CFTC investigating crypto derivatives exchange BitMEX over US trading breach - Report

Quick Take

  • US regulator, the CFTC, is probing whether BitMEX, a major crypto exchange, broke rules by allowing Americans to trade on its platform
  • Seychelles-based BitMEX was forced to close its platform to North Americans in 2018
  • The exchange recently came under attack from crypto-critic, Nouriel Roubini

The U.S. Commodity Futures Trading Commission (CFTC) is reportedly probing crypto derivatives exchange BitMEX to determine whether it broke rules by allowing U.S traders onto its platform.

According to a Bloomberg report on Friday, citing anonymous sources, the probe would be “months-long” to investigate the issue as Seychelles-based BitMEX is not registered with the CFTC. 

In 2018, BitMEX, the largest margin trading platform for Bitcoin, was forced to close North American users’ accounts following a letter from Canadian regulators informing the company it was in breach as an unlicensed entity.

US regulators have been clamping down on crypto trading firms in recent months. For instance, U.S.-based Bittrex and Poloniex delisted tens of tokens earlier this year over concerns they could be deemed securities by the SEC. Binance also announced it was withdrawing from the US last month, although it is planning to open a regulated fiat-to-crypto exchange for American users on a separate platform. Perhaps most notably, at the start of July, the New York Attorney General alleged crypto exchange Bitfinex and affiliated firm Tether had operated in the state as recently as January 2019.

Nonetheless, Bloomberg's report concerning BitMEX this morning highlighted that "regulator's investigations often don't lead to allegations of misconduct." Still, in March, bitcoin derivatives platform 1Broker settled a lawsuit with the CFTC for selling security-based swaps to U.S. investors.

BitMEX also returned to limelight earlier this month when it came under fire from Nouriel Roubini. The crypto-skeptic pointed to the exchange as an example of a firm that is "openly involved in systematic illegality." He cited research that estimates liquidations of customer savings comprise as much as half of BitMEX’s revenue, and that according to his sources inside the company, terrorists and criminals from Russia and Iran purportedly use BitMEX services for money laundering “on a massive scale."


Keep up with the latest news, trends, charts and views on crypto and DeFi with a new biweekly newsletter from The Block's Frank Chaparro

By signing-up you agree to our Terms of Service and Privacy Policy
By signing-up you agree to our Terms of Service and Privacy Policy

For its part, BitMEX CEO Arthur Hayes told Bloomberg, “BitMEX provides safe, fast, professional and liquid ways for those who see the potential of crypto and to trade and hedge cryptocurrency risk. We continue to monitor all legal and regulatory developments around the world and will comply with all applicable laws and regulations; we reject any allegations of criminality, manipulation or unfair treatment of our customers, who are at the center of everything we do.”

BitMEX was co-founded in 2014 by Hayes along with Samuel Reed and thirty-five-year-old British national Ben Delo. The exchange is widely used in Asia and reports overseeing as much as $10 billion in trading a day. Its main office is in Hong Kong but it also has a base in San Francisco.

The probe is ongoing and the CFTC has declined to comment. A BitMEX spokeswoman told Bloomberg that the exchange does not comment on media reports about investigations by government agencies.

This is a developing story....

© 2023 The Block. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Authors

Yogita Khatri is a senior reporter at The Block, covering all things crypto. As one of the earliest team members, Yogita has played a pivotal role in breaking numerous stories, exclusives and scoops. With nearly 3,000 articles under her belt, Yogita holds the records as The Block's most-published and most-read author of all time. Prior to joining The Block, Yogita worked at crypto publication CoinDesk and The Economic Times, where she wrote on personal finance. To contact her, email: [email protected]. For her latest work, follow her on X @Yogita_Khatri5.
Isabel is The Block's London and European reporter. She previously reported for Reuters in Madrid and London, following on from her time as a freelance journalist for the Guardian and the New York Times. She has a Bachelors in War Studies from King’s College London and a Master of Philosophy from the University of Oxford. Conflict of Interest: Edward Woodford, the CEO of SeedCX, is Isabel's brother. She does not report on any issues related to Seed or advise other authors in any regard.