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BitMEX chiefs looted more than $440

Bitmex

November 25, 2020 | 

1624 Views | 

JOHN K MWANIKI | 

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The top officers at HDR, the parent company of BitMex, systematically looted $440M. The Bitmex chiefs also face charges for facilitating unregistered trading and other violations. They looted the money from the HDR accounts. This is after learning of the impending investigations from the US regulators.

The allegations are part of a law court filing for the Bitmex chiefs' case. The case accuses the HDR Co-founders Hayes, Reed, and Delo of money laundering. They also have charges against them for market manipulation.

The lawsuit is on behalf of plaintiffs BMA LLC, Vitaly Dubinin, and Yaroslav Kolchin. It seeks attachments of the HDR assets while its claims against the company are sure deals.

"We know of the Department of Justice (DOJ) and Commodities Futures Trading Commission (CFTC) investigations and impending charges. We are ready to bring a lawsuit from the authorities. The defendants looted $440,308,400 from the proceeds of the BitMEX platforms." The lawsuit reads in part. 

The lawsuit also cited the dates when the practice took place. These are October 15, 2019, November 19, 2019, and January 2020.

The lawsuit claims the looting reduced the assets seized by the authorities. They would hence bring in less when presenting the BitMEX chiefs to court. 

The lawsuit has an exhibit of Bitmex chiefs diverting profits from the trading platform. This was after learning of a possible lawsuit in 2019.

The plaintiffs have also accused the defendants of delaying the lawsuit proceedings. 

The HDR, in their response, has denied any wrongdoing. The HDR Global Trading Limited spokesperson denied the allegations. "Pavel Pogodin of Consensus Law has made several false accusations against us. As has done to others in the cryptocurrency space. We will deal with it as part of any normal litigation. We are also confident the courts will see his claims as such."

What next for BitMEX? 

The BitMEX chiefs' indictment is not the best news for one of the most popular crypto exchanges. It has had to take drastic measures to ensure normal operations of the platform. The first action was to replace the leadership of the exchange. New management replaced Hayes and the other executives. 

The company said the leadership changes were to allows them to focus on the core business. They want to keep offering superior trading opportunities to all BitMEX users. The platform is also still focused on implementing other new inventions.

Such cases, though, are not great for the existence of the crypto exchanges. Most of the exchanges tend to flourish under user trust. Traders want safe spaces for their assets. This is evident after the massive withdrawal that followed the BitMEX chiefs' indictment. 

Several data trackers reported increasing withdrawal from the platform following the revelations. This happens when the platform still maintains its innocence. It also vows to fight the charges and expect a win. Still, the outcome of the cases will determine the future of the exchange. 

Some crypto experts are already speculating on the possible repercussions of the lawsuits. Nic Carter, a prominent cryptocurrency analyst, speculated BitMEX funds could be frozen. The authorities would also halt its operations. Such actions can disrupt the global cryptocurrency market setup

BitMex has over $2B worth of Bitcoin. This is over 1% of the total supply. 

Freezing these cryptos from the economy or transfers would be disruptive. The exchange also holds other major cryptos like Ethereum, Ripple, Tether, and more.

The Future of Crypto Markets Following Bitmex Chiefs Lawsuit 

While the BitMEX chiefs lawsuit might seem only a crypto exchange issue, it goes wider than that. As one of the major cryptocurrency players, it affects the whole economy. Fortune reported the charges against the exchange led cryptocurrency users into selling. The site reports Bitcoin's value dropped by 3% of the lawsuit becoming public. 

The future of crypto markets is all about regulations. Prosecutors and regulators want to focus on crypto platforms' anti-money laundering requirements. They focus on crypto platforms under US regulations, such as the Bank Secrecy Act. 

The DOJ released a report immediately after the BitMEX chiefs' indictment. The report detailed all the enforcement challenges while dealing with digital currency dealers. It also mentioned the authority's plan to increase anti-money laundering accountability. It also seeks to broaden jurisdictions over the crypto trading platforms

The European Union Commission has also provided a regulatory framework proposal. It seeks to align all the crypto-assets and all other digital currency operations. 
The proposal shows an increasing global interest in clarifying laws. They want robust and clear regulations covering cryptocurrencies. 

The need to regulate the virtual currency platforms is for consumer protection. The regulators think about the possible harm from unregulated crypto platforms. The DOJ, on its press release following the BitMEX chief's arrest, stressed the same. It claimed, "the charges represent a push to unearth platforms for money laundering."

The DOJ is working with several other regulatory bodies to ensure compliance. It wants all the companies dealing in cryptos to understand their liabilities. These companies must adhere to proper KYC and AML practices. The rules apply to all crypto companies, even the ones operating overseas.

Cryptocurrency platforms will have to track transactions. They will also have to revamp data analysis when onboarding new clients. They will have to look for risk indicators and report any suspicious transactions. The reach of the regulators into the crypto platform will keep expanding. It's the best way to ensure consumer safety.

Already several other global cryptocurrencies are on target for money laundering violations. The first was in 2017 when the US authorities shut down a Russian-based Bitcoin exchange, BTC-e. This was after criminal and civil lawsuits against the platform. It allegedly facilitated illegal transactions. Several other lawsuits are likely to follow. 

Bottom Line 

The crypto exchange giant, Bitmex has not had the best of the months. Lawsuits have shown BitMEX chiefs looted more than $440m. This comes at a time when they are fighting a lawsuit against the DOJ and CFTC. The company has a lot to do before finally regaining the public trust. 

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