Three co-founders and the head of business development are out at troubled cryptocurrency derivatives exchange BitMEX.
CEO Arthur Hayes, CTO Samuel Reed and fellow co-founder Ben Delo, as well as head of business development Gregory Dwyer, have stepped down after the U.S. Department of Justice indicted them for violating the Bank Secrecy Act and conspiring to violate the Bank Secrecy Act. The charges are based on what prosecutors say are deliberately weak and inefficient customer identification procedures.
Reed was arrested in Massachusetts on Oct. 1, the day the charges were announced.
In addition to the criminal charges, the Commodity Futures Trading Commission (CFTC) announced a civil suit against BitMEX, alleging that the company was “operating an unregistered trading platform and violating multiple CFTC regulations, including failing to implement required anti-money laundering procedures.”
By the next day, customers had pulled $340 million in Bitcoins out of the exchange, according to crypto market analysis firm Glassnode.
Both the DoJ and CFTC charges are based on accusations that Seychelles-based BitMEX did not seek to prevent U.S. customers from using its site, despite a formal ban.
In announcing the charges that the four defendants “violated the Bank Secrecy Act by evading U.S. anti-money laundering requirements,” FBI Assistant Director William F. Sweeney Jr. said:
“One defendant went as far as to brag the company incorporated in a jurisdiction outside the U.S. because bribing regulators in that jurisdiction cost just ‘a coconut.’”
“These changes to our executive leadership mean we can focus on our core business of offering superior trading opportunities for all our clients through the BitMEX platform, whilst maintaining the highest standards of corporate governance,” said 100x Group chairman David Wong, in an Oct. 8 blog post. He added:
“We have an exceptional senior leadership team who are well-placed to continue the growth and development of the 100x Group, including completion of the BitMEX User Verification Programme. It is business as usual for us and we thank all clients for their continued support.”
BitMEX parent company 100x said COO Vivian Khoo has taken up the reins as interim CEO. She is a former managing director of compliance in the Asia Pacific region for Goldman Sachs. While Dwyer is on a leave of absence, Commercial Director Ben Radclyffe—a veteran of Deutsche Bank and UBS—“will have enhanced responsibility for client relationship handling and oversight of financial product,” the company said.