Arthur Hayes to get five years in jail for unlawful businesses

After pleading guilty to violating the US Bank Secrecy Act, former BitMEX CEO Arthur Hayes will be sentenced this Friday (BSA).

The sentencing will bring an end to a legal chapter that began in October 2020, when the Department of Justice and the Commodity Futures Trading Commission (CFTC) filed rival actions against BitMEX and its owners. 

Benjamin Delo, Samuel Reed, and Hayes were among the owner-operators.

Despite the fact that Hayes faces a maximum term of five years in prison, BSA offenses seldom result in jail time.

The Allegations

The CFTC filed a civil lawsuit against the three co-founders, saying that they failed to execute know-your-customer procedures, a client information program, and anti-money laundering procedures, in violation of CFTC standards. 

Separate criminal allegations of breaching the BSA were filed by the DOJ.

Hayes was living in Singapore at the time the complaints were submitted. 

Hayes proceeded to Hawaii after negotiating a surrender arrangement, where he appeared before a federal judge and was later freed on a $10 million bond, with further court procedures set to take place in New York.

Hayes and Delo each pleaded guilty to one count of violating the BSA, which carries a potential jail sentence of five years.

“Mr. Hayes accepts responsibility for his actions and looks forward to the time when he can put this matter behind him,” a spokeswoman for Hayes told The Block at the time of the plea.

That time may be approaching quickly. 

The CFTC case has since been settled, with the three co-founders receiving a $30 million penalty. 

For violations of federal commodities laws, each is liable for $10 million. BitMEX also settled in August 2021, agreeing to pay a $100 million fine and refrain from marketing derivatives products in the United States.

Will hayes get 5 years of jail?

Hayes is optimistic that his criminal charges will be handled without jail time now that the civil enforcement has been resolved.

The BitMEX case is a first-of-its-kind prosecution for the government, as Hayes’ probation request points out.

It’s the first time the SEC has taken action against a crypto company for violating the BSA — a level of compliance that hasn’t always been upheld by the sector.

 In the BitMEX case, the US has made it plain that existing traditional finance anti-money laundering procedures must be followed.

According to Jaimie Nawaday, a former federal prosecutor in the Southern District of New York and current co-head of Seward & Kissel’s Government Security and Internal Investigations Group, felony BSA violations are severe offenses, although they rarely result in jail time.

According to Nawaday, if Hayes is sentenced to prison, anything more than a year would be a significant choice with long-term consequences.

A shorter sentence, such as six months, would have less of an impact. Because the request is more innovative, determining whether a request to travel overseas will be approved is more difficult.

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Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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