Bitmex is one of the largest bitcoin futures marketplaces in the world. But the company has repeatedly run afoul of the law. The consequences are now becoming apparent.
The fact that cryptocurrency exchanges are not far from any law is experienced these days not only Binance, but currently also the futures exchange BitMEX. In 2014, Arthur Hayes, Ben Delo, Samuel Reed founded the company, based in the Seychelles. Now the company is paying the steep fine of $100 million to settle a lawsuit with a government agency. The futures trader failed to carefully screen its customers in the past. In some cases, all that was needed to sign up was an email address and password. There was no trace of “know your customer.”
By law, however, BitMEX should have scrutinized its users more closely. Already in the past, the company was urged by US authorities to deny American market participants access to BitMEX products. However, since the company did not put much emphasis on vetting its customers, BitMEX users included Americans. A regulatory complaint followed, and as a consequence, now the $100 million fine that the company must now pay.
Not just BitMEX – regulatory pressure from authorities worldwide.
“This case underscores expectations that the digital asset industry, which is attracting more and more market participants, takes seriously its responsibilities in the regulated financial industry and its obligations to develop and adhere to a legally compliant culture,” Rostin Behnam, the acting chairman of the Commodity Futures Trading Commission, said in the published announcement. And he went on to announce that “the CFTC will take prompt, massive action” “when activities affecting markets under the CFTC’s jurisdiction raise customer and consumer protection concerns.”
Since the lawsuit, BitMEX has been working to regain the trust of regulators. For example, as recently as July 6, 2021, the company announced that BitMEX was the first major verified derivatives exchange. It said 100 percent of its customers were verified. If one wants to create a BitMEX account now, one has to go through a thorough identity confirmation process.
Crypto trading platforms around the world are currently experiencing that they are not outside the law. Authorities are putting more pressure on crypto exchanges, as Binance is clearly feeling at the moment. The CFTC is an independent American authority that aims to protect trading partners from fraudulent practices. The fact that the CFTC is serious about taking strict measures to protect consumers is evidenced by the currentll settled litigation with BitMEX.