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Founders Of Cryptocurrency Exchange Plead Guilty To Bank Secrecy Act Violations | USAO-SDNY | Department of Justice

damian williams, the united states attorney for the southern district of new york, announced that arthur hayes and benjamin delo, founders and executives of supposedly “off-shore” cryptocurrency derivatives trade the bitcoin trading exchange or “bitmex “, pleaded guilty today to violating the Bank Secrecy Act (the “BSA”) by knowingly failing to establish, implement and maintain an anti-money laundering (“AML”) program at BitMex. Under the terms of their respective plea agreements, Hayes and Delo separately agreed to pay a criminal fine of $10 million representing pecuniary gain from the crime. Hayes and Delo pleaded guilty today before U.S. District Judge John G. koeltl.

US Attorney Damian Williams said: “As cryptocurrencies and technologies designed to facilitate their trade proliferate, companies involved in the virtual currency economy have become critical gatekeepers in efforts to ensure that states United. markets are fair, efficient and secure. The opportunities and benefits of operating in the United States are innumerable, but they come with an obligation for these companies to do their part to help eliminate crime and corruption. Arthur Hayes and Benjamin Delo built a company designed to circumvent those obligations; they deliberately failed to implement or maintain even basic anti-money laundering policies. they allowed bitmex to operate as a platform in the shadow of the financial markets. Today’s guilty pleas reflect this office’s continued commitment to investigating and prosecuting money laundering in the cryptocurrency industry.”

Reading: Bitcoin exchange founders

According to the indictment, public court documents, and statements made in court:[1]

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hayes, along with delo and co-defendant sam reed, was one of the three co-founders and long-time CEO of bitmex. delo was a co-founder and, during the period between September 2015 and September 2020 inclusive, he held various executive positions at bitmex, including COO. bitmex is an online cryptocurrency derivatives exchange that, during the relevant time period, had operations in the us. uu. and served thousands of us dollars. uu. customers, without prejudice to false statements to the contrary by the company. From at least September 2015, and continuing through at least the time of the indictment in September 2020, Hayes and Delo intentionally caused Bitmex to fail to establish and maintain an AML program, including a program to verify the identity of Bitmex customers. (or a “know your customer” or “kyc” program). As a result of its deliberate failure to implement the AML and KYC programs, Bitmex was in effect a money laundering platform. For example, in May 2018, it was notified hayes of allegations that bitmex was being used to launder the proceeds of a cryptocurrency hack. neither hayes, delo nor their company filed a suspicious activity report thereafter (in fact, bitmex did not file any suspicious activity reports between 2014 and september 2020), nor did they implement an aml or kyc program in response. unsurprisingly, bitmex was also a vehicle for sanctions violations – hayes and delo will communicate on directly with bitmex clients who identified themselves as being based in iran, an ofac-sanctioned jurisdiction, but did nothing to implement an aml or kyc program after doing so.

hayes and delo failed to institute aml or kyc programs at bitmex despite closely following u.s. Regulatory developments that made clear its legal obligation to do so if Bitmex operated in the United States, which it did. despite repeatedly stating that bitmex did not serve the us. uu. Customers, including members of the press and others outside of BitMex, Hayes and Delo, were aware that BitMex’s alleged withdrawal from the US. uu. the market in or around september 2015 was a sham, and the so-called “controls” bitmex put in place to prevent the ee. uu. trading was an ineffective front that did not, in fact, prevent users from accessing or trading on bitmex from the united states. hayes and delo not only understood that u.s. Clients continued to trade on BitMex, but made substantial profits from BitMex as a result of US-based trading. uu. hayes and delo actively sought us out. clients by using us based cryptocurrency “influencers”. uu. to market to new customers through the so-called “affiliate program” of bitmex. Hayes also directed U.S. TV appearances and marketing stunts that promoted Bitmex products in the United States. delo allowed a client to continue to access a bitmex trading account even though this client was explicitly “based on us”, simply because that client was “bitcoin famous”. delo falsely changed internal tracking information to reflect that the customer’s country of residence is not the united states, despite knowing it to be false.

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hayes, 36, of miami, florida, and delo, 38, of the united kingdom and hong kong, each pleaded guilty to one count of violating the bank secrecy law, which carries a maximum sentence of 5 years in prison. The potential maximum sentence in this case is prescribed by Congress and is provided here for informational purposes only, as the judge will determine the defendant’s sentence.

mr. Williams praised the excellent investigative work of the FBI’s Money Laundering Investigative Squad in New York and thanked the Commodity Futures Trading Commission attorneys and investigators whose experience and diligence were integral to the development of this investigation.

Prosecution is handled by the office’s Transnational Criminal Enterprises and Money Laundering unit. assistant to us attorneys jessica greenwood, samuel raymond and thane rehn are in charge of the prosecution.

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