By Jonathan Stempel
NEW YORK (Reuters) – U.S. prosecutors filed criminal charges on Thursday accusing four founders and executives of BitMEX, one of the world’s largest cryptocurrency derivatives exchanges, of evading rules designed to stop money laundering.
The Justice Department charged Arthur Hayes, Samuel Reed and Benjamin Delo, who co-founded BitMEX in 2014, as well as its first employee and later head of business development, Gregory Dwyer, with violating the federal Bank Secrecy Act and conspiring to violate it.
Hayes, 34, of Buffalo, New York, and Hong Kong, is also the chief executive officer of BitMEX, while Reed is its chief technology officer.
The Commodity Futures Trading Commission filed a separate civil action to halt BitMEX’s U.S. commodity derivatives business, which is short for Mercantile Exchange.
A spokesperson for BitMEX’s parent company, HDR Global Trading Ltd. said, “We strongly disagree with the U.S. government’s tough decision to bring these charges and intend to vigorously defend against them.”
Counsel for the individual defendants could not immediately be identified.
In an indictment filed in Manhattan federal court, the defendants alleged that the defendants flouted their obligations to implement an anti-money laundering program and that they knew that the “know your customer” requirement was necessary because BitMEX served U.S. customers.
Their steps allegedly included registering BitMEX in the Seychelles, where regulations appear to be less stringent and where Hess once boasted that the cost of bribing authorities – just “a coconut” – was lower than in the United States.
The indictment alleges that BitMEX ultimately made itself a “tool” for money laundering and sanctions violations, including claims that it was used to launder proceeds from cryptocurrency hacking and that customers from Iran traded on its platform.
The defendants “will soon learn that the price of their alleged crimes will not be paid in tropical fruit,” FBI Assistant Director William Sweeney said in a statement.
Each count carries a maximum penalty of five years in prison.Reed was arrested in Massachusetts, and the other defendants are at large.
The case is United States v. Hayes, et al, U.S. District Court for the Southern District of New York, Case No. 20-cr-00500.
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