Is BitMEX bowing its head and admitting its mistakes, or is it "death to the end"?
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100x Holdings Limited
ABS Global Trading Limited
Shine Effort Inc Limited
HDR Global Services（Bermuda）Limited
, Author: Bai Ye, reproduced by Odaily with authorization.
In the early hours of October 2, Beijing time, a piece of news broke out in the cryptocurrency industry: the U.S. Department of Justice and the U.S. Commodity Futures Trading Commission (CFTC) have filed criminal charges against the cryptocurrency derivatives exchange BitMEX and its owner-operator. BitMEX CTO and co-founder Samuel Reed has been arrested in Massachusetts.
HDR Global Trading Limited, the parent company of BitMEX
Arthur Hayes, Co-Founder and CEO of BitMEX
BitMEX co-founder Ben Delo
Greg Dwyer, Head of Business Development, BitMEX
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start, grow
In 2008, at the age of 22, Arthur Hayes graduated from the Wharton School of Business and excitedly joined Deutsche Bank in charge of the Hong Kong market. But in that year, the global financial crisis erupted in full force, with the straw that broke the camel's back, Lehman Brothers, filing for bankruptcy.
In 2013, Arthur Hayes joined Citibank in Hong Kong as a stock trader. He is energetic and a fitness fanatic.
Arthur Hayes was a sociable guy with a big smile, a shapely figure, and a penchant for tight polo shirts, the kind of guy who easily made friends in college and on the trading floor. He's always very motivated to do things, whether it's yoga, skiing, or squash, and he walks at lightning speed even when he's out drinking and having fun with friends.
This kind of personality made Arthur Hayes fall in love with the feeling of being busy in the stock derivatives trading floor, but the 2008 financial crisis had a negative impact on the traditional banking order, and Citigroup, as a veteran bank, was no exception. Soon, Arthur Hayes, who had settled in Hong Kong for six years, lost his job due to the regular layoff system, but he didn't seem too upset, because a new continent appeared before his eyes: Bitcoin.
The money was easy to make, but there was a catch: Under Chinese law, Arthur Hayes could deposit his proceeds in a local bank account, but he couldn't repatriate the money to Hong Kong. So Arthur Hayes started to take the one-hour bus to Shenzhen every day to withdraw cash at the local bank according to the maximum withdrawal limit: 20,000 yuan (US$3,100), and then to the Grand Hyatt Hotel after a full meal with a bag of Cash back to Hong Kong.
In 2014, the Japanese cryptocurrency exchange Mt.Gox lost hundreds of thousands of bitcoins after being hacked, and finally had to choose bankruptcy in February of that year. As an arbitrage trader, Arthur Hayes suddenly found that the idea of simply buying and holding Bitcoin was quite boring. With his work in Deutsche Bank and Citibank in the exchange-traded fund (ETF) business, as well as in stock index futures, far He has extensive experience in futures, swaps, and non-deliverable forward foreign exchange transactions. He worked with Ben Delo, a computer scientist at the University of Oxford in the United Kingdom who developed a high-frequency trading system for JPMorgan Chase, and Samuel Samuel, an American programmer. Reid co-founded BitMEX - BitMEX is a cryptocurrency exchange and derivatives trading platform, owned and operated by HDR Global Trading Limited, which is registered in Seychelles and has offices around the world .
You know, most of the trading platforms in the cryptocurrency market six years ago only allowed investors to buy Bitcoin and other virtual tokens with cash, and BitMEX provided a "weird" service: encrypted derivatives-yes, Asia Ser Hayes introduced the concept of futures contracts to the cryptocurrency market. His trading platform allows investors to make leveraged bets of up to 100 to 1 on 11 digital currencies. Investors injected more than $200 billion worth of orders into BitMEX in the twelve-month period ending January 31, 2018, as Bitcoin skyrocketed in late 2017 and soared to all-time highs. According to data on the company's website, the company's revenue in 2017 was US$83 million, including US$21 million in December alone, successfully ranking among the most liquid bitcoin futures markets in the world.
After tasting the sweetness, Arthur Hayes began to introduce traditional financial products into a seemingly "lawless" industry, including derivatives, leverage, short selling and cryptocurrency price indexes, and even planned to formulate a benchmark interest rate to provide Bitcoin lending service.
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Disdain for compliance?
BitMEX was founded in 2014. At that time, the concept of cryptocurrency was not so popular. People always associated Bitcoin with dark web, money laundering, terrorist financing and other issues. But in Arthur Hayes's view, Bitcoin is not a "gospel for criminals" but a real asset class. He believes that the blockchain is an open digital ledger that can record and reveal the use of bitcoin. Every transaction performed by the currency is more transparent than offshore transactions.
Arthur Hayes fumed when referring to banks criticizing Bitcoin as the currency of choice for money launderers:
Not only that, Arthur Hayes once boasted that the reason why he moved the BitMEX main body to Seychelles, where the supervision is not very strict, was to avoid US supervision. Money is just "coconut price", much less than bribing US officials.
Perhaps it is precisely because of Arthur Hayes' slightly "frivolous" attitude towards regulatory compliance that he planted a time bomb for the subsequent development of BitMEX.
In July 2019, Nouriel Roubini, a cryptocurrency critic and economist known as "Doctor Doom", pointed out that BitMEX may be involved in illegal activities, making traders take too much risk. On the 18th of that month, Bloomberg reported that the U.S. Commodity Futures Trading Commission was launching an investigation into the encryption exchange BitMEX, focusing on whether BitMEX, which has not yet registered with the U.S. Commodity Futures Trading Commission, would allow Americans to trade on the platform.
Nouriel Robini is Arthur Hayes' "nemesis". He has repeatedly exposed the illegal behavior of BitMEX and other cryptocurrency exchanges on Twitter, claiming that BitMEX exchange insiders revealed to him that there are Terrorists and criminals from Russia, Iran, and elsewhere were laundering massive amounts of money on its platform, and Arthur Hayes wasn't stopping them because he was able to profit from the transactions.
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Regulators strike!
Arthur Hayes, Ben Delo, and Samuel Reed were charged with operating an unregistered trading platform and violating Commodity Futures Trading Commission anti-money laundering and KYC (Know You customers) regulatory rules. The CFTC explained the allegations against BitMEX in detail:
In addition to the CFTC charges, the U.S. Department of Justice also indicted Arthur Hayes, Ben DeLow, Samuel Reed, and Greg Dwyer for violating the U.S. Bank Secrecy Act, which A criminal proceeding is obviously much more serious. Except for Samuel Reed, who was arrested in Massachusetts, the other three have not been arrested because they are not in the United States, and Samuel Reed will appear in court in Massachusetts federal court.
FBI Assistant Director William Sweeney said in a statement:
As we speak here today, the four defendants violated the Bank Secrecy Act by knowingly evading U.S. anti-money laundering requirements through the BitMEX cryptocurrency trading platform. Defendants will soon learn that the crimes they are charged with cannot be afforded with some 'tropical fruit' and that the penalties they will face include but are not limited to fines, restitution, and federal prison time. "
Some insiders analyzed that if Arthur Hayes, Ben Delo, Samuel Reid and Greg Dwyer were convicted of criminal charges, they could be sentenced to up to 5 years in prison.
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Will BitMEX's tough fight back end well?
It is worth mentioning that just after this series of turmoil, HDR Global Trading Limited (HDR), the parent company of BitMEX exchange, vowed to fight against these allegations. law and therefore strongly disagrees with these allegations made by the United States Government and intends to vigorously fight them.
Sean Hecker and Jenna Dabbs, two partners of the Kaplan Hecker & Fink law firm, are currently acting as lawyers for Greg Dwyer, director of business development at BitMEX. They responded on behalf of Greg Dwyer:
