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BitMEX Probe: a Single American Citizen Could Make This a Whole Lot Worse

BitMEX has denied any criminal wrongdoing.

BitMEX Probe One Single American Citizen Could Make This A Whole Lot Worse

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US regulators are looking into BitMEX over accusations the popular cryptocurrency derivatives platform broke strict trading laws. The probe might expand into a full-blown investigation if American citizens are found to have been victims of fraud or manipulation by the derivatives platform.

According to a Bloomberg report this morning, the Commodities Futures Trading Commission (CFTC) is ascertaining whether BitMEX allowed Americans to trade on the platform.

The CFTC classifies Bitcoin as a commodity and has jurisdiction over any derivative product based on it. BitMEX, which is based in the Seychelles, would have first needed to register with the regulator in order for US citizens to trade on the platform.

Currently the CFTC is only interested in investigating whether an un-registered derivatives platform has been offering trading services to US citizens. But Crypto Briefing understands that it is standard procedure for the regulator to investigate any other existing allegations surrounding a company.

In the case of the BitMEX probe, it might extend to any accusations where US citizens have been thought to be victims of fraud or manipulation.

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While most regulators consider their jurisdiction to extend only as far as operations within their borders, American regulators claim authority over the entirety of a business if it serves or affects just one US citizen.

This important distinction means many cryptocurrency companies either use subsidiaries for American-specific business – like HBUS for Huobi – or choose not to operate there at all. Binance has announced that it will cease crypto trading in the country earlier this year, while both Poloniex and Bittrex have begun geoblocking tokens – blocking specific token transactions to and from an American IP address.

BitMEX allows clients to trade a whole host of futures and leveraged cryptocurrency products. It offers a maximum of 100:1 on its CFDs, some of the highest leverage in the industry. CEO Arthur Hayes tweeted last month that the platform’s yearly volume had surpassed one trillion dollars.

In October, the anonymous cryptocurrency researcher Hasu accused the platform of exploiting its privileged position in the market. “If [BitMEX] misbehave, there is only the free market to punish them for it,” wrote Hasu. “But what if the company has a quasi-monopoly like BitMEX?”

Nouriel Roubini – who debated Hayes in Taipei earlier this month – has repeatedly accused the company of acting illegally, including front-running its own clients and acting as a money launderer for international criminals.

In FT Alphaville yesterday, Hayes refuted these allegations: “we reject any allegations of criminality, manipulation or unfair treatment of our customers, who are at the centre of everything we do.”

Crypto Briefing reached out to BitMEX for comment on today’s developments. A spokesperson said that neither BitMEX, nor the parent company HDR Global Trading Limited, would comment on ongoing inquiries or investigations by government agencies or regulators.

The CFTC has so far declined to comment on the record: but if the allegations are true, BitMEX may be completely ducked.

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