March 10, 2022

Third BitMEX executive pleads guilty in BSA prosecution

Samuel Reed, charged along with 3 others with violating the Bank Secrecy Act in connection with his ownership and operation of the Bitcoin Mercantile Exchange, or BitMEX, has pleaded guilty to Count 1 of the indictment.  The March 9, 2022 guilty plea in the US District Court for the Southern District of New York is the third in the case:  two of Reed’s co-defendants, Arthur Hayes and Benjamin Delo, pleaded guilty in February 2022.

The indictment alleges that BitMEX was required to register as a futures commission merchant under the Commodity Exchange Act, 7 USC 1 et seq., and as such, to comply with the requirements of the Bank Secrecy Act, 31 USC § 5311 et seq., including the implementation and maintenance of an anti-money laundering program.  According to the allegations, Reed’s failure to implement BSA-compliant anti-money laundering, know-your-customer and suspicious activity report programs was willful and deliberate — for example, Reed and BitMEX’s other founders and executives caused the company to incorporate in the Seychelles, where they believed they could avoid strict BSA compliance while serving US customers and operating in the United States.

Reed moved unsuccessfully to dismiss the indictment on the grounds that he lacked fair notice that the conduct with which he was charged was unlawful.  He pleaded guilty following the denial of this motion, and the guilty pleas of his co-defendants Hayes and Delo.  Reed is scheduled to be sentenced on July 13, 2022.

Prosecution of the fourth defendant, Gregory Dwyer, was severed from the case against the other co-defendants in December 2021.  Trial in that case is scheduled to begin on October 19, 2022.

Superseding Indictment