Cryptocurrency derivatives exchange BitMEX will pay about $100 million to the Financial Crimes Enforcement Network (FinCEN) and Commodity Futures Trading Commission (CFTC) for illegally operating a crypto trading platform.
The US District Court for the Southern District of New York had entered a consent order for HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited, and HDR Global Services Limited to be charged with illegally operating the BitMEX platform, according to a statement released by the Commodity Futures Trading Commission on Tuesday.
BitMEX will pay a $100 million civil monetary penalty to the CFTC and FinCEN “for illegally operating a cryptocurrency trading platform and anti-money laundering offences,” according to the settlement.
Furthermore, the corporation will be compelled to employ an independent expert to perform a historical study of its transactions in order to establish if it failed to disclose suspicious activities correctly.
“As the digital assets industry continues to touch a broader pool of market participants, this case reinforces the expectation that it takes seriously its responsibilities in the regulated financial industry, as well as its duties to develop and adhere to a culture of compliance,” said acting CFTC chair Rostin Behnam.
“When activity affecting CFTC jurisdictional markets raise customer and consumer protection concerns, the CFTC will act quickly.”
Despite the fact that the settlement stemmed from the lawsuit against former CEO Arthur Hayes and other officials at the firm, the people are still likely to face penalties for alleged Bank Secrecy Act violations.
Since surrendering to US authorities in April, Hayes has been free on a $10 million bail, while the trial of some of the former executives is set to begin in March 2022.
The Financial Crimes Enforcement Network stated that “BitMEX allowed consumers to access its platform and undertake derivative trading without proper customer due diligence – gathering merely an email address and failing to verify customer identity.”
FinCEN found that BitMEX failed to implement appropriate policies, procedures, and internal controls to screen for customers who use a virtual private network to access the trading platform and circumvent internet protocol monitoring, despite BitMEX’s public representation that its platform was not conducting business with U.S. persons.
BitMEX failed to maintain proper anti-money laundering protections and neglected to disclose 588 instances of suspicious activity to FinCEN for more than six years, according to FinCEN.
The exchange allegedly transacted at least $209 million with “known darknet markets or unregistered money services organizations providing mixing services,” according to FinCEN
BitMEX declared efforts to strengthen its anti-money laundering and trade surveillance protocols after the allegations were initially filed in October 2020.
The exchange announced in January that it had upgraded its Know Your Customer capabilities, noting that it had cancelled all previously open positions held by unverified users.
“We’re relieved to have this behind us,” BitMEX CEO Alexander Höptner stated. “We take our duties very seriously, and we will continue to work closely with regulators throughout the world to ensure that we contribute positively to the development of this remarkable asset class.”