BitMEX completes user verification

In wake of indictments, BitMEX completes user verification program

The cryptocurrency derivatives exchange began putting an anti-money-laundering program in place for all of its users following the indictment of several executives, including former CEO Arthur Hayes

The troubled cryptocurrency derivatives exchange BitMEX has completed a new user verification program covering all of its users, the company announced on Jan. 7.

The  Seychelles-based exchange has been under severe pressure since the Oct. 1 indictment of four top executives, including former CEO Arthur Hayes, by the U.S. Department of Justice.

They have been charged with violating the Bank Secrecy Act and conspiring to violate the Bank Secrecy Act by failing to put a sufficiently strong anti-money-laundering program in place.

To comply with that requirement, Bithumb put a strong know-your-customer requirement in place beginning on Dec. 4. All open futures positions held by unverified users were completed by Dec. 25, allowing the exchange to start 2021 with a 100% verified active user base, the exchange said. More than $100 billion in volume has been traded since the Dec. 4 know-your-customer (KYC) requirements began, it added.

“The completion of our User Verification Programme is a major milestone in the journey of BitMEX from a start-up to an established high-performance platform with top-tier liquidity and open interest,” said Alexander Höptner, CEO of 100x Group, which owns BitMEX. “It places us in an advantageous position to capitalize on the surge of users—both retail and institutional—who are seeking a platform on which to trade crypto derivatives confidently without sacrificing security, liquidity, or performance.”

Höptner was brought onboard as the new CEO on Dec. 1. He had been CEO of German stock exchange Börse Stuttgart, which began offering regulated cryptocurrency trading services in the European Union under his watch.

Along with Hayes, criminal charges were brought against co-founder and CTO Samuel Reed, co-founder Ben Delo, and head of business development Gregory Dwyer. All four promptly resigned. 

Only Delo was arrested at the time. He has since been released on $5 million bail.

The Commodity Futures Trading Commission (CFTC) simultaneously 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.”

The agency alleged in its filing that BitMEX made more than $1 billion in fees while in violation of its regulations.

“We are now one of the few crypto derivatives exchanges outside the U.S. to be implementing know-your-customer requirements before a user can complete their initial deposit and first trade,” said Malcolm Wright, 100x Group’s Chief Compliance Officer. “BitMEX has long been known for having world class security, technology, and product innovation. With all users on the BitMEX platform verified, we are demonstrating our commitment to being a compliance standout as well.”

Wright, who was hired on Oct. 12, claimed that the “significant achievement is the result of years of work to develop a robust compliance function to meet international standards”—rather than a quick reaction to the charges and lawsuit.

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.