BitMEX Founders Hayes, Delo Plead Guilty to Violating US Bank Secrecy Act

Two co-founders of the controversial crypto derivatives exchange BitMEX pled guilty to charges of violating the US Bank Secrecy Act (BSA). Had the case gone to trial, the pair would have been staring down a potential maximum penalty of five years in prison, but now face a sentence of six to 12 months each.

According to a press release by the Department of Justice (DOJ) on Thursday, Arthur Hayes and Ben Delo have pleaded guilty for their involvement in “willfully failing” to implement and maintain anti-money laundering (AML) measures at BitMEX.

As part of the plea agreement, the co-founders have been ordered to pay $10 million each as a criminal fine that represents financial gains stemming from their offense.

The Southern District Court of New York heard of how the exchange’s founders, including co-defendant Sam Reed, allegedly failed to establish a “program for verifying the identity of BitMEX’s customers.” Reed has not yet formally pleaded guilty to charges, and as such, his involvement has only been alleged by US prosecutors.

Australian Greg Dwyer, BitMEX’s first official employee and former head of business development, will face a criminal trial on similar charges in October following a delayed proceeding originally scheduled for March.

From September 2015 through to September 2020, the DOJ alleges that BitMEX’s was “in effect, a money-laundering platform” as a result of the exchange’s failure to implement AML and Know-Your-Customer programs.

Under the country’s BSA, US law requires financial institutions to monitor, detect and report money-laundering activity to government agencies in a bid to curb related crime. Documentation and transaction histories are generally required from financial institutions to US agencies whenever they suspect clients of transacting illicitly above $10,000.

“Hayes and…Delo built a company designed to flout those obligations; they willfully failed to implement and maintain even basic anti-money laundering policies,” US Attorney Damian Williams said in the release. “They allowed BitMEX to operate as a platform in the shadows of the financial markets.”

The guilty pleas partly conclude a long-drawn-out saga where Reed, Dwyer and Hayes fled in 2020 following criminal charges. Hayes, who was located in Singapore shortly after, negotiated extradition back to the US, as did Dwyer. Delo, a Hong Kong resident, was in the U.K. at the time of the indictment and later voluntarily appeared in the US to face the charges. Reed was arrested in Massachusetts in October 2020. He was later released on an appearance bond of $5 million.

Correction — March 4, 2022: Hayes and Delo face a maximum of one year in prison. Delo was indicted while outside the US; he did not flee.

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