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 Trading Platform Bitmex Reveals Exchange Token Called BMEX, Airdrop

December 21, 2021 Bitcoin.com

Judge scolds BitMEX lawsuit plaintiffs for offering him crypto ‘basics’ lessons

July 14, 2021 Coin Telegraph

Arthur Hayes

The judge urged the plaintiffs to “focus on the task at hand — convincing me that they have stated a plausible claim.”

The California District Judge overseeing a racketeering suit filed against crypto derivatives exchange BitMEX, William H. Orrick, has rebuffed the plaintiffs’ motion offering to provide them with a tutorial on “cryptocurrency basics.”

According to a July 13 report from Law360, the judge responded to Bitcoin Manipulation Abatement LLC (BMA)’s proposal with a one-page order on Tuesday, outlining the offer was “not well taken.”

“Plaintiffs believe that cryptocurrency tutorial will benefit the court. I think not,” Judge Orrick wrote, adding that the plaintiffs should “focus on the task at hand — convincing me that they have stated a plausible claim.”

BMA’s complaint was first filed in May 2020, just weeks after the firm filed lawsuits against Ripple and FTX. The suit against BitMEX is now in its fourth iteration.

The plaintiffs allege that BitMEX’s former parent company, HDR Global Trading Limited, and executives Arthur Hayes, Ben Delo, and Samuel Reed deliberately designed the exchange to “engage in, facilitate, aid, abet, counsel, induce and/or procure a myriad of illegal activities." BMA alleges BitMEX carried out racketeering, money laundering and wire fraud.

A previous version of the suit was dismissed without prejudice in March. BitMEX has staunchly rejected BMA’s claims.

The United States Department of Justice has accused Delo, Hayes, Reed and BitMEX head of business development Gregory Dwyer of violating the Bank Secrecy Act, having filed complaints against the group in October 2020.

Reed was arrested the same month, while Delo and Hayes voluntarily surrendered to authorities in March and April respectively, before being released on bail. The trio will face trial in March 2022, with Dwyer remaining at large.

BitMEX’s Arthur Hayes surrenders in Hawaii, released on $10M bond

April 7, 2021 Coin Telegraph

Arthur Hayes

The former CEO of BitMEX surrendered in Hawaii and was later released after posting a $10 million bond.

Former BitMEX CEO Arthur Hayes surrendered to U.S. authorities in Hawaii on Tuesday, six months after federal prosecutors first levied charges against him and three fellow BitMEX executives.

In a statement, Hayes’ lawyers described the Singapore resident as “a self-made entrepreneur who has been wrongly accused of crimes that he did not commit,” adding:

“Mr. Hayes voluntarily appeared in court and looks forward to fighting these unwarranted charges.”

Hayes was released after posting a $10 million bail bond pending future proceedings in New York.

Hayes’ lawyers proposed his surrender in Hawaii last month. Discussions centered around Hayes’ potential release subject to the $10 million bail bond, his retention of a passport for travel between Singapore and the United States, and a waiver of extradition mutually agreed upon by both parties.

Hayes’ representation began talks with the U.S. government after his indictment was unsealed in October 2020.

The government accuses Hayes, BitMEX co-owners Ben Delo and Greg Dwyer, and former BitMEX CTO Samuel Reed of violating the Bank Secrecy Act by failing to maintain adequate anti-money laundering safeguards and failing to prevent U.S. residents from accessing the exchange despite the company not being registered with the Commodity Futures Trading Commission.

Reed was arrested in October, while Delo voluntarily surrendered to authorities in New York last month, with both pleading not guilty and being released on bond. Dwyer remains at large, however his lawyers state they have notified the U.S. government as to Dwyer’s whereabouts and intention to fight the charges against him.

Samuel Reed

Additional legal battles

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