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BitMEX Co-founder Pleads Guilty to Violating Anti-money Laundering Rules

UTC by Tolu Ajiboye · 3 min read
BitMEX Co-founder Pleads Guilty to Violating Anti-money Laundering Rules
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Samuel Reed is the third co-founder of BitMEX to plead guilty to US money laundering charges and pay $10 million fine.

BitMEX co-founder Samuel Reed has pleaded guilty to violating the US Bank Secrecy Act, and will now pay a $10 million fine. Reed is now the third co-founder of the crypto exchange pleading guilty to contravening US anti-money laundering rules (AML). Last month, the Department of Justice announced that fellow BitMEX co-founders Arthur Hayes and Ben Delo were found guilty

Prosecutors accused BitMEX of establishing offshore operations to evade US AML regulations. Through this, the exchange still allowed US customers to access its platform.

Details of BitMEX Co-founder Guilty Plea

In a Manhattan federal court, Reed pled guilty to “willfully failing to establish, implement, and maintain” anti-money laundering requirements at BitMEX. The $10 million criminal fine he agreed to pay represents a pecuniary gain derived from the offense. In addition, the charge carries a maximum sentence of five years in prison. However, a federal judge will decide that later.

Hayes and Delo each paid the same punitive sum last month, and face the same sentencing enforcement.

Weighing in on the case, US Attorney Damian Williams said in a statement:

“As today’s guilty plea reflects, this Office will not permit cryptocurrency exchanges to operate as a shadow financial system that enables criminal actors to move their illicit proceeds without detection, and will vigorously investigate and prosecute the operators of such exchanges who deliberately flout US law.”

Prosecutors allege that Reed was aware of BitMEX’s complicity in laundering proceeds of a crypto hack back in May 2018. However, they stated that the co-founder failed to file any reports with regulators. Prosecutors also said that he did not improve internal compliance at the exchange in response.

BitMEX Had Had Legal Issues for a While

The BSA violation charges brought against BitMEX date back to October 2020, when the DOJ and the Commodity Futures Trading Commission (CFTC) each presented federal charges. Although the DOJ’s charges against BitMEX were criminal and still linger, the CFTC’s charges leaned toward civil offenses. The US derivatives markets regulatory agency accused BitMEX of operating an unregistered platform and violating CFTC rules. These included the ‘anti-money laundering’ and ‘know-your-customer regulations.’ Eventually, BitMEX settled its case with the CFTC via a hefty $100 million penalty fee. Half of that sum went to the CFTC, while the remainder went to the Financial Crimes Enforcement Network (FinCEN).

Reed’s lawyers issued a statement suggesting that the BitMEX co-founder hopes to put all the legal tussles behind him. According to the legal team:

“Mr. Reed is pleased to have resolved this matter and looks forward to focusing on the next phase of his life and career.”

Reed, Hayes, and Delo founded BitMEX in 2014 with financing from family and friends. The exchange is under the ownership of HDR Global Trading Limited, a Seychelles-registered company that also runs BitMEX operations.

Business News, Cryptocurrency news, News
Tolu Ajiboye
Author Tolu Ajiboye

Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge. When he's not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.

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