News of an indictment against BitMEX and its founders has just been released https://www.coindesk.com/bitmex-cftc-enforcement
There are 2 charges — one by the CFTC on BitMEX itself and affiliates for offering U.S. customers illicit crypto derivative trading services; and the other by the Southern District of New York against the founders Hayes, Delo, Reed and Dwyer for violating the Bank Secrecy Act and conspiracy to violate the act. On the second charge the SDNY has arrested Reed, while the rest remain at large.
The CFTC has alleged that BitMEX received some $11 billion in bitcoin deposits and made more than $1 billion in fees, “while conducting significant aspects of its business from the U.S. and accepting orders and funds from U.S. customers.”
It is seeking a permanent injunction prohibiting the defendants from entering into any transactions “involving ‘commodity interests,’” soliciting funds for purchasing or selling commodity interests and applying for registration with the CFTC.
In addition, CFTC wants the defendants to disgorge profits; provide full restitution to its customers; pay civil penalties; and rescind “all contracts and agreements” with any customers if those agreements violate the law.
This has been coming for awhile now, and while the charges are heavy and coordinated, it remains to see how much bite it actually has.
This certainly puts an end to all of Mex’s US operations, but it’ll be awhile before any judge rules on this and the platform will continue operating outside the US, as it has anyway.
Near-term sentiment however could take a hit, and it’s worth pointing out that Mex has about 190k BTC in their vaults, and 36.5k BTC in their insurance fund. The Mex OI has come off just $45m on this news so far to $550m and is still above month-lows at $500m (Chart 1).
No panic yet but no doubt new lows are imminent for their OI to come. Mex was the venue for most to short anyway, and no dislocation between them and the other exchanges, or in the shape of the futures curve (Chart 2).
However we’re more worried about short-term volatility. The BTC vol curve had been very steep and upward sloping (Chart 3) as many, like us, were preparing for 2 weeks of calm at least until the next debate (Oct 15), with China out for Golden Week as well now. We expect the curve to invert now and have begun rolling all our near date short puts above 10k to lower strikes and longer tenors as we await more clarity on this.
Chart-wise 10.3k is the short-term trendline support, but 10k is still the big level we’re watching (Chart 4). With correlation so high other coins could take a hit too — 320 on ETH is what we’re watching (Chart 5). Exchange tokens BNB and FTT have been hit the hardest — down 9%, & 7%, but so far just giving up their gains for the week.
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