The founders of one of the world’s largest Bitcoin derivatives exchanges have pleaded guilty to violating US banking laws and face up to five years behind bars for their crimes. Arthur Hayes and Ben Delo, founders of the BitMEX exchange, also agreed to pay $10 million each in fines.
In a press release, the US Department of Justice said that Arthur and Ben had pleaded guilty to violating the US Bank Secrecy Act by knowingly failing to establish an anti-money laundering program at BitMEX.
The two pleaded guilty before US District Judge John G. Koeltl. As part of their guilty pleas, they will each pay $10 million, which the Justice Department says represents pecuniary gain from the crime.
BitMEX, formally known as the Bitcoin Mercantile Exchange, is a giant derivatives exchange based in the Seychelles. According to the Department of Justice, it served US users between September 2015 and September 2020. At that time, it did not comply with the BSA, which requires all financial services companies to have adequate AML programs.
The Department of Justice accused BitMEX of being a money laundering platform. He cited an incident in 2018 when Hayes, who was the CEO, and Delo, who was the COO, were told that BitMEX was being used to launder the proceeds of a hack.
“Neither HAYES, DELO nor their company filed a suspicious activity report thereafter (in fact, BitMEX did not file any suspicious activity reports between 2014 and September 2020),” the press release states.
Additionally, they allowed their users to evade sanctions by dealing with customers from sanctioned countries like Iran.
Hayes has always maintained that BitMEX did not serve US users. However, the Justice Department says this was all a sham. Allegedly, all of the measures the exchange put in place were “an ineffective front that did not, in fact, prevent users from accessing or trading on BitMEX from the United States.”
In addition to the fines, the two face a maximum prison sentence of five years.
Commenting on the statement, US Attorney Damian Williams said: “As cryptocurrencies and technologies designed to facilitate their trade proliferate, companies involved in the virtual currency economy have become critical gatekeepers in efforts to ensure that American markets are fair, efficient, and safe.”
Arthur Hayes and Benjamin Delo built a company designed to circumvent those obligations; they deliberately failed to implement or maintain even basic anti-money laundering policies. They allowed BitMEX to operate as a platform in the shadow of the financial markets. Today’s guilty pleas reflect this Office’s continued commitment to investigating and prosecuting money laundering in the cryptocurrency sector.