BitMEX co-founder Benjamin Delo avoids jail, receives 30 months probation

June 16, 2022 Coin Telegraph

AML

Delo was allowed to leave the country to travel to Hong Kong where he is a resident, bringing to a close his part in the legal saga which began in 2020.

Benjamin Delo the co-founder of cryptocurrency exchange BitMEX has been sentenced to 30 months probation for violating the Bank Secrecy Act (BSA), which is an anti-money laundering law.

The sentence, handed down at a federal court in New York on June 15th, follows his guilty plea to charges in February of “willfully failing to establish, implement and maintain an Anti-Money Laundering (AML) program” in his role at BitMEX.

Prosecutors had argued Delo should serve a year in prison or at least receive a two-year probation along with six months of home detention, as was given to former CEO Arthur Hayes in May.

For Delo, his lesser sentence closes the legal saga which started in October 2020 which also saw co-founders Hayes and Samuel Reed along with BitMEX’s first official employee Gregory (Greg) Dwyer charged with similar violations.

Judge John Koeltl called Delo's violations “very serious” and said that heo knew BitMEX was breaking U.S. laws by not implementing an AML and know your customer (KYC) system.

Judge Koeltl noted however that the exchange did later take steps to rectify the issue and become compliant.

“When I look back, I see a fundamental failure to address a flaw in our systems," Delo told the court, adding he deeply regrets the actions that brought him in contact with the justice system and vowed that it would be his last brush with it.

A citizen of the United Kingdom residing in Hong Kong, Judge Koeltl ordered Delo be allowed to serve his probationary sentence in Hong Kong.

Judge Koeltl also took into consideration the fact that Delo paid a $10 million fine settling a court order from May in a civil case brought by the Commodity Futures Trading Commission (CFTC) for violating aspects of the Commodity Exchange Act.

A spokesperson for Delo's legal team said after the sentencing hearing they’re pleased the court rejected “the government's cynical attempt to exaggerate the seriousness of the Bank Secrecy Act charge in this case.”

Delo’s lawyers said he intends to soon leave the U.S. for Hong Kong.

Meanwhile, Australian-born former BitMEX head of business development Greg Dwyer, who currently resides in Bermua, is in talks with the New York federal court to extend a deadline for filing pre-trial documentation according to the Sydney Morning Herald.

A letter sent to the court by Dwyer’s lawyer said “the parties continue to engage in discussions regarding a possible resolution to the matter.”

Court orders BitMEX founders to pay $30M civil penalty

May 6, 2022 Coin Telegraph

Court orders BitMEX founders to pay M civil penalty

Benjamin Delo

The three co-founders have been ordered to pay hefty fines for what the CFTC calls their involvement in serious violations of regulations and the Commodity Exchange Act.

The U.S. District Court for the Southern District of New York has ordered a total of $30 million civil monetary penalties from the three co-founders of BitMEX crypto derivatives exchange, including former CEO Arthur Hayes.

Hayes, Benjamin Delo, and Samuel Reed were each fined $10 million in consent payments according to a statement from the Commodity Futures Trading Commission (CFTC) at the conclusion of a court battle on May 5 in which the CFTC said they violated aspects of the Commodity Exchange Act and CFTC regulations from November 2014 to October 2020.

CFTC: Bitmex Co-Founders Ordered to Pay $10 Million Each
— db (@tier10k) May 5, 2022

The CFTC filed suit against the exchange and its three co-founders on Oct. 1, 2020. In a rundown of the conclusion of the case today, the Commission stated that the defendants were accused of “operating the BitMEX platform while conducting significant aspects of BitMEX’s business from the U.S., and unlawfully accepting orders and funds from U.S. customers to trade cryptocurrencies,” including Bitcoin (BTC), Ether (ETH), and Litecoin (LTC) derivatives.

The CFTC said unlawful acts included the operation of a facility to trade or process swaps without having CFTC approval to operate as a Designated Contract Market or a Swap Execution Facility. It said they had also operated as a Futures Commission Merchant without CFTC registration, failed to implement a Customer Information Program and Know-Your-Customer procedures or an adequate Anti-Money Laundering program.

CFTC Commissioner Carline D. Pham said in a separate May 5 statement that her Commission is committed to pursuing “wrongdoers with an unfair advantage” that operate in violation of the law.

“By enforcing individual accountability for registration, market conduct, and anti-money laundering rules—fundamental aspects of the U.S. regulatory framework—the CFTC is ensuring that BitMEX’s management is held responsible after last year’s $100 million dollar settlement with corporate defendants.”

Additional legal battles

According to reporting from Cointelegraph in February, Hayes and Delo pleaded guilty to violating the Bank Secrecy Act in a separate case filed by the DOJ. In the plea, they admitted to “willfully failing to establish, implement and maintain an Anti-Money Laundering (AML) program.”

Bloomberg reported on May 5 that Hayes’s mother was particularly concerned with how the federal judge presiding over the DOJ’s case would sentence her son. The defense offered a letter from her asking for a lenient sentence, and his lawyers requested a sentence of probation without house arrest or community confinement.

Last August, Cointelegraph reported that BitMEX agreed to pay $100 million in consent payments to both the CFTC and the Financial Crimes Enforcement Center (FinCEN) in order to resolve a separate case where the CFTC and FinCEN said exchange operators HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited and HDR Global Services Limited illegally operated the exchange.

Crypto Exchange Bitmex’s Founders Plead Guilty to Bank Secrecy Act Violations

February 26, 2022 Bitcoin.com

BitMEX founders plead guilty to Bank Secrecy Act violations

February 25, 2022 Coin Telegraph

Arthur Hayes

Arthur Hayes and Benjamin Delo will each have to pay a fine for their part in flouting the Bank Secrecy Act and operating what the DOJ called a “money laundering platform.”

The founders of crypto exchange BitMEX have pled guilty to violating the Bank Secrecy Act after a lengthy litigation process with the U.S. Department of Justice (DOJ).

American Arthur Hayes and British Hong Konger Benjamin Delo admitted to “willfully failing to establish, implement, and maintain an anti-money laundering (AML) program” at their crypto derivatives and futures exchange, BitMEX.

BitMEX is a Seychelles-based crypto trading platform that offers crypto futures, derivatives, and margin trading up to 100x. The exchange once offered its services without any know-your-customer (KYC) or AML verification procedures to Americans. The DOJ’s Feb. 24 announcement on the case states that such a lack of regulatory compliance essentially caused BitMEX to become a “money-laundering platform.”

Both Hayes and Delo made their guilty pleas ahead of the March trial date, and have agreed to pay $10 million in criminal fines each.

HAYES, 36, of Miami, Florida, and DELO, 38, of the United Kingdom and Hong Kong, pled guilty to one count each of violating the Bank Secrecy Act, which carries a maximum penalty of 5 years in prison - DOJ
— db (@tier10k) February 24, 2022

The attorney for the DOJ Damian Williams said that operating a crypto business in the U.S. carries “the obligation for those businesses to do their part to help in driving out crime and corruption.” He continued that BitMEX operated as “a platform in the shadows of financial markets” and that:

“Arthur Hayes and Benjamin Delo built a company designed to flout those obligations; they willfully failed to implement and maintain even basic anti-money laundering policies.”

Adding more fuel to the DOJ’s case was the insinuation that Hayes had bribed the Seychelles local government when BitMEX completed its move there in 2020. He allegedly bragged that the bribery cost him just a coconut.

Although the BitMEX base of operations was in the United States from about 2015 to 2020, Hayes and Delo insisted that no Americans were using the platform. The DOJ proved that claim was not factual. By January 2021, the exchange reported it had verified 100% of its users with a KYC-AML procedure.

Since fully vetting all of its users, BitMEX’s share of Bitcoin futures open interest (OI) has diminished into relative insignificance. In February 2021, there was only about $3.5 billion in OI, almost a third of which came from BitMEX. However, there is now $15.18 billion in OI according to data from CoinGlass, of which only $482 million, or 3%, comes from BitMEX.

Benjamin Delo

Additional legal battles

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