Syed Rahman looks at the leniency shown by the US President to the crypto exchange
President Donald Trump has pardoned the cryptocurrency exchange BitMEX’s owners and senior figures.
In the first corporate pardon of his second term of office, President Trump has pardoned HDR Global Trading Limited – the company that owns BitMEX – BitMEX co-founders Arthur Hayes, Benjamin Delo and Samuel Reed, and its former business development chief Gregory Dwyer.
The pardons are the latest twist in a saga that has seen BitMEX and a number of those associated with it facing a range of legal troubles.
Three years ago, the now-pardoned executives pleaded guilty to violating the Bank Secrecy Act by failing to implement an anti-money laundering programme for the company. They were ordered to pay a $10 million criminal fine, with Dwyer agreeing to pay a separate $150,000 fine as part of his plea deal.
Just three months ago, a Manhattan federal court ordered BitMex to pay a $100 million fine and serve two years of unsupervised probation. The US Department of Justice said in January that the Seychelles-registered company had broken the law by “wilfully failing to establish, implement, and maintain an adequate” anti-money laundering and know-your-customer programme. The company had pleaded last year to one count of violating the Bank Secrecy Act.
Four years ago, BitMEX had reached a $100 million settlement with the Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN) for similar conduct.
The company had pulled out of the US market and formally incorporated in the Seychelles because it thought the regulations there would be less strict. But prosecutors said that BitMEX continued to allow US users to access its platform and even encouraged them to do so through marketing stunts, such as renting three Lamborghinis and parking them outside a New York cryptocurrency conference in 2018.
Difficult
It is difficult to assess precisely why BitMEX was pardoned, beyond it being in line with the Trump administration’s overall strategy of being lenient towards the crypto industry and providing clemency to white-collar criminals.
The pardon may encourage some crypto firms to take regulatory risks. It is also likely to prompt concerns from consumers and investors about a lack of regulatory action - and a drop in compliance that may be the result. Other crypto companies - especially their executives - may see this as a sign that more regulatory risks can be taken, with the possibility of only lenient punishments being imposed under the current administration if things go wrong.
This could, in theory, foster further innovation and entice more crypto businesses into viewing the US as the perfect jurisdiction for them. Companies must, however, still ensure that their innovation does not breach existing US regulations. The Trump administration has said it will crack down hard on those that exploit the regulations that apply to crypto; even though those regulations are far from strict. There is also the argument that the politicisation of the crypto industry should be a cause for concern for crypto companies that have spoken out against the administration.
