John Obee

"Crypto millionaires donate to Reform". But the stories are always more complex than headlines. In both Bitmex (Delo) and Bitifnex (Harborne), a substantial owner of a crypto exchange controlled a separate non-exchange company that obtained conventional banking access while the exchange itself faced banking difficulties. We recently became aware that Christopher Harborne walked back from his lawsuit against the WSJ where a core claim, disputed by him and alleged to be defamation, was linked to bank accounts and Bitfinex money. The quote from Delo's lawsuit is striking: "In or about July 2015, BitMEX acquired a company called Shine Effort Inc. Limited, which was at all relevant times a Hong Kong-registered company. In or about August 2015, BitMEX “sold” Shine Effort to one of the Founders, Benjamin Delo, for $1. Although Delo was the record owner of Shine Effort, BitMEX was in fact the true beneficial owner of the entity. This arrangement was ultimately memorialized in a Declaration of Trust, which provided that Delo held his ownership interest in Shine Effort on behalf of the true owner, BitMEX. In or about September 2015, Benjamin Delo opened a bank account in the name of Shine Effort (the “Shine Effort Bank Account”) at a Hong Kong subsidiary of an international bank (“Bank-1”). Arthur Hayes assisted Delo in opening the Shine Effort Bank Account. The Shine Effort Bank Account at Bank-1 was used to, among other things, conduct operations of BitMEX, the defendant. For example, Shine Effort was used to convert the Bitcoin earned by BitMEX – which did not have a corporate bank account in its own name – into U.S. dollars and other fiat currencies, which were deposited in the Shine Effort Bank Account" The difficulties in operating crypto at that time was a fact. Banks did not want to touch crypto money. By July 2018 more than 80% of Bitfinex client deposits were in accounts controlled by Crypto Capital, illustration of that access challenge. The question here is what kind of steps were taken by exchange owners to make their operations viable. Despite some similarities, Delo was sued during the Biden administration - Harborne never was. Delo paid personally a $10m fine which DOJ stipulated as economic gains from the illegal activity conducted by Bitmex, principally profits generated by continuing to serve US customers without implementing the AML/KYC regime that would have accompanied lawful US operations. FinCEN found that from approximately 2014 through 2020, BitMEX allowed customers to trade derivatives while “collecting only an email address and failing to verify customer identity. Yes, really. Just an e-mail. justice.gov/usao-sdny/media/… fincen.gov/news/news-release…