Former BitMEX CEO Arthur Hayes faces trial in a New York court on Friday after pleading guilty in February to charges that he willfully failed to implement an anti-money laundering (AML) program at the exchange.
Prosecutors allege that the lack of know-your-customer (KYC) requirements at BitMEX allowed the company to thrive as a hotbed for criminal activity, including money laundering and evading sanctions.
Hayes and his BitMEX co-founders Samuel Reed and Ben Delo, as well as the company's first employee, Gregory Dwyer, were initially charged in October 2020 with one count each of violating the Bank Secrecy Act (BSA) and another count of conspiracy to do so.
The four men, as well as BitMEX and other companies, also faced civil charges from the Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN) that resulted in fines. BitMEX was ordered to pay $100 million to regulators; Hayes, Reed, and Delo each had to pay $10 million.
The criminal charges carry a maximum sentence of five years each, but Hayes' plea agreement with prosecutors reduced the sentencing guidelines to six to 12 months.
Hayes, a U.S. citizen and longtime Singapore resident, turned himself in to U.S. authorities in Hawaii last April after his lawyers and prosecutors reached a plea agreement. He was released on $10 million bail, secured by $1 million in cash and co-signed by his mother.
Two sides of the story.
In a 65-page sentencing memorandum submitted to the court May 4, Hayes' attorneys asked the judge for leniency: probation, no jail time and no house arrest. They also requested that Hayes retain his freedom to travel internationally and live abroad.
The motion also included a letter from his mother. Hayes' lawyers argued that the former BitMEX CEO's life had already been shaken by the charges, which they said "have had an extraordinary and well-publicized impact on Mr. Hayes' personal life and on the BitMEX business he helped found."
They also argued that Hayes is unlikely to reoffend.
The government, however, sees the matter differently. In a sentencing memo filed May 12, prosecutors urged the judge to impose "a substantial term of imprisonment in excess of the applicable sentencing range of 6 to 12 months."
Prosecutors allege Hayes flaunted BitMEX's disregard for KYC and AML policies and promoted the company's lack of compliance on the exchange's website and in blog posts and media interviews.
This, prosecutors said, attracted "the very bad actors the BSA seeks to deter" - and netted Hayes more than $100 million.
Hayes' notoriety in the crypto community and his penchant for talking to journalists about his worldview (and his glamorous life on the run) seems to be a sore spot for prosecutors:
"The defendant chose to use his influence to promote a vision for the crypto industry that was in direct conflict with the law and aimed to undermine government regulations," prosecutors wrote. "The defendant routinely criticized and ridiculed KYC requirements and made clear that he had no interest in complying with them."