Commodity Futures Trading Commission v. HDR Global Trading Ltd.

HDR Global Trading Ltd. and various affiliated entities (collectively, HDR) (defendants) operated BitMEX. BitMEX was a platform that allowed users, including users based in the United States (U.S.), to trade cryptocurrency derivative products. BitMEX offered leveraged (i.e., financed) trading to, among others, individual retail users. In May 2016, BitMEX launched its perpetual-contract product (also known as a perpetual swap), which BitMEX described as a virtual-currency swap product that traded like traditional futures product. BitMEX was not a registered board of trade with the Commodity Futures Trading Commission (CFTC), nor was BitMEX a registered foreign board of trade. BitMEX solicited or accepted orders for the purchase or sale of commodities for future delivery, solicited or accepted orders for commodities swaps, solicited or accepted orders for retail commodity transactions, or acted as a counterparty for such transactions. However, BitMEX did not register with the CFTC as a designated contract market or a swap-execution facility. BitMEX also did not employ an adequate supervisory system and failed diligently to perform its supervisory duties by, among other things, failing to implement (1) a customer identification system to enable BitMEX to identify U.S.-based users or determine most customers’ true identities and (2) an adequate antimoney-laundering program to uncover illegal activities. The CFTC sued BitMEX, alleging that BitMEX’s activities violated Commodity Exchange Act (CEA) §§ 4(a), 4c(b), 4d, and 5h(a)(1) and CFTC Regulations 32.2, 166.3, and 42.2. In response, BitMEX represented that it implemented remedial measures, including the development of antimoney-laundering and user-verification programs. Thus, BitMEX strengthened its controls designed to uncover and prevent suspicious transactions, appointed a chief compliance officer, hired new antimoney-laundering staff, and retained a third-party consultant to review and test BitMEX’s antimoney-laundering program and customer-identification practices. The CFTC and BitMEX agreed to settle the CFTC’s claims. The district court issued findings of fact and conclusions of law in connection with its entry of a consent order implementing the parties’ settlement.