FOLLOW US

A Manhattan federal judge slapped offshore crypto exchange BitMEX with a $100 million fine Wednesday, rejecting its suggestion that guilty pleas and $110 million of earlier penalties were sufficient punishment for a five-year, $1.3 billion course of evading U.S. financial controls.

The "significant but reasonable" penalty was imposed by U.S. District Judge John G. Koeltl after a 2.5-hour sentencing hearing. Judge Koeltl declined a request by the defendant, whose corporate name is HDR Global Trading Inc., to walk away with no probation, imposing a two-year probationary period.

After hearing counsel for BitMEX assert that the company and its chastened principals — who also were criminally prosecuted but avoided jail — will not violate U.S. law again, a skeptical Judge Koeltl said the "temptation" for offshore players to access the giant U.S. crypto market would remain.

Only after being criminally indicted by the Manhattan U.S. Attorney's office did BitMEX acknowledge responsibility, Judge Koeltl observed.

"For five years the company represented that it wasn't in the United States — that it couldn't be in the United States," the judge said, despite the fact that U.S. customers had become its "largest source" of business in that time.

"The offense was a violation of criminal law and was willful," the judge added.

BitMEX last year copped to violating the Bank Secrecy Act by knowingly failing to maintain adequate anti-money laundering and know-your-customer programs for five years ending in September 2020.

Arguing for a lesser sentence, BitMEX general counsel Peter Wilkinson said Wednesday that the company has lost market share and has struggled to maintain banking and regulatory relationships in other countries because of the criminal case.

"Together, all these factors have snowballed into a virtual death knell for the business," Wilkinson said.

He also cited what he called a robust, ongoing compliance effort to make sure the company stays away from U.S. customers until such time as it may attempt to enter the U.S. market legitimately.

Prosecutor Thane Rhen noted that the government's evidence suggested the company and its principals actively encouraged U.S. customers to trade on BitMEX and guided them on how to avoid government controls.

As late as 2023, company co-founder Arthur Hayes called the criminal charges "absurd" in public comments, Rhen said.

"This is what the company actually thinks about U.S. regulatory efforts," he said. "In public it's mocking the regulatory efforts. The industry is watching this case."

In calculating the sentencing guidelines for BitMEX, Judge Koeltl credited a government expert who said the company took in over $1.3 billion of revenue as it flouted U.S. law. The court also credited a government estimate that roughly 11.5% of the company's users at the time were in the U.S.

But his sentence came in below guidelines that — given the numbers at hand — contemplated a fine of between $231 million and $471 million.

The government had asked for a sentence at the top of those guidelines, but the judge indicated that would be too high given the $110 million in penalties already imposed against the company and its principals.

The government is represented by Thane Rhen and Jessica Greenwood of the U.S. Attorney's Office for the Southern District of New York.

BitMEX is represented by David Esseks, Eugene Ingoglia, Megan Sharkey and Melinda Bothe of Allen Overy Shearman Sterling and by its general counsel Peter Wilkinson.

The case is USA v. HDR Global Trading, case number 1:24-cr-00424, in the U.S. District Court for the Southern District of New York.