Seeing him getting up from Zhulou, seeing him entertaining guests, seeing his building collapse.BitMEX, the king of contract exchanges once famous for its hundreds of times leverage, is now under the supervision of the US government, and it seems to be gradually declining. How did all this happen?The veteran American lifestyle magazine "Vanity Fair" has a 40,000-word long article, explaining the rise and fall of BitMEX, as well as the strangeness and regulatory doubts.
crazy rich people
Arthur Hayes's life is very exciting, just like the rich man Bobby Axelrod in the American TV series "Billions", just replace New York with Hong Kong, and inject some elements of Silicon Valley.One second before, Hayes was still skiing in Hokkaido, and the next second, he was showing his skills on the underground court in Central, Hong Kong. At the same time, he also has one eye on an unknown-sounding cryptocurrency exchange on which more than $3 trillion in funds once flowed.The African-American banker turned maverick represents the contemporary fintech pioneer with all the good looks and wealth of a silver screen star. But the FBI's description of Arthur Hayes is different: he is a"shadow of financial markets"in operation,"despise"Law's most wanted criminal.Hayes' indictment was unsealed in October. Prosecutors in New York want to arrest and try him on two felony counts. He could be sentenced to 10 years in prison, but he remains at large in Asia.It's a tale of new money versus old money, as children of financial wizards upend banking veterans, and as U.S. authorities try to apply 20th-century laws to 21st-century innovations.Prosecutors charged Hayes and his business partners with violating the Bank Secrecy Act by failing to implement and maintain an adequate anti-money laundering program to ward off criminals and dirty money.At the same time, Hayes' colleagues in the cryptocurrency space believe that he is being punished for producing original products that confuse lawmakers, vexed regulators and, once they become widely popular, have the greatest participation in some markets. posed a threat.Some high-level legal experts are even more vocal. They think that the United States v. Arthur Hayes is largely unprecedented absurdity.pot of gold
Hayes, 35, disappeared online last October. But the big crypto player wasn't always so elusive.Born into a middle-class family that worked for General Motors and was subject to the changing fortunes of the auto giant, Hayes spent his formative years between Detroit and Buffalo, where his mother, Barbara, managed to make Her gifted son attended Nichols School, a private educational institution established in 1892."He's been successful in everything from his studies to the playing field to making lasting friendships,"Barbara was included in a testimony read on a fundraising page on the school's website."Nichols gave him the academic background, the stimulus and, at one point, a scholarship to thrive."In return, Hayes funds a scholarship to ensure that "a worthy student will be able to experience the excellence of a Nichols education and its lifelong benefits."After graduating from Wharton, he went to Hong Kong to work at Deutsche Bank and Citibank as a market maker for exchange-traded funds (ETFs), hybrid securities that, unlike mutual funds, diversify investors' risk and can Trade like a stock.In May 2013, just as Hayes was hitting his stride to make a career out of it, a pink sack slip arrived.“The bankers tell you that everyone has a bullet with their name on it,” he explained over tea one afternoon at the Marina Bay Sands hotel in Singapore, the site of the film Crazy Asians. The iconic hotel in the finale.He's wearing his standard attire: tight T-shirt, jeans, and an expensive watch (the Hublot Big Bang). “I’m not married, I don’t have kids, I have no obligations. I was an investment banker, so I’m not sleeping rough. I want to build something.”Go back to that pink note. Eight years ago, after losing his job, Hayes decided to go it alone, combining his knack for designing novel financial instruments with a newfound passion: cryptocurrencies, and specifically, bitcoin.At first, Hayes was a nobody in the vast ocean of cryptocurrencies, including tax evaders, drug dealers, arms dealers, child pornography, libertarians, and wandering bankers eager to return to the gold standard.They are frustrated with the old-style banking industry and its slow pace, cumbersome verification requirements for account opening and money transfers, and feel that the relationship between the financial industry and the government has become too comfortable.From their point of view, starting with the US government and spreading outward, they believed and acted as if they had monopolized money and resisted the crypto uprising. People invest in anonymous digital assets to earn profits, hide their wealth, and throw off the establishment.The crypto gold rush initially attracted three types of players: visionaries with gold-plated resumes, boiler room loan sharks who can recite enough buzzwords to fundraise, and the inevitable parasites who grab and try to cash in on everyone else get food.Not surprisingly, Hayes stands in the middle of the smart bunch."I bought my first bitcoin from Arthur in 2013."Jehan Chu, a native of New Jersey, took a circuitous route to the Pacific Rim, recalls. He taught himself how to code as an undergrad at Johns Hopkins University, just in time for the first dot-com boom of the late 1990s. After working at a small web-development shop in New York, Sotheby's called to help the auction house grow its digital business."We sold the famous Declaration of Independence in 2000."He pointed to the only remaining copy of the "Declaration of Independence" in private hands and sighed.After the $8.14 million sale, as the online market slumped, Chu traveled to Hong Kong to help Sotheby's cater to ultra-wealthy Asian clients, many of whom have a seemingly insatiable appetite for art and antiquities.In his spare time, Zhu Jiehan organized a brainstorming meeting for cryptocurrency enthusiasts. What started with five people in a smoky bar in Sheung Wan quickly grew into a community of thousands.By 2016, Zhu had"Turn your OCD into a career", established Kenetic, a cryptocurrency venture capital firm that has invested in more than 150 companies so far. At the same time, he watches in amazement as his friend Hayes rises in the crypto world, from manual trader to industry titan.Arthur Hayes started out as an arbitrage trade: buying bitcoin in one market and selling it at a premium in another.Until October 2013, he had problems accessing the cryptocurrency he had sent to Mt. Gox, a Tokyo-based bitcoin exchange that helps customers convert their bitcoin holdings into traditional Fiat currency such as USD, EUR, GBP or CNY.In early 2014, Mt. Gox announced that hackers had stolen nearly $500 million from its exchange. Unlike most other investments and sums (about 24,000), Hayes managed to get the money out, and in the process learned an important lesson: In an otherwise secure bitcoin ecosystem, exchanges constitute a single point Fault.Mt. Gox is perhaps the most notorious case, dozens of exchanges have been hit, and untold billions in bitcoin and other cryptocurrencies have been wiped out.For arbitrage, Hayes decided to take the money elsewhere. When he heard that bitcoin was trading at significantly higher prices in mainland China, he bought the bundle, transferred the coins to an exchange in China, and exchanged them for yuan, carrying a backpack with a stack of banknotes."Over the course of a few days, I took a bus with some friends to actually cross the border to Shenzhen, had lunch, and came back across the border with a legal amount of cash", he recalls, was a neat trick, and relatively lucrative.But in the real world, the dangers of moving real money across borders got him thinking. Why not build an online exchange where people can profit from Bitcoin by using derivatives?Bitcoin and beer
In January 2014, Hayes arranged to meet Ben Delo, a brilliant British mathematician and programmer whose fellow students at Oxford University were said to have brought him to a lavish rooftop swimming pool. Voted the most likely to become a millionaire and the second most likely to go to prison. After graduating in 2005, he worked at IBM, two hedge funds and, after moving to Hong Kong, at JP Morgan.When Hayes and Delo came together, there was little sign of their shocking order. On paper, both men have the same résumé: elite education and stints at big companies.However, everyone is an exception. The son of an auto worker, Hayes has left the regulated and highly regulated world of investment banking for the wild west of the crypto world, where rules run as they please and regulations are few and far between.Sir Jonathan, Provost of Worcester College, University of Oxford, said that Delo"Overcame great odds in school to win a place at Oxford from a local state school"。In fact, as the child of a civil engineer father and a schoolteacher mother, he was kicked out of three elementary schools before being diagnosed with Asperger's. At Oxford University, he double majored in mathematics and computer science, and won what the British call a double first. When he graduated, he had a perfect GPA in both subjects.As the pair mapped out what they needed to bring Hayes' vision to life, Delo, a back-office specialist who designs complex algorithms and high-speed trading systems, said they needed a front-end Web developer.Hayes happened to know someone, a young American programmer and technology evangelist named Sam Reed, who Hayes met at one of Reed's talks, Reed In his speech, he warned aspiring tech people not to join startups whose bosses routinely exploited and squeezed their programmers.When Hayes pitched his idea for a bitcoin derivatives exchange to Reed, Reed signed on without giving it much thought.Reed, the youngest of three boys, grew up in Manitowoc, Wisconsin. His father was a network administrator for the Air Force and his mother was a newspaper editor. There were many old computers around the Reed family, and Sam managed to fix them up, and by the age of 12, he had a paying job: debugging and repairing computers for friends and neighbors.Reed is much younger than Hayes and Delo, but he has the longest tenure in the crypto game. In 2009, during his senior year in Washington, the self-proclaimed"bitcoin hipster"man was mining bitcoins on his laptop at a time when bitcoins were practically worthless.Reed had amassed around 100 bitcoins along the way, but in the process of reformatting his hard drive, he accidentally erased the private keys needed to access the coins, leaving him permanently without them.Less institutionalized than Hayes and DeLow, Reid, who worked for a large defense contractor, found the corporate world stifling, and bid his time at several startups and freelance jobs, Then found my way to Hong Kong in 2013.Sitting in a hut in Thailand to record a video of an online career forum at his alma mater, Reid shared tips for crypto businesses.His insights include: "In a gold rush, if you don't want to mine gold, you sell shovels."Reid has said that he has been flirting with the idea of building an exchange to trade cryptocurrencies, explaining his rationale:"If you can cut out the bank, you cut out most of the complexity. You cut out a lot of the anti-money laundering (AML), KYC and stuff like that that the U.S. laws deal with, and you get rid of a lot of fraud because all of that, you know, by design accordingly, money on the Internet can actually be verified.Hayes, Delo, and Reid got serious about what they called the Bitcoin Mercantile Exchange (BitMEX). Hayes is the CEO, Delo is the COO, and Reed is the Chief Technology Officer (CTO).Nasdaq meets Vegas
BitMEX is known as "a peer-to-peer trading platform that offers leveraged contracts for Bitcoin." It allows users to effectively bet on the future price of the currency with up to 100x leverage. The translation is that a customer with $10,000 in a BitMEX account can seamlessly execute a trade worth $1 million. The allure of the exchange is that people can make big bucks by putting in relatively little crypto seed money.In a blog post on the BitMEX website, Hayes wrote:"Trading without leverage is like driving a Lamborghini in first gear, you know it's safer, but that's not why you bought it."His friend Zhu Jiehan compared BitMEX with Nasdaq,"If Nasdaq was in Las Vegas"。When asked about the potentially catastrophic negative impact of having people trade so many trades on margin, Zhu insisted that personal responsibility has always been at the heart of the crypto ethos."You open a 100 times? First off, make sure you read the fine print, mom isn't here to make sure you don't fall off your skateboard."Hartej Singh Sawhney is another colorful figure in the US expat crypto scene. In his words, his turban is made of"secret fabric"Made, and a clothing line of the same name.Sawhney has always been sympathetic to BitMEX’s business model, insisting:"They are running a pretty sophisticated casino environment. But I'm a free market guy and in my opinion BitMEX should be able to come up with anything, their terms are very clear."Six years ago, the birth of BitMEX was perfectly timed, but also fraught with danger. In the eyes of U.S. authorities, Bitcoin was on the way from being a currency favored by bad actors (in 2013 to the notorious black market for drugs and guns)"silk road"exemplified by the crackdown in 2019) transitioning to investment-grade assets that institutional players began buying as insurance against inflation, but also because of the outsize returns it promised.Hayes, DeLoe, and Reed were in the catbird seat and began to amass a huge fortune. All three are billionaires, according to sources familiar with their finances.But at the same time, they were also outsiders, suddenly playing in an arena where insiders were all looking to collaborate.Their high-efficiency, highly-leveraged character is reminiscent of the kind of potentially toxic financial instruments that would eventually attract regulatory scrutiny, and later in Adam McKay in 2015 according to Michael Lewis. Lewis' best-selling book "The Big Short," and despite BitMEX's rapid growth, it also comes with dire risks."This thing is developing very fast, it didn't exist 10 years ago,"J. Christopher Giancarlo explained that he served on the powerful Commodity Futures Trading Commission (CFTC) under President Obama and later as CFTC Chairman under President Trump,"Regulation always lags behind innovation, and sometimes, in democracies, it lags behind other jurisdictions." For years, Giancarlo has been pressuring Congress to create a comprehensive regulatory framework covering the crypto space. Instead, lawmakers have relied on laws from the 1930s — the Securities Exchange Act and the Commodity Exchange Act — that were later amended after the 2008 financial crisis.Even so, the rules are still very outdated. Therefore, according to Giancarlo, regulators must decide how to regulate pioneering platforms like BitMEX, if at all."About 8,000 nascent platform tools have been identified,"He said. In each case, regulators must ask:"secondary title"amazing idea
Understanding what BitMEX is selling may not be as important as understanding who it is selling to. In our early conversations, Hayes insisted that BitMEX was cautious,"no US customers", There are technical barriers set up, such as blocking IP addresses in the United States, so that American customers cannot enter the platform, and domestic regulatory agencies in the United States cannot enter.But U.S. officials said that was not the case. They haven’t forgotten that BitMEX has many U.S. users, many of whom use virtual private network (VPN) software to disguise their location, and thousands flock to BitMEX.Despite Hayes' background in banking institutions, with entire divisions dedicated to enforcing anti-money laundering (AML) and know-your-customer (KYC) requirements, his immersion in the deep libertarian world of crypto seems to make him suspicious of some Turn a blind eye to reality. Among them: American authorities have wide reach, long memories, and the ability to knock people down, especially savage upstarts."Hayes is an iconoclast,"His friend Meltem Demiros argued."He's not afraid of controversy, and, you know, history hasn't been kind to these guys."As chief strategy officer of digital asset investment firm CoinShares, Demiros has been called the Sheryl Sandberg of crypto.Born in the Netherlands to Turkish parents, Demiros moved to the United States at age 10 to study mathematics and economics at Rice University. She earned her MBA at MIT, where she taught fintech and blockchain strategy, which she later brought to students at Oxford. It's not hard to see why Hayes and DeMillo became friends and like-minded people."I feel like an outsider,"she says,"I'm female in the sense that I'm not funded by Silicon Valley and my parents aren't wealthy.... I don't have the same background as a lot of people in this industry and when I walk into a room people still Will raise eyebrows."Hayes too," in Demiros' view,"He doesn't have famous VC backers, and he doesn't have the advantages that others have."Hayes' original sin may have been his refusal to play the game."He doesn't care about the faux pas and bullshit, and he doesn't care about Silicon Valley and think tanks, all the stupid things that are done for prestige. He just doesn't care....sometimes, people's greatest qualities are also their greatest flaws."BitMEX was incorporated in Seychelles, a move that allowed the startup to grow quickly and minimize its tax exposure, while Western governments struggled to even understand, let alone create, the novelty financial instruments and markets that BitMEX was building. A way of governance.In a 2015 investor presentation, Hayes made this point:"Bitcoin derivatives are completely unregulated globally....regulators are still trying to figure out how to swap fiat and bitcoin."It's an amazing thought. “In the beginning there were no rules, and the government was not interested in spelling out the rules,” Zhu remembers. “You would go to them for guidance, but you would get nothing.”"Is it illegal? There's no answer." Only after the fact, he says, do cryptic edicts emerge to guard against encryption, usually in response to some breach the regulator hadn't spelled out before. The difference is that Zhu Jiehan sees the chaotic place, Hayes saw an opportunity.For nearly a year after its launch, BitMEX's business has been lackluster. "There were days when we didn't trade," Hayes remembers. "Nobody bought or sold," and the fees for trading on the platform barely covered the server bill, which Reid paid with a credit card.While Hayes and DeLo remained in Hong Kong, Reed married and moved back to the U.S., settling in Milwaukee, where he operates in a co-working space.However, time zone differences work in their favor. Delo and Reid, in iconic entrepreneurial fashion, take turns"stand by", 24/7 to solve customer support issues.The company's fortunes changed in late 2015 when it began offering clients leverage of 100 times -- five times that of its nearest competitor.The following year, with Brexit and the election of Donald Trump, political turmoil boosted cryptocurrency trading volumes. By 2017, BitMEX had to hire 30 employees to cope with the explosive growth in trading volume. The company moved into new premises, which soon became unusable again.By 2018, BitMEX had become a high-stakes marketplace, with billions of dollars traded every day. During one meeting, Hayes commented: "We are the largest trading platform in the world in terms of trading volume."shark and lamb
In May 2018, on the opening day of Consensus (the equivalent of CES in the crypto world), Hayes parked an orange Lamborghini at the Hilton Hotel in Midtown Manhattan and tweeted,"Did you see my car at #Consensus2018 today?"A close friend insisted he was just laughing at the thousands of attendees who gathered at the hotel, investors who talked about cashing out on crypto when they managed to burn millions in venture capital On a runaway ICO. In retrospect, though, the high-profile de Lamborghini may well have been Hayes drawing a bull's-eye on his own back.It is true that the partners in the firm have different attitudes towards their image and thriving business. Hayes didn't mind stirring up trouble, and he immersed himself in the role of the financial rebel. Reed kept an extremely low profile, a secretive billionaire on the streets of Milwaukee.However, Ben Delo seems eager for mainstream recognition. When BitMEX was announced as the world's largest cryptocurrency exchange in 2018, a string of British newspapers dubbed him"Britain's youngest self-made billionaire"。In October of that year he donated £5m to Oxford University's Worcester College, and a few months later he signed a bill designed by Bill Gates and Melinda and Buffett"donation pledge"，"Billionaires are publicly invited to... publicly commit to giving the majority of their wealth to charity"。In a letter explaining his decision, he wrote:"When I was 16 in the UK, I was asked to list my ambitions for the future. I answered concisely: Computer Programmer, Internet Entrepreneur, Millionaire, I have been very lucky to exceed these goals, and I am very grateful to be able to sign this pledge."Two years ago, BitMEX leased the 45th floor of Cheung Kong Centre, the most expensive real estate in Hong Kong and home to Goldman Sachs, Barclays, Bloomberg and Bank of America. Hayes, DeLow and Reed are really going to be in the building.Battle of Taipei
Come summer of 2019, the amount of money trading through BitMEX is staggering. On June 27, the company announced a new daily record with $16 billion in transaction volume.Hayes tweeted two days later."$1 trillion traded in a year, stats don't lie, BitMEX isn't a fucking thing, @Nouriel I'll see you Wednesday."The person he was blaming on Twitter was Nouriel Roubini, a respected NYU economics professor and BitMEX’s fiercest critic. Known as Doctor Doom, Roubini was a member of President Clinton's Council of Economic Advisers and held positions at the Treasury Department, the International Monetary Fund and the World Bank. In other words, he, like Hayes, has an elite background.On July 3, the two faced off on the stage of the Asian Blockchain Summit, which was advertised as"Taipei dispute", when the theme of "Rocky" sounded above their heads, the two sat in alignment.The professor spoke first and went straight to the point."In this particular industry there is some sleazy behavior going on...criminals, scammers, salesmen etc, there is a gentleman next to me who works with depraved gamblers and retail investors, non-accredited investor."Roubini emphasized in his Italian-accented English,"There is a great account on twitter called BitMEX Rekt, retk means 'bastard, every second someone gets liquidated by these guys, thousands of people are in financial trouble."He accused the company of violating regulations, insisting that trading on BitMEX,"everyone will be rekt", with the exception of Hayes and his associates, Roubini said, who earn commissions and fees and maintain a liquidation fund that profits from bankrupts.Hayes immediately countered,"BitMEX. One hundred times leverage. So what? You can trade this leverage anywhere you want. In the US, we have something called an Exchange Traded Fund - ETF. There's a great...it's (based on) shorting volatility... February 2018, the most liquid day in the world's most regulated financial market, all these nice banks, in suits Man, went to a top tier college and your ETF dropped to fucking zero. Rekt!"That's an odd claim for someone who got his start building and promoting ETFs.In fact, Hayes had many fans in the auditorium that day who believed that he, like Facebook's Zuckerberg, created an entire market from scratch, an influential, secure, and highly profitable platform, People never knew they needed the platform.As Hayes spoke, though, other similarities to Zuckerberg were apparent: arrogance, disdain for authority, and a tone of self-sabotage, all on display in Taipei.When moderators questioned BitMEX’s decision to register in Seychelles, where, some say, there are no regulations, Hayes lost his temper."Maybe the US-centric Roubini thinks that the NYDFS and the NY Attorney General are the only game in town and that we have to bow and bow to the US government because it is regulated. Now, I don't know, it's really not my game."Asked whether he might concede that regulators in the US and Europe have a different strategy than those in Seychelles, Hayes said:"It just costs more to bribe them."So how much did Hayes pay to bribe the Seychelles authorities? His answer is:"a coconut"。A few weeks later, Doctor Doom hit back with an op-ed titled "The Great Crypto Heist." In it, he raises red flags about the systemic illegal behavior of offshore exchanges. Still blushing in Taipei, he focused his ire on BitMEX and its CEO, accusing them of rough business practices: such as using an in-house for-profit trading desk to front-run their own client trades and take as much as half of the profits from liquidations Explain that BitMEX has a strong incentive to defraud people who trade on the platform.Then Roubini delivered the coup de grace."BitMEX insiders have revealed to me that the exchange is used on a daily basis for money laundering on a massive scale by terrorists and other criminals in Russia, Iran, and elsewhere; profit."Finally, he humiliated the regulator, saying,"Regulators have been sleeping while crypto cancer metastasizes."Demiros had a more humane take on the Taipei spat:"This is an example of Hayes acting, Hayes is a performer who creates a scene."She marveled at the adoration of complete strangers, even those who had been rekt on BitMEX, would approach Hayes on the street, wanting to give him a hug."For many people, Hayes is like an icon,"crisiscrisis
At 6 a.m. on October 1, 2020, FBI agents parked their car in front of a comfortable villa in the suburbs of Boston. Records show the house was purchased a year ago by a Delaware limited liability company, and the real owner of the property, Sam Reed, was taken away in handcuffs.Hours later, Acting U.S. Attorney Audrey Strauss of the Southern District of New York (SDNY) and FBI New York Field Office Chief William Sweeney Jr. announced the indictment of BitMEX founders Hayes, Delo and Reed , and their friend and first hire, Gregory Dwyer.The individuals were charged with violating and conspiring to violate the Bank Secrecy Act,"Willfully failing to establish, implement and maintain an appropriate anti-money laundering program". Each charge carries a maximum penalty of five years in prison. Reed, the only defendant in the United States at the time, was released after posting $5 million bond and agreeing to surrender his passport.The FBI's Sweeney hit Hayes hard:"One defendant went so far as to boast that the company was incorporated in a jurisdiction other than the US because bribing regulators in that jurisdiction cost 'a coconut'."he warned,"They will soon learn that the price of their alleged crimes will not be paid in tropical fruit, but may result in fines, restitution and federal prison terms."Professor Roubini has been sounding the alarm for more than a year, and in October, the federal government responded. But it’s not just the Justice Department involved, the Commodity Futures Trading Commission (CFTC) aims to protect retail and institutional investors from fraudulent, manipulative and abusive practices related to the sale of futures and options.The CFTC filed a civil lawsuit against BitMEX and its founders, alleging that it operated an unregistered trading platform and failed to implement required anti-money laundering procedures.The criminal case has alarmed legal observers."I don't know, I've been doing this for a long time with no other criminal prosecutions, and certainly not one individual criminal prosecution, based solely on the failure of an anti-money laundering program."Laurel Lomis said so. He is an expert in financial crimes. He worked for the Department of Justice for 16 years and prosecuted the Department of Justice's first digital currency case. He is now in private practice at O'Melveny & Myers. Cryptocurrency and blockchain companies provide advice. Like other Justice Department veterans I interviewed, she was shocked that there were no more substantive charges."In an indictment, you typically see allegations of specific criminal activity, whether it's fraud, credit card theft, child pornography, terrorist financing. In this indictment, you don't see any allegations of any of these things."(Of course, prosecutors who obtained some 100,000 pages of BitMEX documents in the course of their investigation may bring new charges, and additional ones, if they deem it necessary.)By contrast, when the Justice Department went after another crypto exchange called BTC-E in 2017, it indicted it on 21 counts, including identity theft and facilitating drug trafficking, as well as helping criminal groups launder money, including those that allegedly Those responsible for the Mt.Gox hack.According to Lomis, through BitMEX, U.S. authorities trained the founders of the biggest and brightest players in the digital asset derivatives space, sending a message to the entire crypto community:"We want to make sure you understand that this industry is under our jurisdiction."As for the civil suit, a source familiar with the administration's thinking said BitMEX's failure to get what it wanted was "exceptional" under the CFTC's jurisdiction.In fact, an unregistered exchange like BitMEX is allowed to sell leveraged commodities to U.S. retail investors, but it must complete those transactions within 28 days. The problem is that some of BitMEX's most popular products, so-called perpetual contracts, are designed not to expire, but rather to allow people to maintain trade positions.In short, Hayes, Drew, and Reed, three shrewd fellows, with the help of a slew of high-priced legal professionals, fell prey to the Commodity Exchange Act of 1936, a law. This was amended by the Dodd-Frank Act of 2010. New CFTC guidance on such transactions, only published last March, clarifies the point further.The committee did not buy the company's assertion that Americans could not participate. According to a civil filing, most of BitMEX's trading volume and fees come from U.S. clients. Prosecutors alleged that the company's anti-money laundering (AML) and know-your-customer (KYC) policies and practices were window-dressing.BitMEX allows customers to open accounts with anonymous emails and passwords and deposit bitcoins, and BitMEX does not collect any documents to verify the identity or location of the vast majority of users."The CFTC told the federal court,"Requires surrender of ill-gotten gains, civil monetary penalties, restitution of client interests, permanent registration and trading ban, and permanent ban from future violations."(The company announced in January that all user information on the platform has been verified).Officials have spent a lot of time and planning to accuse the BitMEX founder of serious crimes, angering the broader crypto community.Some strongly believe that the game is rigged."Show me a bank with no money laundering violations and I'll just show you a piggy bank,"Zhu Jiehan told me,"This is a double standard. Who went to jail for money laundering at HSBC? You know about their dealings with Iran and all these sanctions violations? They just get fined."He was right. After HSBC admitted to laundering nearly $1 billion for the Sinaloa cartel and moving funds for sanctioned clients in Cuba, Iran, Libya, Sudan and Myanmar, the Justice Department opted not to indict the bank or its officials, instead Make it pay a $1.92 billion fine and install court-appointed compliance monitoring programs.This is hardly an exception. Barclays, BNP Paribas, Credit Suisse, Deutsche Bank, ING, Lloyds Banking Group, RBS and Standard Chartered have all paid fines for conduct including money laundering, sanctions breaches and massive tax fraud.In the world of high finance, charges against individual company executives are rare."You can google 'morgan' and 'fraud' and see what comes up,"Sawhney suggests,"Wells Fargo, JPMorgan Chase, they all pleaded guilty to fraud, yet none of their sentences or fines were as severe as what we saw with Hayes."In fact, 48 hours before announcing the charges against Hayes and his partners, JPMorgan was in talks with the Department of Justice, the Commodity Futures Trading Commission, and the SEC"reached a resolution", a euphemism for the resolution in which the bank agreed to pay nearly $1 billion to fight two separate fraudulent schemes: one involving precious metals futures and the other involving Treasury bills and bonds.The FBI's Sweeney was among those announcing the deal, "For nearly a decade, many JPMorgan traders and salespeople have openly disregarded U.S. laws designed to prevent illicit activity in the marketplace... Today's DPA ... strongly remind others that allegations of this type will be vigorously investigated and pursued."Really? Since 2000, JPMorgan Chase, America's largest bank, has paid tens of billions in fines, including more than $2 billion in anti-money laundering alone. However, its chief executive and chairman Jamie Dimon and his top lieutenants have not been held criminally responsible. Instead, Dimon, who ran for president in 2020, collected $31.5 million in salary and incentives last year."You can look at the history of anti-money laundering prosecutions over the last 10 years and you don't see many individual defendants being named,"Rimon, a lawyer and crypto expert, elaborated, “Of course, you don’t do that when you’re talking about a violation of procedure and not evidence of actual money laundering. So it’s unusual. I think it’s intentional.” Yes. I think (here) the government made the decision to do that to send a message."Deterrence is of course an important part of the US criminal justice system. But so is the discretion of the prosecution. Whether it's a big bank, or even a big pharmaceutical company like Purdue, whose owners, members of the Sackler family, are accused of knowingly addicting millions of Americans and killing hundreds of thousands (Sackler Le family denies this).Zhu echoed the views of many people when he described the gentleman's agreement."These multinational corporations, controlled by the elite, are very proficient in dealing with government departments. It is not a quid pro quo, but an effective partnership, which includes illegal activities and law enforcement components, which is carefully designed. The Sackler family people will not be arrested.""i can counter this"Former CFTC Chairman Giancarlo replied,"The CFTC has been no slouch in conducting criminal proceedings."He cited the examples of Refco and Peregrine Financial, whose chief executives were later charged by the Justice Department with lengthy prison terms at the committee's urging.Jean Carlo earned the nickname "Crypto Dad" for advising Congress to "treat Bitcoin not with contempt, but with openness."In short, he is not anti-cryptocurrency. Nor were his former CFTC colleagues, who last year put the crypto community on notice that the commission takes its jurisdiction and authority seriously, he said."BitMEX apparently didn't get the memo and the CFTC sanctioned them."Still, the allegations caught BitMEX executives off guard. Delo, a Hong Kong resident, was in the UK when the indictment was issued. While U.S. prosecutors have yet to initiate extradition proceedings (due in part to the coronavirus pandemic), sources close to Delo say he will appear in court if extradition proceedings are announced.I've been told that Hayes may be in Singapore, where he allegedly has a residence, and it remains an open question when or if he will return to the United States to face trial.Still, even if they end up defeating the government at trial, or reaching a settlement beforehand, that doesn't necessarily spell the end of their troubles. BitMEX and its founders have been sued by investors and customers who claim to have lost money trading on a platform that was stacked against them.Most notable, though, were allegations by an early investor named Frank Amato, who filed a lawsuit seeking to cash out his alleged stake in the company. (A spokesman for BitMEX Holdings said the case was dropped after the dispute was settled on non-disclosure terms.)In a filing by Amato, he claimed that Hayes, DeLow, and Reid "began misappropriating funds a long time ago ... (and) knew they were being investigated by the U.S. regulator CFTC no later than January 2019." investigation, and that co-founder Reade made false statements to the committee.A source familiar with the Amato lawsuit told me that after learning of the circumstances, the two allegedly paid themselves $140 million in multiple installments, though those figures could not be verified, given that the executives Dividends are often paid based on company performance, which isn't necessarily fake, but even for three billionaires, the numbers are substantial. 
