BitMEX is a big risk – Despite a last-ditch attempt to add the KYC procedure, the BitMEX platform is finally caught up with the US courts. The CFTC accused the platform of operating illegally and failing to follow basic compliance procedures.
BitMEX, the derivatives giant… no KYC
BitMEX is a platform for the exchange of cryptomoney, specializing in derivative products. It has set itself apart from the competition by launching, as of 2014, a leveraged trading service with a coefficient of up to x100.
In 2015, BitMEX was once again in the news with the launch of its Bitcoin futures contract (XBTUSD). It quickly became the leading platform in terms of volume for Bitcoin derivatives, even passing OkEx, the long time market leader in this market.
Since its launch, more than $11 billion in Bitcoin has been deposited on it. These activities have enabled it to generate more than $1 billion in fees.
BitMEX sued by the TCRC
On Thursday, October 1, the TCRC issued a press release announcing a civil lawsuit filed in the Southern District of New York against the BitMEX platform.
The lawsuit involves the managers and founders of the platform, Arthur Hayes, Ben Delo and Samuel Reed, as well as five companies related to the management of Bitmex, HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited and HDR Global Services (Bermuda) Limited (BitMEX).
The accused are charged with 3 counts :
Operating an unregistered trading platform;
Failure to implement the required anti-money laundering procedures ;
Failure to implement KYC (Know Your Customer) procedures.
„BitMEX has never been registered with the CFTC in any capacity and has failed to comply with laws and regulations that are essential to the integrity and vitality of the U.S. markets, such as KYC procedures to prevent money laundering, or procedures designed to detect and prevent manipulative transactions and other illegal activities. „Complaint filed
In fact, since 2014, BitMEX manages an exchange platform accessible from the United States, even though it is based in the Seychelles. Once again, KYC’s procedures were only recently put in place, on August 14th.
As part of this procedure, the CFTC is seeking the repayment of illegal gains, civil monetary penalties and restitution to clients. Obviously, BitMEX will be subject to a permanent ban on registration and trading.
At the same time, the Department of Justice has filed a complaint against founders Hayes, Delo, Reed and Greg Dwyer, BitMEX Business Development Manager, for violation of the banking secrecy law. The defendants face up to 5 years in prison.
The BitMEX platform, for its part, does not intend to stop there. It has already announced that it will „vigorously defend itself“:
„We strongly disapprove of the US government’s decision to bring these charges, and we intend to vigorously defend the allegations. Since our inception as a start-up, we have always sought to comply with applicable U.S. law as understood at the time and based on available guidance. „BitMEX Press Release
As BitMEX prepares to enter into a legal battle with the U.S. government, one of its founders, Samuel Reed, was nevertheless arrested (physically) in Massachusetts.