Nouriel Roubini Ramps Up Campaign Against Crypto Exchange BitMEX

(Bloomberg) -- Nouriel Roubini, a well-known critic of cryptocurrencies, just escalated his debate with BitMEX’s Chief Executive Officer Arthur Hayes, posting a report that suggests Hayes’s exchange “may be openly involved in systematic illegality.”

Roubini, a professor of economics at the Stern School of Business, said BitMEX lets traders take on too much risk, allowing them to leverage bets to 100 times the amount of funds they put down. He cited estimates in an anonymous blogger’s widely read post on Medium last year that liquidations may, at times, account for a significant share of BitMEX’s revenue. He also pointed to the blogger’s claim that BitMEX trades against clients. And Roubini said the exchange “skirts” regulations designed to stop money laundering.

Crypto derivatives trading platform BitMEX, which is based in the Seychelles, is hardly the only crypto exchange to offer customers 100 times leverage. And Hayes told Yahoo Finance last year that the exchange doesn’t make money when customers are liquidated and doesn’t trade against them.

“BitMEX provides safe, fast, professional and liquid ways for those who see the potential of crypto and to trade and hedge cryptocurrency risk,“ Hayes told Bloomberg News via an email from a spokeswoman. “We continue to monitor all legal and regulatory developments around the world and will comply with all applicable laws and regulations; we reject any allegations of criminality, manipulation or unfair treatment of our customers, who are at the center of everything we do.”

Roubini is entitled to his opinion, Hayes added. That opinion was withering.

“At a minimum, Hayes and all of the others overseeing similar rackets from offshore safe havens should be investigated, before millions more retail investors get scammed into financial ruin,” Roubini wrote.

The posting extends a public debate Roubini and Hayes held at the Asia Blockchain Summit earlier this month, dubbed by organizers as the “Tangle in Taipei,” in which both men later declared themselves the winner. Roubini spent days demanding on Twitter that the video of the debate be released, and it eventually was.

Their spat comes amid heightened skepticism of crypto ventures in Washington. Congress is holding hearings on Facebook Inc.’s plans to help start a new digital currency called Libra. In recent days, President Donald Trump, Treasury Secretary Steven Mnuchin and Federal Reserve Chair Jerome Powell have all commented on Libra and cryptocurrencies in general, expressing worries that they may be used by criminals and terrorists.

Other exchanges have been accused of generating fake trading volume, or not stopping pump-and-dump schemes in which traders buy coins, get others to buy them driving up the coins’ price, and then dump them.

To contact the reporters on this story: Olga Kharif in Portland at okharif@bloomberg.net;Benjamin Robertson in Hong Kong at brobertson29@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net, Joanna Ossinger, David Scheer

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