BitMEX Crypto Exchange to Pay $100 Million to Settle Probes

(Bloomberg) -- A group of companies that operated the BitMEX crypto exchange will pay $100 million to settle allegations that they allowed years of illegal trades and violated anti-money laundering rules, resolving one of the first big cases in an emerging U.S. crackdown on digital tokens.

BitMEX broke regulations by letting U.S. residents trade cryptocurrency derivatives from at least November 2014 through October 2020, the Commodity Futures Trading Commission said in a Tuesday statement. The trading platform’s backers also settled claims from the Financial Crimes Enforcement Network that they didn’t adhere to the Bank Secrecy Act and failed to report suspicious transactions to American authorities.

BitMex was once the world’s largest crypto-derivatives exchange but its prospects have soured amid the U.S. investigations, which came to a head last October when the CFTC filed a lawsuit. The futures regulator has since launched probes into other platforms over similar suspicions that they are allowing Americans to buy and sell derivatives without registering with the agency.

The agreement requires the BitMEX companies to pay $50 million to the CFTC and provides a credit for up to $50 million for payments made under a related deal with FinCEN. BitMEX also certified that anyone based in the U.S. is prohibited from accessing its trading platform.

BitMEX said in a statement that it has improved its compliance program in recent years and is pleased to put the investigations behind the company.

Shaping Future

“We take our responsibilities extremely seriously, and will continue to actively engage with regulators around the world to ensure that we play a positive role in helping to shape the future of this extraordinary asset class,” Chief Executive Officer Alexander Hoptner said in the statement.

The resolution doesn’t involve Arthur Hayes, Benjamin Delo and Samuel Reed, the three men who founded BitMEX. All have entered not guilty pleas in a separate Justice Department case that accuses them of violating the Bank Secrecy Act.

A spokesman for Hayes, Delo and Reed reiterated Tuesday that they intend to fight the government’s allegations.

”As their defense will show, from the company’s earliest days, the co-founders sought to comply with applicable law as it developed over time,” the spokesman said in a statement.

Top Promoter

Hayes, a former Citigroup Inc. equities trader, was once regarded as one of the crypto industry’s top promoters. In 2018, BitMEX rented three Lamborghinis to park outside a Bitcoin conference in Manhattan, with Hayes declaring the stunt a success because of all the publicity it generated.

The companies involved in Tuesday’s accord included HDR Global Trading Ltd., 100x Holdings Ltd., ABS Global Trading Ltd., Shine Effort Inc. and HDR Global Services (Bermuda) Inc. The firms neither admitted nor denied the allegations.

The case is Commodity Futures Trading Commission v. HDR Global Trading Ltd., 20-cv-08132, U.S. District Court, Southern District of New York (Manhattan),

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