The US Attorney’s Office for the Southern District of New York recently announced that Gregory Dwyer, a high-ranking employee with one of the oldest and largest convertible virtual currency derivatives exchanges, Bitcoin Mercantile Exchange (BitMEX), pleaded guilty to violating the Bank Secrecy Act (BSA) for willfully failing to establish, implement, and maintain an anti-money laundering program at BitMEX, and aiding and abetting the same.
The USAO reports that Dwyer, one of BitMEX’s first employees, served as the company’s Head of Business Development. According to the criminal indictment that was unsealed in October 2020, Dwyer and BitMEX’s three founders – Benjamin Delo, Arthur Hayes, and Samuel Reed – were each charged with violating the BSA and conspiracy to violate the Act for taking affirmative steps, between 2015 and 2020, to exempt BitMEX from the application of US law by incorporating in the Seychelles and then marketing BitMEX’s services to US customers. According to the indictment, BitMEX was an online trading platform that operated for a portion of the relevant period from an office in New York and served thousands of US customers making the company subject to the requirements of the BSA, including the establishment and maintenance of an AML program and a “know your customer” or KYC program. The indictment further alleges that, since its launch in 2014, BitMEX never filed a suspicious activity report and allowed its customers to register and trade on its platform without providing sufficient identifying information, despite receiving notice that the platform may have been used to launder the proceeds of a cryptocurrency hack.
On August 10, 2021, the Financial Crimes Enforcement Network (FinCEn) and the Commodity Futures Trading Commission (CFTC) reached a global settlement with five companies responsible for operating BitMEX and were ordered to pay a $100 million civil money penalty. In addition, on May 5, 2022, the three cofounders were each ordered to pay a $10 million monetary penalty and were enjoined from further violations of the Commodity Exchange Act and CFTC regulations.
In early 2022, all three BitMEX co-founders pleaded guilty to BSA violations – Hayes and Delo in February 2022 and Reed in March 2022. In May 2022, Hayes, BitMEX’s former chief executive officer, was sentenced to 2 years’ probation, and, Delo, its former chief operating officer and chief strategy officer, was sentenced to 30 months’ probation in June 2022. In July 2022, Reed, BitMEX’s former chief technology officer, was sentenced to 18 months’ probation.
Dwyer is currently scheduled to be sentenced on November 10, 2022.
USAO for SDNY Press Release | SDNY Minute Entries | USAO for SDNY Press Release – October 1, 2020 | Indictment | CFTC Press Release