The Commodity Futures Trading Commission (CFTC) has charged five entities and three individuals that own BitMEX with operating an unregistered trading platform and violating anti-money laundering procedures. Among those charged are the founders of the company, Arthur Hayes, Ben Delo, and Samuel Reed. According to Bloomberg, Samuel Reed was arrested in Massachusetts this morning.
The cryptocurrency derivatives trading platform was founded in 2014. BitMEX is registered in the Seychelles but has offices in Hong Kong and San Francisco. Previously, the platform only required users to provide an email address and password and identify their country of residence during the sign-up process. In August this year, BitMEX updated its policy to include additional information such as ID verification, proof of the origin of funds, and investment experience.
The complaint charges BitMEX with operating a trading platform without registering with the CFTC. It further details charges for failing to implement know-your-customer and anti-money laundering procedures and allegedly receiving more than $11 billion in bitcoin deposits while conducting significant portions of its business from the U.S. and serving U.S. customers.
“BitMEX touts itself as the world’s largest cryptocurrency derivatives platform in the world with billions of dollars’ worth of trading each day. Much of this trading volume and its profitability derives from its extensive access to United States markets and customers,” the filing said.
“Nevertheless, BitMEX has never been registered with the CFTC in any capacity and has not complied with the laws and regulations that are essential to the integrity and vitality of the U.S. markets.”
Initial reactions to the news include speculation about approximately $2 billion held by the exchange, according to a chart shared by Castle Island Ventures General Partner Nic Carter. On its website, BitMEX states that funds are held in multisignature addresses, which would mean that keys from multiple parties are required to access the funds and any potential seizures, should they be initiated, might become more complicated.
Casa co-founder Jameson Lopp commented in a tweet, "[n]ow we get to see if BitMEX's multisig setup is nation state resistant."
Concerns raised within the Bitcoin community further included whether BitMEX would process withdrawals tomorrow: as per its website, the exchange reviews and signs offline multisignature withdrawals once a day at 13:00 UTC. Should the exchange's operations be compromised due to the charges, withdrawals may be affected.
However, according to information made available to the BTC Times, BitMEX appears to now be sending out emails to users attempting to withdraw their funds. An email shared with the BTC Times shows a withdrawal approval email that indicates the exchange is processing withdrawals.
In a blog post published several hours after news of the charges against BitMEX became public, the firm commented on the developments, condemning the Department of Justice's decision:
We strongly disagree with the U.S. government’s heavy-handed decision to bring these charges, and intend to defend the allegations vigorously. From our early days as a start-up, we have always sought to comply with applicable U.S. laws, as those laws were understood at the time and based on available guidance.
The blog post further stresses that BitMEX "is operating entirely as normal and all funds are safe."
UPDATE (Oct 1st, 18:10 UTC): Included new information that BitMEX seems to now be approving its users' withdrawals in real-time.
UPDATE (Oct 1st, 19:58 UTC): Added information about a newly publish blog post by BitMEX that comments on the charges.