A day after crypto derivatives exchange BitMEX, its associated companies, and its executives got hit with charges, the exchange is still fully operational. 

Yesterday, the United States Commodity Futures Trading Commission (CFTC) charged Seychelles-based derivatives exchange BitMEX with operating an unregistered trading platform and breaking anti-money laundering regulations, but the company doesn’t seem phased. 

Relying on decentralisation to avoid the law

It has long been known that BitMEX has all but ignored even basic AML and KYC requirements, seemingly confident in relying on its decentralised structure to evade any repercussions. However, there is an increasing awareness that, although authorities in a specific country like the United States, may be unable to directly shutdown operations completely, they could still effectively disrupt operations by targeting key individuals and third-party service providers. 

Indeed, even BitMEX itself eventually acknowledged it couldn’t continue to ride roughshod over regulations indefinitely, introducing mandatory KYC requirements in April 2020. In July, BitMEX’s parent company, HDR Global Trading Limited, also restructured and rebranded as ‘100x Group’ , possibly in an effort to further distance itself from its past behaviour. But, it looks like that was far too little, far, far too late. 

According to a statement released yesterday, the CFTC has filed a civil enforcement action in the Southern District of New York, against five corporate entities and three individuals who are allegedly responsible for owning and operating the exchange. 

As expected, the individuals include Arthur Hayes, CEO of BitMEX, along with Ben Delo and Samuel Reed. The corporate entities charged are HDR Global Trading Limited, 100x Holding Limited, ABS Global Trading Limited, Shine Effort Inc Limited, and HDR Global Services (Bermuda) Limited (BitMEX).

Civil and criminal charges

The CFTC alleges BitMEX has illegally offered services to retail trades amounting to a staggering $1 trillion USD since launching in 2014, and is seeking disgorgement of all “ill-gotten gains”, civil monetary penalties, permanent trading bans, and injunctions against future violations. Specifically, the CFTC says BitMEX received $11 billion in BTC deposits and raked in over $1 billion in fees, “while conducting significant aspects of its business from the US and accepting funds from US customers.” 

The US attorney for the District of New York has also indicted Hayes, Delo, Reed, and BitMEX’s head of business development, Gregory Dwyer, for violating and conspiring to violate the Bank Secrecy Act. If convicted they could each face fines of up to $250K and up to five years imprisonment. 

Citing the audacity of the operation, FBI Assistant Director, William Sweeney, commented:

“One defendant went as far as to brag the company incorporated in a jurisdiction outside the U.S. because bribing regulators in that jurisdiction cost just ‘a coconut.’ Thanks to the diligent work of our agents, analysts, and partners with the CFTC, [the defendants] will soon learn the price of their alleged crimes will not be paid with tropical fruit, but rather could result in fines, restitution, and federal prison time.”

As of last night, Reed was the only individual to have been arrested. Meanwhile Sean Hecker and Jenna Dabbs, partners for Kaplan Hecker & Fink, the law firm representing Dwyer, sent out statements insisting that their client had complied with the CFTC investigation, had never even been invited to talk with US prosecutors, and had “always worked in good faith to comply with all applicable regulations and requirements. 

HDR Global responds

In a statement, an external spokesperson for HDR Global, said:

“We strongly disagree with the US government’s heavy-handed decision to bring these charges, and intend to defend the allegations vigorously. From our early days as a startup, we have always sought to comply with applicable US laws, as those laws were understood at the time and based on available guidance.”

The BitMEX platform has continued to operate normally, and the company has assured customers that their funds are safe. 

AYO.NEWS says:

Yesterday’s charges were hardly surprising, and everyone at BitMEX and its associated companies must have seen them coming months ago. Indeed, we first reported about a possible US investigation of BitMEX way back in July 2019. Perhaps most surprising is that Samuel Reed hadn’t already ensured he was out of reach. 

Will the US be able to exert enough pressure in the right places to get BitMEX itself shutdown, or will this just turn into one very long and very costly circus that results in nothing more than a few more wealth crypto exiles who simply avoid every stepping foot on US territory (or anywhere with easy extradition) again? 

‘AYO.NEWS says’ features the opinion of the author and does not necessarily reflect the views of Pentagon Digital Limited or its affiliates or associates. 

All original content featured on this site is © Pentagon Digital Limited, 2020

Romanian authorities have announced the country’s first ever auction of seized crypto assets. 

Earlier today, Romania’s National Agency for the Management of Seized Assets (ANABI) confirmed it will be holding an auction for confiscated Bitcoin (BTC) and Ether (ETH). The action is in response to a ruling from the Prosecutor’s Office in the Ploiesti Court, and involves cryptocurrency seized during a fraud case. 

ANABI has stressed that it will only transfer the crypto assets to a winning bidder who provides public addresses associated with a legal and registered crypto platform, adhering to Romania’s legislative norms, and complying with Know Your Customer and Anti-Money Laundering provisions. 

As previously reported, it was only in July 2020 that Romania finally brought its cryptocurrency regulations up to full 5AMLD standard. 

AYO.NEWS says:

It’s no secret that there’s a whole lot of cryptocurrency sloshing about in the criminal world, so we can expect to see this kind of thing become common as courts and various authorities become more comfortable with handling crypto. In February, the United States Marshals Service (USMS) auctioned over 4,000 confiscated Bitcoins (BTC), worth around $37.4m USD at the time. 

‘AYO.NEWS says’ features the opinion of the author and does not necessarily reflect the views of Pentagon Digital Limited or its affiliates or associates. 

All original content featured on this site is © Pentagon Digital Limited, 2020

The Danish gambling authority, Spillemyndigheden, has appointed former deputy director of the Danish Immigration Service, Anders Dorph, as its new director. 

Dorph is scheduled to take up his new role on 1 November 2020. 

Commenting on his appointment, Dorph said:

“Spillemyndigheden is an exciting agency that plays an important role in the regulation of the gaming market. That is why I’m very much looking forward to the task and to collaboration with many talented colleagues.”

While Denmark’s minister of taxation, Morten Bødskov, added:

“Anders Dorph has an extremely wide professional profile with broad experience from politically led organisations and cooperation across authorities. I look forward to benefiting from his experience.”

Spillemyndigheden’s previous director, Morten Niels Jakobsen, stepped down in August and is now director of the Danish Valuation Agency, Vurderingsstyrelsen – the body responsible for for the public assessment of land and property values. 

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Liga Profesional de Fútbol del Ecuador (LigaPro) has appointed Stats Perform as its exclusive Official Data Partner for Serie A and Serie B domestic competitions.

Stats Perform’s trusted Opta and RunningBall data brands will exclusively deliver official ultrafast data and detailed player performance data to licensed betting operators, broadcasters, publishers, fantasy providers and the leagues’ own digital platforms.

Stats Perform’s Integrity Unit has also been appointed to help protect the integrity of the LigaPro. This will include monitoring global betting markets, an extensive integrity intelligence programme, and its unique performance integrity analysis service.

Miguel Ángel Loor, Presidente de LigaPro, Commented:

“We are excited to be working with Stats Perform. Not only will they help us improve on-field performances through deep and accurate data, they will support us in preventing match manipulation and betting fraud. Stats Perform’s pedigree for collecting deep, accurate and fast data and unrivalled distribution network will help us engage fans globally and grow the sport we love.”

The Liga Profesional de Fútbol del Ecuador exclusive data rights deal follows the recent news that Stats Perform added the exclusive betting streaming and data rights to the Brazilian and Colombian football leagues to its football content offering, which also includes Spanish La Liga, French Ligue 1 and numerous other European, South American and global sports.

Staying with Stats Perform, in recent months the company has also entered into a multi-year partnership with Beyond Sports (covering the usage of its positional tracking data of the English Premier League), renewed its partnership with Matchroom, announced an agreement with the Belgian Pro League, extended its exclusive betting data and streaming deal with Australia’s Hungry Jack’s National Basketball League (NBL), and its data partnership with US-based fantasy and sports betting operator DraftKings. 

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The UK’s Gambling Commission (UKGC) has introduced new guidance regarding VIP customers. 

Aimed at tackling “irresponsible incentivisation” of high-value customers, and improving customer protection, the new rules have been formulated following a consultation process that ran from June to August. 

UK operators will now be required to conduct extensive checks on customers before enrolling them in VIP programs. In addition to on-going gambling harm checks, operators will need to ascertain the source of funds and occupation, and carry out identity verification. Crucially, operators will be required to establish that customers’ spending is affordable and sustainable.

Each VIP program will also be required to be overseen by an assigned senior executive, who must hold a personal management license (PML). They will be personally responsible for customer safety. 

Commenting on the changes Gambling Commission chief executive, Neil McArthur, said:

“We have introduced these new rules to stamp out malpractice in the management of ‘VIP’ customers and to make gambling safer. Our enforcement work has identified too many cases of misconduct in the management of VIP schemes and this is the last chance for operators to show they can operate such schemes appropriately.

“We understand that the number of customers signed up to ‘VIP’ schemes has already reduced by 70% since we challenged the industry to get its house in order, last year. Whilst that is a sign of the positive impact our innovative approach to collaborative working can have, these new rules are designed to ensure progress continues to be made to protect vulnerable customers.

“Operators can be in no doubt about our expectations. If significant improvements are not made, we will have no choice but to take further action and ban such schemes. These new rules are part of the Commission’s comprehensive programme of tougher enforcement and compliance activity which has also seen the introduction strengthened protections around online age and ID verification, improved customer interaction practices, and the banning of gambling on credit cards.”

The new rules will be enforced from 31 October 2020. 

In the coming weeks, the Commission will be launching a consultation on customer interaction, and will also be responding to a consultation on safe online game design. 

Last week, the UK’s Betting and Gaming Council (BGC) attempted to assuage the UKGC by introducing a new code of conduct covering the design of online games. 

AYO.NEWS says:

Though this is going to add a lot of extra work and responsibilities for gambling operators, everyone knew it was coming, and many would argue the industry brought it on itself. For a long time now, many operators have centred their business models around attracting a relatively small number of ‘VIP’ customers, usually via affiliate marketing networks – leaving themselves horribly vulnerable to changes like those announced by the UKGC today. 

Of course, there is an alternative approach, which involves scaling and relying on large numbers of microtransactions. This tends to be more common in the esports and crypto betting scenes, and requires extensive automation to make it viable, but it arguably results in more sustainable and resilient businesses. 

‘AYO.NEWS says’ features the opinion of the author and does not necessarily reflect the views of Pentagon Digital Limited or its affiliates or associates. 

All original content featured on this site is © Pentagon Digital Limited, 2020.

The Esports Integrity Commission (ESIC) has released findings from its CS:GO spectator bug exploitation investigation.

On 4 September ESIC revealed it was investigating the historical abuse of a bug in CS:GO’s spectator mode. It contracted the services of Michal Slowinski, who had originally discovered the wrongful use of the exploit, to help with the investigation.

Though ESIC initially believed it would need to review 25K demos in order to assess the level of exploitation, it actually retrieved 99,650 demos (approx. 15.2TB of data), dating back to 2016, via accessing the demo databases of the ESEA and HLTV. 

Despite ESIC only finding positive indications of Spectator Bug abuse in 0.1% of demos, so far the investigation has exposed 96 cases of the bug being deliberately abused in a competitive environment, implicating 37 parties.

Sanctions have now been issued to prevent the offending parties from joining official match game servicers, from communicating with players 15 minutes before and after matches, and being involved in the map veto process. They will be enforced by all ESIC member organisations, including BLAST, DreamHack, Eden Esports, ESL, LVP, NODWIN Gaming, and We Play! Esports. 

In a message to the CS:GO community, ESIC said:

“We understand that these revelations have been tough for many people within the CS:GO community, but we believe it is in the long term best interests of the game and all of esports for integrity breaches to be dealt with head on. 

“We know that most coaches, players, tournament organisers, publishers and developers, fans, sponsors and broadcasters want CS:GO and esports to be clean and a fair competition between players and teams doing their very best to win. We see our job as being to ensure that that happens and that corrupt and bad actors are rehabilitated or removed.”

AYO.NEWS says:

With CS:GO being one of the most popular esports for betting, it’s critical that integrity is maintained, so it’s great to see ESIC conducting such a thorough investigation. Hopefully it will also act as a deterrent to other potential bad actors across all titles. 

‘AYO.NEWS says’ features the opinion of the author and does not necessarily reflect the views of Pentagon Digital Limited or its affiliates or associates. 

All original content featured on this site is © Pentagon Digital Limited, 2020