Hefty Monetary Penalties – Accompanied by the Possibility of No Prison Time
The legal saga involving the civil and criminal cases against the entity and former individual owners of the Bitcoin Mercantile Exchange, or BitMEX—a large and well-known online trading platform dealing in futures contracts and other derivative products tied to the value of cryptocurrencies (see here, here, and here)—continues unabated.
Most recently, BitMEX co-founder and former CEO, Arthur Hayes, a high-profile leader in the cryptocurrency industry, settled his civil charges with the CFTC and pleaded guilty to criminal charges brought by the DOJ. He now faces sentencing in the criminal case, currently scheduled for the end of this week. As we will discuss, Hayes and the government take very different views regarding his appropriate sentence.
These cases emerged publicly in October 2020 when: (1) the Commodity Futures Trading Commission (“CFTC”) filed a civil complaint against the entities operating the BitMEX trading platform and its three individual owners for allegedly failing to register with the CFTC and violating various laws and regulations under the Commodity Exchange Act (“CEA”); and (2) the Department of Justice obtained an indictment against the three individual owners and another individual, including Hayes, charging each with violating, and conspiring to violate, the Bank Secrecy Act (“BSA”) by failing to maintain an adequate anti-money laundering (“AML”) program.
The cases have raised novel legal questions concerning which, if any regulatory regimes, apply to participants in the cryptocurrency market. Moreover, Hayes’ upcoming sentencing raises the question of whether an offense is so novel that it can merit probation, despite the high dollar value of the alleged scheme at issue.