[NEW YORK] Former BitMEX chief executive officer Arthur Hayes turned himself in to face US charges that he failed to take steps to prevent the pioneering cryptocurrency exchange he co-founded from being used for money laundering.
A Singapore resident, Hayes on Tuesday surrendered to US authorities in Hawaii, six months after federal prosecutors in New York accused him and his BitMEX co-founders of conspiring to skirt US laws requiring the implementation of money-laundering controls.
He appeared before a federal judge in Honolulu and, pursuant to an earlier agreement, was released on US$10 million bond pending future court proceedings in New York.
"Arthur Hayes is a self-made entrepreneur who has been wrongly accused of crimes that he did not commit," his lawyers said in a statement. "Mr Hayes voluntarily appeared in court and looks forward to fighting these unwarranted charges."
Hayes, a former equities trader for Citigroup in Hong Kong, founded the Seychelles-based BitMEX in 2014 with Benjamin Delo, an Oxford-educated computer scientist who previously developed high-frequency trading systems for JPMorgan Chase & Co, and Samuel Reed, a programmer specialising in web applications.
The case is part of growing US scrutiny of cryptocurrency exchanges, even as investors flock to them. In February, Coinbase Global disclosed that it was responding to a wide-ranging probe by the US Commodities Futures Trading Commission (CFTC). Bloomberg reported in March that Binance Holdings was also being investigated by the CFTC, according to people familiar with the matter.
Customers have been drawn to such platforms in part by the availability of crypto futures that allow them to make highly leveraged investments. BitMEX invented such futures and at one time ranked as the world's largest crypto-derivatives exchange.
FLOUTING US LAWS
The CFTC began probing BitMEX in 2019, focusing on whether it broke rules by allowing US customers to trade on the platform. According to prosecutors, in order to serve US customers, the company was required to register with the CFTC and set up programmes to make sure it wasn't used for money laundering.
But Hayes and other BitMEX executives instead actively worked to skirt compliance programmes and bragged about flouting US laws, prosecutors say. Hayes allegedly said the founders chose to base the exchange in Seychelles to escape regulatory scrutiny.
Hayes, Delo and Reed were each charged with one count of violating the Bank Secrecy Act and one count of conspiring to violate the act. Each offence carries a maximum sentence of five years in prison.
Reed was arrested in Massachusetts the day the charges were unveiled in October and Delo turned himself in in March, vowing to fight the charges, which he called unfounded and an overreach by US authorities.
Both pleaded not guilty and were released on bond. The company's first employee and head of business operations, Gregory Dwyer, was also charged in the case and remains at large.
"We have been in touch with the government on Mr Dwyer's behalf and have informed them of his whereabouts," his lawyers said in a statement. "They are also aware that he has every intention to defend himself in court against these meritless charges and is eager to do so."
The founders stepped aside from their roles at the holding group behind BitMEX after the charges were unveiled, and the company appointed Alexander Hoptner as chief executive officer in November.
Though Hayes is no longer a BitMEX executive, he has continued to post on the exchange's blog and on his own Medium page, where he writes about everything from crypto arbitrage trading to DeFi, or decentralised finance. In one post, he even said he tried to buy GameStop shares.