The BitMEX crypto exchange is under considerable legal pressure in the USA. Both the New York Public Prosecutor’s Office and the CFTC supervisory authority accuse BitMEX, among other things, of conducting illicit business. BitMEX co-founder Samuel Reed was arrested.
BitMEX‘s red alert: The platform, which specializes in trading with crypto-derivatives, is under attack by U.S. authorities in what appears to be a concerted action. Co-founder Samuel Reed is put under arrest, is called it in a press release of the public prosecutor’s office of the southern district of New York (SDNY). The other founders, Arthur Hayes and Ben Delo, have also been charged. They had systematically violated banking laws and engaged in bribery outside the USA. BitMEX categorically rejects the accusations in a statement that they have always abided by the law.
Parallel to the creation of the SDNY, the Commodity Futures Trading Commission (CFTC) also opened proceedings against BitMEX and the offshore companies behind it. The CFTC is the US regulatory authority for options and futures markets. It accuses BitMEX, represented by Reed, Hayes and Delo, of having offered to trade derivatives for years without authorization and registration. In a press release of the CFTC it says that at least one billion US dollars in fees were collected and tens of billions of US dollars were moved.
BitMEX: Responsible person is said to have bragged about bribery
The SDNY cooperated with the FBI in its investigation. According to the SDNY, BitMEX managers had known since fall 2015 that their platform did not meet minimum legal requirements. As a result, they had moved company headquarters to the Seychelles and boasted internally that bribing officials there cost only a “coconut”. Now, however, the BitMEX leadership team must learn, according to the SDNY, that the price for criminal actions is not paid in “tropical fruits” but results in fines, compensation and imprisonment. The accused are to face up to five years in prison. The CFTC demands compensation for investors as well as fines.
Conclusion: BitMEX soon at the end?
BitMEX affirms that it will continue its business normally. To reassure customers, additional time slots for payouts have been announced. Finally BitMEX had announced to make identity checks (Know Your Customer, KYC) obligatory for all users as basically last large crypto exchange.
But this approach to regulations could come too late for BitMEX. The accusations are massive and point to systematic ignoring of US rules and laws. The talk is of aiding and abetting money laundering, bribery, gang formation, false information and more. Besides the BitMEX founders, Gregory Dwyer is also in the focus of the SDNY, which Dwyer considers to be the “first employee” of BitMEX. It is questionable whether the accused will be able to escape the situation in view of the overwhelming evidence. Because with accusations also from the criminal law the chances of an out-of-court settlement dwindle massively.
From the past it is well-known that the US authorities make sure with legal procedure against the crypto industry that customers if possible no damage develops. But to rely on the fact that BitMEX operates still for a long time as used would be probably dreaming according to the present information conditions.
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