U.S. CFTC Reportedly Investigating BitMEX for Unlawful Derivatives Trading

The U.S. Commodity Futures Trading Commission (CFTC), the American agency charged with regulating futures markets, are investigating the BitMEX cryptoasset exchange for allegedly allowing U.S. persons to trade on its platform, according to anonymous sources speaking to Bloomberg.

The investigation has already been underway for “months,” and has not been made public by the CFTC. U.S. persons are barred from trading securities, derivatives and futures products on exchanges not regulated by one of its regulatory agencies. The BitMEX exchange is registered in Seychelles, an island archipelago nation in the Indian Ocean.

BitMEX have for some time blocked connections coming from the U.S. and Québec, as well as several other countries, and even recently updated their terms of service to further highlight this standard. Yet it remains easy to bypass this geoblocking with the use of a virtual private network (VPN).

A spokesperson for BitMEX told CryptoGlobe:

"HDR Global Trading Limited, owner of BitMEX, as a matter of company policy, does not comment on any media reports about inquiries or investigations by government agencies or regulators and we have no comment on this report."

VPNs and Crypto Exchanges

CryptoGlobe considered this issue in detail early in 2019, and found BitMEX to be at risk of precisely such an investigation based on historical example and industry experts’ opinions.

A September 2018 report from the Office of the New York State Attorney General (OAG) on general performance of many top cryptoasset exchanges wrote on the subject of VPNs: “platforms must take reasonable steps to unmask or block customers that attempt to access their site via known VPN connections.”

The contest between VPNs and entities trying to block VPNs is an ongoing and complex battle. It remains a question however, whether BitMEX, beyond blocking IPs originating from unauthorized countries like the U.S., institutes any further measures to prevent those users from connecting using basic routing tools.

Nearly a year ago, U.S. authorities seized the domain of 1Broker, a Marshall-islands based exchange offering services similar to BitMEX’s to offering unapproved services to U.S. persons. 1Broker was well known for allowing U.S. IPs to connect without even a VPN to mask the origin.