Below are some excerpts from the CFTC case against Bitmex, which is separate from the DOJ case, whose indictment I haven’t read yet.
Excerpts copied verbatim:
BitMEX accepted bitcoin deposits worth more than $11 billion from at least 85,000 user accounts with a U.S. nexus.
Despite being incorporated in the Seychelles, HDR does not have, and never has had, any operations or employees in the Seychelles. HDR operates, or has operated during the Relevant Period, out of various locations and offices throughout the world, including in New York, San Francisco, Milwaukee, Hong Kong, Singapore, and Bermuda.
BitMEX allows customers to open accounts with an anonymous email and password, and a deposit of bitcoin. BitMEX does not collect any documents to verify the identity or location of the vast majority of its users.
Between November 22, 2014 and February 9, 2020, BitMEX has had over 2.5 trillion contracts traded on its platform. Most of that volume—more than two trillion contracts— has been in the XBTUSD swap.
…BitMEX has failed to maintain required records, and in fact has actively deleted required records including critical customer identification information. Further, BitMEX has failed to establish rules to minimize conflicts of interest. This is apparent because Hayes, Delo, Reed, and numerous other BitMEX employees trade on the platform, and BitMEX’s own internal “market-making” desk has at times been one of the largest traders on the platform.
BitMEX has employed approximately half of its workforce in the U.S., including at least 9 in New York and 56 in San Francisco.
For example, in August 2014, shortly before the launch of the platform, Hayes wrote to Delo that BitMEX would not do any KYC, saying “Basically just valid email address until we feel significant pressure to do otherwise.”
As of July 27, 2018, at least 1,100 U.S. affiliate program customers received affiliate payments from BitMEX for soliciting customers to trade on BitMEX. In 2019, BitMEX paid out $66 million to customers in affiliate commissions.
For example, YouTube contains videos of U.S. customers trading on BitMEX, along with instructions on how to access BitMEX from the U.S. Messaging applications Discord and Telegram have chat groups that instruct U.S. residents to use a VPN to access BitMEX if trading from the U.S.
BitMEX has also “deleted” records for numerous accounts, in certain cases explicitly because a user was found to be located in the U.S. or another “restricted jurisdiction.” In a December 2018 chat involving BitMEX Customer Support personnel, a BitMEX supervisor describes the policy: “At the moment we are deleting people’s accounts once they have withdrawn if they are from a restricted jurisdiction.”
BitMEX even maintained an internal dashboard of open accounts from supposedly restricted jurisdictions. 90. Delo altered a U.S. resident’s (and prominent BitMEX user) account location to Canada for a user that brought in 1,336 user accounts through BitMEX’s affiliate program.
Hayes regularly filled out KYC forms for himself and BitMEX’s various corporate entities at other exchanges and with BitMEX trading partners, often noting BitMEX’s own decision not to implement any KYC or AML procedures.