The hits keep coming for BitMEX. In addition to being indicted on criminal charges, founders Arthur Hayes, Ben Delo and Samuel Reed are being sued in California for running a RICO (Racketeer Influenced and Corrupt Organizations Act) enterprise engaging in wire fraud, money laundering, interstate transportation of stolen property, digital asset market manipulation and racketeering. Other personnel associated with BitMEX and the alleged RICO scheme are also named as defendants in the lawsuit.
The suit is brought by Păun Gabriel-Razvan, a digital asset trader and the owner of news aggregator 24/7 Crypto News. The allegations are scathing, calling Hayes, Delo and Reed “notorious fraudsters, who have been criminally charged with felony money laundering related offenses by the U.S. Department of Justice and two of whom are currently fugitives from U.S. law enforcement.” It says that in launching BitMEX, the defendants intentionally sidestepped mandatory financial controls and refused to implement any KYC or AML checks. The non-existent registration requirements enabled and encouraged money laundering and market manipulation on the BitMEX platform and has led to the misappropriation of over $427,000,000 from traders, it is alleged.
Much of what the plaintiff is accusing BitMEX and its founders of is already a focus in the criminal investigation, including attempts by the defendants to reincorporate their business in the Seychelles in order to avoid regulatory obligations and offering their services to U.S. residents without obtaining a license, covering some $70,000,000 worth of business from New York and California alone.
However, the suit also details a broader scheme to conceal the true nature of the funds earned from the money laundering and market manipulation orchestrated by BitMEX. It alleges that the defendants used fraudulent shell companies in the U.S. to facilitate a real estate investment scheme in order to disguise the source of the finds.
All in all, the lawsuit asks for relief on 17 separate counts. They request that the Court enter a judgment that the defendants are guilty of each count, award compensatory and treble damages to Razvan, and award Razvan exemplary and punitive damages against the defendants to the tune of $50,000,000.
All of this is to be expected. Now that the U.S. Department of Justice has moved on BitMEX for what is being called a RICO enterprise, expect many more civil suits of this kind to follow. While RICO is a law enforcement tool to lay criminal penalties on criminal organizations—and is currently being used in this way against BitMEX in the indictments—any person can bring a civil lawsuit if they have been injured by a RICO violation by a private party. In addition to compensation for the actual damage suffered, plaintiffs can be awarded treble damages, which triples the amount of the compensatory damages.
No doubt anyone who has put money into BitMEX will read the lengthy allegations contained in the indictments and Razvan’s suit and begin to see that they may have been cheated out of their money by what is turning out to be—if the allegations are proven true—a significant criminal enterprise. Fortunately for them, RICO has the answer.