Crypto Exchange BitMex To Pay $100 Million To Settle Claims Of Illegal Trading And Anti-Money Laundering Violations - Forbes

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Topline

Cryptocurrency exchange BitMex, one of the world's largest trading platforms for crypto derivatives, said Tuesday it will pay a $100 million penalty to settle civil charges with the Commodities Futures Trading Commission and Financial Crimes Enforcement Network, resulting in one of the biggest settlements ever against a cryptocurrency exchange as regulators rev up enforcement of the nascent industry.

Key Facts

The decision concludes the regulators' yearlong investigations into BitMex for allegedly operating a cryptocurrency trading platform illegally and violating anti-money laundering laws, FinCEN announced Tuesday afternoon.

In its complaint filed last October, the CFTC alleged BitMex and its three cofounders operated the exchange from the U.S. for at least six years and unlawfully accepted orders and funds from U.S. investors to trade cryptocurrencies without regulator clearance.

Meanwhile, FinCEN alleges the exchange failed to maintain necessary anti-money laundering protocols and conducted at least $209 million in transactions with “known darknet markets or unregistered money services businesses providing mixing services.”

Investigations into the three cofounders are ongoing, but as of June 30, BitMex has ceased all marketing and trading operations in the U.S., the CFTC said.

In a statement, BitMex CEO Alexander Höptner, who is not under investigation, said the company is "very glad to put this behind" it and pledged to "actively engage with regulators around the world... to shape the future of this extraordinary asset class."

The Tuesday settlement marks the biggest fine against a cryptocurrency exchange since FinCEN levied a $110 million penalty against BTC-e in 2017, alleging the now-defunct exchange facilitated ransomware and dark-net drug sales during a three-year period at the start of the decade.

Crucial Quote

“This case reinforces the expectation that the digital assets industry, as it continues to touch a broader pool of market participants, takes seriously its responsibilities in the regulated financial industry and its duties to develop and adhere to a culture of compliance,” CFTC Acting Chair Rostin Behnam said in a Tuesday statement.

Chief Critic

“As their defense will show, from the company’s earliest days, [BitMex’s] cofounders sought to comply with applicable law as it developed over time,” a spokesperson for the company’s cofounders said in a Tuesday statement. “The actions against Arthur, Ben, and Sam by the U.S. authorities are unfounded and represent an unwarranted overreach. The co-founders look forward to defending themselves in court.”

Key Background

The settlement with BitMex comes as regulators and lawmakers look to ramp up oversight of the booming cryptocurrency space. In the past week alone, the Securities and Exchange Commission slapped a $10 million fine on cryptocurrency firm Poloniex for operating an unregistered exchange and announced its first case involving the blockchain-based decentralized finance space, charging two Florida men and their Cayman Islands company with allegedly raising $30 million in an unregistered offering. Last week, SEC Chairman Gary Gensler called on Congress to ramp up its authority over cryptocurrencies and likened the industry to the “Wild West.” BitMex also isn't alone among exchanges facing recent scrutiny. The Department of Justice and Internal Revenue Service reportedly opened an investigation into cryptocurrency exchange Binance earlier this year for potential money laundering.

Big Number

$2.5 billion. That's about how much U.S. regulators have levied in fines against the cryptocurrency industry since bitcoin was first created in 2009, according to an analysis by blockchain analytics company Elliptic in June.