Court orders BitMEX founders to pay $30M civil penalty

Published at: May 6, 2022

The United States District Court for the Southern District of New York has ordered a total of $30 million civil monetary penalties from the three co-founders of BitMEX crypto derivatives exchange, including former CEO Arthur Hayes.

Hayes, Benjamin Delo and Samuel Reed were each fined $10 million in consent payments, according to a statement from the Commodity Futures Trading Commission (CFTC) at the conclusion of a court battle on Thursday in which the CFTC said they violated aspects of the Commodity Exchange Act and CFTC regulations from November 2014 to October 2020.

CFTC: Bitmex Co-Founders Ordered to Pay $10 Million Each

— db (@tier10k) May 5, 2022

The CFTC filed suit against the exchange and its three co-founders on October 1, 2020. In a rundown of the conclusion of the case today, the Commission stated that the defendants were accused of “operating the BitMEX platform while conducting significant aspects of BitMEX’s business from the U.S., and unlawfully accepting orders and funds from U.S. customers to trade cryptocurrencies,” including Bitcoin (BTC), Ether (ETH) and Litecoin (LTC) derivatives

The CFTC said unlawful acts included the operation of a facility to trade or process swaps without having CFTC approval to operate as a Designated Contract Market or a Swap Execution Facility. It said they had also operated as a Futures Commission Merchant without CFTC registration and failed to implement a Customer Information Program and Know Your Customer (KYC) procedures or an adequate Anti-Money Laundering (AML) program.

CFTC commissioner Carline D. Pham said in a separate Thursday statement that her commission is committed to pursuing “wrongdoers with an unfair advantage” that operate in violation of the law.

“By enforcing individual accountability for registration, market conduct, and anti-money laundering rules—fundamental aspects of the U.S. regulatory framework—the CFTC is ensuring that BitMEX’s management is held responsible after last year’s $100 million dollar settlement with corporate defendants.”

Additional legal battles

Cointelegraph previously reported in February that Hayes and Delo pleaded guilty to violating the Bank Secrecy Act in a separate case filed by the U.S. Department of Justice. In the plea, they admitted to “willfully failing to establish, implement and maintain an Anti-Money Laundering (AML) program.”

Bloomberg reported on Thursday that Hayes’s mother was particularly concerned with how the federal judge presiding over the DOJ’s case would sentence her son. The defense offered a letter from her asking for a lenient sentence, and his lawyers requested a sentence of probation without house arrest or community confinement.

Last August, Cointelegraph reported that BitMEX agreed to pay $100 million in consent payments to both the CFTC and the Financial Crimes Enforcement Center (FinCEN) in order to resolve a separate case where the CFTC and FinCEN said exchange operators HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited and HDR Global Services Limited illegally operated the exchange.