On October 1, 2020, an indictment was unsealed in the US District Court for the Southern District of New York, charging four men with violations of the Bank Secrecy Act for willfully causing a financial institution to violate the Act by failing to establish, implement and maintain an anti-money laundering program that satisfies the minimum standards required by the law.
As alleged in the indictment, the defendants, Benjamin Delo, Arthur Hayes, Samuel Reed, and Gregory Dwyer, were executives at Bitcoin Mercantile Exchange, or “BitMEX,” which operates as an online trading platform, soliciting and accepting orders for trades in futures contracts and other financial products, and is subject to the requirements of the BSA.
BitMEX was required under the BSA to establish an anti-money laundering program that incorporates a risk-based know your customer program, and includes policies, procedures and internal controls that are reasonably designed to prevent the use of the organization for money laundering or terrorism financing; the BSA also mandates the filing of suspicious activity reports under specific circumstances.
According to the indictment, the defendants took affirmative steps to exempt BitMEX from the application of US law by incorporating in the Seychelles, but then advertised BitMEX’ services to US customers, and failed to implement an IP address check program that would effectively prevent trades on BitMEX’ platform from IP addresses within the US. The indictment further alleges that the defendants caused BitMEX to reject the adoption of formal AML policies and procedures, failed to file even one SAR from BitMEX’ launch in November 2014 to-date, and caused BitMEX to allow customers to register and trade without providing sufficient identifying information – despite being notified of allegations that BitMEX was being used to launder the proceeds of a cryptocurrency hack.
The defendants are charged with one count each of violating the Bank Secrecy Act and conspiracy to violate the Act, 31 USC §§ 5318 and 5322.