Cryptocurrency exchange BitMEX has agreed to pay a $100 million civil penalty as part of a settlement with the US Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN), the company announced Tuesday. The fine addresses charges that the derivatives exchange allowed illegal trades and violated anti-money laundering laws.
BitMEX didn't address the less savory uses of its platform for years, as FinCEN says the company “willfully failed to comply with its obligations under the BSA (Bank Secrecy Act).” According to the organization:
For over six years, BitMEX failed to implement and maintain a compliant anti-money laundering program and a customer identification program, and it failed to report certain suspicious activity.
FinCEN claims those issues exposed other financial entities to unnecessary risk due to the company’s unwillingness to collect more than an email address from traders from 2014 to 2020. Worse, BitMEX senior leadership deliberately altered customer information to hide customer’s true location, FinCEN claims.
The probe into BitMEX started in 2020 with a charge from the CFTC and the Department of Justice that BitMEX and its founders were running the exchange outside of the US and “unlawfully accepting orders and funds from U.S. customers to trade cryptocurrencies, including derivatives on bitcoin, ether, and litecoin,” the CFTC wrote.
Getting investigated by the government is good, actually
BitMEX’s announcement that it would pay didn’t confirm CFTC’s claims or FinCEN’s concerns over the BSA, nor did it address the criminal charges against BitMEX’s original three founders. Everything is apparently fine at BitMEX though, according to CEO Alexander Höptner. “Putting this legal matter with the CFTC and FinCEN behind us will only accelerate our evolution, and puts us firmly on the right path,” Höptner writes.
As part of the settlement, the company will be forced to bring on an independent consultant to analyze its transactions and review its policies and procedures. It doesn’t seems like BitMEX has a choice but to be on the “right path.”
The resolution to BitMEX’s tussle with regulators is just the latest example of the US government’s growing focus on regulating cryptocurrencies. BitMEX’s “sin” of obscuring transactions is in the process of being addressed with even more permanent action. FinCEN has proposed regulations for crypto wallets that would require identities to be tied to transactions of certain sizes, and members of the US Securities and Exchange Commission have called for even more power to regulate crypto trading.