Former BitMEX CEO Sentenced to House Arrest on Anti-Money-Laundering Charges

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Arthur Hayes was sentenced to serve six months of house arrest and two years probation for violating anti-money-laundering law

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The offense, though “very serious,” didn’t warrant the more than one year in prison that prosecutors had sought, US District Judge John Koeltl said.

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Mr. Hayes was charged in what has become a closely watched test of US power to impose its banking rules on offshore crypto exchanges.

Prosecutors said that Mr. Hayes made himself rich by closely studying—then studiously ignoring—US anti-money-laundering laws and regulations meant to stop financial institutions from moving funds for criminals and terrorists.

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Seychelles-incorporated BitMEX, at Mr. Hayes’s direction became one of the world’s largest crypto exchanges and personally earned him more than $100 million, according to prosecutors. But some of the business was with US customers, and BitMEX failed to set up anti-money-laundering and know-your-customer programs that would comply with US rules, they said.

Mr. Hayes’s defense team, though, argued he had little guidance from regulators on how US law applied to offshore cryptocurrency businesses.

A native of Buffalo, NY, and Detroit, Mr. Hayes founded BitMEX at age 28, having already worked for Deutsche Bank AG

and Citigroup Inc.

in Hong Kong, and was a cryptocurrency pioneer, his lawyers said.

BitMEX operated without an anti-money-laundering program for a time, but eventually retained consultants and lawyers, and made belated efforts to comply with US law, they said.

Mr. Hayes, who pleaded guilty in February, is the first of three BitMEX co-founders to be sentenced for violations of the Bank Secrecy Act. Two other co-founders, Benjamin Delo and Samuel Reed, also have pleaded guilty. BitMEX’s first employee, Gregory Dwyer, has pleaded not guilty.

Judge Koeltl granted a request from Mr. Hayes’s defense team that he be allowed to confer with Messrs. Delo and Reed. People on probation are normally barred from communicating with felons, but the three intend to continue to work in the cryptocurrency business together, defense lawyer James Benjamin said.

Mr. Hayes, who is now 36, said he deeply regretted his involvement in the criminal activity. He intends to return to his home in Singapore, where his wife lives, when his house arrest stateside ends.

BitMEX itself entered into a $100 million settlement with US regulators in August.

Write to Richard Vanderford at [email protected]

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Credit: www.wsj.com /

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