[HN Gopher] Founders and Executives of Cryptocurrency Derivative...
___________________________________________________________________
Founders and Executives of Cryptocurrency Derivatives Exchange
BitMEX Charged
Author : xoxoy
Score : 107 points
Date : 2020-10-01 16:28 UTC (6 hours ago)
(HTM) web link (www.justice.gov)
(TXT) w3m dump (www.justice.gov)
| flyGuyOnTheSly wrote:
| Why doesn't/hasn't some American three letter agency simply
| seized the bitmex.com domain?
|
| Or will it be seized once they are charged in absentia I imagine?
| flyGuyOnTheSly wrote:
| Interesting timing as BitMEX just announced in late August 2020
| that they will be enforcing KYC/AML measures early next year.
|
| I wonder who was trying to get the jump on who, both here and
| there.
| flyGuyOnTheSly wrote:
| How expensive/difficult would it have been for bitmex to register
| with the SEC and/or CFTC? Jumped through all of the hoops, so to
| speak?
| hnracer wrote:
| Huobi, OkCoin, Binance and many others do the identical thing
| (synthetic USD products - they literally copied Bitmex's business
| model) and have the same or more volume as Bitmex.
|
| I'm guessing nobody is going after them because they have China's
| protection or what? Or did they go through some special
| regulatory process inside the US?
| spurdoman77 wrote:
| Maybe they do more AML/KYC?
| csomar wrote:
| They all require certain ID verification beyond some balance.
| Bitmex doesn't, which made it popular by US customers. Also,
| all of them are terrible for creating a synthetic USD while
| Bitmex is pretty darn good for that.
| hnracer wrote:
| Their synthetic USD is perfectly fine and I would say is
| better than Bitmex, Bitmex has memes made about how bad their
| platform is. They were just the first movers/innovators who
| invented the financial product and now have really good
| network effects. These other exchanges trade billions in
| notional synthetic USD per day.
|
| Some of the big Chinese synthetic USD exchanges don't require
| any ID verification.
| csomar wrote:
| Ha, we have must very different experiences then. Volatile
| funding rates, frequent claw-backs and thin order books
| doesn't make for a perfectly fine USD; but maybe it's just
| me.
| hnracer wrote:
| Huobi and Okex synthetic quarterlies are fine. Not
| identical to bitmex perp but pretty much the same.
|
| Clawback is a negative but so is the mex insurance fund,
| specific users end up paying for it (more in aggregate
| because the size of the fund has to be massive) through
| stops.
|
| Anyway who has the best synthetic isnt central to the
| discussion
| doublesCs wrote:
| Would you like to discuss what makes a syncthetic good or
| bad?
| csomar wrote:
| 1. Order book, aka enough liquidity, aka moving positions
| doesn't incur a haircut on your capital.
|
| 2. Funding rate stability. aka it doesn't cost much (or
| actually make you money) to hold the position.
|
| 3. Claw-backs, aka you don't wake up one day and find that
| half your collateral is gone because the market made a big
| move. This is a big problem especially for Okex.
|
| Basically, a synthetic USD is good if it behaves and
| _yield_ like a real USD.
| Temasik wrote:
| muh censorshit resistance
| coderintherye wrote:
| >"'Seychelles is cheaper to bribe than [the United States]' and
| when asked how much he had to pay Seychelles to register BitMEX
| there, he said 'a coconut.'"
|
| In government regulated finance, our counsel had very good
| advice: Don't provoke the regulators.
| nlh wrote:
| Great quote from the press release:
|
| "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.' Thanks to the
| diligent work of our agents, analysts, and partners with the
| CFTC, they will soon learn the price of their alleged crimes
| will not be paid with tropical fruit, but rather could result
| in fines, restitution, and federal prison time."
| [deleted]
| atemerev wrote:
| BitMEX only operates with cryptocurrencies. Not a single US
| dollar ever passed through it. US citizens were explicitly
| disallowed to use the service, and the US was blocked by IP. Why
| it even happened?
| x86_64Ubuntu wrote:
| They say that BitMEX ran some operations in New York.
| pjc50 wrote:
| Two US nationals appeared to be _running_ it, though. Was any
| of the operation or staff in the US?
| xoxoy wrote:
| their entire engineering and product staff is in San
| Francisco so yes
| avrionov wrote:
| Page 8 of the indictment: They had customer support, business
| development and marketing operations in New York.
| ta1234567890 wrote:
| America, world police.
|
| Some friends started a Wealthfront copycat in latinamerica. To
| get local financial permits they had to comply with a bunch of
| KYC policies/rules because the US imposes it on their local
| banks and governments, and in turn the banks demand compliance
| from them, even though their company is strictly local.
| roywiggins wrote:
| It's a real issue, but BitMEX operated an office in NYC.
| thebean11 wrote:
| Weedmaps.com operates an office in NYC too (a site for
| sourcing marijuana).
|
| Not exactly the same thing, but both are businesses with an
| office in a place they can't actually conduct business.
| ciarannolan wrote:
| Can you at least read the article before going full "America
| bad"?
|
| They operated an office in Manhattan and had US customers.
| ta1234567890 wrote:
| I missed that in the article, could you please provide a
| quote with the relevant content about the Manhattan office?
| Thank you.
| TedDoesntTalk wrote:
| page 5: https://www.justice.gov/usao-sdny/press-
| release/file/1323316...
|
| "...the Company also has subsidiaries and affiliates
| registered in the United States..."
| ciarannolan wrote:
| https://www.justice.gov/usao-sdny/press-
| release/file/1323316...
|
| Page 8.
| csomar wrote:
| First, because US citizens still traded on the exchange.
| (mostly through a VPN); and second, Bitmex was offering a
| synthetic USD product. That's worse than being a non-regulated
| entity that offers real dollars.
| [deleted]
| DethNinja wrote:
| How can they know these were USA based customers if they used
| VPNs?
| roywiggins wrote:
| The press release said they knew, so probably there's
| written evidence (emails, chat logs) of them discussing
| having US customers.
|
| One way they might know is by seeing people posting online
| about how they used VPNs to get around the block. Crypto
| traders are often bad at being subtle.
|
| It also alleges that they _solicited_ American customers,
| which presumably they also have evidence of. For instance,
| maybe advertising on American websites or posting on forums
| they knew were frequented by Americans, etc. Maybe they
| posted winking messages that told Americans how to get
| around the IP ban? All sorts of possibilities.
|
| Edit: from the indictment, page 7: "internal BitMEX records
| reflected thousands of BitMEX accounts with United States
| location information that were enabled for trading." So
| people volunteered their location information to BitMEX.
|
| Page 12: "the defendants, knew that specific customers,
| residing in the United States, continued to access BitMEX'
| s platform... DELO and DWYER knowingly allowed one of these
| customers to access BitMEX using a non-U. S. passport in
| the name of a third party that did not belong to this
| customer. DELO also allowed another customer to continue to
| access a BitMEX trading account despite this customer being
| "US based," because "[h]e's famous in Bitcoin," and falsely
| changed this customer' s internal country of residence to a
| country other than the United States."
| ulzeraj wrote:
| I'm not from the US. I had an account there and once I've
| logged in to the site through a personal vpn vps located
| in Texas. They've requested KYC data and thread closing
| my account almost immediately. Happened last year.
| DethNinja wrote:
| Thanks for the summary, it is good that plaintiff is
| claiming that with some evidence instead of some blanket
| statement about existence of VPNs.
| spurdoman77 wrote:
| Tough in this case it might be not enough to make authorities
| from other countries to cooperate. The website is still
| running and withdrawals are working. For some reason the
| domain isnt seized.
| csomar wrote:
| Withdrawals in Bitmex are processed once a day. Still 18
| hours for withdrawals dispatching.
| Qasaur wrote:
| I hope I'm not the only one that finds this completely
| ridiculous. What right does the U.S. Federal Government have
| to prosecute people who aren't even operating within their
| jurisdiction? This is nothing but imperialism and a captured
| government trying to shut down competitors to U.S.-based
| regulated exchanges from more crypto-friendly countries.
| splintercell wrote:
| America is the one world govt, it created this world order
| we live in, it provide(d) protection and unmolested trade
| routes to everyone in the world. Hell US even protected
| Vietnam's trade during the Vietnam War, no country in the
| world has done that in past.
|
| Of course that world order is coming down fast because
| nobody in the US cares about maintaining it as much as they
| are interested in proclaiming it.
| csomar wrote:
| US imperialism is not new news.
| roywiggins wrote:
| Ed: From the indictment, page 8: "BitMEX personnel...
| conducted BitMEX operations from an office in Manhattan,
| New York, including but not limited to customer support,
| business development, and marketing, involving customers
| located in the United States and elsewhere ."
|
| If[0] they posted on American forums or solicited customers
| on American-hosted sites, they operated in the US for the
| purposes of the law. You don't have to physically be
| somewhere to be subject to the law there. Ditto wire and
| mail fraud that originates overseas.
|
| Mailing a pipebomb from Canada to the US is illegal in
| Canada, but it's also illegal in the US, even if it was
| done by a Canadian citizen who didn't step foot here.
|
| Operating outside American AML/KYC law is not quite the
| same as mailing a pipe bomb, but the jurisdictional issue
| is hard to distinguish.
|
| [0] (this remains to be proven)
| ciarannolan wrote:
| > What right does the U.S. Federal Government have to
| prosecute people who aren't even operating within their
| jurisdiction?
|
| Besides the office in Manhattan, I'm sure you mean?
|
| https://www.justice.gov/usao-sdny/press-
| release/file/1323316...
|
| Page 8.
| dragonwriter wrote:
| > What right does the U.S. Federal Government have to
| prosecute people who aren't even operating within their
| jurisdiction?
|
| The jurisdiction of any sovereign state is whatever that
| state says it's jurisdiction is; extraterritorial
| jurisdiction is not at all uncommon.
|
| In order for an entity to have externally-imposed limits on
| its jurisdiction, it would have to be answerable to a
| superior soveriegnty (which would itself either be or be
| answerable to, perhaps through more layers, an entity
| without such limitation.)
| roywiggins wrote:
| Jurisdiction here is easy: they had an office in
| Manhattan...
| 317070 wrote:
| Apparently, they are of the opinion that Bitmex did operate
| in the US:
|
| > With the opportunities and advantages of operating a
| financial institution in the United States comes the
| obligation for those businesses to do their part to help in
| driving out crime and corruption.
| roywiggins wrote:
| According to the indictment they had an office in
| Manhattan.
| vmception wrote:
| captured government lmao
|
| this is pretty default behavior for the US
|
| everything anyone told you about the US dollar use being
| needed to establish jurisdiction was a lie, I have
| literally only heard that from crypto people, arent these
| the same people that used to say "litecoin is asic proof
| because its memory hard" lmao
|
| right, not new news.
|
| The criminal charges are around the Bank Secrecy Act and
| Conspiracy to circumvent some Bank Secrecy Act requirements
|
| What right? Its not a right its a privilege the US has that
| most countries around the world will listen to it. Many
| countries have laws to exercise jurisdiction outside of
| their borders, they're just irrelevant. They are irrelevant
| markets, irrelevant geopolitically, have no resources to
| pursue or even bother charging people, faces actual
| consequences from trading partners if they did try,
| everything is distinctly opposite for the US.
| ciarannolan wrote:
| They had an office in Manhattan and customers in the US.
|
| https://www.justice.gov/usao-sdny/press-
| release/file/1323316... (Page 8)
| vmception wrote:
| > But please, expand on the "America bad" argument you
| were making. Very interesting stuff.
|
| It wasn't an America bad argument, it was a global
| hegemony acknowledgement.
|
| How do you read me talking about how almost everywhere is
| literally "irrelevant", my words, by all metrics and get
| an "America bad" argument out of it?
|
| Could have just left that out.
| ciarannolan wrote:
| I removed it from my comment (probably as you were
| writing) because you're right, it's lame and doesn't
| belong on HN. My apologies.
| ahupp wrote:
| It's run by Americans, the one arrest so far was in
| Massachusetts.
| ypeterholmes wrote:
| Ironic charge on the heels of the FinCEN leaks. Maybe next time
| just file a SAR?
| TedDoesntTalk wrote:
| SARs are warnings, flags. They do not indicate a crime has been
| committed. And the Dept of Justice does not issue SARs.
| flyGuyOnTheSly wrote:
| >REED allowed a friend of his who he knew resided in the United
| States to continue to access BitMEX's platform up to and
| including at least in or about October 2018.
|
| How could they possibly know this?
| not2b wrote:
| An informant, perhaps. They'd have to prove it in court if it's
| the basis for one of the charges.
| idorosen wrote:
| One of BitMEX's security features at one point (if memory serves)
| was that one (or more) of the principals had to review/approve
| withdrawals daily. That is likely difficult for them to do from
| prison or while being detained pending trial or extradition.
| BitMEX is probably not a great place to have assets that you need
| access to any time soon right now.
| flyGuyOnTheSly wrote:
| They're all located in countries that hold no extradition
| treaty with the United States iirc.
| miohtama wrote:
| CTO was arrested in Massachusetts
| x86_64Ubuntu wrote:
| And of course they mention changes to the law caused by the
| Patriot Act as being the source of the charges.
| LatteLazy wrote:
| I think the World Police BS that America engages needs to stop.
| That said, these guys have made it really really hard for
| regulators NOT to act.
|
| You can't just put "No Americans (no proof needed)" on a US based
| website with a lot of US citizen clients dealing in synthetic USD
| products that's 110% non compliant with almost any US law and
| expect a nice outcome. Not with those sort of assets and market
| share.
| Barrin92 wrote:
| >I think the World Police BS that America engages needs to stop
|
| Not American and I'm annoyed by the US pretty frequently but
| I'm not really sure why the US having teeth when it comes to
| clamping down on global money laundering is a bad thing.
|
| The financial sector appears to be the one sector where US
| authorities actually do a good job to stamp out crime, and I
| can obviously understand why the US will not tolerate an
| completely unmonitored shadow economy that could easily be used
| for sanction avoidance by Iran or any other rogue state.
| ghkklj wrote:
| I'm Iranian, why does the US government get to decide whether
| or not I can move my savings? Is my existance a crime?
| LatteLazy wrote:
| I think that sort of depends on your opinion of US foreign
| policy. Anti money laundering laws are basically there to
| stop people doing things the US doesn't like. So if enforcing
| them means (say) less terrorist attacks GREAT! But the same
| laws are used much more frequently to try and enforce drug
| prohibition. That's meh at best in my opinion. And
| occasionally you see the US use them to prevent countries
| like Iran buying medical supplies in a pandemic. That's
| pretty shitty.
|
| I'd give the US more points for enforcement (which you are
| correct is strongly pursued) if I thought the laws being
| enforced were less self serving in the first place...
| lend000 wrote:
| Your account is immediately frozen if you log in just once via
| a US IP address. They track funds from known hacks and are not
| considered a safe option for hackers to liquidate. They have a
| much better reputation for service, exchange quality, and
| account safety than any of their non-KYC competitors. Not a
| single US dollar has passed through their platform -- nobody is
| using it for money laundering, but for speculative trading.
| They still have to convert to fiat somewhere. The fiat on their
| platform is _synthetic._ What more were they supposed to do?
|
| I just hope this witch-hunt doesn't end the same as the Dread
| Pirate Roberts case for the government's political game on
| controlling cryptocurrencies and maintaining their monopoly
| over the financial system. Hayes is a great comedic writer and
| insightful analyst on the global financial system -- I highly
| recommend his posts on the Bitmex blog. However, I fear the
| tongue and cheek and comedy will be used against him in the
| case.
| metadatabad wrote:
| Exactly. Just like what the other poster said, the World
| Police BS has to stop now.
| huac wrote:
| > Your account is immediately frozen if you log in just once
| via a US IP address.
|
| The complaint alleges that the check for a US IP address only
| happened once and that they did not take any precautions
| against VPN usage, so as long as you VPN'd once, you could
| login from US addresses as much as you wanted afterwards.
|
| Furthermore, the complaint alleges that the company
| leadership received analytics reports broken down by country,
| including the US; and that the team did not monitor the funds
| from a hack in 2018, which allowed the hackers to launder
| those funds.
|
| These allegations may be false, but the case seems strong
| that Bitmex 1. served US customers, 2. did not comply with
| the necessary US regulations to serve those customers.
| switch11 wrote:
| Unfortunately, this is very accurate -> I just hope this
| witch-hunt doesn't end the same as the Dread Pirate Roberts
| case for the government's political game on controlling
| cryptocurrencies and maintaining their monopoly over the
| financial system.
|
| __* They went after Kik and Telegram also
|
| They basically don't want anyone to have any option to bypass
| the Petrodollar
| heimatau wrote:
| > I think the World Police BS that America engages needs to
| stop.
|
| I legit thought it would've been reduced with Trump because of
| his isolationist positioning. I guess this is going to be the
| norm for a distant future. I don't see how this box is closed
| without an aggressive shift in Geopolitics. I don't see how
| this would be a peaceful transition but if you see a solution
| like that, I'd love to hear!
|
| (edited for formatting)
| LatteLazy wrote:
| I think that "locking up foreigners" nationalism is more
| trumps flavour than "trade with all, allies with none" etc.
|
| He's very good at convincing people he supports their
| ideological position when he's really just using it to
| justify what he wants to do right now for his own reasons and
| will drop it the second it's not useful. That whys he's anti
| China until he has to actually take an action on China or
| exporting jobs or crime and punishment etc. :(
| heimatau wrote:
| > He's very good at convincing people he supports their
| ideological position
|
| That's actually not what he's doing. Look up his history.
| Evidence speaks for itself but too many are lazy to look it
| up.
|
| > That whys he's anti China
|
| Umm. I hate to spoiler your preconceived notions but
| China's method of governing is absolutely terrifying to a
| free society. uighur? Great leap forward causalities?
|
| Aside from the gaslighting on my part, realize this. China
| has been _known_ as a global threat for at least 20 years.
| I was taught this from my science teacher. He told us 'two
| issues your generation will face; China and water'.
|
| America has it's own issues and there is a large segment of
| the US that believe in Isolationism. FDR led the way there
| (with failings too).
|
| These issues are complicated and not simple but it's still
| sad that we're seeing World Police Officer be also the
| function of the US POTUS.
|
| P.S. Since HN seems to be anti-anything related to Trump.
| Let me make it clear. I'm a FDR/Bernie democrat. I voted
| Green Party last election and will this one too. Trump's
| policies (and lack thereof) aren't mutually exclusive to
| Trump.
| LatteLazy wrote:
| I mean, you're right he should act on China, a lefty
| Liberal like me agrees, he promised to do so, and he has
| all the reasons you listed plus more. So why hasn't he?
|
| Because he has no interest in doing anything, he's not
| committed to any actual policy, except for whatever suits
| him right now. And that's the real danger: soft power
| works sometimes, hard power works sometimes, "I'll give
| you whatever you want if you leave me alone and let me
| build a hotel" doesn't work (except for building hotels).
|
| That's the issue here. Trump is pro trump. He not an
| isolationist except if (claims of) isolationism forward
| the trump self service agenda. He'd be a leftist
| internationalist pro-china stogge if he thought he'd make
| a buck or get a vote more doing that.
|
| Yet people refuse to see this obvious, data driven
| conclusion...
___________________________________________________________________
(page generated 2020-10-01 23:00 UTC)