DOJ seeks to intervene in CFTC case against BitMEX
Several months after the Commodity Futures Trading Commission (CFTC) launched a civil action against five entities and three individuals that own and operate the BitMEX trading platform, the Department of Justice (DOJ) has made clear its intentions to intervene in this case.
On February 10, 2021, the Government submitted a Letter at the New York Southern District Court announcing its plan for a motion to intervene in the CFTC case in order to seek a stay of discovery in thee civil matter during the pendency of the criminal case. The criminal case involves three of the same defendants, and relating to the same operative facts.
“BitMEX,” or the Bitcoin Mercantile Exchange, is an online trading platform that was launched in or about November 2014. Arthur Hayes, Ben Delo, and Samuel Reed are the founders and long-time executives of BitMEX. BitMEX has at all relevant times been owned and operated through one or more parent companies (collectively referred to herein as BitMEX), including HDR Global Trading Limited and others.
On October 1, 2020, a criminal indictment was unsealed charging Hayes, Delo, and Reed (and another BitMEX executive, Gregory Dwyer) with violating the Bank Secrecy Act (BSA) and participating in a conspiracy to violate the BSA. The Indictment alleges that from at least in or about September 2015 and continuing until in or about September 2020, BitMEX operated as a Futures Commission Merchant with U.S. customers.
BitMEX also failed to establish, implement, and maintain an anti-money laundering program satisfying the minimum standards that the BSA requires of FCMs, including a “know-your-customer” or customer identification program; and the defendants willfully caused and conspired to cause these BSA violations by BitMEX. On October 1, 2020, the CFTC filed a complaint in the instant proceeding against Hayes, Delo, Reed, and BitMEX arising out of the same core facts as the Indictment.
The DOJ notes that the Criminal Case involves claims and defenses that share common questions of law and fact with this case, and the Government has a discernible interest in preventing this matter from being used to undermine discovery limitations in the Criminal Case. Both the Indictment and CFTC Complaint allege, among other things, that BitMEX operated as a Futures Commission Merchant; that BitMEX violated BSA anti-money laundering requirements; and that the individual defendants were legally and factually responsible for BitMEX’s violations.
Resolving these allegations will necessarily require considering overlapping legal and factual issues. Accordingly, the Government argues that it should be permitted to intervene in this case and the threshold inquiry for granting a stay has been satisfied.
The Government has conferred with the parties and understands that the CFTC as well as the corporate BitMEX defendants intend to take no position on the Government’s stay request. Hayes and Reed intend to oppose the motion.