Feds: Major Cryptocurrency Exchange Acted as 'Vehicle for Money Laundering'

The New York Times reports that federal authorities have brought criminal charges against the owners of one of the world’s biggest cryptocurrency trading exchanges, BitMEX, alleging that the Hong Kong-based company was used to launder money and engage in illegal transactions. BitMEX handles a volume of $1.5 billion in crypto trades each day, making it one of the top five cryptocurrency exchanges.

The New York Times reports in an article titled “Owners of BitMEX, a Leading Bitcoin Exchange, Face Criminal Charges,” that federal prosecutors in Manhattan have indicted the CEO and three co-owners of BitMEX, a cryptocurrency exchange accused of facilitating criminal activity. CEO Arthur Hayes and co-owners Benjamin Delo, Samuel Reed, and Gregrow Dwyer have all been indicted.

The indictment released on Thursday stated: “BitMEX made itself available as a vehicle for money laundering and sanctions violations.” BitMEX handles over $1.5 billion of trades each day recently making it one of the five biggest exchanges on average. The NYT described the history of BitMEX writing:

After it was founded in 2014, BitMEX grew popular by allowing traders to buy and sell contracts tied to the value of Bitcoin — known as derivatives, or futures — with few of the restrictions and rules that were in place in other exchanges. That allowed investors to take out enormous loans and make risky trades.

The relaxed attitude also made it possible for people all over the world to easily move money in and out of BitMEX without the basic identity checks that can prevent money laundering. In August, BitMEX put in place some of those verification checks.

Mr. Hayes is from Buffalo, and previously worked as a trader at Deutsche Bank and Citi after graduating from the University of Pennsylvania. He incorporated BitMEX in the Seychelles even though its offices were in Hong Kong and New York.

Mr. Hayes chose Seychelles “because it cost less to bribe Seychellois authorities — just ‘a coconut’ — than it would cost to bribe regulators in the United States and elsewhere,” according to the indictment.

A spokesperson for one of the corporate entities that control BitMEX, HDR Global Trading Limited, commented on the indictment stating: “We strongly disagree with the U.S. government’s heavy-handed decision to bring these charges, and intend to defend the allegations vigorously.”