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Bitmex to pay $100 million to settle compliance allegations

BitMEX chief executive officer Arthur Hayes is shown with then National Security Minister Wayne Caines, left, and David Burt, the Premier, in 2018.

A group of companies that operated the BitMEX crypto exchange will pay $100 million to settle allegations that they allowed years of illegal trades and violated anti-money laundering rules, resolving one of the first big cases in an emerging US crackdown on digital tokens, Bloomberg has reported.

BitMEX broke regulations by letting US residents trade cryptocurrency derivatives from at least November 2014 through October 2020, the Commodity Futures Trading Commission said in a statement today. The trading platform’s backers also settled claims from the Financial Crimes Enforcement Network that they didn’t adhere to the Bank Secrecy Act and failed to report suspicious transactions to American authorities.

BitMex was once the world’s largest crypto-derivatives exchange but its prospects have soured amid the US investigations, which came to a head last October when the CFTC filed a lawsuit, Blomberg said.

The futures regulator has since launched probes into other platforms over similar suspicions that they are allowing Americans to buy and sell derivatives without registering with the agency.

The agreement requires the BitMEX companies to pay $50 million to the CFTC and provides a credit for up to $50 million for payments made under a related deal with FinCEN.

BitMEX also certified that anyone based in the US is prohibited from accessing its trading platform.

BitMEX said in a statement that it has improved its compliance programme in recent years and is pleased to put the investigations behind the company.

“We take our responsibilities extremely seriously, and will continue to actively engage with regulators around the world to ensure that we play a positive role in helping to shape the future of this extraordinary asset class,” chief executive officer Alexander Hoptner said in the statement.

The resolution doesn’t involve Arthur Hayes, Benjamin Delo and Samuel Reed, the three men who founded BitMEX. All have entered not guilty pleas in a separate Justice Department case that accuses them of violating the Bank Secrecy Act.

Gregory Dwyer, a senior employee of BitMEX, is facing extradition from Bermuda to the US to face money laundering charges.

Mr Dwyer had been charged on October 1 last year with violating the US Bank Secrecy Act and conspiring to violate the Bank Secrecy Act.

Mr Dwyer, 38, will return to Magistrates’ Court on August 25 for an extradition hearing before Magistrate Khamisi Tokunbo.

BitMEX was launched in 2014 as a platform for exchanging cryptocurrencies derivatives, which allows traders to make money off the performance of digital currencies.

Two of its associated companies are registered in Bermuda.

They were formed after Mr Hayes visited Bermuda in June, 2018 and met David Burt and Wayne Caines, then national security minister who was leading the government’s fintech initiative.

The Premier tweeted photos of the meeting and wrote that Mr Hayes “met our #fintech team to learn more about our digital asset regulation, with a view to establishing a Bitmex office in Bermuda”.

HDR Global Services (Bermuda) Ltd was incorporated here as an exempted software technology development company soon after, on July 3, 2018.

HDR Capital Ltd, an investment holding firm, was incorporated as an exempted company here on April 5, 2019.

A spokesman for Hayes, Delo and Reed reiterated on Tuesday that they intend to fight the government’s allegations.

”As their defence will show, from the company’s earliest days, the co-founders sought to comply with applicable law as it developed over time,” the spokesman said in a statement.

Hayes, a former Citigroup Inc. equities trader, was once regarded as one of the crypto industry’s top promoters.

In 2018, BitMEX rented three Lamborghinis to park outside a Bitcoin conference in Manhattan, with Hayes declaring the stunt a success because of all the publicity it generated.

The companies involved in Tuesday’s accord included HDR Global Trading Ltd., 100x Holdings Ltd., ABS Global Trading Ltd., Shine Effort Inc. and HDR Global Services (Bermuda) Inc.

The firms neither admitted nor denied the allegations.

The case is Commodity Futures Trading Commission v. HDR Global Trading Ltd., 20-cv-08132, US District Court, Southern District of New York (Manhattan)