BitMEX is one of the world’s largest cryptocurrency trading platforms. On August 10, 2021, the U.S. District Court for the Southern District of New York entered a Consent Order that the U.S Commodities Futures and Trading Commission agreed to with five companies charged with operating BitMEX. The order requires the BitMEX entities to pay a $100 million civil monetary penalty and provides that up to $50 million of the penalty may be offset by payments the BitMEX entities make or are credited pursuant to a Consent to Assessment of Civil Monetary Penalty entered by the Financial Crimes Enforcement Network (FinCEN). This settlement is the second largest fine against a cryptocurrency exchange.
The Order states that from November 2014 to October 2020, BitMEX had violated the US Commodity Exchange Act by operating as a futures commission merchant without CFTC registration. According to the original Complaint, the founders operated the BitMEX platform while conducting significant aspects of BitMEX’s business from the U.S. and unlawfully accepting orders and funds from U.S. customers to trade cryptocurrencies, including derivatives on bitcoin, ether and litecoin.
Furthermore, according to FinCEN, from 2014 through 2020, BitMEX collected only an email address from users and did not verify traders’ identities, which lack of AML procedures exposed the exchange to risks such as dealing with money launderers, terrorist financiers, and ransomware attackers. FinCEN further stated that BitMEX conducted at least $209 million of transactions with known darknet markets, which typically facilitate dealing in illegal drugs, computer-hacking software and counterfeit goods. The CFTC said BitMEX made its trading available to both U.S. retail and institutional customers through its website and was aware that American customers used virtual private networks to get around barriers that were set up to screen out U.S. traders.
The Order notes that BitMEX has engaged in remedial measures, including the development of anti-money laundering and user identification programs. Furthermore, in connection with the Order, BitMEX has certified to the CFTC that anyone located, incorporated, or otherwise established in, or a resident of, the U.S. is prohibited from accessing the BitMEX trading platform; all active users of the platform have undergone user-verification; and all U.S. persons and unverified users have been blocked from trading on the platform or making withdrawals. BitMEX also certified that as of June 30, 2021, BitMEX is no longer maintaining any operations or business functions in the U.S., except for limited personnel performing limited non-marketing services.
BitMEX did not admit or deny the regulators’ allegations. Three of the company’s co-founders (Arthur Hayes, Benjamin Delo and Samuel Reed ) are defendants in the lawsuit but were not part of the settlement. They were also separately indicted on a charge of failing to use an effective anti-money-laundering program and have pleaded not guilty.