Cryptocurrency exchange BitMEX has pleaded guilty to one count of violating the Bank Secrecy Act for failing to establish, implement, and maintain an adequate anti-money laundering program, the Department of Justice (DOJ) announced on July 10.
“Our founders accepted this and were sentenced back in 2022,” the company said. “BitMEX has long since fully remediated its operations, and there is nothing new in this charge. ”
BitMEX was founded in 2014 by Arthur Hayes, Benjamin Delo, and Samuel Reed and was one of the leading cryptocurrency derivatives platforms in the world from 2015 to 2020.
Between September 2015 and September 2020, BitMEX and its executives knew that the exchange was required by law to implement an adequate anti-money laundering (AML) program, which included a “know your customer” (KYC) component, because it operated in the United States and served U.S. customers, according to court documents.
AML programs help prevent financial institutions from being used by criminals to launder money or finance terrorism, among other illicit activities. They also help protect the integrity of the U.S. financial system and national security more broadly, the DOJ noted.
However, the company and its executives chose not to implement an AML program and instead only required customers to provide an email address to use the crypto exchange, effectively allowing them to register and trade cryptocurrency anonymously, the DOJ said.
“Indeed, senior executives each knew that customers residing in the United States continued to access BITMEX’s trading platform through at least in or about 2018 and that BITMEX policies nominally in place to prevent such trading were toothless or easily overridden to serve BITMEX’s bottom line goal of obtaining revenue through the U.S. market without regard to U.S. criminal laws,” the DOJ said in a press release.
BitMEX effectively made itself available as a vehicle for money laundering and sanctions violations, the department said.
Executives at the company took “affirmative steps” purportedly aimed at exempting BITMEX from having to abide by U.S. laws like AML and KYC requirements, despite being aware of the company’s obligation to implement such programs by operating in the United States, the DOJ said.
As part of its alleged efforts to evade those requirements, BITMEX “lied to a bank about the purpose and nature of a subsidiary to allow the company to pump millions of dollars through the U.S. financial system,” the DOJ said.
In a statement, U.S. Attorney for the Southern District of New York Damian Williams noted BitMEX’s founders admitted in federal court in 2022 that the company operated in the United States “without any meaningful anti-money laundering program,” as required by federal law.
“As a result, BitMEX opened itself up as a vehicle for large-scale money laundering and sanctions evasion schemes, posing a serious threat to the integrity of the financial system,” Mr. Williams said.
“Today’s guilty plea indicates again the need for cryptocurrency companies to comply with U.S. law if they take advantage of the U.S. market,” he added.
U.S. District Judge John G. Koeltl is overseeing the case. The charge carries a maximum sentence of five years in prison and a fine, the DOJ said in a press release.
BitMEX said that it will seek an expedited sentencing hearing after accepting the charge and ask that no further fine be imposed by the court “given the substantial amounts already paid by our founders under the BSA charges brought against them.”
“Needless to say, this charge has no impact on our business operations,” the company said.
