Following the announcement by the United States Attorney, Southern District of New York on October 1, 2020 that it indicted the principals of the alleged off-shore cryptocurrency derivatives exchange BitMEX, there are many clear take-aways. To address just two, violations of the Bank Secrecy Act implicate criminal violations that can wreck both a company and its founders’ lives. Second, it does not pay to pretend you are not doing business in the United States when you in fact are doing so. On this second point, the regulators will clearly investigate and identify any presence you have to the United States, including whether you have United States customers. And this is not a difficult inquiry.
The BitMEX indictment leaves the important question: what is next in the cryptospace for the DOJ and other criminal authorities? This can best be assessed by considering a October 16, 2020 posting on the Coinbase blog by its Chief Legal officer Paul Grewal (https://blog.coinbase.com/transparency-at-coinbase-c8edf6dce4d6). Grewal reports that between January 1, 2020 and June 30, 2020, Coinbase received 1,914 law enforcement requests, and 1848 were from agencies with criminal enforcement responsibilities. This should worry crypotcurrency founders about the adequacy of their KYC/AML program, among other things. In short, BitMEX is the first case of many cases that will be brought to enforce the Bank Secrecy Act. So the time is now to get your AML program up to compliance to meet legal requirements.
The information and materials in this article are provided for general informational purposes only and are not intended to be legal advice. The issues discussed include complicated areas of law and legal advice should be obtained from a securities attorney about your specific circumstances.