US prosecutors seek 12-month probation for BitMEX employee

United States prosecutors are asking the court to sentence former BitMEX employee Greg Dwyer to 12 months probation for wilfully failing to establish, implement and maintain an anti-money laundering (AML) program at the cryptocurrency exchange.

Dwyer had asked that the court recognize his time already served by refusing to sentence him to probation.

Dwyer, who initially pleaded guilty in August, was BitMEX’s first hired employee and eventually was appointed its head of business development. According to the indictment, Dwyer, together with his bosses Arthur Hayes, Benjamin Delo, and Samuel Reed, deliberately failed to establish an AML program at BitMEX, to the point that the exchange had no Know Your Customer (KYC) program, which the Department of Justice said made BitMEX a money laundering platform.

Dwyer’s role in the failure was particularly egregious considering he apparently was a close follower of U.S. regulatory developments, which made BitMEX’s obligations as a result of operating in the U.S. clear, according to prosecutors.

“Dwyer knew that BitMEX’s purported withdrawal from the U.S. market in or about September 2015 was a sham, and that purported ‘controls’ BitMEX put in place to prevent U.S. trading were an ineffective façade that did not, in fact, prevent users from accessing or trading on BitMEX from the United States.”

Dwyer’s charge—violating the Bank Secrecy Act—carries a maximum penalty of five years in prison. He’s already paid a $150,000 fine as part of his plea agreement.

Compared to the statutory maximum, 12 months probation might seem light. However, the case is notable because Dwyer was hit with criminal charges for his activities as an employee, as opposed to the other BitMEX defendants who founded the company. Hayes, the CEO of BitMEX, was sentenced to two years probation, including six months of home detention. While Dwyer isn’t getting the worst of it, the Department of Justice (DOJ) certainly sees his conduct in the same league as the company’s owners.

In a statement to CoinGeek, a spokesperson for Dwyer said: “As Head of Business Development at BitMEX, Mr. Dwyer never served in any compliance, legal or regulatory role and had only a very nominal ownership interest in the company. Even the government concedes that Mr. Dwyer did not have control over BitMEX’s operations or the company’s approach to compliance, and we are not aware of charges of this nature ever being brought against a similarly situated individual. Mr. Dwyer worked for several years developing strategic partnerships to help build BitMEX into a successful trading platform for sophisticated institutional and retail customers. The government’s heavy-handed approach with respect to the prosecution of Mr. Dwyer is regrettable, and Mr. Dwyer is relieved to have this matter behind him and looks forward to getting on with his life – both personally and professionally.”

Dwyer’s successful prosecution will no doubt be sending chills down the spines of the digital asset companies currently being thrust under the government microscope as a result of FTX’s catastrophic meltdown.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.