BitMEX Co-founder Pleads Guilty to US Bank Secrecy Act Violations

Samuel Reed, one of the three co-founders of the cryptocurrency derivatives exchange BitMEX, has pled guilty to bank secrecy act violations, specifically for violating the Bank Secrecy Act (BSA), by willfully failing to establish, implement and maintain an anti-money laundering program at the firm.

In addition, according to the United States Attorney for the Southern District of New York, the executive agreed to separately pay a $10 million criminal fine representing pecuniary gain derived from the offense under the terms of his plea agreement.

“Samuel Reed has now joined his co-founders, Arthur Hayes and Benjamin Delo, in admitting that they caused BitMEX to commit criminal violations of the anti-money laundering laws that govern financial institutions operating in the United States. As today’s guilty plea reflects, this Office will not permit cryptocurrency exchanges to operate as a shadow financial system that enables criminal actors to move their illicit proceeds without detection, and will vigorously investigate and prosecute the operators of such exchanges who deliberately flout US law,” Damian Williams, the US Attorney, commented on the announcement.

Reed entered a plea of guilty today before Chief U.S. District Judge Laura T. Swain and will be sentenced by US District Judge John G. Koeltl. In February. Arthur Hayes and Benjamin Delo, the other two founders of BitMEX, pled guilty to the same offense.

Both Hayes and Delo have agreed to pay $10 million each as a criminal fine under the terms of their plea agreement. In addition, they are looking at a maximum jail term of 5 years, but the judge will decide on the sentencing.

Case Background

BitMEX was established in 2014 and gained popularity for offering 100x leverage on cryptocurrency derivative instruments. The exchange officially withdrew its services from the US markets around September 2015, but the prosecutors said that both Hays and Delo knew that the move was a sham.

The controls put in place by the exchange to prevent US customers from trading were ineffective. According to the prosecutors, BitMEX knew about the US-based trading and was collecting substantial profits from their activities. They even lured US customers through influencer marketing under their affiliate program.