Crypto never sleeps, but it received a wake-up call after an indictment came down against widely used bitcoin exchange BitMEX, which allows up to 100x leverage and technically bans US traders.
The Commodity Futures Trading Commission and Department of Justice are both coming after the exchange and its owners, including the face of the company, Arthur Hayes, for not enforcing KYC and AML protocols. Two others on the management team, Ben Delo and Samuel Reed, are also in hot water.
Crypto Twitter Responds
Crypto market leaders were quick to weigh in, including bitcoin bull Mike Novogratz. The Galaxy Digital chief reminded his crypto friends that in America, you are innocent until proven guilty. He added that while he does not have any insight into the case, he wishes Arthur Hayes well.
In addition, he addressed the elephant in the room, which is the bitcoin price and the future of the cryptocurrency market. After all, the demise of Mt. Gox 2013 had a damaging and prolonged effect on the BTC price, so it’s understandable that investors would worry that the same could happen if BitMEX, which boasts more than $1 billion in daily trading volume, is shuttered.
Novogratz offers some perspective in a tweet, saying that in his opinion bitcoin is bigger than what’s going down at BitMEX and advising investors to “buy dips.”
Crypto friends, Let’s remember that you are innocent to proven guilty. It’s a cornerstone of American justice. I have no insight into the case but I wish @CryptoHayes well.
I do think that $btc and crytpo is far bigger than any one exchange or person. So buy dips.
— Mike Novogratz (@novogratz) October 1, 2020
So far, investors aren’t heeding his advice, with the BTC price down more than 1%. But bitcoin remains perched above $10,600, and the bottom doesn’t appear to have fallen out in response to the BitMEX charges.
Perhaps it has something to do with the fact that BitMEX is still processing withdrawals so as not to cause a panic. Their strategy appears to be doing the trick — for now.
Not everybody will likely be as forgiving, including economist and bitcoin basher Nouriel Roubini. Based on his remarks from a year ago, after debating the BitMEX chief, Roubini might revel in the fact that Hayes’ loosey-goosey attitude toward the law has finally caught up with him.
Others pointed out the hypocrisy on Wall Street, considering how JPMorgan just reached a record settlement of $920 million over traders who were accused of market manipulation in the precious metals market; yet unlike Hayes, CEO Jamie Dimon is not looking over his shoulder.
BitMEX vehemently denies the charges, saying in a statement,
“From our early days as a startup, we have always sought to comply with applicable U.S. laws, as those laws were understood at the time and based on available guidance.”
While the precedents in the courts are still being written for crypto, relying on the bad advice defense might not get them very far.