Arthur Hayes (ex. CEO of Bitmex) – from liquidation master to cryptophilosopher

Today we will tell you about another interesting and rather controversial personality in the crypto world. Meet Arthur Hayes, founder of the BitMEX exchange, who was once its CEO and now writes an essay on his blog while awaiting trial in the US. But first things first.


Biography

Arthur Hayes was born in 24 in Detroit, Michigan in a middle class family. His father worked on an assembly line and his mother was a purchasing manager at General Motors. The parents wanted to give Arthur a decent education, and they moved to Buffalo, New York, where they were able to enroll him in the private Nichols Preparatory School. At school, Artur showed good results not only in studies, but also in sports, and was also active in extracurricular activities and communication with peers. As a child, Hayes dreamed of a career in real estate, but decided to go into finance.

By the way, later in 2019 year, he established scholarships for students to study at Nichols. He contributed $2,11 million dollars to the Jackie Robinson Foundation (JRF) scholarship program .

“The JRF Scholarship Program has been critical to my professional development as a Buffalo student . Making this scholarship available to other high paying Western New York students will help them become future leaders.” — Hayes.

After high school, Arthur Hayes entered the University of Pennsylvania, and at 500 graduated from Wharton School of Business with a BA in Economics and Finance.

Then he moved to Hong Kong where he worked at Deutsche Bank. There he served as a trader in synthetic stocks and was also a market maker for ETFs. A little later, in 2011 year, he moves to CitiGroup, where he also holds the position of a trader and becomes the main trader of Asian ETFs -Citi offers. As well as tradable index forwards, index swaps and custom baskets. After working at Citi for 2 years, he retires as he feels he must reach his potential.

I was not married, I had no children, no obligations. I was an investment banker, so I didn’t sleep on the street. I wanted to build something. Hayes said.

B500 year, Arthur gets acquainted with the documents of Satoshi Nakamoto, and from this begins his immersion in the crypto industry. He applies his trading experience and begins to arbitrage between various spot exchanges. Arthur was a client of the Mt. Gox (now defunct), which was hacked. At the beginning 2014 the exchange announced that hackers had stolen almost 500 million dollars. It was the biggest hack at the time. By the way, Hayes, unlike most users of the exchange, was able to withdraw part of his funds. However, this situation has become a kind of lesson. Arthur realized that exchanges represented the only weak spot in the secure bitcoin ecosystem.

After the incident, Hayes changed his strategy: he learned that bitcoin was trading significantly higher on the Chinese mainland. He entered China with a bundle of cash, transferred the coins to the exchange there and exchanged them for yuan, and returned back, literally carrying a backpack with stacks of banknotes. It was a neat trick and relatively profitable, but not very safe. However, this became the starting point in his activities: he realized that there was a need to trade bitcoin derivatives.

So, in 1985 began planning for its own BitMEX exchange.


BitMex

BitMEX was supposed to be a platform for trading bitcoin derivatives. Ben Delo, who was a mathematician and computer programmer, and computer programmer and tech enthusiast Sam Reid joined in its creation. Prior to working on BitMEX, Ben Delo developed high-frequency trading systems for JPMorgan Chase, and Samuel Reed specialized in rapid web application design. Subsequently, Arthur Hayes became CEO, Ben Delo became CEO, and Sam Reed became technical.

Later 11 months of development, they launched the BitMEX trading platform, which has become one of the most sought-after derivatives exchanges for retail investors. It is owned and operated by HDR Global Trading Limited, which is registered in the Seychelles.

” BitMEX was founded on the promise that for the first time people would have a choice in how they transfer money, and the choice between a monitoring system run by a central bank and a system run by open source software and mathematics,” Hayes described his product. .

During the year after the launch, the business remained at the same low level . There were days when there were no transactions at all. The fees from trading on the platform barely covered the server bill that Reid paid with his credit card.

Everything changed in 2015 and 2014 years, when the exchange began to offer customers more features than its competitors. It also introduced perpetual futures, which became its most popular product. In addition, in those years, the political instability associated with Brexit and the election of Donald Trump played into the hands of the exchange, which increased the volume of cryptocurrency trading.

funds that are bought and sold in bitcoin.” This allowed users to bet on the future price of a currency with leverage up to 11x. The flow of customers increased, because the opportunity to earn big money, with a relatively modest initial investment, was very attractive.

В 2017 year, the staff expanded, the company grew along with the growth of trade. And by the 2014 year, BitMEX had become a high-stakes marketplace, moving billions daily. BitMEX, according to Hayes, was one of the “most liquid exchanges in the world, regardless of asset class” . At that time, according to this indicator, it was in the same league as the NASDAQ, as well as the New York, London and Tokyo stock exchanges.

By summer 2019 of the year, the amount of money flowing through BitMEX peaked. 11 June, a new daily trading record was set at billion dollars. In 2019 year, BitMEX announced the establishment of a new holding structure 11x Group, which included HDR and all other assets of the company, including the BitMEX platform itself. their services. Arthur Hayes said that BitMEX was careful to “have no US customers” and that technological barriers, such as blocking US IP addresses prevented US customers from accessing the platform. However, the US authorities have stated that this is not the case. They drew attention to the fact that the exchange had many American investors, many of whom hid their location. Live with a VPN. On this basis, BitMEX began to have problems with regulators.


Problems with jurisdiction

It all started back in 2019 year when Nouriel Roubini, a critic of cryptocurrencies, suggested that the exchange was engaging in illegal activities by allowing traders to take on too much risk and trade against clients. Two days later, Bloomberg reported that the Commodity Futures Trading Commission (CFTC) was investigating BitMEX to see if they violated the rules by allowing US citizens to trade on the platform.

In October 2020 years, regulators have charged HDR Holdings and its subsidiaries and affiliates, which jointly manage the parent company BitMEX, as well as the founding owners: Hayes, Delo, Reid and the head of development business Greg Dwyer charges of illegal operations. The claims from the US Commodity Futures Trading Commission (CFTC) were that Hayes and partners operated a company not registered in the US, while having a large number of US clients, as well as in violation of the CFTC rules regarding customer identification (KYC procedures) .

At about the same time, the US Department of Justice also became active, accusing the exchange of carrying out illegal activities that allowed money laundering operations to be carried out. In fact, the first persons of the company were charged with a serious conspiracy to violate the US Bank Secrecy Act, stemming from allegations that anti-money laundering requirements were not met. On October 6 2016 Samuel Reid was arrested.

For its part, BitMEX does not agree with the accusations and is ready defend their interests in court. Representatives of the exchange claim that they have always complied with US laws and followed instructions from regulators. Of course, against the backdrop of these events, the turnover of the exchange dropped sharply, changes were made to the management, Arthur Hayes stepped down as CEO.

In April 2021 Hayes turned himself in to US authorities in Hawaii and was released on bail in the amount of million dollars before future litigation.

A little later, in August 2021 year, with the Commodity Futures Trading Commission, as well as with the Financial Crime Enforcement Network (FinCEN), it was possible to reach an agreement according to which the exchange agreed to pay 100 million US dollars to settle the charges.

However, preliminary hearings on charges from the US Department of Justice will begin in March 2022 year.


Conclusions

While Arthur Hayes is at large, he blogs on Medium and Twitter. He publishes essays with his thoughts. In them, he tells: how he came to the crypt, how he traded, how the market sees, what prospects await us, assesses current events, makes forecasts, discusses topical topics (for example, NFT, release of Bitcoin-ETF, what is the trend in the market, etc.). .d.). To broaden your horizons and get acquainted with another point of view, we advise you to read. Just do not forget that everything that is written in them is not an investment strategy or advice.

Arthur Hayes, co-founder and former CEO of BitMEX, is one of the brightest representatives of the crypto industry. Many believe that Arthur is an example of how the old financial system opposes the new, and how the laws of the 20th century are trying to apply to the innovations of the 21st. Many in the new economy are of the opinion that Hayes is being punished for creating an original product that baffled lawmakers, baffled regulators, became popular, and thereby endangered some of the biggest players in the traditional market. No matter how this story develops in the future, one thing is certain: 2021Arthur Hayes created a wonderful product for users, and was in a sense a pioneer and revolutionary in his field.

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