About a month after Ben Peter Delo, a BitMEX founder, executive, manager, and board member, sought to dismiss a legal action brought against him by the United States Commodity Futures Trading Commission (CFTC), the regulator has responded to Delo’s motion to dismiss.

As one might expect, the CFTC opposes Delo’s motion and requests that the Court denies it.

The CFTC complaint alleges that from at least November 2014 through the present, and at the direction of Arthur Hayes, Ben Delo, and Samuel Reed, BitMEX has illegally offered leveraged retail commodity transactions, futures, options, and swaps on cryptocurrencies including bitcoin, ether, and litecoin, allowing traders to use leverage of up to 100 to 1 when entering into transactions on its platform.

According to the complaint, BitMEX has facilitated cryptocurrency derivatives transactions with an aggregate notional value of trillions of dollars, and has earned fees of more than over $1 billion since beginning operations in 2014. Yet, as alleged in the complaint, BitMEX has failed to implement the most basic compliance procedures required of financial institutions that impact U.S. markets.

The complaint charges BitMEX with operating a facility for the trading or processing of swaps without having CFTC approval as a designated contract market or swap execution facility, and operating as a futures commission merchant by soliciting orders for and accepting bitcoin to margin digital asset derivatives transactions, and by acting as a counterparty to leveraged retail commodity transactions. The complaint further charges BitMEX with violating CFTC rules by failing to implement know-your-customer procedures, a customer information program, and anti-money laundering procedures.

As alleged in the complaint, BitMEX touts itself as the world’s largest cryptocurrency derivatives platform, with billions of dollars’ of trading volume each day. Much of this volume, and related transaction fees, derives from the operation of the platform from the U.S. and its extensive solicitation of and access to U.S. customers, the complaint alleges. Nevertheless, BitMEX has failed to register with the CFTC, and has failed to implement key safeguards required by the CEA and CFTC’s regulations designed to protect the U.S. derivatives markets and market participants.

In his response to the CFTC’s complaint, Delo noted that he is a foreign, minority owner and non-CEO executive of a company organized in a foreign jurisdiction. Delo argued that personal jurisdiction over him is lacking, and the Due Process Clause of the U.S. Constitution requires that he be dismissed from this action.

On October 15, 2021, the CFTC filed its response to Delo’s motion in the New York Southern District Court.

The regulator says that Delo’s arguments ignore and, at times, contradict the allegations in the Complaint and the overwhelming evidence of Delo’s contacts with the United States, both individually and in his capacity as one of the three principal founding owners of BitMEX.

According to the CFTC, as a BitMEX founder, executive, manager, and board member, Delo was involved in nearly every aspect of BitMEX’s operations – customer support, customer solicitation, project management, design of BitMEX’s financial products, and development of the BitMEX trading engine.

And Delo played a key role in the decisions he and his business partners, co-Defendants Arthur Hayes and Samuel Reed, made that are at the heart of violations of the Commodity Exchange Act (CEA) and CFTC Regulations alleged in the Complaint, including BitMEX’s decision not to implement an effective anti-money laundering (AML) program, a customer information program (CIP), or any know-your-customer (KYC) procedures, and the decision to allow U.S. traders to access and trade on the BitMEX platform.

The Commission argues that the Court can and should exercise jurisdiction over Delo for two independent reasons.

First, jurisdiction over Delo is proper based on his individual contacts with the United States. Delo supervised BitMEX’s U.S.-based employees and regularly traveled to the United States in connection with his managerial duties. He also entered into contracts (through Defendant Shine Effort Inc Limited) with United States counterparties in furtherance of BitMEX’s business.

Second, in addition to Delo’s individual contacts with the United States, BitMEX’s forum contacts may be imputed to him because, at a minimum, Delo was aware of those contacts, consented to them (in fact he took active steps to facilitate those contacts), and exercised control over all aspects of BitMEX, including its solicitation of U.S. users and its failure to implement an effective AML program.

The CFTC insists that Delo’s motion to dismiss should be denied by the Court.