Maths whiz shelters from global legal storm in Bermuda
An Australian bitcoin executive facing criminal charges in the United States as part of a Department of Justice-led anti-money laundering inquiry was riding out the storm in Bermuda – until yesterday.
Nine months after he was accused of violating and conspiring to violate the US Bank Secrecy Act, Gregory Dwyer, former head of business development at Bitmex, voluntarily appeared at Magistrates’ Court (see separate story).
The appearance, prompted by an extradition request from a New York court, put Bermuda firmly at the centre of a global news story involving what was one of the world’s biggest cryptocurrency exchanges.
Bitmex, which operates a derivatives trading platform, set up offices here in 2018 following a visit by its founder Arthur Hayes, who met with David Burt, the Premier.
Earlier today I welcomed @BitMexdotcom Co-Founder & CEO, Arthur Hayes to #Bermuda. He met our #Fintech team to learn more about our digital asset regulation, with a view to establishing a BitMEX office in Bermuda. pic.twitter.com/rpyxkg5uGH— Premier David Burt (@BermudaPremier) June 28, 2018
Mr Dwyer moved here the following year, according to the Sydney Morning Herald, to run them.
In March 2019, he posted a picture of Horseshoe Bay on Facebook, calling it a “great little spot”.
Last July, he retweeted a Bloomberg article about Bermuda’s digital nomads scheme, along with a photo of a jet ski in the water and the words “Come join us on the jet skis”.
But the 38-year-old was much more behind-the-scenes than Mr Hayes, who made headlines in the financial press in July 2019 after a public spat at a conference in Taiwan with academic and bitcoin sceptic Nouriel Roubini.
Dr Roubini accused Bitmex of operating a business that flouted US laws because it was not licensed and of illegally selling its products to US customers.
Mr Hayes and his Bitmex colleagues seemed to revel in the controversy, tweeting a mocked-up poster depicting the debate as The Tangle in Taipei.
Alright, we had our fun trolling. Special thanks to @Nouriel for nailing his part by melting down over this past week. We couldn't have scripted it better.— BitMEX (@BitMEX) July 15, 2019
Here's the full uncut debate with @CryptoHayes vs @Nouriel with @afneil as referee: https://t.co/GtDMK5PNQ2pic.twitter.com/nnHaB6prBA
But Dr Roubini’s remarks reportedly prompted a major investigation by the US Commodities Futures Trading Commission.
The regulator launched a civil action in October last year against Mr Hayes and HDR Global Services (Bermuda) – one of two exempted companies set up here by Bitmex.
The lawsuit alleged that five Bitmex entities and the owners and operators of the Bitmex trading platform operated an unregistered trading platform and violated multiple regulations, including failing to implement required anti-money laundering procedures.
Bitmex denies the claims.
Criminal charges brought by the Department of Justice alleged that Mr Hayes, along with Bitmex co-founders Ben Delo and Samuel Reed and Mr Dwyer, wilfully failed to “establish, implement and maintain an adequate anti-money laundering programme”.
The criminal indictment claimed the Bitmex exchange was being used by hackers to launder stolen money, and by people in countries under US sanctions, including Iran.
It also claimed Bitmex solicited and accepted customers in the US, despite not being registered with the CFTC and even after it sought to exempt itself from US law by incorporating in the Seychelles.
The four men, who all resigned their positions at Bitmex, deny the allegations.
Until yesterday, Mr Dwyer had been at large since October 1 last year, when the criminal charges were laid.
Mr Reed was arrested at the time and Mr Delo and Mr Hayes subsequently turned themselves into the authorities.
Lawyers for Mr Dwyer, of Warwick, told the Herald in March this year that he was yet to agree a deal to hand himself over to authorities in the States.
An article in Decrypt the same month, based on court transcripts from a February 9 hearing, quoted Assistant US Attorney Jessica Greenwood as saying that prosecutors had been in discussions with his counsel about “obtaining his appearance”.
"We were unable to negotiate a voluntary surrender so we have begun extradition proceedings against him in Bermuda,“ she reportedly told the US District Court of the Southern District of New York.
Mr Dwyer, described by the Herald as a “maths whiz” from the Sydney suburb of Gordon and a graduate of the prestigious St Ignatius College and Sydney University, became Bitmex’s first employee after becoming friends with Mr Hayes in Hong Kong.
Jerome Lynch QC, his lawyer here, told Magistrate Khamisi Tokunbo yesterday that his client wanted an extradition hearing to decide the issue of whether he must return to the US to face charges.
That will take place on August 25.
Mr Dwyer was released on $20,000 bail in the meantime – a far smaller sum than his former bosses, who are all on multimillion dollar bail in the US – and had to surrender his passport.
Yahoo Finance reported last month that the Bitmex money laundering trial would begin in March next year.
The news site said Bitmex had been “one of the world’s most popular derivatives platforms” but was now a “much smaller player in the space” after users fled the platform because of the civil and criminal cases.
Little is known about the company’s operations here, though it was believed to be operating from Seon Place on Front Street.
The Royal Gazette asked Bitmex last November if it had applied for a licence from the Bermuda Monetary Authority to operate a cryptocurrency exchange or whether it planned to.
The newspaper also asked how many people HDR employed in Bermuda, if it expected to hire more, and if Mr Hayes remained the director of HDR Global Services (Bermuda) and HDR Capital, as was listed on the Bermuda Directors’ Registry.
A spokeswoman declined to respond to the questions.
She said Bitmex was wholly owned and operated by HDR Global Trading Limited, a Republic of Seychelles incorporated entity, and US citizens were banned from trading on its platform.
"Bitmex is not facing criminal charges,“ she said. ”The US CFTC filed a civil enforcement action against HDR Global Trading Limited and related parties.
“HDR Global Trading Limited is the holding company for the Bitmex platform and related entities.”