A major crypto derivatives exchange, the Bitcoin Mercantile Exchange (BitMEX) is facing allegations that it violated U.S. law by failing to establish proper anti-money laundering (AML) controls.
The U.S. attorney’s office for the Southern District of New York announced charges against the three founders of BitMEX and its first employee, alleging that they violated federal banking legislation by flouting U.S. AML rules.
It alleged that the four knew the company had an obligation to implement AML and KYC programs because it was serving U.S. customers, but that they took actions to avoid those obligations, such as incorporating offshore to avoid U.S. oversight and authorities.
The allegations have not been proven.
Alongside the government’s charges, the U.S. Commodity Futures Trading Commission (CFTC) also filed a civil enforcement action charging the three founders and five companies, which own and operate the trading platform, with violating its rules by operating an unregistered trading platform and failing to implement AML controls.
The CFTC said that BitMEX’s platform has facilitated crypto derivatives trades representing trillions of dollars, and that it generated more than US$1 billion in fees, while violating its rules.
“Digital assets hold great promise for our derivatives markets and for our economy. For the United States to be a global leader in this space, it is imperative that we root out illegal activity like that alleged in this case,” said CFTC chairman, Heath Tarbert.
“New and innovative financial products can flourish only if there is market integrity. We can’t allow bad actors that break the law to gain an advantage over exchanges that are doing the right thing by complying with our rules,” he added.