On August 10, 2021, the Financial Crimes Enforcement Network (FinCEN) announced a $100 million civil money penalty that was assessed as part of a global settlement with five companies charged with operating BitMEX, one of the oldest and largest convertible virtual derivatives exchanges. The settlement resolves allegations that BitMEX willfully failed to implement an anti-money laundering compliance program for more than 6 years in violation of the Bank Secrecy Act (BSA), and FinCEN and CFTC implementing regulations. BitMEX is also accused of failing to implement a customer identification program and report certain suspicious activities to the US government amidst allegations that the company conducted almost $209 million in transactions with known darknet markets or unregistered money services businesses. Bitmex also allegedly failed to file suspicious activity reports (SARs) for at least 588 suspicious transactions and engaged in transactions involving high-risk jurisdictions and alleged fraud schemes.
Without admitting or denying the allegations, the BitMEX entities – HDR Global Trading Limited, 100x Holdings Limited, ABS Global Trading Limited, Shine Effort Inc. Limited, and HDR Global Services (Bermuda) Limited – also agreed to the terms of a separate consent order with the Commodity Futures Trading Commission (CFTC), entered by the US District Court for the Southern District of New York, which requires BitMEX to pay an additional $100 million civil penalty. However, both the CFTC and FinCEN settlements provide for an offset of up to $50 million of their penalties imposed for payments made to each other, bringing the total penalty amount to $100 million. The order also prohibits BitMEX from committing further violations of CFTC regulations.
FinCEN reports that this is its first enforcement action against a futures commission merchant (FCM). As part of the assessment, BitMEX entities not only agree to pay the civil penalty but will also appoint an independent consultant to conduct an historical analysis of its transactions to determine whether additional suspicious activity reports (SARs) should be filed. BitMEX also agreed to engage an independent consultant to ensure that BitMEX has an effective compliance program and confirm that BitMEX does not have substantial operations in the US. The $100 million assessment requires BitMEX to make immediate payments totaling $80 million to FinCEN and the CFTC, but allows for the suspension of $20 million pending the completion of the reviews by the independent consultants.
BitMEX released a statement on August 10, 2021 confirming that settlements were reached with the CFTC and FinCEN. BitMEX also provided details related to compliance milestones that it has achieved since 2020, including the hiring of a new chief compliance officer in October 2020, the hiring of a new CEO in December 2020, and the successful implementation of its new user verification program in January 2021.
The settlement comes several months after the indictments of four BitMEX executives in October 2020 for their efforts to avoid compliance with US laws and refusal to adopt formal AML policies and procedures after being notified of allegations that BitMEX was being used to launder funds related to a cryptocurrency hack. Each of the executives has been charged with one count of violating the BSA and conspiracy to violate the Act. Litigation related to the charges against the BitMEX executives continues.