In the cryptocurrency world there are a number of exchange platforms individuals can use to trade USD to cryptocurrency, as well as trading coins of one type for another. Recently, a large platform known has BitMex has come to the spotlight thanks to the involvement of the US Commodities Futures Trading Commission, a US government agency.
BitMex is a person to person cryptocurrency exchange platform based out of the country of Seychelles. They process trades for numerous different cryptocurrency coins as well as accept US Dollars for the trade of coins. The site boasts impressive security measures such as multi-factor security, one hundred audits of trades per second, and the coins are kept in cold storage so they are not susceptible to hacks or server intrusions. BitMex has a high-tech trading engine which is also used by hedge funds and investment banks all over the world and processes such a large volume of trades that they can handle almost any amount requested. On this platform you can also trade Bitcoin with 100x leverage, Ethereum with 50x leverage, and trades have no expiration. For a large volume cryptocurrency trader, BitMex is an extremely useful tool.
On October 1st, 2020, the United States CFTC charged BitMex’s owners with violating the Bank Secrecy Act. The US government claims that the employees Arthur Hayes, Ben Delo, Samuel Reed, and Gregory Dwyer knowingly, and willingly, violated the act by doing illegal financial business with Americans and doing so without proper identity verification. Assistant FBI director William Sweeney Jr. claims the FBI has been investigating the website since June 2019, and that now they have sufficient evidence to formally charge them. The men will face hefty fines, restitution, and possible prison time for their actions.
Did BitMex actually break the law? It’s hard to say. Users are unable to access the BitMex website from any IP address originating in the United States, which follows the current laws. However, it’s 2020, and most people now know how to use, and abuse, a VPN. If an American does use a non-US IP address to access the site, they are able to sign up for an account with just their email and selecting which country they are from. If you follow the steps of making an account, and select that you live in the United States during the process, after you verify your email address a note pops up saying you are unable to perpetuate any sort of trades and that you can use the website for monitoring coin prices only. Whether this is actually true or not we were unable to discern. This brings us to another problem though, because someone who knows how to use a VPN to access a site illegally, also knows how to lie while selecting a country in the drop-down menu.
It sure seems like BitMex has done their due diligence, after all, it isn’t their fault that users know how to lie about their country of origin and use a VPN. And it seems like it’s probably impossible to trade if you don’t do either of these things. And even if users do find a way around up to this point, there are limits placed on your account until you verify your identity, which follows the US laws. And here’s where the proficient liars will run into another problem, according to the website’s policies, you cannot verify your account using an American identity card of any sort. But again, this doesn’t mean that there are not ways around verifying your identity, in fact, some people spend years getting alternative identity documents for these purposes. And in this day and age a fake identity can be purchased online on the dark web for a fee.
So, we are back to the question, is BitMex at fault for their users lying during account creation and the verification process? And if we decide they are, is this even fair? Can we blame BitMex for the users lies? On the flip side, this truly is a gray area, after all, it is likely that the creators knew there would be some liars that would find around their website rules, and it is their responsibility to place ample blockers in place. But did were methods they used to block possible fake accounts sufficient? Is it possible they would let some things knowingly slip through the cracks? And even if the previous question is true whether the US government can prove they did so maliciously and knowingly is another story.
First of all, as mentioned above, BitMex is not based in the US. And it’s doubtful the owners are located in the US either with the exception of Mr. Reed who has already been arrested in the state of Massachusetts. So, the US government first has to find the individuals listed in the charge and extradite them if they are in a country with extradition laws to the US. And that’s if the US government even knows where they are.
Assuming all of the above happens, there will likely be a lengthy legal battle to show that BitMex was operating illegally on purpose. And everyone knows this process could take years, or longer and any lawyers these individuals would hire to defend them would probably be the best in the business.
For the time being, users need not worry as BitMex is running at its full functionality as always. BitMex truly is based outside of the United States and therefore the US government has no actual power to shut them down. There is a possibility that if those mentioned in the charges are arrested and placed in federal holdings, that functionality, or other questions surrounding the continuation of the website would come to be an issue. It’s always wise to keep up with the cryptocurrency news so that you can be informed of any happenings. In light of this specific issue, it’s smart to subscribe to a specific cryptocurrency news source or the company’s social medias, that way you can be informed immediately of a possible shut down or change to the website's operations, whether that website is BitMex or another trading platform (because lets be honest the US government is probably looking for ways to close them all).
As always, remember cryptocurrencies can be a risky investment in and of themselves, and no matter what exchange you choose to use there is always an inherent risk and we at MintDice don’t claim to know the validity, or security of any exchange, even the ones aforementioned in this article.
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