Two of the founders of Bitcoin Mercantile Exchange (BitMEX) have each been fined $10m for failing to implement anti-money laundering (AML) protections at the offshore cryptocurrency derivatives exchange.
Arthur Hayes, 36, and Benjamin Delo, 38, both plead guilty to violating the US Bank Secrecy Act and will pay the fines, which represent their financial gain derived from the offence, according to the US Attorney's Office for the Southern District of New York.
Hayes and Delo were found to have "willfully caused" BitMEX to fail to establish and maintain an AML programme, including failing to perform basic identity checks or know your customer (KYC) verification, from at least September 2015 to September 2020, during which time it served thousands of US customers.
BitMEX was also found to have become a "vehicle for sanctions violations", with Hayes and Delo hosting illicit transactions at the exchange with customers claiming to be based in Iran, in violation of US sanctions against the country.
The company filed no suspicious activity reports from 2014 to September 2020, and did nothing to implement AML or KYC after contact was made with customers in Iran.
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"Hayes and Delo failed to institute AML or KYC programs at BitMEX despite closely following US regulatory developments that made clear their legal obligation to do so if BitMEX operated in the United States, which it did," prosecutors said.
"Despite repeatedly stating that BitMEX did not serve US customers, including to members of the press and others outside of BitMEX, Hayes and Delo both knew that BitMEX’s purported withdrawal from the US market in or about September 2015 was a sham, and that purported “controls” BitMEX put in place to prevent U.S. trading were an ineffective facade that did not, in fact, prevent users from accessing or trading on BitMEX from the United States."
The US Attorney's Office for the South District of New York added the pair continued to make "substantial profits" from US-based trading and "actively sought" US customers by using American cryptocurrency influencers to market their services in addition to television appearances and marketing stunts.
It also said Delo allowed a US-based customer to continue accessing their BitMEX trading account because they were "famous in Bitcoin," and stated that he falsely changed internal tracking information to change said customer's country of residence.
Hayes and Delo were charged, along with two other BitMEX employees, by US Department of Justice and the Commodity Futures Trading Commission for operating an unregistered trading platform and violating the Bank Secrecy Act in autumn 2020.
Authorities seized BitMEX funds related to the violation, and the company paid up to $100m last year to resolve the charges. At the time, the exchange didn't admit to the allegations but promised to keep US residents from using its services.
Hayes, from Miami, and Delo, of the UK and Hong Kong, both plead guilty to violating the Bank Secrecy Act, and US Attorney for the Southern District of New York Damian Williams praised the FBI's New York money laundering investigation squad for the "outstanding work".
Speaking to the Wall Street Journal, a representative for Delo said he "regrets" that BitMEX lacked an adequate customer identification programme while a representative for Hayes said he accepts responsibility for his actions and looks forward to putting this matter behind him.
(Pic: Getty Images)
