Court Hits BitMEX Co-founders With $30M in Civil Monetary Penalties

The Commodity Futures Trading Commission (CFTC) on Thursday announced that the District Court for the Southern District of New York (SDNY) had issued a Consent Order against all three founders of crypto exchange BitMEX, imposing a total of $30 million in civil monetary penalties.

The Southern District of New York earlier ordered BitMEX corporate entities to pay $100 million for illegally operating a crypto trading platform and violating anti-money laundering (AML) regulations.

“Unlawful Acts”

According to the CFTC statement, Arthur Hayes, Benjamin Delo, and Samuel Reed have been slapped with a $10 million penalty each. The regulators said BitMEX and its executives had violated the Commodity Exchange Act (CEA) from the period of November 2014 to October 2020.

The CFTC moved against BitMEX along with its executives in October 2020 for operating business in the US without any license from the regulatory agency. It accused the exchange of functioning as a Designated Contract Market or a Swap Execution Facility without approval and as a Futures Commission Merchant without adequate registration. The CFTC also said BitMEX failed to implement KYC/AML procedures for its customers.

The exchange settled charges with CFTC and FinCEN, paying a monetary penalty of $100 million. After the court filings, the company reshuffled its management team and also went on to appoint a new compliance head with an AML background. It also made other key hires following the departure of Arthur Hayes and other founders.

In a separate statement, CFTC Commissioner Caroline D. Pham said enabling “unregistered companies” to function in violation of the law gives “wrongdoers with an unfair advantage over those who are doing the right thing” by adhering to the rules laid down by the regulators. She also added,

“By enforcing individual accountability for registration, market conduct, and anti-money laundering rules – fundamental aspects of the U.S. regulatory framework – the CFTC is ensuring that BitMEX’s management is held responsible after last year’s $100 million dollar settlement with corporate defendants.”

Requests for No Jail Term and Freedom to Travel

The recent development follows a report revealing Hayes’ lawyers had filed a request for probation with a Manhattan federal judge.

In a 65-page submission, the legal representatives of the former BitMEX CEO also requested no home detention or community confinement after signing a plea deal that would result in a reduced prison sentence of 6 tob12 months under federal guidelines.