Traders Withdraw Over 40K Bitcoin from BitMEX as Company’s Legal Woes Kick-Off

Top cryptocurrency derivatives exchange platform BitMEX is currently battling a hoard of criminal charges from the United States government. While the Seychelles-based exchange has denied any wrongdoing, the scandals appear to be causing it to bleed customers.

Antsy Traders On the Move

According to data from Glassnode, traders have withdrawn about 45,000 BTC tokens (worth about $420 million) from the exchange since its row with the U.S. government began. The blockchain data tracking firm had previously pointed out that BitMEX lost 23,200 BTC (about $243 million) in a single hour, marking the most massive hourly outflow that the exchange has ever recorded. 

As Glassnode added, BitMEX wallets initially held about 170,00 BBTC (worth about $1.8 billion). This significant outflow of assets will undoubtedly hurt the firm.

Along with the outflows, open positions on Bitcoin futures contracts on the exchange have dropped by 20 percent, according to data from market analytics firm Skew. As the drop in assets, it is most likely that the government indictment case caused this hit to open positions.

Data from Crystal Blockchain corroborated the Glassnode report, explaining that net outflows from BitMEX continue to rise. The data analytics firm also posited that Huobi, Binance, OKEx, and Gemini had been the investor flight’s biggest beneficiaries. The four exchanges alone have reportedly taken in 20,000 BTC of the transferred assets.

Things Could Get Messy

The drops in metrics are coming from a significant BitMEX charge that dropped earlier this month. On October 1, the United States Commodity Futures Trading Commission (CFTC) filed a complaint against the Seychelles-based exchange, accusing it of operating an unregistered trading platform and violating Anti-Money Laundering (AML) violations. 

The filing, which was placed at the Southern District of New York, named five entities and three individuals who own the exchange. They include Arthur Hayes, BitMEX’s CEO, Samuel Reed, and Ben Delo. Other entities include and HDR Global Services (Bermuda) Limited (BitMEX), ABS Global Trading Limited, HRD Global Trading Limited, Shine Effort Inc., and 100x Holding Limited.

As the Commission explained, it believes that BitMEX had been illegally offering leveraged trading services to traders. Since its inception in 2014, the exchange reportedly offered leveraged trading to the tune of $1 trillion. It also charged BitMEX of violating basic compliant procedures, including failure to register with authorities and a lack of any AML and Know-Your-Customer (KYC) procedures.

The agency confirmed seeking disgorgement, civil monetary penalties, permanent trading bans, and injunctions against future violations. Besides the charges, the Court also indicted the three aforementioned individuals – as well as BitMEX’s Head of Business Development Gregory Dwyer – of violating the Bank Secrecy Act. If convicted, they could each face five years in prison and pay fines of about $250,000. 

FBI Assistant Director William Sweeney claimed that one of the company’s executives had bragged about the firm being incorporated in a jurisdiction outside of the U.S. because it would be easy to bribe their regulators. The Department of Justice confirmed in a statement that Reed was arrested on Thursday morning in Massachusetts. The other company executives are still at large.