CFTC has charged BitMEX with illegally operating a derivatives trading platform.
Back in July 2019 U.S. Commodity Futures Trading Commission (CFTC) started investigating the exchange with a focus on allowing Americans to trade on the platform while not being registered with the agency.
But as Jake Chervinsky, general counsel at Compound Finance, said the bigger news is BitMEX founder Arthur Hayes, Samuel Reed, and Benjamin Delo being indicted on charges of violating the Bank Secrecy Act, which carries a maximum prison term of five years.
Exchange’s first employee who later became the head of business development, Gregory Dwyer, was also charged and arrested this morning in Massachusetts —the rest remain at large, said the prosecutors.
BREAKING: CFTC sues Bitmex, Arthur Hayes "to enjoin their ongoing illegal offering of commodity derivatives to U.S. persons, their acceptance of funds to margin derivatives transactions from individuals and entities in the U.S., & their operation of a derivatives trading platform pic.twitter.com/CacEatcG0T
— Palley (@stephendpalley) October 1, 2020
The founders of BitMEX were indicted by federal prosecutors in New York for failing to comply with adequate anti-money laundering measures at the company.
“These defendants flouted (to do their part to help in driving out crime and corruption) obligation and undertook to operate a purportedly ‘off-shore’ crypto exchange while willfully failing to implement and maintain even basic anti-money laundering policies,” Acting Manhattan U.S. Attorney Audrey Strauss said.
The official press release further states that one of the defendants even bragged about the company incorporated outside the US where “bribing regulators…cost just ‘a coconut.’”
“Thanks to the diligent work of our agents, analysts, and partners with the CFTC, they will soon learn the price of their alleged crimes will not be paid with tropical fruit, but rather could result in fines, restitution, and federal prison time,” it reads.
The real question is, how fast will foreign exchanges that still allow US-based traders to use their service via VPN or without KYC. The implications of this could be huge for the cryptocurrency community.
In response to the news, bitcoin fell from above $10,900 to $10,460 within minutes and is currently trading at around $10,500. The rest of the crypto market also dropped in tandem.