By: Merav Shor, John Peurifoy, and Kevin March, Floating Point Group
Updated: 12:30 PM ET, Fri October 2, 2020
On October 1st, 2020, the CFTC charged BitMEX owners with illegally operating a cryptocurrency derivatives trading platform. Further, the U.S. attorney for the district of New York indicted the owners for violating the Bank Secrecy Act.
Below, you’ll find a timeline of the history of BitMEX outlining the relevant issues in the recent charge brought by the CFTC as well as the generally increased focus on regulation in the space. The entire CFTC report can be found at the CFTC website here and this visual is only meant to summarize the key developments in chronological fashion. Each item in the timeline is hyperlinked to the page in the report it comes from or the relevant outside news article.
- The regulators base all action on the Relevant Period – defined as starting when BitMEX formed to its current operating date.
- The initial probe of BitMEX was announced mid-2019 and in the wake several things happened quickly: customers withdrew funds from BitMEX, BitMEX announced a new holding structure, and BitMEX parted ways with its then COO.
- BitMEX announced in August 2020 that it would require all customers to undergo KYC, nearly a year after the announcement of the probe.
- Two items appear to be the most fragrant: the lack of KYC in violation of the BSA (punctuated by open remarks by the founders chastising others for following KYC), and willful neglect (in some cases encouragement) to evade restrictions against U.S. users signing up on the platform – most notably in the form of encouraging the use of VPNs.
BitMEX states in investor presentations it needs "constant presence on these media platforms ensures that...[when the] Bitcoin community thinks of derivatives BitMEX comes to mind". BitMEX also solicits customers and advertises in the U.S. at various conferences and meeting with individual customers. Lastly, BitMEX launches an affiliate program - that can reward U.S. customers for bringing in non-U.S. customers.2015
BitMEX launches the leveraged Swap (perpetual future). This allows users to buy or sell Bitcoin and keep their contracts open for as long as they want without expiry date.2016 May
Canadian regulators state "BitMEX is not registered or recognized in any capacity in Ontario". Shortly after, BitMEX begins to restrict users from Canada.2020 - August
CFTC charges BitMEX owners with illegally operating a cryptocurrency derivatives trading platform and anti-money laundering violations. The U.S. attorney for the district of New York indicts Hayes, Delo, and Reed on federal charges of violating the Bank Secrecy Act and conspiracy to violate the Bank Secrecy Act. Reed is arrested in Massachusetts.2020 - October
Via the BitMEX blog, a statement is issued, "We strongly disagree with the U.S. government’s heavy-handed decision to bring these charges, and intend to defend the allegations vigorously. From our early days as a start-up, we have always sought to comply with applicable U.S. laws, as those laws were understood at the time and based on available guidance.”2020 - October