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WPCNR FBI WIRE. From the Federal Bureau of Investigation. May 23, 2022:

Damian Williams, the United States Attorney for the Southern District of New York, announced that Arthur Hayes was sentenced today to six months of home detention, in connection with his violation of the Bank Secrecy Act (the “BSA”), —

through his willful failure to establish, implement, and maintain an anti-money laundering (“AML”) program at the cryptocurrency company he co-founded and owned, Bitcoin Mercantile Exchange or “BitMEX”.  U.S. District Judge John G. Koeltl imposed today’s sentence.

U.S. Attorney Damian Williams said:  “While building a cryptocurrency platform that profited him millions of dollars, Arthur Hayes willfully defied U.S. law that requires businesses to do their part to help in preventing crime and corruption.  He intentionally failed to implement and maintain even basic anti-money laundering policies, which allowed BitMEX to operate as a platform in the shadows of the financial markets. This Office will continue to vigorously enforce United States law intended to prevent money laundering through financial institutions, including cryptocurrency platforms.”

According to the Indictment, public court filings, and statements made in court:

ARTHUR HAYES, together with BENJAMIN DELO and SAM REED, who have also pled guilty and are scheduled to be sentenced in the near-future, was one of the three co-founders and the CEO of BitMEX. 

BitMEX is an online cryptocurrency derivatives exchange that, during the relevant time period, had U.S.-based operations and served thousands of U.S. customers, notwithstanding false representations to the contrary by the company, including HAYES.  From at least September 2015, and continuing at least through the time of the Indictment in September 2020, HAYES willfully caused BitMEX to fail to establish and maintain an AML program, including a program for verifying the identify of BitMEX’s customers (or a “know your customer” or “KYC” program).  As a result of its willful failure to implement AML and KYC programs, BitMEX was in effect a money laundering platform. 

For example, in May 2018, HAYES was notified of allegations that BitMEX was being used to launder the proceeds of a cryptocurrency hack.  Neither HAYES nor the company filed a suspicious activity report thereafter, nor did they implement an AML or KYC program in response. 

HAYES failed to institute AML or KYC programs at BitMEX despite closely following U.S. regulatory developments that made clear their legal obligation to do so if BitMEX operated in the United States, which it did.  Despite repeatedly stating that BitMEX did not serve U.S. customers, including to members of the press and others outside of BitMEX, HAYES knew that BitMEX’s purported withdrawal from the U.S. market in or about September 2015 was a sham, and that “controls” BitMEX put in place to prevent U.S. trading were an ineffective facade that did not, in fact, prevent users from accessing or trading on BitMEX from the United States. 

HAYES derived substantial profits from BitMEX, as a result of U.S.-based trading, and aggressively advertised the company’s lack of an AML or KYC program.  At various points in time, BitMEX’s website stated that “No real name or other advanced verification is required on BitMEX.”  Through at least August 2017, the platform’s registration page explicitly stated that first and last name were “not required” to register.

Because of the lack of KYC, the full scope of criminal conduct on BitMEX may never be known. The company, still owned by HAYES and his co-defendants, accepted a settlement with the Department of Treasury in which the Company neither admitted nor denied that that it had conducted more than $200 million in suspicious transactions, and that the Company had failed to file suspicious activity reports on nearly 600 specific suspicious transactions.

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HAYES, 36, of Miami, Florida, was sentenced to six months of home detention and two years of probation.  Hayes also agreed to pay a fine of $10 million dollars representing his pecuniary gain from the offense.

Mr. Williams praised the outstanding investigative work of the Federal Bureau of Investigation’s New York Money Laundering Investigation Squad, and thanked the attorneys and investigators at the Commodity Futures Trading Commission whose expertise and diligence were integral to the development of this case.

The prosecution is being handled by the Office’s Money Laundering and Transnational Criminal Enterprises Unit.  Assistant U.S. Attorneys Jessica Greenwood, Samuel Raymond, and Thane Rehn are in charge of the prosecution. 

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