Thursday, the co-founders of BixMex pled guilty to “violating the Bank Secrecy Act by willfully failing to establish, implement, and maintain an anti-money laundering program” at their exchange. The pair will pay a collective $20 million in criminal fines.

“The worst part of this case is that the company appears to have had criminal intent. It would have been incredibly easy to implement a solution which would’ve made their exchange compliant. I’ve been following the regulatory landscape closely, and we warn our clients and the media alike of the compliance necessities when operating in this industry. I even designed a complex solution specifically created to stop money launderers and keep exchange executives legal, which integrates with all popular KYC & AML providers, and goes above and beyond, utilizing advanced geo-fencing that looks for proxies, such as VPNs and Tor exit nodes; provides Suspicious Activity Alerts; and features Ciphertrace and Chainanalysis integrations to identify deposits associated with criminal activity. In this case, the pair seems like they went out of their way to operate in an illegal fashion, and, if that’s the case, they deserve jail time,” said Richard Gardner, CEO of Modulus, a US-based developer of ultra-high-performance trading and surveillance technology that powers global equities, derivatives, and digital asset exchanges.

According to the indictment, public court filings, and statements made in court, the pair “willfully caused BitMEX to fail to establish and maintain an AML program, including a program for verifying the identity of BitMEX’s customers,” resulting in the company effectively serving as a “money laundering platform.”

It continued to note that the pair “failed to institute AML or KYC programs at BitMEX despite closely following U.S. regulatory developments that made clear their legal obligation to do so if BitMEX operated in the United States, which it did,” despite claims to the contrary.

U.S. Attorney Damian Williams said, “As cryptocurrencies and technologies designed to facilitate their trade proliferate, companies engaged in the virtual currency economy have become critical gatekeepers in efforts to ensure that U.S. markets are fair, efficient, and secure. The opportunities and advantages of operating in the United States are legion, but they carry with them the obligation for those businesses to do their part to help in driving out crime and corruption.  Arthur Hayes and Benjamin Delo built a company designed to flout those obligations; they willfully failed to implement and maintain even basic anti-money laundering policies.  They allowed BitMEX to operate as a platform in the shadows of the financial markets. Today’s guilty pleas reflect this Office’s continued commitment to the investigation and prosecution of money laundering in the cryptocurrency sector.”

“The FBI did good work. But, fining each only $10 million is a slap on the wrist for the enormity of the crime, and it sends the wrong message to the industry,” said Gardner. “BitMEX had the ability to stay legal, stay in compliance, and do the right thing. They chose the opposite road, and there should be a more punitive response.”

Modulus is known throughout the financial technology segment as a leader in the development of ultra-high frequency trading systems and blockchain technologies. Modulus has provided its exchange solution to some of the industry’s most profitable digital asset exchanges, including a well-known multi-billion-dollar cryptocurrency exchange. Over the past twenty years, the company has built technology for the world’s most notable institutions, with a client list which includes NASA, NASDAQ, Goldman Sachs, Merrill Lynch, JP Morgan Chase, Bank of America, Barclays, Siemens, Shell, Yahoo!, Microsoft, Cornell University, and the University of Chicago.

“Right now, as we wait for the government to build a complete guidebook to regulate the industry in a fair, commonsense fashion, it is critical that we look at intent. In this case, there was intent to provide a haven for money launderers. This isn’t a case where the exchange was engaged in a legal gray area made fuzzy by a failure to adequately regulate. This is a case where BitMex knew the legal way to operate and acted in brazen, purposeful opposition. That can’t happen if we want the industry to succeed,” noted Gardner.