Founders and Executives of Cryptocurrency Derivatives Exchange BitMEX Charged(justice.gov)
justice.gov
Founders and Executives of Cryptocurrency Derivatives Exchange BitMEX Charged
https://www.justice.gov/usao-sdny/pr/founders-and-executives-shore-cryptocurrency-derivatives-exchange-charged-violation
147 comments
Bitmex was competent, transparent and trustworthy. I can see why the US govt found them threatening
Not doing any KYC/AML with that kind of volumes can't really be seen as competent by any standards. Of course customers love it when KYC procedures are not needed, but from their own perspective they should have tried at least some basic covering of their own ass by investing in compliance.
From the US point of view. The problem is that US gov is expanding their laws as crossbordering. E.g. if I don't work with american people at all and do service with less regulations requirements I can be still charged and extradited to US prison because "SOME Americans could lie both to me AND American gov and use fake data and VPNs". That's a nonsense for today global world and slowing down lots of developing countries. Current world should revise extradition laws and US intervention in non-US citizens businesses.
KYC/AML is a nonsense for virtual-currency exchange, it is nominal and trifling irritation for the end user, since you can use simply use another persons "verified" account as a proxy-account for your trades as I expect many do for the purposes of privacy.
Whether KYC/AML laws make sense is totally beside the point. That's like saying because cannabis being illegal makes no sense, therefore it makes sense to sell cannabis publicly in large quantities and not comply with any laws.
I understand this, but what I mean by this is that the infringement then is logically also small since the quantifiable infraction is in reality small compared to those whom the officials deem to be compliant.
They are charging the owners of a non American company that banned most Americans with violating US banking laws. Even tho Bitmex never used a US bank, is not a US company and only used bitcoin for transactions
While the US does love exporting our/their rule of law outside, the internet creates an interesting problem with jurisdiction. By serving customers in the US, have they subjected themselves to US law?[a] Many times before, the courts have found that an American company doing business in State X meant they could be sued there. But they’ve also found otherwise. It’s an interesting question that doesn’t seem to have a clear answer.
[a] When visiting another country, it’s very clear you’re subjecting yourself to their laws (I can’t visit France and expect only US laws will apply to me), but the internet (a global system) poses a problem.
[a] When visiting another country, it’s very clear you’re subjecting yourself to their laws (I can’t visit France and expect only US laws will apply to me), but the internet (a global system) poses a problem.
They did there job and did it well. What users were happy? I thought US govt was saving as from bitmex? The US govt criminals charges against the owners is a disgusting overreach
Can you provide an example of a typical trade that was done on BitMEX for someone who understands what derivative means (from a few of the good books that came out following 2008 and later) but is generally unfamiliar with that world?
There are great deteails and write-ups on Bitmex's website such as https://www.bitmex.com/app/perpetualContractsGuide, but in general it is basically either futures or a type of swap contract, but all based in BTC.
There's a lot of depth in it, but here's my version for laymen. I was a derivatives trader in the financial markets and also did some work in crypto exchanges.
Imagine someone offers you a deal where instead of buying stocks, you agree with someone to pay you the difference between the price of a stock today and whenever you decide to exit the deal. PnL should look a lot like whatever the stock did over the period.
Add to this that of course when the trade starts, it's worth about zero to either side. But there's a chance you're gonna lose money, so the exchange wants you to put up some money. Not the entire amount that the shares cost, because you probably won't lose that much. And we can adjust the margin according to how the market moves.
So you can then get a much larger exposure than if you just bought the stock with the same amount of cash.
Now add to this a minor wrinkle, that is you don't use the cash dollars to buy the bet, you actually use the stock. And if you win, you get more stock.
Imagine someone offers you a deal where instead of buying stocks, you agree with someone to pay you the difference between the price of a stock today and whenever you decide to exit the deal. PnL should look a lot like whatever the stock did over the period.
Add to this that of course when the trade starts, it's worth about zero to either side. But there's a chance you're gonna lose money, so the exchange wants you to put up some money. Not the entire amount that the shares cost, because you probably won't lose that much. And we can adjust the margin according to how the market moves.
So you can then get a much larger exposure than if you just bought the stock with the same amount of cash.
Now add to this a minor wrinkle, that is you don't use the cash dollars to buy the bet, you actually use the stock. And if you win, you get more stock.
>"‘Seychelles is cheaper to bribe than [the United States]’ and when asked how much he had to pay Seychelles to register BitMEX there, he said ‘a coconut.’"
In government regulated finance, our counsel had very good advice: Don't provoke the regulators.
In government regulated finance, our counsel had very good advice: Don't provoke the regulators.
Great quote from the press release:
"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.’ Thanks to the diligent work of our agents, analysts, and partners with the CFTC, they will soon learn the price of their alleged crimes will not be paid with tropical fruit, but rather could result in fines, restitution, and federal prison time."
"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.’ Thanks to the diligent work of our agents, analysts, and partners with the CFTC, they will soon learn the price of their alleged crimes will not be paid with tropical fruit, but rather could result in fines, restitution, and federal prison time."
3 of the 4 defendants "remain at large", and live in countries w/o US extradition treaties.
I wouldn't be surprised to see BitMEX continue operating for the next 10 years. Their exchange is simply the best.
I wouldn't be surprised to see BitMEX continue operating for the next 10 years. Their exchange is simply the best.
[deleted]
BitMEX is the best, most reputable, and most secure crypto derivatives exchange. Their fees are -0.025% (maker) and 0.075% (taker), practically the lowest on the market.
They have never been hacked. They actively work to track and stop hacked proceeds from being deposited on their platform; and they do a better job at it than most regulated exchanges. (The complaint alleges one instance of a miss; but just look at the FinCEN leaks to understand how it's impossible to get everything).
3 of the founders live in jurisdictions w/o extradition treaties to the USA, so I hope they will be able to continue operating the best bitcoin exchange.
They have never been hacked. They actively work to track and stop hacked proceeds from being deposited on their platform; and they do a better job at it than most regulated exchanges. (The complaint alleges one instance of a miss; but just look at the FinCEN leaks to understand how it's impossible to get everything).
3 of the founders live in jurisdictions w/o extradition treaties to the USA, so I hope they will be able to continue operating the best bitcoin exchange.
Maybe playing with derivatives was considered to be something similar to gambling and that's why it attracted regulators attention. There is a lot of "currencies" like loyalty points, games currencies, etc. which do not require KYC checks (for now, at least)?
I'll add that they have a fantastic API, by crypto exchange standards. Worst, by far, is OKEx.
except for the overload? Not the fastest API either.
What alternative would you claim is better with equivalent liquidity?
I pay a thousand a year in trading fees to my stockbroker in Australia and they don't even offer an API.
Last tax year my trading fees were low double digits with bitmex.
The volume with both is about the same.
I pay a thousand a year in trading fees to my stockbroker in Australia and they don't even offer an API.
Last tax year my trading fees were low double digits with bitmex.
The volume with both is about the same.
> better with equivalent liquidity?
this really depends on what kind of size you trade and how you execute. Binance futures (their btc/usdt perp) is most likely cheaper if you look at take fee + spread + slippage. Their default taker fee is 4bps (or 3.6 bps if you pay it in BNB). That means you can slip $4 (with BTC at 10k) and pay the same for your exec - but with most sizes you don't slip that much, if you trade small binance is most often better (spread + slippage wise) since the tick size (minimum spread) is 0.01bps instead of 0.5bps. And on top of that you get a massive fee discount.
> I pay a thousand a year in trading fees to my stockbroker in Australia and they don't even offer an API.
I wouldn't compare Bitmex to an Australian stock broker, I would compare it to other crypto exchanges
this really depends on what kind of size you trade and how you execute. Binance futures (their btc/usdt perp) is most likely cheaper if you look at take fee + spread + slippage. Their default taker fee is 4bps (or 3.6 bps if you pay it in BNB). That means you can slip $4 (with BTC at 10k) and pay the same for your exec - but with most sizes you don't slip that much, if you trade small binance is most often better (spread + slippage wise) since the tick size (minimum spread) is 0.01bps instead of 0.5bps. And on top of that you get a massive fee discount.
> I pay a thousand a year in trading fees to my stockbroker in Australia and they don't even offer an API.
I wouldn't compare Bitmex to an Australian stock broker, I would compare it to other crypto exchanges
> Their fees are -0.025% (maker) and 0.075% (taker), practically the lowest on the market.
This used to be lowest, it's pretty high nowadays for traders who do volume (huobi, binance, okex, ftx all have the same product for lower fees). A few other exchanges like Bybit and Deribit have the same fees.
This used to be lowest, it's pretty high nowadays for traders who do volume (huobi, binance, okex, ftx all have the same product for lower fees). A few other exchanges like Bybit and Deribit have the same fees.
The video of the debate between the founder of BitMEX and skeptic economist Nouriel Roubini [1], whose 2019 report [2] 'exposed' BitMEX and inspired the gov investigation into the company:
https://www.youtube.com/watch?v=qlZukhN_C6c&feature=youtu.be
Quite fascinating in retrospect. Very testy debate and lots of weaselling work by Author Hayes (BitMEX) to evade direct answers.
That said, like any gov takedown, I'm not entirely sold that there isn't a world where BitMEX was providing a positive development to the industry. One that today simply fits poorly in the current US legislative frameworks [3] or entrenched companies. Of course, ideally it will be within a a more mature structure with better basic oversight and competition (technically Roubini is filling this role ATM) it has a better chance of existing, assuming it doesn't get neutered.
[1] https://en.wikipedia.org/wiki/Nouriel_Roubini
[2] https://www.bloomberg.com/news/articles/2019-07-17/nouriel-r...
[3] Albeit as much as the infrastructure financial 'efficiency optimization' really provides long term value to society instead of just swiping a piece during the elaborate processes created by law and entrenched business.
https://www.youtube.com/watch?v=qlZukhN_C6c&feature=youtu.be
Quite fascinating in retrospect. Very testy debate and lots of weaselling work by Author Hayes (BitMEX) to evade direct answers.
That said, like any gov takedown, I'm not entirely sold that there isn't a world where BitMEX was providing a positive development to the industry. One that today simply fits poorly in the current US legislative frameworks [3] or entrenched companies. Of course, ideally it will be within a a more mature structure with better basic oversight and competition (technically Roubini is filling this role ATM) it has a better chance of existing, assuming it doesn't get neutered.
[1] https://en.wikipedia.org/wiki/Nouriel_Roubini
[2] https://www.bloomberg.com/news/articles/2019-07-17/nouriel-r...
[3] Albeit as much as the infrastructure financial 'efficiency optimization' really provides long term value to society instead of just swiping a piece during the elaborate processes created by law and entrenched business.
Huobi, OkCoin, Binance and many others do the identical thing (synthetic USD products - they literally copied Bitmex's business model) and have the same or more volume as Bitmex.
I'm guessing nobody is going after them because they have China's protection or what? Or did they go through some special regulatory process inside the US?
I'm guessing nobody is going after them because they have China's protection or what? Or did they go through some special regulatory process inside the US?
They all require certain ID verification beyond some balance. Bitmex doesn't, which made it popular by US customers. Also, all of them are terrible for creating a synthetic USD while Bitmex is pretty darn good for that.
Their synthetic USD is perfectly fine and I would say is better than Bitmex, Bitmex has memes made about how bad their platform is. They were just the first movers/innovators who invented the financial product and now have really good network effects. These other exchanges trade billions in notional synthetic USD per day.
Some of the big Chinese synthetic USD exchanges don't require any ID verification.
Some of the big Chinese synthetic USD exchanges don't require any ID verification.
Ha, we have must very different experiences then. Volatile funding rates, frequent claw-backs and thin order books doesn't make for a perfectly fine USD; but maybe it's just me.
Frequent clawback? I don't think there has been any clawback this year nor last.
Huobi and Okex synthetic quarterlies are fine. Not identical to bitmex perp but pretty much the same.
Clawback is a negative but so is the mex insurance fund, specific users end up paying for it (more in aggregate because the size of the fund has to be massive) through stops.
Anyway who has the best synthetic isnt central to the discussion
Clawback is a negative but so is the mex insurance fund, specific users end up paying for it (more in aggregate because the size of the fund has to be massive) through stops.
Anyway who has the best synthetic isnt central to the discussion
Would you like to discuss what makes a syncthetic good or bad?
1. Order book, aka enough liquidity, aka moving positions doesn't incur a haircut on your capital.
2. Funding rate stability. aka it doesn't cost much (or actually make you money) to hold the position.
3. Claw-backs, aka you don't wake up one day and find that half your collateral is gone because the market made a big move. This is a big problem especially for Okex.
Basically, a synthetic USD is good if it behaves and yield like a real USD.
2. Funding rate stability. aka it doesn't cost much (or actually make you money) to hold the position.
3. Claw-backs, aka you don't wake up one day and find that half your collateral is gone because the market made a big move. This is a big problem especially for Okex.
Basically, a synthetic USD is good if it behaves and yield like a real USD.
Have you considered USD? That behaves and yields like a real USD.
Right but it doesn’t have blockchain.
Is it really hard to figure out that someone going through the hassle of managing a synthetic USD has a very good reason to do?
Usually crime, yeah.
BitMEX isn't going through all this trouble and criminal indictment avoiding KYC because people using it are super on the up-and-up and have no problem with validating their identities.
BitMEX isn't going through all this trouble and criminal indictment avoiding KYC because people using it are super on the up-and-up and have no problem with validating their identities.
The large majority of synthetic USD trading is speculation and hedging. It's significantly cheaper to trade synthetic USD than actual BTCUSD, so 100% of traders will prefer that.
I'm curious how true that is, 30% of Tether's backing currency was seized for being associated with money laundering.
Maybe they do more AML/KYC?
One of BitMEX’s security features at one point (if memory serves) was that one (or more) of the principals had to review/approve withdrawals daily. That is likely difficult for them to do from prison or while being detained pending trial or extradition. BitMEX is probably not a great place to have assets that you need access to any time soon right now.
Withdrawals will likely still go out: the incapacity of 1 in 4 founders do not stop the multisig from being signed.
They're all located in countries that hold no extradition treaty with the United States iirc.
CTO was arrested in Massachusetts
Was that Sam Reed? Damn.
I wonder if the fact that he continually provoked trump... while running an illegal exchange... from within the united states... had anything to do with the charges today? [0]
[0] https://twitter.com/strml_?lang=en
I wonder if the fact that he continually provoked trump... while running an illegal exchange... from within the united states... had anything to do with the charges today? [0]
[0] https://twitter.com/strml_?lang=en
First paragraph of TFA: "REED was arrested in Massachusetts this morning"
Unlikely that contributed anything, however, if BitMEX donated to Trump's campaign or stayed at Trump properties, I wouldn't be surprised if this indictment would've never saw the light of day.
Hi Ido :-)
They still do that, I can confirm.
They still do that, I can confirm.
Interesting timing as BitMEX just announced in late August 2020 that they will be enforcing KYC/AML measures early next year.
I wonder who was trying to get the jump on who, both here and there.
I wonder who was trying to get the jump on who, both here and there.
If history is any guide, get your money out before that. You won't be happy when they lock your account and demand a verification document that you can't get.
Not sure what you are referring to, but if you're worried just KYC right now and I don't see the risk of them not giving you your money back for paperwork reasons.
And of course they mention changes to the law caused by the Patriot Act as being the source of the charges.
Ironic charge on the heels of the FinCEN leaks. Maybe next time just file a SAR?
SARs are warnings, flags. They do not indicate a crime has been committed. And the Dept of Justice does not issue SARs.
Op is likely referring to the fact that, as shown by the recent FinCEN leaks, big banks like HSBC and Deutsche Bank have processed likely (and likely obviously), but filed SARs so they don't even get a slap on the hand.
I think the OP is talking about BitMex. I work at a crypto exchange and a large part of our team is dedicated to monitoring and reporting(through SARs and STRs) suspicious activity.
Why doesn't/hasn't some American three letter agency simply seized the bitmex.com domain?
Or will it be seized once they are charged in absentia I imagine?
Or will it be seized once they are charged in absentia I imagine?
The business itself is not illegal. It is illegal to offer those services to US customers, and they have no KYC verification so it is trivially easy to trade on BitMEX from the US.
They block US IP addresses. Sign in with a US IP, ever, and your account immediately gets banned.
Using a VPN is active circumvention by the user. What's next: banning exchanges that KYC/AML because users can forge IDs?
Using a VPN is active circumvention by the user. What's next: banning exchanges that KYC/AML because users can forge IDs?
Seems like the problem isn't that random US citizens can (and do, in large numbers) easily bypass the IP blocking, but that the executives demonstrably knew of specific US citizens who were using the platform and had not gone through any KYC.
Russia, China, Europe, etc don't arrest American citizens for not comply with local laws (which sometimes are as shitty as American's KYC paranoia) in the internet.
Doing KYC for US citizens would require doing KYC for everyone, which is not fair at all (on the other case you can't say that particular guy is not from US). That effectively force the whole world to live under US laws requirements.
Doing KYC for US citizens would require doing KYC for everyone, which is not fair at all (on the other case you can't say that particular guy is not from US). That effectively force the whole world to live under US laws requirements.
Virtual money is everywhere, there seem to be many computer games, online gambling systems and on and offline card trading systems, vouchers and points systems. All of which can be traded without any heavy KYC/AML. It would be interesting to know where the line is drawn as Bitmex only trades in Bitcoin for Bitcoin.
>REED allowed a friend of his who he knew resided in the United States to continue to access BitMEX's platform up to and including at least in or about October 2018.
How could they possibly know this?
How could they possibly know this?
BitMEX only operates with cryptocurrencies. Not a single US dollar ever passed through it. US citizens were explicitly disallowed to use the service, and the US was blocked by IP. Why it even happened?
First, because US citizens still traded on the exchange. (mostly through a VPN); and second, Bitmex was offering a synthetic USD product. That's worse than being a non-regulated entity that offers real dollars.
I hope I'm not the only one that finds this completely ridiculous. What right does the U.S. Federal Government have to prosecute people who aren't even operating within their jurisdiction? This is nothing but imperialism and a captured government trying to shut down competitors to U.S.-based regulated exchanges from more crypto-friendly countries.
> What right does the U.S. Federal Government have to prosecute people who aren't even operating within their jurisdiction?
Besides the office in Manhattan, I'm sure you mean?
https://www.justice.gov/usao-sdny/press-release/file/1323316...
Page 8.
Besides the office in Manhattan, I'm sure you mean?
https://www.justice.gov/usao-sdny/press-release/file/1323316...
Page 8.
captured government lmao
this is pretty default behavior for the US
everything anyone told you about the US dollar use being needed to establish jurisdiction was a lie, I have literally only heard that from crypto people, arent these the same people that used to say “litecoin is asic proof because its memory hard” lmao
right, not new news.
The criminal charges are around the Bank Secrecy Act and Conspiracy to circumvent some Bank Secrecy Act requirements
What right? Its not a right its a privilege the US has that most countries around the world will listen to it. Many countries have laws to exercise jurisdiction outside of their borders, they’re just irrelevant. They are irrelevant markets, irrelevant geopolitically, have no resources to pursue or even bother charging people, faces actual consequences from trading partners if they did try, everything is distinctly opposite for the US.
this is pretty default behavior for the US
everything anyone told you about the US dollar use being needed to establish jurisdiction was a lie, I have literally only heard that from crypto people, arent these the same people that used to say “litecoin is asic proof because its memory hard” lmao
right, not new news.
The criminal charges are around the Bank Secrecy Act and Conspiracy to circumvent some Bank Secrecy Act requirements
What right? Its not a right its a privilege the US has that most countries around the world will listen to it. Many countries have laws to exercise jurisdiction outside of their borders, they’re just irrelevant. They are irrelevant markets, irrelevant geopolitically, have no resources to pursue or even bother charging people, faces actual consequences from trading partners if they did try, everything is distinctly opposite for the US.
They had an office in Manhattan and customers in the US.
https://www.justice.gov/usao-sdny/press-release/file/1323316... (Page 8)
https://www.justice.gov/usao-sdny/press-release/file/1323316... (Page 8)
> But please, expand on the "America bad" argument you were making. Very interesting stuff.
It wasn't an America bad argument, it was a global hegemony acknowledgement.
How do you read me talking about how almost everywhere is literally "irrelevant", my words, by all metrics and get an "America bad" argument out of it?
Could have just left that out.
It wasn't an America bad argument, it was a global hegemony acknowledgement.
How do you read me talking about how almost everywhere is literally "irrelevant", my words, by all metrics and get an "America bad" argument out of it?
Could have just left that out.
I removed it from my comment (probably as you were writing) because you're right, it's lame and doesn't belong on HN. My apologies.
> What right does the U.S. Federal Government have to prosecute people who aren't even operating within their jurisdiction?
The jurisdiction of any sovereign state is whatever that state says it's jurisdiction is; extraterritorial jurisdiction is not at all uncommon.
In order for an entity to have externally-imposed limits on its jurisdiction, it would have to be answerable to a superior soveriegnty (which would itself either be or be answerable to, perhaps through more layers, an entity without such limitation.)
The jurisdiction of any sovereign state is whatever that state says it's jurisdiction is; extraterritorial jurisdiction is not at all uncommon.
In order for an entity to have externally-imposed limits on its jurisdiction, it would have to be answerable to a superior soveriegnty (which would itself either be or be answerable to, perhaps through more layers, an entity without such limitation.)
Jurisdiction here is easy: they had an office in Manhattan...
Ed: From the indictment, page 8: "BitMEX personnel... conducted BitMEX operations from an office in Manhattan, New York, including but not limited to customer support, business development, and marketing, involving customers located in the United States and elsewhere ."
If[0] they posted on American forums or solicited customers on American-hosted sites, they operated in the US for the purposes of the law. You don't have to physically be somewhere to be subject to the law there. Ditto wire and mail fraud that originates overseas.
Mailing a pipebomb from Canada to the US is illegal in Canada, but it's also illegal in the US, even if it was done by a Canadian citizen who didn't step foot here.
Operating outside American AML/KYC law is not quite the same as mailing a pipe bomb, but the jurisdictional issue is hard to distinguish.
[0] (this remains to be proven)
If[0] they posted on American forums or solicited customers on American-hosted sites, they operated in the US for the purposes of the law. You don't have to physically be somewhere to be subject to the law there. Ditto wire and mail fraud that originates overseas.
Mailing a pipebomb from Canada to the US is illegal in Canada, but it's also illegal in the US, even if it was done by a Canadian citizen who didn't step foot here.
Operating outside American AML/KYC law is not quite the same as mailing a pipe bomb, but the jurisdictional issue is hard to distinguish.
[0] (this remains to be proven)
US imperialism is not new news.
Apparently, they are of the opinion that Bitmex did operate in the US:
> With the opportunities and advantages of operating a financial institution in the United States comes the obligation for those businesses to do their part to help in driving out crime and corruption.
> With the opportunities and advantages of operating a financial institution in the United States comes the obligation for those businesses to do their part to help in driving out crime and corruption.
According to the indictment they had an office in Manhattan.
America is the one world govt, it created this world order we live in, it provide(d) protection and unmolested trade routes to everyone in the world. Hell US even protected Vietnam's trade during the Vietnam War, no country in the world has done that in past.
Of course that world order is coming down fast because nobody in the US cares about maintaining it as much as they are interested in proclaiming it.
Of course that world order is coming down fast because nobody in the US cares about maintaining it as much as they are interested in proclaiming it.
So that was the view of a pre-9/11 world. Post 9/11 we learned that terrorist organizations can plot and fund crimes against the US from overseas.
The best way to stop terrorists are with their funding. Stop the funding and they wither on the vine.
The best way to stop terrorists are with their funding. Stop the funding and they wither on the vine.
There was no synthetic USD, that is clear. What they do is display the average price of BTC from external crypto exchanges. No USD or Synthetic USD was ever exchanged on Bitmex.
Tough in this case it might be not enough to make authorities from other countries to cooperate. The website is still running and withdrawals are working. For some reason the domain isnt seized.
It's not illegal to offer services to non-US customers, so seizing the domain would be disrupting a legitimate business that clears $500M - $5B in daily volume. BitMEX isn't Silk Road.
Withdrawals in Bitmex are processed once a day. Still 18 hours for withdrawals dispatching.
[deleted]
How can they know these were USA based customers if they used VPNs?
Trivially: ask the VPN operators where they were connecting from. If they really don't store logs, ask them to.
Less trivially: other, out-of-band clues based on support emails sent to BitMEX; location information in BitMEX profile; same username on other platforms and mention of location; that sort of thing
Less trivially: other, out-of-band clues based on support emails sent to BitMEX; location information in BitMEX profile; same username on other platforms and mention of location; that sort of thing
The press release said they knew, so probably there's written evidence (emails, chat logs) of them discussing having US customers.
One way they might know is by seeing people posting online about how they used VPNs to get around the block. Crypto traders are often bad at being subtle.
It also alleges that they solicited American customers, which presumably they also have evidence of. For instance, maybe advertising on American websites or posting on forums they knew were frequented by Americans, etc. Maybe they posted winking messages that told Americans how to get around the IP ban? All sorts of possibilities.
Edit: from the indictment, page 7: "internal BitMEX records reflected thousands of BitMEX accounts with United States location information that were enabled for trading." So people volunteered their location information to BitMEX.
Page 12: "the defendants, knew that specific customers, residing in the United States, continued to access BitMEX' s platform... DELO and DWYER knowingly allowed one of these customers to access BitMEX using a non-U. S. passport in the name of a third party that did not belong to this customer. DELO also allowed another customer to continue to access a BitMEX trading account despite this customer being "US based," because "[h]e's famous in Bitcoin," and falsely changed this customer' s internal country of residence to a country other than the United States."
One way they might know is by seeing people posting online about how they used VPNs to get around the block. Crypto traders are often bad at being subtle.
It also alleges that they solicited American customers, which presumably they also have evidence of. For instance, maybe advertising on American websites or posting on forums they knew were frequented by Americans, etc. Maybe they posted winking messages that told Americans how to get around the IP ban? All sorts of possibilities.
Edit: from the indictment, page 7: "internal BitMEX records reflected thousands of BitMEX accounts with United States location information that were enabled for trading." So people volunteered their location information to BitMEX.
Page 12: "the defendants, knew that specific customers, residing in the United States, continued to access BitMEX' s platform... DELO and DWYER knowingly allowed one of these customers to access BitMEX using a non-U. S. passport in the name of a third party that did not belong to this customer. DELO also allowed another customer to continue to access a BitMEX trading account despite this customer being "US based," because "[h]e's famous in Bitcoin," and falsely changed this customer' s internal country of residence to a country other than the United States."
I’m not from the US. I had an account there and once I’ve logged in to the site through a personal vpn vps located in Texas. They’ve requested KYC data and thread closing my account almost immediately. Happened last year.
Thanks for the summary, it is good that plaintiff is claiming that with some evidence instead of some blanket statement about existence of VPNs.
America, world police.
Some friends started a Wealthfront copycat in latinamerica. To get local financial permits they had to comply with a bunch of KYC policies/rules because the US imposes it on their local banks and governments, and in turn the banks demand compliance from them, even though their company is strictly local.
Some friends started a Wealthfront copycat in latinamerica. To get local financial permits they had to comply with a bunch of KYC policies/rules because the US imposes it on their local banks and governments, and in turn the banks demand compliance from them, even though their company is strictly local.
It's a real issue, but BitMEX operated an office in NYC.
Weedmaps.com operates an office in NYC too (a site for sourcing marijuana).
Not exactly the same thing, but both are businesses with an office in a place they can't actually conduct business.
Not exactly the same thing, but both are businesses with an office in a place they can't actually conduct business.
Can you at least read the article before going full "America bad"?
They operated an office in Manhattan and had US customers.
They operated an office in Manhattan and had US customers.
I missed that in the article, could you please provide a quote with the relevant content about the Manhattan office? Thank you.
page 5: https://www.justice.gov/usao-sdny/press-release/file/1323316...
"...the Company also has subsidiaries and affiliates registered in the United States..."
"...the Company also has subsidiaries and affiliates registered in the United States..."
They say that BitMEX ran some operations in New York.
It's run by Americans, the one arrest so far was in Massachusetts.
How expensive/difficult would it have been for bitmex to register with the SEC and/or CFTC? Jumped through all of the hoops, so to speak?
Registration has nothing to do with it. The lack of AML/KYC controls is the issue. Implementing these would have likely been extremely costly to their business in the form of much lower growth.
Yeah, just look at Gemini/Coinbase liquidity/volume vs. the offshore cowboy exchanges and it's clear that following regulations has a huge cost.
Besides not getting any users, you're also not able to offer products anyone wants. Current "US regulated" exchanges are just money onramps with a fraction of the volume/profit seen in the rest of crypto.
Also keep in mind that currently crypto is a lot bigger outside of the US, most of Asia don't want to deal touch things close to US regulators. Eg. it's why Tether is so much bigger than things like USDC (as they actively fight against US regulators in court to protect users).
Also keep in mind that currently crypto is a lot bigger outside of the US, most of Asia don't want to deal touch things close to US regulators. Eg. it's why Tether is so much bigger than things like USDC (as they actively fight against US regulators in court to protect users).
Real question: why they just did not register their company in countries like Switzerland and operated from there?
Real answer:
1) Registering a company in Switzerland requires a Swiss address and Swiss national as a director. See https://www.companyformationswitzerland.com/register-swiss-c... and elsewhere
2) Registering a Swiss company wouldn't by itself allow them to escape US DoJ enfoncement actions. see https://www.justice.gov/opa/pr/ubs-enters-deferred-prosecuti... for example
3) Registering a Swiss company wouldn't exempt them from KYC requirements http://bankersacademy.com/pdf-aml/amlswitzerland-law.pdf for example says that the swiss AML legislation includes non-bank financial institutions (such as exchanges)
Edit to add: It's also non-trivial to get a Swiss work visa if you're not a national. I had one for a while and it required a Swiss company to use up one of their finite central allocation and show that the work wasn't replacing the job of a Swiss national and was being paid the average wage or more (this to prevent exploitation of migrant labour apparently).
1) Registering a company in Switzerland requires a Swiss address and Swiss national as a director. See https://www.companyformationswitzerland.com/register-swiss-c... and elsewhere
2) Registering a Swiss company wouldn't by itself allow them to escape US DoJ enfoncement actions. see https://www.justice.gov/opa/pr/ubs-enters-deferred-prosecuti... for example
3) Registering a Swiss company wouldn't exempt them from KYC requirements http://bankersacademy.com/pdf-aml/amlswitzerland-law.pdf for example says that the swiss AML legislation includes non-bank financial institutions (such as exchanges)
Edit to add: It's also non-trivial to get a Swiss work visa if you're not a national. I had one for a while and it required a Swiss company to use up one of their finite central allocation and show that the work wasn't replacing the job of a Swiss national and was being paid the average wage or more (this to prevent exploitation of migrant labour apparently).
> non-trivial to get a Swiss work visa
If you just want to work, maybe. If you want to found a company and have half a million CHF of capital, it's a different story.
The other statements still apply.
If you just want to work, maybe. If you want to found a company and have half a million CHF of capital, it's a different story.
The other statements still apply.
I think the World Police BS that America engages needs to stop. That said, these guys have made it really really hard for regulators NOT to act.
You can't just put "No Americans (no proof needed)" on a US based website with a lot of US citizen clients dealing in synthetic USD products that's 110% non compliant with almost any US law and expect a nice outcome. Not with those sort of assets and market share.
You can't just put "No Americans (no proof needed)" on a US based website with a lot of US citizen clients dealing in synthetic USD products that's 110% non compliant with almost any US law and expect a nice outcome. Not with those sort of assets and market share.
>I think the World Police BS that America engages needs to stop
Not American and I'm annoyed by the US pretty frequently but I'm not really sure why the US having teeth when it comes to clamping down on global money laundering is a bad thing.
The financial sector appears to be the one sector where US authorities actually do a good job to stamp out crime, and I can obviously understand why the US will not tolerate an completely unmonitored shadow economy that could easily be used for sanction avoidance by Iran or any other rogue state.
Not American and I'm annoyed by the US pretty frequently but I'm not really sure why the US having teeth when it comes to clamping down on global money laundering is a bad thing.
The financial sector appears to be the one sector where US authorities actually do a good job to stamp out crime, and I can obviously understand why the US will not tolerate an completely unmonitored shadow economy that could easily be used for sanction avoidance by Iran or any other rogue state.
I think that sort of depends on your opinion of US foreign policy. Anti money laundering laws are basically there to stop people doing things the US doesn't like. So if enforcing them means (say) less terrorist attacks GREAT! But the same laws are used much more frequently to try and enforce drug prohibition. That's meh at best in my opinion. And occasionally you see the US use them to prevent countries like Iran buying medical supplies in a pandemic. That's pretty shitty.
I'd give the US more points for enforcement (which you are correct is strongly pursued) if I thought the laws being enforced were less self serving in the first place...
I'd give the US more points for enforcement (which you are correct is strongly pursued) if I thought the laws being enforced were less self serving in the first place...
> But the same laws are used much more frequently to try and enforce drug prohibition.
Drug cartels in the western hemisphere turn out to be pretty violent, to the point where you can think of them as terrorists -- bombings and other mass casualty events.
The other point you make is valid, though.
Drug cartels in the western hemisphere turn out to be pretty violent, to the point where you can think of them as terrorists -- bombings and other mass casualty events.
The other point you make is valid, though.
Cartels are only involved due to prohibition. If it were ended, it would be pharmaceutical (ie industrial chemical) companies selling the drugs.
Sigma-Aldrich and Bayer don't seem like terrorist organizations to me. Or perhaps I missed the headline where Pfizer was caught beheading people?
Sigma-Aldrich and Bayer don't seem like terrorist organizations to me. Or perhaps I missed the headline where Pfizer was caught beheading people?
No, companies wouldn't behead people. That's silly. It's way too messy and doesn't scale.
Terrorist companies would be smarter than that. Sell and market a highly addictive, deadly drug, and profit from it making it look like it's all above board.
Then they blame the users for getting hooked on it on the first place after getting the doctors to prescribe it heavily using kickbacks. And thousands upon thousands of people die.
https://www.newyorker.com/news/news-desk/the-sackler-familys...
Terrorist companies would be smarter than that. Sell and market a highly addictive, deadly drug, and profit from it making it look like it's all above board.
Then they blame the users for getting hooked on it on the first place after getting the doctors to prescribe it heavily using kickbacks. And thousands upon thousands of people die.
https://www.newyorker.com/news/news-desk/the-sackler-familys...
I’m sure our victory in the drug war will come any moment now.
The solution to that is pretty simple.. end drug prohibition.
> The financial sector appears to be the one sector where US authorities actually do a good job to stamp out crime
Yeah, they're really great at that /s. It wasn't just last month that it was revealed that US banks laundered $2T. How many people got arrested for that? The Fed even said the disclosure of the banks internal reports was the crime.
Yeah, they're really great at that /s. It wasn't just last month that it was revealed that US banks laundered $2T. How many people got arrested for that? The Fed even said the disclosure of the banks internal reports was the crime.
FinCEN received 2 Million SARs last year. They have 333 employees.
https://www.rferl.org/a/global-banks-reported-2-trillion-in-...
https://www.rferl.org/a/global-banks-reported-2-trillion-in-...
How is the number of employees relevant? The point is the massive hypocrisy and inconsistent enforcement. Personally I think the $10k SAR threshold is stupid, it hasn't been adjusted up for inflation since it was put in place in 1970 when an oz of gold was $35.
Internally I am sure they are filtering them somehow, likely ignoring lower amounts, but why would the government voluntarily increase the minimum? They would then have less data. Better to just collect it all and selectively use some of it.
Sure, it's better for them if their goal is total financial surveillance. It's not better for people who care about financial privacy, and it makes a mockery of the rule of law when laws are enforced selectively in secret like that.
Not really surprising that increasing numbers of people would just stop caring about breaking such laws.
Not really surprising that increasing numbers of people would just stop caring about breaking such laws.
I'm Iranian, why does the US government get to decide whether or not I can move my savings? Is my existance a crime?
The US government decides what checks a financial institution must perform when dealing with US customers. In this case, BitMEX knew there were serving US customers while not performing the US-required checks.
You, as a non-US citizen, can do any transaction you want with BitMEX. BitMEX, as a company with US presence in NY, must make sure that you are not a US citizen (maybe based on your declaration that you are not one).
You, as a non-US citizen, can do any transaction you want with BitMEX. BitMEX, as a company with US presence in NY, must make sure that you are not a US citizen (maybe based on your declaration that you are not one).
Your account is immediately frozen if you log in just once via a US IP address. They track funds from known hacks and are not considered a safe option for hackers to liquidate. They have a much better reputation for service, exchange quality, and account safety than any of their non-KYC competitors. Not a single US dollar has passed through their platform -- nobody is using it for money laundering, but for speculative trading. They still have to convert to fiat somewhere. The fiat on their platform is synthetic. What more were they supposed to do?
I just hope this witch-hunt doesn't end the same as the Dread Pirate Roberts case for the government's political game on controlling cryptocurrencies and maintaining their monopoly over the financial system. Hayes is a great comedic writer and insightful analyst on the global financial system -- I highly recommend his posts on the Bitmex blog. However, I fear the tongue and cheek and comedy will be used against him in the case.
I just hope this witch-hunt doesn't end the same as the Dread Pirate Roberts case for the government's political game on controlling cryptocurrencies and maintaining their monopoly over the financial system. Hayes is a great comedic writer and insightful analyst on the global financial system -- I highly recommend his posts on the Bitmex blog. However, I fear the tongue and cheek and comedy will be used against him in the case.
> Your account is immediately frozen if you log in just once via a US IP address.
The complaint alleges that the check for a US IP address only happened once and that they did not take any precautions against VPN usage, so as long as you VPN'd once, you could login from US addresses as much as you wanted afterwards.
Furthermore, the complaint alleges that the company leadership received analytics reports broken down by country, including the US; and that the team did not monitor the funds from a hack in 2018, which allowed the hackers to launder those funds.
These allegations may be false, but the case seems strong that Bitmex 1. served US customers, 2. did not comply with the necessary US regulations to serve those customers.
The complaint alleges that the check for a US IP address only happened once and that they did not take any precautions against VPN usage, so as long as you VPN'd once, you could login from US addresses as much as you wanted afterwards.
Furthermore, the complaint alleges that the company leadership received analytics reports broken down by country, including the US; and that the team did not monitor the funds from a hack in 2018, which allowed the hackers to launder those funds.
These allegations may be false, but the case seems strong that Bitmex 1. served US customers, 2. did not comply with the necessary US regulations to serve those customers.
The complaint is factually incorrect. I visited BitMEX while on a holiday trip to the USA. Immediately I got a notice of account closure, banning me from trading and telling me to withdraw my funds in 7 days.
I petitioned support and was unable to get my account restored.
--
It's impossible to monitor EVERY single hack in the crypto space, but BitMEX has actively worked to do their best to track and freeze hack funds.
Their customer service is incredible, when I had an issue with their API, I got a direct response from the CTO fixing my code for me, within the same hour.
When I had a dispute with instrument methodology, one of the founders got back to me in the same day, explaining why.
It has never been hacked or suffered a serious security breach. The only thing I remember was a one-time accidental CC instead of BCC in the newsletter program.
I petitioned support and was unable to get my account restored.
--
It's impossible to monitor EVERY single hack in the crypto space, but BitMEX has actively worked to do their best to track and freeze hack funds.
Their customer service is incredible, when I had an issue with their API, I got a direct response from the CTO fixing my code for me, within the same hour.
When I had a dispute with instrument methodology, one of the founders got back to me in the same day, explaining why.
It has never been hacked or suffered a serious security breach. The only thing I remember was a one-time accidental CC instead of BCC in the newsletter program.
Unfortunately, this is very accurate -> I just hope this witch-hunt doesn't end the same as the Dread Pirate Roberts case for the government's political game on controlling cryptocurrencies and maintaining their monopoly over the financial system.
* They went after Kik and Telegram also
They basically don't want anyone to have any option to bypass the Petrodollar
* They went after Kik and Telegram also
They basically don't want anyone to have any option to bypass the Petrodollar
Exactly. Just like what the other poster said, the World Police BS has to stop now.
It's not exactly world policing. They are enforcing alleged violations of their own securities laws.
Their securities laws only apply to those under US jurisdiction. BitMEX does not accept US customers.
BitMEX immediately closes the accounts of anyone who ever signs in with a US IP, no matter what. I've been there: my bitmex account is permanently closed because I signed into it while I was holidaying to the USA.
They _are_ world policing.
BitMEX immediately closes the accounts of anyone who ever signs in with a US IP, no matter what. I've been there: my bitmex account is permanently closed because I signed into it while I was holidaying to the USA.
They _are_ world policing.
Bitmex does accept US customers when they use a VPN.
> I think the World Police BS that America engages needs to stop.
I legit thought it would've been reduced with Trump because of his isolationist positioning. I guess this is going to be the norm for a distant future. I don't see how this box is closed without an aggressive shift in Geopolitics. I don't see how this would be a peaceful transition but if you see a solution like that, I'd love to hear!
(edited for formatting)
I legit thought it would've been reduced with Trump because of his isolationist positioning. I guess this is going to be the norm for a distant future. I don't see how this box is closed without an aggressive shift in Geopolitics. I don't see how this would be a peaceful transition but if you see a solution like that, I'd love to hear!
(edited for formatting)
I think that "locking up foreigners" nationalism is more trumps flavour than "trade with all, allies with none" etc.
He's very good at convincing people he supports their ideological position when he's really just using it to justify what he wants to do right now for his own reasons and will drop it the second it's not useful. That whys he's anti China until he has to actually take an action on China or exporting jobs or crime and punishment etc. :(
He's very good at convincing people he supports their ideological position when he's really just using it to justify what he wants to do right now for his own reasons and will drop it the second it's not useful. That whys he's anti China until he has to actually take an action on China or exporting jobs or crime and punishment etc. :(
heimatau(1)
People have the right to use their money how they want without any outside interference.
If people want to play with their money on BitMex they should be able to instead of using VPN's to disguise themselves and do it illegally.
But apparently you are only permitted to spend your USD in the manner approved by the U.S. Gov and once the US goes to a digital currency, this whole law enforcement will be 1000x easier as every single transaction can be traced and immediately frozen.
If people want to play with their money on BitMex they should be able to instead of using VPN's to disguise themselves and do it illegally.
But apparently you are only permitted to spend your USD in the manner approved by the U.S. Gov and once the US goes to a digital currency, this whole law enforcement will be 1000x easier as every single transaction can be traced and immediately frozen.
It is also, by far, the best way to gain leverage in cryptocurrency products, with lower fees, great security, and even a wonderful blog and transparency.
I'm interested to what extent the government believes the BSA needs to apply to this, since a different area of the government (IRS) decided BTC was not even a currency. Of course, all of the relevant governing bodies (of which there are many in the US) can all choose their own designations, which may result in apparent inconsistencies, but I wonder to what extent they were warned about this beforehand.
What is also interesting is that Bitmex did not allow US residents to use their exchange via blocking US IP addresses and asking for country of residence, aside from perhaps the first few months. Some US residents would use a VPN and use it instead, but they (the client) would have to lie to Bitmex in doing so. It appears that's what the argument here is - that they did a poor job, knowingly so, of stopping US residents from using their services. BitMex was, over time, implementing tougher KYC, but currently it's not required by all of their clients for a few more months.