The U.S. Commodity Futures Trading Commission (CFTC) and federal prosecutors alleged crypto trading platform BitMEX facilitated unregistered trading and other violations.
The CFTC announced Thursday it was charging BitMEX, CEO Arthur Hayes, company owners Ben Delo and Samual Reed, and corporate entities HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited and HDR Global Services (Bermuda) Limited with offering U.S. customers illicit crypto derivative trading services.
Similarly, Audrey Strauss, the acting U.S. Attorney for the Southern District of New York announced that Hayes, Delo, Reed and Gregory Dwyer were being charged with violating the Bank Secrecy Act and conspiracy to violate the act.
Reed has already been arrested; the others remain at large, an SDNY press release said.
In a press release, the CFTC alleged that BitMEX received some $11 billion in bitcoin deposits and made more than $1 billion in fees, “while conducting significant aspects of its business from the U.S. and accepting orders and funds from U.S. customers.”
The CFTC charged BitMEX with executing futures transactions on an unregistered board, offering illegal options, failing to register as a futures commission merchant, failing to register as a designated contract market, failing to implement proper know-your-customer rules and other counts, according to an attached legal filing.
“BitMEX touts itself as the world’s largest cryptocurrency derivatives platform in the world with billions of dollars’ worth of trading each day. Much of this trading volume and its profitability derives from its extensive access to United States markets and customers,” the filing said. “Nevertheless, BitMEX has never been registered with the CFTC in any capacity and has not complied with the laws and regulations that are essential to the integrity and vitality of the U.S. markets.”
The CFTC is looking for a permanent injunction prohibiting the defendants from entering into any transactions “involving ‘commodity interests,’” soliciting funds for purchasing or sellign commodity interests and applying for registration with the CFTC.
In addition, the agency wants the defendants to disgorge profits, etc. that violate the Commodity Exchange Act alongside interest; provide full restitution to its customers, civil penalties and to rescind “all contracts and agreements” with any customers if those agreements violate the law.
“As a derivatives market regulator that supports innovation and ingenuity, it is imperative that we actively police trading platform activity and remove the bad apples so that legitimate, law-abiding marketplaces can flourish,” said CFTC Commissioner Brian Quintenz in a statement. “We will not stand for any participant brazenly flouting our rules. I look forward to the successful resolution of this matter and the beneficial impact it will have in this market by holding those who deliberately ignore the law accountable.”
BitMEX was not immediately available for comment.
Read the full CFTC complaint below: