White Plains Financial Adviser Arrested For Embezzlement (DOJ Release)Founders And Executives Of Off-Shore Cryptocurrency Derivatives Exchange Charged With Violation Of The Bank Secrecy Act / Arthur Hayes, Benjamin Delo, Samuel Reed, and Gregory Dwyer Flouted U.S. Anti-Money Laundering Rules (DOJ Release)CFTC Charges BitMEX Owners with Illegally Operating a Cryptocurrency Derivatives Trading Platform and Anti-Money Laundering Violations (CFTC Release)Principal Of Cryptocurrency Escrow Company Pleads Guilty To Multimillion-Dollar Fraudulent Scheme (DOJ Release)
BRIE embezzled funds from two victims, both of whom lived in his White Plains apartment complex. He advised his first victim, a disabled man on a fixed income and confined to a wheelchair, to buy shares in Alaska Air Group, Inc. Bank records show that this victim gave BRIE more than $480,000. BRIE told his victim that he had opened accounts for him at a brokerage firm and that his stock had increased in value to approximately $8 million. When the victim asked for his money, BRIE told him that his accounts were frozen because the stockbrokers had done something "sketchy" in order to buy the shares at a lower price. When the victim attempted to contact the brokerage firm, BRIE told him that he would "murder [him]" if the victim attempted to contact the firm again. BRIE repeated this threat at least two more times, noting that he meant his threats to be taken "literally, not metaphorically."According to written loan agreements drafted by BRIE, the second victim made three loans to BRIE in a total amount of approximately $157,000 "for the purpose of producing and distributing a proprietary, composite unimold commode for use within indigent venues of the African nation of Uganda."The FBI's analysis of bank accounts controlled by BRIE showed that BRIE spent the money he obtained from his two victims primarily on credit cards and a Mercedes Benz lease. The evidence showed that there was no brokerage account.
HAYES, DELO, and REED founded BitMEX in or about 2014, and DWYER became BitMEX's first employee in 2015 and later its head of business development. BitMEX, which has long serviced and solicited business from U.S. traders, was required to register with the Commodity Futures Trading Commission ("CFTC") and to establish and maintain an adequate AML program. AML programs ensure that financial institutions, such as BitMEX, are not used for illicit purposes, including money laundering.Despite those obligations, HAYES, DELO, REED, and DWYER knew by no later than in or about September 2015 that, because BitMEX served U.S. customers, it was required to implement an AML program that included a "know your customer" or "KYC" component, but chose to flout those requirements. Indeed, each of the defendants knew of customers residing in the United States who continued to access BitMEX's trading platform through at least in or about 2018, and that BitMEX policies nominally in place to prevent such trading were toothless or easily overridden to serve BitMEX's bottom line goal of obtaining revenue through the U.S. market without regard to U.S. regulation. While knowing of BitMEX's obligation to implement AML and KYC programs because BitMEX was serving U.S. customers, HAYES, DELO, REED, and DWYER took affirmative steps purportedly designed to exempt BitMEX from the application of U.S. laws such as AML and KYC requirements. For example, the defendants caused BitMEX and its parent corporations formally to incorporate in the Seychelles, a jurisdiction they believed had less stringent regulation and from which they could still serve U.S. customers without performing AML and KYC. Indeed, in or about July 2019, HAYES bragged that the Seychelles was a more friendly jurisdiction for BitMEX because it cost less to bribe Seychellois authorities - just "a coconut" - than it would cost to bribe regulators in the United States and elsewhere.
The complaint alleges that from at least November 2014 through the present, and at the direction of Hayes, Delo, and Reed, BitMEX has illegally offered leveraged retail commodity transactions, futures, options, and swaps on cryptocurrencies including bitcoin, ether, and litecoin, allowing traders to use leverage of up to 100 to 1 when entering into transactions on its platform. According to the complaint, BitMEX has facilitated cryptocurrency derivatives transactions with an aggregate notional value of trillions of dollars, and has earned fees of more than over $1 billion since beginning operations in 2014. Yet, as alleged in the complaint, BitMEX has failed to implement the most basic compliance procedures required of financial institutions that impact U.S. markets.The complaint charges 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.As alleged in the complaint, BitMEX touts itself as the world's largest cryptocurrency derivatives platform, with billions of dollars' of trading volume each day. Much of this volume, and related transaction fees, derives from the operation of the platform from the U.S. and its extensive solicitation of and access to U.S. customers, the complaint alleges. Nevertheless, BitMEX has failed to register with the CFTC, and has failed to implement key safeguards required by the CEA and CFTC's regulations designed to protect the U.S. derivatives markets and market participants.
THOMPSON claimed in promotional materials that his cryptocurrency escrow company, Volantis Escrow Platform LLC, and the related company Volantis Market Making LCC (collectively "Volantis"), "minimize[d] settlement default risk" in cryptocurrency transactions. THOMPSON claimed that because Volantis acted as a custodian of assets for "both sides of the transaction, there is no risk of default."In June and July 2018, THOMPSON made false statements to a company ("Company-1") to induce Company-1 to send Volantis over $3 million to fund the purchase of Bitcoin for Company-1. THOMPSON falsely assured Company-1 that THOMPSON would act as an escrow and that Company-1's money could not be lost. In particular, THOMPSON told Company-1 that the transaction would take place through an "atomic swap process" after THOMPSON had custody of both the Bitcoin and Company-1's cash. THOMPSON falsely represented that he would not transfer Company-1's cash to the seller until he had the Bitcoin in hand. Based on these fraudulent representations, Company-1 wired THOMPSON $3.25 million. THOMPSON then wired over $3 million of Company-1's money to a third-party entity without first receiving any of the Bitcoin in hand. After taking Company-1's money, THOMPSON lied for days about the status of the transaction and the location of Company-1's Bitcoin and money, which was never returned.
The department's business review letter recognizes that ISDA's proposed amendments to its standardized documents for derivatives contracts are part of a larger effort to use alternative reference rates in financial instruments in the place of IBORs. This is in part because investigations by U.S. and regulators from other jurisdictions uncovered explicit manipulation of the submissions from certain banks to administrators of LIBOR and other interest rate benchmarks. In addition, the United Kingdom's Financial Conduct Authority, LIBOR's regulator, has publicly stated that firms cannot rely on LIBOR being published after 2021. To account for this eventuality, ISDA worked with regulators and industry participants to propose amendments to ISDA's standardized documentation to incorporate fallback rates and calculation methods so that market participants can, if they so choose, refer to different rates in future derivatives contracts and efficiently amend existing contracts to incorporate the different rates.
Beginning in the summer of 2018, Liu transferred a total of 495 files containing confidential information, as defined by the firm, from DCF to a personal cloud storage site or personal email account. A significant majority of these files contained non-public information from DCF's corporate customers.1 Liu transferred 484 of the files between February 21, 2019 and March 1, 2019, shortly before he resigned to assume a position elsewhere with a non-FINRA member. Additionally, on March 18, 2019, in connection with his pending departure, Liu falsely certified to DCF that he had complied with his obligations under DCF's policies on confidential information and was not taking any confidential information. DCF identified the file transfers on March 19, 2019 and required Liu to delete the files before his departure.By transferring the 495 files in circumvention of his firm's policies and procedures as well as falsely certifying that he had not taken confidential information, Liu violated FINRA Rule 2010, which requires associated persons to observe high standards of commercial honor and just and equitable principles of trade in the conduct of their business.= = = = =Footnote 1: The corporate customers were not "consumers" as defined by Regulation S-P.