CFTC has charged derivatives exchange BitMEX, BitMEX’s CTO was arrested in Massachusetts

The Commodity Futures Trading Commission filed money-laundering and other civil charges against BitMEX for illegally operating in the U.S. today.

Among those charged are company owners Arthur Hayes, Ben Delo, and Samuel Reed, who operate BitMEX’s platform through a maze of corporate entities. These entities, also named as defendants in the complaint, are HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited, and HDR Global Services (Bermuda) Limited (BitMEX).

BitMEX’s platform has received more than $11 billion in bitcoin deposits and made more than $1 billion in fees, while conducting significant aspects of its business from the U.S. and accepting orders and funds from U.S. customers, according to the announcement on October 1.

The Bitmex team, Arthur Hayes, Samuel Reed, and Ben Delo.

“Digital assets hold great promise for our derivatives markets and for our economy,” said Chairman Heath P. Tarbert. “For the United States to be a global leader in this space, it is imperative that we root out illegal activity like that alleged in this case. New and innovative financial products can flourish only if there is market integrity. We can’t allow bad actors that break the law to gain an advantage over exchanges that are doing the right thing by complying with our rules.”

According to FBI Assistant Director William Sweeney, “One defendant went as far as to brag the company incorporated in a jurisdiction outside the U.S. because bribing regulators in that jurisdiction cost just ‘a coconut.’ Thanks to the diligent work of our agents, analysts, and partners with the CFTC, [the defendants] will soon learn the price of their alleged crimes will not be paid with tropical fruit, but rather could result in fines, restitution, and federal prison time.”

A statement from the Department of Justice reveals that Reed, BitMEX’s chief technology officer, was arrested on Thursday morning in Massachusetts. Hayes, Delo and Dwyer “remain at large.”

HAYES, 34, of Buffalo, New York and Hong Kong, DELO, 36, of the United Kingdom and Hong Kong, REED, 31, of Massachusetts, and DWYER, 37, of Australia and Bermuda, are each charged with one count of violating the Bank Secrecy Act, and one count of conspiring to violate the Bank Secrecy Act, each of which carries a maximum penalty of five years in prison.  The maximum potential sentences in this case are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendants will be determined by the judge.

BitMex denies CFTC and DoJ allegations, says trading will continue

In a blog post published Thursday afternoon, Bitmex lashed out at charges that the Commodity Futures Trading Commission and Department of Justice filed against the exchange and its management earlier today.

“We strongly disagree with the U.S. government’s heavy-handed decision to bring these charges, and intend to defend the allegations vigorously. From our early days as a start-up, we have always sought to comply with applicable U.S. laws, as those laws were understood at the time and based on available guidance.” said BitMex’s blog.

In its post denying the charges, Bitmex also assured users that trading will continue as usual. This is despite the fact that the DOJ arrested at least one of Bitmex’s founders, Samuel Reed, earlier today.

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