U.S. Regulators CFTC Charges Crypto Exchange BitMEX for Illegal Operation of Derivatives Exchange

The United States Commodities and Futures Trading Commission (CFTC) has accused and charged crypto exchange BitMEX for unregistered trading of cryptocurrency derivates as well as violating other anti-money laundering laws.

The regulator notes that BitMEX has illegally offered leveraged commodities transactions, crypto futures, options, as well as swaps on digital currencies like Bitcoin, Litecoin, and Ether. It alleges that BitMEX failed to adhere to some of the most basic compliance procedures required by all financial institutions operating in the U.S.

“BitMEX has failed to register with the CFTC, and has failed to implement key safeguards required by the CEA and CFTC’s regulations designed to protect the U.S. derivatives markets and market participants,” wrote CFTC.

The commodities regulator has explicitly names BitMEX, CEO Arthur Hayes and other company owners - Samuel Reeds and Ben Delo. The U.S. Attorney for the Southern District of New York - Audrey Strauss - has also charged these people for violating the Bank Secrecy Act along with the conspiracy to violate the act.

Besides, it has also mentioned corporate entities like ABS Global Trading Limited, HDR Global Trading Limited, Shine Effort Inc Limited, 100x Holding Limited, and HDR Global Services (Bermuda) Limited involved in the act.

In the press release, the CFTC notes that BitMEX received $11 billion and made over $1 billion in fees while “conducting significant aspects of its business from the U.S. and accepting orders and funds from U.S. customers.”

As a result, the CFTC has sought multiple charges against BitMEX like the civil monetary penalties, the disgorgement of ill-gotten gains, permanent registration and trading bans, restitution for the benefit of customers, and a permanent injunction from future violations of the Commodity Exchange Act (CEA).

CFTC chairman Heath P. Tarbert said: “Digital assets hold great promise for our derivatives markets and for our economy. For the United States to be a global leader in this space, it is imperative that we root out illegal activity like that alleged in this case. New and innovative financial products can flourish only if there is market integrity. We can’t allow bad actors that break the law to gain an advantage over exchanges that are doing the right thing by complying with our rules.”

The complaint by CFTC also accuses CFTC for violating or failing to implement the know-your-customer (KYC) procedures as well as other anti-money laundering procedures. Division of Enforcement Director James McDonald said: “As the CFTC has made clear, registration requirements are a cornerstone of the regulatory framework that protects Americans and U.S. financial markets. Effective anti-money laundering procedures are among the fundamental requirements of intermediaries in the derivatives markets, whether in traditional products or in the growing digital asset market. This action shows the CFTC will continue to work vigilantly to protect the integrity of these markets.”