BitOoda Regulatory Analysis — SPECIAL EDITION, 10/2/20: Charges against BitMEX Validate Market Evolution Toward Regulated Participants
We are sharing an early edition of our weekly regulatory analysis in light of yesterday’s momentous announcement of civil and criminal charges brought against BitMEX by the CFTC and Department of Justice (DOJ). The CFTC charged BitMEX’s CEO, company owners, and corporate entities with operating an unregistered trading platform and violating multiple CFTC regulations, while DOJ brought federal criminal charges for violations of the Bank Secrecy Act. More specifically:
· CFTC charged BitMEX with “operating a facility for the trading or processing of swaps without having CFTC approval as a designated contract market or swap execution facility, and operating as a futures commission merchant by soliciting orders for and accepting bitcoin to margin digital asset derivatives transactions, and by acting as a counterparty to leveraged retail commodity transactions. The complaint further charges BitMEX with violating CFTC rules by failing to implement know-your-customer procedures, a customer information program, and anti-money laundering procedures.”
· DOJ charged BitMEX with “violating the Bank Secrecy Act and conspiring to violate the Bank Secrecy Act, by willfully failing to establish, implement, and maintain an adequate anti-money laundering (“AML”) program.” The FBI Assistant Director noted, “One defendant went as far as to brag the company incorporated in a jurisdiction outside the U.S. because bribing regulators in that jurisdiction cost just ‘a coconut.’”
These coordinated enforcement actions validate and reinforce the trend we at BitOoda have been observing, assessing, and frankly planning for, as the digital asset ecosystem shifts to a market centered around regulated, compliant platforms and participants. As regulators continue to expand their understanding of digital asset markets and their awareness of ongoing market conduct, we expect they will become increasingly confident in initiating enforcement actions against unregistered and unregulated players, as well as others skirting regulations.
We strongly encourage our current and prospective clients to carefully evaluate the platforms they use and the firms they work with. Unregulated offshore derivatives exchanges and others operating in the U.S. market non-compliantly will face more aggressive opposition from regulators over time, and legitimate market activity will continue to migrate to compliant firms and platforms. Echoing the CFTC’s advice, “The CFTC strongly urges the public to verify a company’s registration with the Commission before committing funds. If unregistered, a customer should be wary of providing funds to that company.”
BitOoda has been registered and regulated by the CFTC and NFA since 2017, and all of our Bitcoin derivative business is handled 100% compliantly here in the U.S. Our trades are executed by Series 3 licensed brokers on regulated exchanges such as the CME and Bakkt, and our communications are carried out on regulated chat platforms such as ICE Chat. We offer compliant solutions and effective, informed strategies and products to trade BTC and BTC derivatives. Yesterday’s charges against BitMEX reinforce our longstanding focus on compliance and our thesis on the advancement of a regulated and orderly digital asset ecosystem.