US Court Orders BitMEX Founders to Pay $30M for Illegal Trading

A federal judge ordered the three co-founders of BitMEX to pay a total of $30 million for operating an illegal cryptocurrency derivatives platform and violating money-laundering rules, the Commodity Futures Trading Commission (CFTC) said in a statement on Thursday.

The U.S. District Court for the Southern District of New York ordered the platform’s founders – Arthur Hayes, Benjamin Delo and Samuel Reed – to each pay a $10 million penalty in connection with CFTC accusations that they illegally conducted business with U.S. customers. The order followed the February resolution of a related Department of Justice case in which the three pleaded guilty to violations of the Bank Secrecy Act for running the crypto spot and derivatives trading platform without proper controls against money laundering.

Related to that plea, they are still awaiting sentencing “in the upcoming weeks,” according to the CFTC.

In 2020, the U.S. derivatives regulator first sanctioned the company and its founders for “unlawfully accepting orders and funds from U.S. customers to trade cryptocurrencies, including derivatives on bitcoin [BTC], ether [ETH] and litecoin [LTC].” This week’s penalties stem from that CFTC action, in which the company had previously agreed to pay the agency and the Financial Crimes Enforcement Network (FinCEN) $100 million.

“This is another example of the commission taking decisive action where appropriate to ensure that digital asset derivatives trading platforms comply with the Commodity Exchange Act and Commission regulations,” CFTC Chairman Rostin Behnam said in a statement.

Caroline Pham, who was recently sworn in as one of the agency's new commissioners, said these latest orders "highlight the CFTC’s leading role in bringing digital assets within the regulatory perimeter so that important protections for customers and market participants apply."

The CFTC said the co-founders “failed to implement and enforce effective controls to prevent or detect BitMEX’s unlawful conduct.”

A spokesman for Hayes declined to comment. Lawyers representing the other co-founders couldn’t immediately be reached for comment.

BitMEX spokesman Taylor Bossung said the company is aware of the developments but won’t comment on legal matters that don't directly involve the company.

“It’s business as usual, and we are focused on launching the BitMEX spot exchange in the coming weeks and expanding the platform further to serve our customers,” Bossung said.

Update (May 5, 2022, 20:40 UTC): Updates earlier breaking news story on Federal judge's order.

Update (May 5, 2022, 23:15 UTC): Adds comment from Caroline Pham.