BitMEX agrees to pay $100 million fine to settle with FinCEN and CFTC

Crypto derivatives exchange BitMEX has agreed to pay up to $100 million to settle charges from the U.S. Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN).

In a statement on Tuesday, the CFTC said the U.S. District Court for the Southern District of New York had issued a consent order against HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited, and HDR Global Services Limited for allegedly operating the BitMEX platform illegally.

As part of its settlement with the CFTC and FinCEN, BitMEX will pay a $100 million civil penalty for “unlawfully operating a cryptocurrency trading platform and violating anti-money laundering regulations.” Additionally, the company will be required to hire an independent consultant to conduct a historical analysis of its transactions to determine whether it failed to properly report suspicious activity.

“This case reinforces expectations that as the digital asset industry continues to engage with a broader group of market participants, it will take seriously its responsibilities within the regulated financial industry and its duty to develop and uphold a culture of compliance,” said CFTC Acting Chairman Rostin Behnam. “The CFTC will act swiftly when activity affecting CFTC-regulated markets raises customer and consumer protection issues.”

The company's former CEO Arthur Hayes and other executives may still face charges for alleged violations of the Bank Secrecy Act. According to a spokesperson for BitMEX co-founders, Hayes, Ben Delo and Sam Reed are not parties to the CFTC and FinCEN settlement agreements. Hayes has been released on $10 million bail since he surrendered to U.S. authorities in April, while the trial of some former executives is scheduled to begin in March 2022.

FinCEN said: “BitMEX allowed customers to access its platform and trade derivatives without adequate customer due diligence—collecting only email addresses and failing to verify customer identities. Despite BitMEX’s public statements that its platform does not do business with U.S. persons, FinCEN found that BitMEX failed to implement adequate policies, procedures, and internal controls to screen customers who used virtual private networks to access the trading platform and circumvent Internet Protocol surveillance.”

According to FinCEN, BitMEX failed to maintain adequate anti-money laundering protections. The exchange conducted at least $209 million in transactions with “known darknet markets or unregistered money services businesses that provided mixing services.”

Following the initial allegations in October 2020, BitMEX announced plans to strengthen its anti-money laundering and trade monitoring protocols. As of January, the exchange said it had improved its Know Your Customer features.

“We take our responsibilities very seriously and will continue to actively engage with regulators around the world to ensure we play an active role in helping to shape the future of this extraordinary asset class,” said Alexander Höptner, CEO of BitMEX.