Exchange Admits Guilt to Breaching Bank Secrecy Legislation

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Crypto Exchange Bitmex Pleads Guilty To Bank Secrecy Act Violations

The United States Justice Department has announced that BitMEX, a cryptocurrency exchange, has pleaded guilty to infringing upon the Bank Secrecy Act (BSA). This charge pertains to the platform’s activities spanning from 2015 to 2020, a period during which BitMEX was a major player in the global market for bitcoin derivatives, all the while lacking a comprehensive Anti-Money Laundering (AML) mechanism.

Acknowledgment of Bank Secrecy Act Violations by BitMEX

Damian Williams, the US Attorney for the Southern District of New York, accentuated the gravity of BitMEX’s contraventions, stating that the exchange was broadly employed for significant money laundering operations and attempts to bypass sanctions, thus jeopardizing the integrity of the financial framework.

BitMEX’s approach to AML observance was notably lenient, only requiring a user’s email address rather than enforcing a stringent AML policy that complies with Know Your Customer protocols.

Bitmex Case
Source: US Justice Department

Arthur Hayes, Benjamin Delo, and Samuel Reed, the trio of founders, were cognizant of the fact that their relaxed enforcement of standards was impacting US customers and was infringing on federal laws.

Now faced with considerable legal consequences, the cryptocurrency exchange, founded in the Republic of Seychelles and previously known as HDR Global Trading Limited, may see individuals responsible within the company subject to a maximum of five years’ incarceration and potential financial sanctions. The narrative of BitMEX’s inception in 2014, actively courting American clientele and operating from US locations, reinforces their legal accountability at that time to register with the Commodities Futures Trading Commission and to establish a strong AML strategy.

Guilty Plea Underscores Persistent Regulatory Enforcement in Crypto Sector

The latest admission of guilt involves a specific infraction of the Bank Secrecity Act, which could lead to a sentence of five years in jail and a financial penalty, highlighting the unrelenting legal scrutiny within the crypto sphere.

There have been other notable instances of regulatory lapses within the cryptocurrency landscape. BitMEX is neither the sole nor the inaugural exchange to face censure for contravening US legislation.

As an illustrative case, former Binance CEO Changpeng Zhao has commenced a four-month term at a minimum-security federal facility in California, following his late 2023 conviction due to Binance’s insufficient AML practices.

CFTC Previously Imposed Fines on Founders

In a related event in 2022, Arthur Hayes, Benjamin Delo, and Samuel Reed were collectively assessed $30 million in civil fines by a court, stemming from a Commodity Futures Trading Commission lawsuit. Their admission of AML infractions under the BSA resulted in a probation sentence for each.

Nonetheless, the US judicial system continues its vigilant governance over the cryptocurrency realm. Following admissions of guilt, sentencing for individuals connected to the now defunct FTX and Alameda Research will shortly proceed. Nishad Singh, former FTX engineering director, and co-founder Gary Wang are set to undergo sentencing by Judge Lewis Kaplan of the Southern District of New York starting in October. Meanwhile, Sam Bankman-Fried, the former CEO, having been convicted at trial, is currently serving a 25-year prison term.

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