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Arthur Hayes, a co-founder and former chief executive of cryptocurrency derivatives exchange BitMEX, has been sentenced to serve six months of house arrest for violating U.S. law by failing to establish a compliant anti-money-laundering program.
Mr. Hayes, who was sentenced at a hearing in federal court in Manhattan on Friday, also was ordered to serve two years probation. He already has paid a $10 million penalty in connection with a settlement with the U.S. Commodity Futures Trading Commission.
The offense, though “very serious,” didn’t warrant the more than one year in prison that prosecutors had sought, U.S. District Judge
Mr. Hayes was charged in what has become a closely watched test of U.S. power to impose its banking rules on offshore crypto exchanges.
Prosecutors said that Mr. Hayes made himself rich by closely studying—then studiously ignoring—U.S. anti-money-laundering laws and regulations meant to stop financial institutions from moving funds for criminals and terrorists.
Seychelles-incorporated BitMEX, at Mr. Hayes’s direction became one of the world’s largest crypto exchanges and personally earned him more than $100 million, according to prosecutors. But some of the business was with U.S. customers, and BitMEX failed to set up anti-money-laundering and know-your-customer programs that would comply with U.S. rules, they said.
Mr. Hayes’s defense team, though, argued he had little guidance from regulators on how U.S. law applied to offshore cryptocurrency businesses.
A native of Buffalo, N.Y., and Detroit, Mr. Hayes founded BitMEX at age 28, having already worked for
Deutsche Bank AG
in Hong Kong, and was a cryptocurrency pioneer, his lawyers said.
BitMEX operated without an anti-money-laundering program for a time, but eventually retained consultants and lawyers, and made belated efforts to comply with U.S. law, they said.
Mr. Hayes, who pleaded guilty in February, is the first of three BitMEX co-founders to be sentenced for violations of the Bank Secrecy Act. Two other co-founders,
also have pleaded guilty. BitMEX’s first employee,
has pleaded not guilty.
Judge Koeltl granted a request from Mr. Hayes’s defense team that he be allowed to confer with Messrs. Delo and Reed. People on probation are normally barred from communicating with felons, but the three intend to continue to work in the cryptocurrency business together, defense lawyer
Mr. Hayes, who is now 36, said he deeply regretted his involvement in the criminal activity. He intends to return to his home in Singapore, where his wife lives, when his house arrest stateside ends.
BitMEX itself entered into a $100 million settlement with U.S. regulators in August.
Write to Richard Vanderford at [email protected]
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Appeared in the May 21, 2022, print edition as ‘Crypto Exchange Co-Founder Is Sentenced.’