Bitcoin Bounces Back After U.S. Department Of Justice And CFTC Files Charges Against BitMEX

The U.S. Department of Justice and the Commodities and Futures Trading Commission have filed charges against crypto derivatives exchange BitMEX and members of its leadership team.

CEO Arthur Hayes along with co-founders Ben Delo and Samuel Reed are charged with operating an unregistered trading platform in addition to violating CFTC regulations surrounding anti-money laundering practices and know-your-customer guidelines. 

The CFTC filed the civil enforcement action through the U.S. District Court for the Southern District of New York charging five entities - including BitMEX's parent company HDR Global Trading Limited - that own and operate BitMEX. 

“For the United States to be a global leader in this space, it is imperative that we root out illegal activity like that alleged in this case. New and innovative financial products can flourish only if there is market integrity," Chairman Heath P. Tarbert said in a statement. "We can’t allow bad actors that break the law to gain an advantage over exchanges that are doing the right thing by complying with our rules.”

The U.S. Department of Justice filed separate charges against Hayes, Delo, Reed and BitMEX head of business development Greg Dwyer with violating the Bank Secrecy Act. The Act requires financial institutions to assist government agencies in detecting and preventing money laundering. Reed was arrested on Thursday morning and will appear in federal court in Massachusetts. 

A spokesperson for HDT Global Trading Limited told The Block in a statement that the company plans to fight the charges and criticised the U.S. government for taking such a heavy handed approach in punishing the exchange. BitMEX emphasized that it is functioning as usual in a Telegram announcement.

"The BitMEX platform is operating entirely as normal and all funds are safe," the exchange wrote. 

Despite the assurances, some on Crypto Twitter took the event as an occasion to urge people to move their Bitcoin out of exchanges. Self-custody Bitcoin service Casa used the charges to remind followers that they believe that not trusting exchanges is a safer bet.

Others took the opportunity to highlight the resilience of the crypto market given the cycle of recent poor news. Last week crypto exchange KuCoin was hacked with $150 million worth of cryptocurrencies stolen. Bitcoin being able to maintain its support at $10,000 despite the bad press was a strong indicator to many crypto commentators. 

While Bitcoin was able to maintain support at $10,000, the currency dropped around 4% on BitMEX futures. Altcoins dropped less than 3% over the past 24 hours, Messari data shows. Overall the market's reaction was relatively tame and since the news broke Bitcoin's price seems to have regained lost ground. At the time of writing Bitcoin is trading hands at $10,541 and is down 1.23%. 

It is likely that after the charges have run their course it will be virtually impossible for foreign exchanges like Seychelles-based BitMEX to continue offering services without VPN or know-your-customer settings in place. 

By Emily Mason

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