The U.S. Department of Justice and the Commodity Futures Trading Commission (CFTC) have filed charges against crypto derivatives exchange BitMEX and its owner-operators, including co-founder and CEO Arthur Hayes.
Hayes — along with co-founders Ben Delo and Samuel Reed — are accused of operating an unregistered trading platform as well as violating CFTC rules, including anti-money laundering and know-your-customer regulations.
"The complaint charges BitMEX with operating a facility for the trading or processing of swaps without having CFTC approval as a designated contract market or swap execution facility, and operating as a futures commission merchant by soliciting orders for and accepting bitcoin to margin digital asset derivatives transactions, and by acting as a counterparty to leveraged retail commodity transactions. The complaint further charges BitMEX with violating CFTC rules by failing to implement know-your-customer procedures, a customer information program, and anti-money laundering procedures," the CFTC said in a statement.
In a separate action, the Department of Justice filed criminal charges against Hayes, Delo, Reed and BitMEX head of business development Greg Dwyer with violating the Bank Secrecy Act. According to the DOJ press release, Reed was arrested in Massachusetts on Thursday morning "and will be presented in federal court there."
“As we allege here today, the four defendants, through their company’s BitMEX crypto-currency trading platform, willfully violated the Bank Secrecy Act by evading U.S. anti-money laundering requirements," FBI assistant director William Sweeney said in a statement.
The 40-page CFTC complaint also names HDR Global Trading Limited, BitMEX's parent company, as well as 100x Holdings Limited, ABS Global Trading Limited, Shine Effort Inc Limited and HDR Global Services (Bermuda) Limited as defendants.
According to the complaint:
"... the CFTC brings this action pursuant to Section 6c of the Act, 7 U.S.C. § 13a-l (2018), to enjoin Defendants’ unlawful acts and practices and to compel their compliance with the Act. In addition, the CFTC seeks civil monetary penalties and remedial ancillary relief, including, but not limited to, trading and registration bans, disgorgement, restitution, pre- and post-judgment interest, and such other relief as the Court may deem necessary and appropriate."
“Digital assets hold great promise for our derivatives markets and for our economy,” CFTC Chairman Heath Tarbert said in a statement. “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.”
The full CFTC complaint can be found below:
Enf Hdr Global Trading Complaint 100120 by MichaelPatrickMcSweeney on Scribd
The full Department of Justice indictment can be found below:
Arthur Hayes Et Al. Indictment Redacted 0 by MichaelPatrickMcSweeney on Scribd
Editor's Note: This report and its headline have been updated with additional information.