Prominent Economist Brings Serious Crypto Money Laundering Charges Against SADC Member State


Through Nouriel Roubini, CEO of Roubini Macro Associés and professor of economics at Stern SSchool of Business, New York University.

NEW YORK – There is a good reason why every civilized country in the world tightly regulates its financial system. The global financial crisis of 2008, after all, was largely the result of declining financial regulation. Crooks, criminals and crooks are a fact of life, and no financial system can serve its own purpose unless investors are protected from them.

Therefore, there are regulations requiring securities to be registered, monetary service activities permitted, capital controls to include ‘anti-money laundering‘ (AML) and ‘know your client’ ( KYC) (to prevent tax evasion and other illicit financial flows) and that fund managers serve the interests of their clients. Because these laws and regulations protect investors and society, the compliance costs associated with them are reasonable and appropriate.

But the current regulatory regime does not cover all financial activities. Cryptocurrencies are regularly launched and traded outside the realm of official financial supervision, where avoidance of compliance costs is touted as a source of efficiency. The result is that the crypto land has become an unregulated casino, where uncontrolled crime is rampant.

This is not a simple guess. Some of the biggest players in crypto may be openly involved in systematic illegality. Consider BitMEX, a trillion dollar unregulated crypto derivative exchange domiciled in Seychelles but active globally. Its CEO, Arthur Hayes, openly boasted that the BitMEX business model involves peddling to “degenerate players”(Ie distraught retail investors) crypto derivatives with 100-to-one leverage.

To be clear, with 100 to one leverage, even a 1% change in the price of the underlying assets could trigger a margin call and wipe out his entire investment. Worse yet, BitMEX charges hefty fees every time you buy or sell your toxic instruments, and then it takes another bite of the apple by siphoning off clients’ savings into a “liquidation fund” that will likely be several times larger. than what is necessary to avoid counters. – risk of party. It’s no wonder that, according to an independent researcher, estimates, liquidations sometimes account for up to half of BitMEX’s revenue.

BitMEX insiders have revealed to me that this exchange is also used daily for large-scale money laundering by terrorists and other criminals from Russia, Iran and elsewhere; the exchange does nothing to stop this, as it takes advantage of these transactions.

As if that wasn’t enough, BitMEX also has an internal for-profit (supposedly market-making) trading desk that has been accused to manage its own customers upstream. Hayes denied this, but because BitMEX is absolutely unregulated, there is no independent audit of its accounts, and therefore no way of knowing what is going on behind the scenes.

In any case, we know that BitMEX bypasses AML / KYC regulations. While it claims not to serve US and UK investors subject to such laws, its method of “verifying” their citizenship is by verifying their IP address, which can easily be masked with a standard VPN app. This lack of due diligence constitutes a flagrant violation of securities laws and regulations. Hayes has even openly challenged anyone to try to prosecute him in the unregulated Seychelles, knowing that he operates in the shadow of laws and regulations.

Earlier this month, I debated Hayes in Taipei and called out his racket. But, unbeknownst to me, he had obtained the exclusive rights to the video of the event from the conference organizers and refused for a week to broadcast it in its entirety. Instead, he posted handpicked “Highlights” to make it look like he performed well. Guess that’s normal with crypto scammers, but it’s ironic that someone who claims to represent the “resistance” against censorship has become the father of all censors now that their scam has been exposed. Eventually, humiliated in public by his own supporters, he relented and released the video.

On the same day we debated, the UK’s Financial Conduct Authority offers an outright ban on high-risk retail crypto investments. Yet unless there is a concerted response from policymakers, retail investors who are drawn into the crypto arena will continue to be duped. Price manipulation is rampant in all crypto exchanges, due to pump and dump patterns, washout trading, impersonation, front running, and other forms of manipulation. According to a to study, up to 95% of all Bitcoin transactions are fake, indicating that fraud is not the exception but the rule.

Of course, it’s no surprise that an unregulated market becomes the playground for crooks, criminals, and snake oil sellers. Crypto trading has created a multibillion dollar industry, comprising not only stock exchanges but also propagandists posing as journalists, opportunists who talk about their own financial books to peddle “shitcoin” and lobbyists to seeking regulatory exemptions. Behind all of this hides an emerging criminal racketeering that would put the Cosa Nostra to shame.

It is high time the United States and other law enforcement agencies intervened. So far, regulators have fallen asleep at the wheel as crypto cancer has metastasized. According to a to study, 80% of the “initial coin offers” in 2017 were scams. At a minimum, Hayes and everyone else overseeing similar racketeering at offshore shelters should be investigated, before millions of other retail investors are scammed and financially ruined. Even US Treasury Secretary Steven Mnuchin – no fan of financial regulation – agrees that cryptocurrencies should not be allowed to “become the equivalent of secret numbered accounts”, which have long been the preserve of terrorists, gangsters and other criminals.


Copyright: Project Syndicate, 2019.

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