On August 10, 2021, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced the assessment of a civil monetary penalty against several BitMEX entities for violations of the Bank Secrecy Act (BSA) and its implementing regulations.
FinCEN found that BitMEX willfully failed to comply with its obligations under the BSA, including the requirements to adopt and implement an AML compliance program, implement and maintain a customer identification program (CIP), and report suspicious activity.
Of note, FinCEN asserted jurisdiction over BitMEX, an offshore exchange, because BitMEX was a “financial institution” under the BSA since it operated as a futures commission merchant (FCM) required to register with the Commodity Futures Trading Commission (CFTC) and because BitMEX engaged in significant business activities within the U.S. and solicited and accepted orders from U.S. customers. Additionally, FinCEN found that BitMEX provided money transmission services within the U.S., transmitting funds for U.S. customers, thereby providing another hook for jurisdiction.
The CFTC separately announced that it had entered into a consent order with BitMEX in the U.S. District Court for the Southern District of New York. The CFTC’s order found that BitMEX violated the Commodity Exchange Act (CEA) by operating as an FCM without CFTC registration, and that BitMEX violated the CEA by operating a facility to trade or process swaps without being approved as a designated contract market or a swap execution facility. The CFTC order further found that BitMEX violated CFTC regulations regarding CIP and know your customer (KYC) procedures and failed to implement an adequate AML program.
In total, BitMEX paid a $100m penalty to FinCEN, with $50m credited for payment to the CFTC, and $10m suspended pending BitMEX’s compliance with a SAR transaction lookback, and $10m suspended pending BitMEX’s compliance with a comprehensive review of its internal controls. The CFTC’s litigation against BitMEX’s founders continues, as do the criminal cases.