BitMEX Co-Founders Slapped with $30 Million Fine

The Commodity Futures Trading Commission (CFTC) announced on Thursday that a New York court entered a consent order against all three co-founders of crypto derivatives exchange BitMEX, Arthur Hayes, Benjamin Delo and Samuel Reed.

They have been ordered to pay a total civil penalty of $30 million as each has to shell out $10 million. Also, the court enjoined all three of them from any further violations of the Commodity Exchange Act (CEA) and CFTC regulations.

“This is another example of the Commission taking decisive action where appropriate to ensure that digital asset derivatives trading platforms comply with the Commodity Exchange Act and Commission regulations,” CFTC’s Chair, Rostin Behnam said.

Operating without Licenses

The CFTC moved against BitMEX and its three co-founders in October 2020 for conducting business in the United States without any license.

The exchange, under the control of its co-founders, offers trading services to the US residents without obtaining CFTC’s approval to operate as a Designated Contract Market (DCM) or a Swap Execution Facility (SEF). Further, it operated as a Futures Commission Merchant (FCM) without registration and failed to implement customer information program (CIP) and know-your-customer (KYC Know Your Customer (KYC) Know Your Customer (KYC) is the process via which the broker is verifying the true identity of its clients in order to comply with multiple regulations. KYC is used to assess the suitability of customers when it comes to anti-money laundering regulations, any type of financial fraud and determining whether they are potentially risky for the brokerage.In particular, KYC guidelines in financial services mandate that individuals make a cohesive effort to verify the identity, suitability, and risks Know Your Customer (KYC) is the process via which the broker is verifying the true identity of its clients in order to comply with multiple regulations. KYC is used to assess the suitability of customers when it comes to anti-money laundering regulations, any type of financial fraud and determining whether they are potentially risky for the brokerage.In particular, KYC guidelines in financial services mandate that individuals make a cohesive effort to verify the identity, suitability, and risks Read this Term) procedures, along with anti-money laundering (AML Anti-Money Laundering (AML) Anti-money laundering (AML) is a term that describes laws, processes, and regulations that are intended to prevent illegally obtained funds from being disguised as income gained through legitimate means. The fundamental purpose of the AML laws is to help safeguard, detect, and report suspicious activity including the predicate offenses to money laundering and terrorist financing, such as securities fraud and market manipulation.Most exchanges have AML measures that include identity verification Anti-money laundering (AML) is a term that describes laws, processes, and regulations that are intended to prevent illegally obtained funds from being disguised as income gained through legitimate means. The fundamental purpose of the AML laws is to help safeguard, detect, and report suspicious activity including the predicate offenses to money laundering and terrorist financing, such as securities fraud and market manipulation.Most exchanges have AML measures that include identity verification Read this Term) measures.

BitMEX already settled with the US regulator earlier, paying a monetary penalty of $100 million.

Additionally, the CFTC filed criminal charges against the three BitMEX co-founders and one of its employees for the violation of the Bank Secrecy Act and conspiracy to commit offences. Moreover, all the three co-founders entered a guilty plea and are now awaiting sentencing.

“Individuals who control cryptocurrency derivatives trading platforms conducting business in the U.S. must ensure that their platform complies with applicable federal commodities laws, including CFTC registration and regulatory requirements such as Know-Your-Customer and Anti-Money Laundering regulations,” Gretchen Lowe, CFTC’s Acting Director of Enforcement, said.