LAW & CRYPTO

Arthur Hayes faces U.S. prosecution over how he ran his overseas Bitcoin exchange

- Benjamin Robertson and Edward Robinson, with Zheping Huang

Ever since Arthur Hayes became a star in the Bitcoin universe, he’s been called many things, from trailblazer to anarchist. On April 6 the former chief executive officer of crypto exchange BitMEX surrendered to U.S. authorities in Hawaii to face a more consequential label: alleged criminal. Six months ago, prosecutors accused him and three others of failing to implement adequate money laundering controls. Hayes pleaded not guilty and was released on $10 million bond pending federal court proceedings in New York.

His legal troubles come at a pivotal moment for the asset he championed. Regulators as well as Wall Street are stepping in to remake the crypto industry as the value of Bitcoin surges. It recently traded at more than $60,000, up from about $7,000 a year ago.

A 35-year-old American who’s long lived in Asia, Hayes had no problem playing the crypto rebel who charged through the guardrails of traditional finance. In 2014 he launched BitMEX, where traders could invest not in Bitcoin itself but in contracts linked to its price moves. (The name is an apparent nod to older markets such as Nymex or Comex where traders swap oil or metals futures.) Contracts can allow traders to take positions quickly, to bet on prices falling as well as rising, and to use leverage to magnify their potential return and risk. “I just loved the fact that with Bitcoin there wasn’t much out there at that time,” the former Citigroup Inc. equities trader told Bloomberg News in a 2018 story. “It was an opportunity to do something on my own, to take some risk, rather than going to some structured, monolithic corporation.”