Sebastian Sinclair

<div id="highlights-block_62aa762598486" class="highlights">
 <ul>
 <li>Delo, along with Hayes, agreed to settle with the DOJ and CFTC and agreed to pay a $10 million fine in February</li>
 <li>The co-founder has now resolved all regulatory cases relating to BitMEX, according to the law firm representing Delo</li>
 </ul>
 
</div>



BitMEX co-founder Benjamin Delo has received 30 months on probation without home confinement following charges over his role in violating the US Bank Secrecy Act (BSA).



Delo, along with BitMEX founder Arthur Hayes, <a href="https://cms.blockworks.co/bitmex-founders-hayes-delo-plead-guilty-to-violating-us-bank-secrecy-act/" target="_blank" rel="noreferrer noopener">pleaded guilty</a> to charges earlier this year by the Department of Justice (DOJ) which accused the pair of “willfully failing” to implement anti-money laundering measures at the exchange.



The case against the founders initially began two years ago when the DOJ accused Delo, Hayes and BitMEX’s first official employee Greg Dwyer of operating a &#8220;money-laundering platform&#8221; from September 2015 through to September 2020.



The exchange’s failure to implement AML and Know-Your-Customer programs were central to the department&#8217;s argument in the case for their violations of the BSA.



BSA violations carry a maximum sentence of five years, had the case gone to trial, but the pair were able to reach a plea agreement where the DOJ pushed for a 6-12 month prison sentence.



In a parallel civil case filed in February with the Commodity and Futures Trading Commission, both Hayes and Delo agreed to pay a $10 million fine, which also formed part of the agreement with the DOJ. For his involvement, Hayes previously received a six months sentence of home detention and two years of probation.



In a statement, a spokesperson for the New York-based law firm Smith Villazor LLP — representing Delo — said they were pleased the court rejected the government’s &#8220;cynical attempt to exaggerate the seriousness&#8221; of the BSA charge.



&#8220;Today’s sentence of probation recognized that this case involved a compliance lapse that led to a regulatory violation and nothing more,&#8221; the spokesperson said. &#8220;The government’s campaign — both in the courtroom and in the press — to malign Ben with highly inflammatory and misleading language concerning Ben’s conduct gained no traction with the court.&#8221;



Together with the recent settlement with the CFTC, Delo has now resolved all regulatory cases relating to BitMEX, the spokesperson said.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>

Arthur Hayes

BitMEX Co-Founder Delo Gets 30 Months Probation, Avoids Jail Time

<div id="highlights-block_6218113695fc1" class="highlights">
 <ul>
 <li>Arthur Hayes and Ben Delo have been ordered to pay $10 million each in addition to their sentences</li>
 <li>Greg Dwyer, BitMEX&#8217;s first official employee and former head of business development, will face a criminal trial on similar charges in October</li>
 </ul>
 
</div>



Two co-founders of the controversial crypto derivatives exchange BitMEX pled guilty to charges of violating the US Bank Secrecy Act (BSA). Had the case gone to trial, the pair would have been staring down a potential maximum penalty of five years in prison, but now face a sentence of six to 12 months each.



According to a <a href="https://www.justice.gov/usao-sdny/pr/founders-cryptocurrency-exchange-plead-guilty-bank-secrecy-act-violations" target="_blank" rel="noreferrer noopener">press release</a> by the Department of Justice (DOJ) on Thursday, Arthur Hayes and Ben Delo have pleaded guilty for their involvement in &#8220;willfully failing&#8221; to implement and maintain anti-money laundering (AML) measures at BitMEX.



As part of the plea agreement, the co-founders have been ordered to pay $10 million each as a criminal fine that represents financial gains stemming from their offense.



The Southern District Court of New York heard of how the exchange&#8217;s founders, including co-defendant Sam Reed, allegedly failed to establish a &#8220;program for verifying the identity of BitMEX’s customers.&#8221; Reed has not yet formally pleaded guilty to charges, and as such, his involvement has only been alleged by US prosecutors.



Australian Greg Dwyer, BitMEX&#8217;s first official employee and former head of business development, will face a criminal trial on similar charges in October following a delayed proceeding originally scheduled for March.



From September 2015 through to September 2020, the DOJ alleges that BitMEX&#8217;s was &#8220;in effect, a money-laundering platform&#8221; as a result of the exchange&#8217;s failure to implement AML and Know-Your-Customer programs.



Under the country&#8217;s BSA, US law requires financial institutions to monitor, detect and report money-laundering activity to government agencies in a bid to curb related crime. Documentation and transaction histories are generally required from financial institutions to US agencies whenever they suspect clients of transacting illicitly above $10,000.



&#8220;Hayes and&#8230;Delo built a company designed to flout those obligations; they willfully failed to implement and maintain even basic anti-money laundering policies,&#8221; US Attorney Damian Williams said in the release. &#8220;They allowed BitMEX to operate as a platform in the shadows of the financial markets.&#8221;



The guilty pleas partly conclude a long-drawn-out saga where Reed, Dwyer and Hayes fled in 2020 following criminal charges. Hayes, who was located in Singapore shortly after, negotiated extradition back to the US, as did Dwyer. Delo, a Hong Kong resident, <a href="https://www.vanityfair.com/news/2021/02/the-rise-and-fall-of-bitcoin-billionaire-arthur-hayes" target="_blank" rel="noreferrer noopener">was in the U.K.</a> at the time of the indictment and later <a href="https://www.bloomberg.com/news/articles/2022-02-24/bitmex-founders-hayes-and-delo-plead-guilty-in-us-prosecution" target="_blank" rel="noreferrer noopener">voluntarily appeared</a> in the US to face the charges. Reed was arrested in Massachusetts in October 2020. He was&nbsp;later released&nbsp;on an appearance bond of $5 million.



Correction — March 4, 2022: Hayes and Delo face a maximum of one year in prison. Delo was indicted while outside the US; he did not flee.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Get the news in your inbox. Explore Blockworks newsletters:



<ul class="wp-block-list">
<li><a href="https://blockworks.co/newsletter/the-breakdown">The Breakdown</a>: Decoding crypto and the markets. Daily.</li>



<li><a href="https://blockworks.co/newsletter/0xresearch">0xResearch</a>: Alpha in your inbox. Think like an analyst. </li>
</ul>