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SDNY COURTHOUSE, May 5 – Four executives of the Bitcoin Mercantile Exchange or BitMEX were criminal defendants for violations of the Bank Secrecy Act.   On February 24, with no notice, a guilty plea.  

      Back on October 13, 2021 U.S. District Court for the Southern District of New York  Judge John G. Koeltlt held a proceeding. Inner City Press covered it, below.

On February 24, with no prior notice and not included in the day's Calendar on PACER, this: "Damian Williams, the United States Attorney for the Southern District of New York, announced that ARTHUR HAYES and BENJAMIN DELO, founders and executives of purportedly “off-shore” cryptocurrency derivatives exchange the Bitcoin Mercantile Exchange or “BitMEX,” pled guilty today to violating the Bank Secrecy Act (the “BSA”) by willfully failing to establish, implement, and maintain an anti-money laundering (“AML”) program at BitMEX.  Under the terms of their respective plea agreements, HAYES and DELO each agreed to separately pay a $10 million criminal fine representing pecuniary gain derived from the offense.  HAYES and DELO pled guilty today before U.S. District Judge John G. Koeltl."

  On May 4 Hayes put in his sentencing submission, asking for probation in a redacted letter. The argument includes that "in this first of its kind prosecution the government has achieved a notable success by establishing the principle that cryptocurrency derivatives trading platforms much comply with the Bank Secrecy Act if they provide services to US customers." Who knew? Hayes lost his immigration status in Singapore - then, a redaction.

Back on March 9, SAMUEL REED, one of three co-founders and a high-ranking executive of purportedly “off-shore” cryptocurrency derivatives exchange the Bitcoin Mercantile Exchange or “BitMEX,” pled guilty today to violating the Bank Secrecy Act (the “BSA”) by willfully failing to establish, implement, and maintain an anti-money laundering (“AML”) program at BitMEX.  Under the terms of his plea agreement, REED agreed to separately pay a $10 million criminal fine representing pecuniary gain derived from the offense.  REED pled guilty today before Chief U.S. District Judge Laura T. Swain, and will be sentenced by U.S. District Judge John G. Koeltl.  The other two founders of BitMEX, Arthur Hayes and Benjamin Delo, previously pled guilty to the same offense in February 2022.

For those wondering why not, even in the absence of Judge Koeltl, plead guilty before a Magistrate Judge, that would require a second step of Judge Koeltl approving the Magistrate's decision. So the plea was before Chief Judge Swain as Part I Judge; the sentencing is set for July 13 before Judge Koeltl.

  We'll have more on this.

  Earlier: The complaint says the defendants "deliberately failed to implement BSA-Compliant AML and KYC programs at BitMEX."

They have demanded a bill of particulars, and the government has opposed it.  Judge Koeltl on October 13 gave the defendants until October 22 to reply to DOJ's opposition.

On October 20, after initially being stopped from entering the SDNY Magistrates Court (even while the overflow room 15A was locked), Inner City Press managed to enter and witness the telephone presentment of defendant Gregory Dwyer, by phone - from JFK airport, as it happened.

Dwyer's lawyers had written in request the airport phone presentment so as to avoid a night of incarceration (to which others on October 20 were confined, in non white collar cases).

Magistrate Judge Robert W. Lehrburger could be heard speaking into the phone, but the other side's responses could not be, even in the courtroom. But the conditions of release were announced by Judge Lehrburger, including ultimately freedom to travel to Bermuda.

 On January 20, 2022 Judge Koeltl ruled, among other things, that Hayes' quote about bribing officials in the Seychelles with a coconut will not come into evidence, as too inflammatory. From the January 20 rulings, the prosecution may be in trouble. For more, in the run-up to the trial that Inner City Press will cover along with many other now unblocked trials, see Bloomberg by Chris Dolmetsch, here, and Law360 by Pete Brush (paywall/7 day trial), here. Here's the video from Taipei, Hayes v. Nouriel Roubini, here (from Minute 10: Andrew Neil asks, How much are you paying to bribe the Seychelles authorities? Hayes says, "A coconut.")

  Soon after the January 20 conference, the defendants submitted for signature a revised subpoena to the CFTC, about the March 1, 2016 CFTC letter about ICBIT and a June 26, 2018 meeting with Hayes and Sullivan & Cromwell.

The trial is set for March 30: "ORDER as to Arthur Hayes, Benjamin Delo, Samuel Reed. Trial in this matter is adjourned to Wednesday, March 30, 2022, at 9:00am (Jury Trial set for 3/30/2022 at 09:00 AM before Judge John G. Koeltl.) (Signed by Judge John G. Koeltl on 12/7/21)."

The case is overall case is US v. Hayes, et al., 20-cr-500 (Koeltl)

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