By Jonathan Stempel
NEW YORK (Reuters) – U.S. prosecutors on Thursday filed criminal charges accusing four founders and executives of BitMEX, one of the world’s largest cryptocurrency derivatives exchanges, of evading rules designed to stop money laundering.
The Department of Justice charged Arthur Hayes, Samuel Reed and Benjamin Delo, who together founded BitMEX in 2014, and Gregory Dwyer, its first employee and later head of business development, with violating the federal Bank Secrecy Act and conspiring to violate that law.
Hayes, 34, of Buffalo, New York, and Hong Kong, is chief executive of BitMEX, while Reed is its chief technology officer.
The Commodity Futures Trading Commission filed a separate civil lawsuit to halt BitMEX’s U.S. commodity derivatives business. BitMEX is short for Bitcoin Mercantile Exchange.
“We strongly disagree with the U.S. government’s heavy-handed decision to bring these charges, and intend to defend the allegations vigorously,” a spokesman for BitMEX’s parent HDR Global Trading Ltd said.
Dwyer’s lawyer, Sean Hecker, said his client will contest the charges. Lawyers for the other individual defendants could not be identified.
An indictment filed in Manhattan federal court said the defendants flouted their obligation to implement an anti-money laundering program with a “know your customer” requirement, which they knew was needed because BitMEX served U.S. customers.
Their steps allegedly included incorporating BitMEX in the Seychelles because of its seemingly less stringent regulations, and where Hayes once bragged it would cost less to bribe authorities – just “a coconut” – than in the United States.