New York, NY – Three co-founders of the cryptocurrency derivatives platform BitMEX have agreed to pay $30 million in penalties to settle charges brought by the Commodity Futures Trading Commission (CFTC). Arthur Hayes, Benjamin Delo, and Samuel Reed each face a $10 million civil monetary penalty for violations of the Commodity Exchange Act (CEA) and CFTC regulations.
The consent orders, entered by the U.S. District Court for the Southern District of New York, also permanently enjoin Hayes, Delo, and Reed from further violations. The CFTC alleged the trio operated BitMEX while conducting significant business from the U.S., unlawfully accepting orders and funds from American customers for cryptocurrency derivatives trading, including Bitcoin, Ether, and Litecoin.
“As digital asset markets grow globally, the Commission continues to actively use its existing enforcement authority in the digital asset commodity space to protect customers and ensure these emerging markets are free from fraud and manipulation,” stated CFTC Chairman Rostin Behnam. Acting Director of Enforcement Gretchen Lowe added that individuals controlling cryptocurrency platforms operating in the U.S. must comply with federal commodities laws, including registration, Know-Your-Customer (KYC), and Anti-Money Laundering (AML) regulations.
The orders stem from a complaint filed by the CFTC in October 2020. The complaint detailed that from November 2014 through October 2020, Hayes, Delo, and Reed controlled BitMEX and were responsible for its violations. These included operating a trading facility without CFTC approval as a Designated Contract Market (DCM) or Swap Execution Facility (SEF), functioning as an unregistered futures commission merchant (FCM), and failing to implement adequate KYC and AML programs.
The CFTC previously resolved a related action against the BitMEX entities in August 2021, resulting in a $100 million penalty and injunctions.
Separately, the U.S. Attorney’s Office for the Southern District of New York indicted Hayes, Delo, Reed, and a fourth individual on charges of violating the Bank Secrecy Act and conspiracy to commit the same offense. Hayes, Delo, and Reed have each pleaded guilty to one count of the indictment and are awaiting sentencing.
Source: CFTC.gov
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