The U.S. Department of Justice filed an indictment against the BitMEX senior executive team, including Arthur Hayes, Samuel Reed and Benjamin Delo as well as Gregory Dwyer, for violating the federal Bank Secrecy Act. At the same time, the Commodity Futures Trade Commission (CFTC) took civil enforcement action against BitMEX for not doing enough to prevent U.S. customers from onboarding onto the exchange.
Stephen Palley, a partner at law firm Anderson Kill, explained exactly what the BitMEX management team is up against, saying,
(38:10) “I mean it’s as serious as a heart attack. The allegations are of significant and ongoing violations of the Bank Secrecy Act, a statute that has criminal penalties of up to five years imprisonment for each violation. I don’t see any appearance by Mr. Hayes or Mr. Delo or Mr. Dwyer. In the criminal case, it would appear that they are still at large.”
Palley offered his opinion about what it all means, saying,
(40:43) “My expectation is based on drawing from other examples and particularly given the fact that this has been going on according to the indictment since 2014. And from at least 2017 or 2018 BitMEX knew that they were dealing with US persons and that they were required to comply with the BSA and they didn’t. They moved to the Seychelles for the state of reasons that it would be easier to bribe people there. My expectation is that, my back of the envelope guess, is that eventually the executive team will be found, will be extradited to the United States and will do prison time. There’s been a significant flight of capital from BitMEX. I think they’re down 30%. Certainly, no interest in causing panic and I don’t have crypto holdings. So this doesn’t affect me personally. I would be surprised if that exchange exists in a year or two.
Palley had a warning for other offshore cryptocurrency exchanges, saying,
(50:10) “I guess I would say it’s a good time to get your house in order if you’re offshore and maybe you’ve had contact with the United States in the past and not for malevolent reasons, just because maybe you were sloppy. It’s a good time to evaluate that and come up with a compliance plan, whether it’s backwards looking or forwards looking. In some cases, it’s better to go to the regulator before they come to you. I don’t know how BitMEX handled that, but apparently how they handled it was not the right way. Otherwise there wouldn’t be criminal charges.”