BitMEX agrees to pay $100 million in settlement of claims by U.S. authorities

WASHINGTON-Financial Crimes Enforcement Network (FinCEN) has ordered a $100 million civil monetary penalty against BitMEX, one of the oldest and largest convertible virtual currency derivatives exchanges, for violations of the Bank Secrecy Act (BSA) and FinCEN enforcement rules.

BitMEX, which acted as an unregistered futures contracts seller (FCM) and provided funds transfer services, willfully failed to comply with its obligations under the BSA. FinCEN's actions are part of a global agreement with the U.S. Commodity Futures Trading Commission (CFTC).
 
"BitMEX's rapid rise to one of the largest futures traders offering derivative convertible virtual currencies without a proper anti-money laundering program puts the U.S. financial system at significant risk," said FinCEN Deputy Director Annalu Tirole. "It is critical that platforms ensure financial integrity from the outset so that financial innovation and capabilities are protected from vulnerabilities and exploitation."

For more than 6 years, BitMEX failed to implement and maintain an appropriate anti-money laundering program and customer identification program, and failed to report some suspicious activity. These deliberate failures put financial institutions at increased risk of conducting transactions with money launderers and terrorist financiers, including non-compliant exchanges in high-risk jurisdictions, rogue extortionists and dark net markets. BitMEX conducted at least $209 million in transactions with known darknet markets or unregistered money services companies that provide mixers. BitMEX also conducted transactions involving high-risk jurisdictions and suspected fraud schemes. BitMEX failed to file a Suspicious Activity Report (SAR) on at least 588 specific suspicious transactions.

From about 2014 through 2020, BitMEX allowed customers to access its platform and trade derivatives without proper customer verification - collecting only an email address and not verifying customer identity. Despite BitMEX's public statement that its platform did not do business with U.S. persons, FinCEN found that BitMEX failed to implement appropriate policies, procedures, and internal controls to verify customers who use a virtual private network to access the trading platform and circumvent Internet protocol monitoring. In some cases, BitMEX's senior management altered customer information in the U.S. to conceal a customer's true location.

In addition to paying a civil penalty, BitMEX has agreed to hire an independent consultant to conduct a historical analysis of its transaction data, sometimes referred to as a "SAR review," to determine whether BitMEX should file additional SARs regarding this activity. BitMEX will also engage an independent consultant to conduct two reviews, including appropriate testing, to ensure that appropriate policies, procedures and controls are effective and reasonably designed and implemented to ensure that BitMEX does not operate in whole or in substantial part in the United States.

This is FinCEN's first enforcement action against FCM. FinCEN appreciates working closely with its partners at the CFTC on this issue. The CFTC and BitMEX separately negotiated a Consent Order requiring the payment of a civil monetary penalty with an additional equitable relief. FinCEN's $100 million assessment will be satisfied by immediate payments totaling $80 million to FinCEN and the CFTC, with $20 million suspended pending successful completion of SAR and independent consultant reviews.

"Today is an important day in our company's history, and we are very happy to put this whole situation behind us," said BitMEX CEO Alexander Heptner. - As the cryptocurrency industry has evolved and entered a new era, we too have grown into the largest crypto derivatives platform with a fully verified user base. Comprehensive user verification, robust legal compliance measures and anti-money laundering capabilities are not only iconic features of our business, but also drivers of long-term success."

"We take our own commitments with extreme seriousness and will continue to actively engage with regulators around the world to play an active role in shaping the future of this outstanding asset class," Heptner added.