NEW YORK, Oct 1 (Reuters) - U.S. prosecutors on Thursday
filed criminal charges accusing four founders and executives of
BitMEX, one of the world's largest cryptocurrency derivatives
exchanges, of evading rules designed to stop money laundering.
The Department of Justice charged Arthur Hayes, Samuel Reed
and Benjamin Delo, who together founded BitMEX in 2014, and
Gregory Dwyer, its first employee and later head of business
development, with violating the federal Bank Secrecy Act and
conspiring to violate that law.
Hayes, 34, of Buffalo, New York, and Hong Kong, is chief
executive of BitMEX, while Reed is its chief technology officer.
The Commodity Futures Trading Commission filed a separate
civil lawsuit to halt BitMEX's U.S. commodity derivatives
business. BitMEX is short for Bitcoin Mercantile Exchange.
"We strongly disagree with the U.S. government's
heavy-handed decision to bring these charges, and intend to
defend the allegations vigorously," a spokesman for BitMEX's
parent HDR Global Trading Ltd said.
Dwyer's lawyer, Sean Hecker, said his client will contest
the charges. Lawyers for the other individual defendants could
not be identified.
An indictment filed in Manhattan federal court said the
defendants flouted their obligation to implement an anti-money
laundering program with a "know your customer" requirement,
which they knew was needed because BitMEX served U.S. customers.
Their steps allegedly included incorporating BitMEX in the
Seychelles because of its seemingly less stringent regulations,
and where Hayes once bragged it would cost less to bribe
authorities - just "a coconut" - than in the United States.
Prosecutors said BitMEX ultimately made itself a "vehicle"
for money laundering and sanctions violations, including claims
it was used to launder proceeds of a cryptocurrency hack and
that customers from Iran traded on its platform.
The defendants "will soon learn the price of their alleged
crimes will not be paid with tropical fruit," FBI Assistant
Director William Sweeney said in a statement.
Each count carries a maximum five-year prison term. Reed was
arrested in Massachusetts and the other defendants are at large.
The case is U.S. v. Hayes et al, U.S. District Court,
Southern District of New York, No. 20-cr-00500.
(Reporting by Jonathan Stempel in New York; Additional
reporting by Gertrude Chavez-Dreyfuss in New York
Editing by Richard Chang and Matthew Lewis)