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The Crypto derivatives exchange BitMEX is in for some trouble. The U.S. Department of Justice and the Commodity Futures Trading Commission (CFTC) which is an independent Federal Body has apparently filed charges against crypto derivatives exchange BitMEX and its owners and its co-founders. The CFTC regulates the commodity futures and options market. It facilitates competitive and efficient futures markets which also includes the protection of investors against any form of malpractice, abusive trade practices, manipulation, and fraudulent activities.
Arthur Hayes, Co-founder, and CEO, along with other co-founders Ben Delo and Samuel Reed have also been sent notices. They have been accused of the count of operating an unregistered trading platform as well as not abiding by the rules of CFTC that include anti-money laundering regulations and KYC norms. This is what CFTC had to say about the whole occurrence,
“The complaint charges BitMEX with operating a facility for the trading or processing of swaps without having CFTC approval as a designated contract market or swap execution facility, and operating as a futures commission merchant by soliciting orders for and accepting bitcoin to margin digital asset derivatives transactions, and by acting as a counterparty to leveraged retail commodity transactions. The complaint further charges BitMEX with violating CFTC rules by failing to implement know-your-customer procedures, a customer information program, and anti-money laundering procedures.”
The Department of Justice or the Justice Department that enforces law and administration in the US have filed criminal charges against Hayes, Delo, Reed, the three founders along with the Head of BD department Greg Dwyer. They have been charged with the violation of the Bank Secrecy Act. In its press release, the department implied that Reed was arrested in Massachusetts on Thursday morning and will be presented in the Federal Court in that region.
The Assistant Director, FBI Willina Sweeny stated:
“As we allege here today, the four defendants, through their company’s BitMEX crypto-currency trading platform, willfully violated the Bank Secrecy Act by evading U.S. anti-money laundering requirements.”
The complaint that runs for 40 pages has also named DR Global Trading Limited, BitMEX’s parent company, as well as 100x Holdings Limited, ABS Global Trading Limited, Shine Effort Inc Limited, and HDR Global Services (Bermuda) Limited as defendants.
An excerpt from the complaint can be seen below:
“… the CFTC brings this action pursuant to Section 6c of the Act, 7 U.S.C. § 13a-l (2018), to enjoin Defendants’ unlawful acts and practices and to compel their compliance with the Act. In addition, the CFTC seeks civil monetary penalties and remedial ancillary relief, including, but not limited to, trading and registration bans, disgorgement, restitution, pre- and post-judgment interest, and such other relief as the Court may deem necessary and appropriate.”
The CFTC Chairman Heath Tarbet said that he believes digital assets are quite promising for the derivatives market and the economy as a whole. But he also said that if the country has to lead by example, it has to root out all the illegal activities. New and innovative products are coming in this sector, and they will survive only when there is market integrity.