Third Founder Of Cryptocurrency Exchange Pleads Guilty To Bank Secrecy Act Violations

 

Samuel Reed Designed BitMEX as a Platform to Flout U.S. Anti-Money Laundering Rules

 Damian Williams, the United States Attorney for the Southern District of New York, announced that SAMUEL REED, one of three co-founders and a high-ranking executive of purportedly “off-shore” cryptocurrency derivatives exchange the Bitcoin Mercantile Exchange or “BitMEX,” pled guilty today to violating the Bank Secrecy Act (the “BSA”) by willfully failing to establish, implement, and maintain an anti-money laundering (“AML”) program at BitMEX.  Under the terms of his plea agreement, REED agreed to separately pay a $10 million criminal fine representing pecuniary gain derived from the offense.  REED pled guilty today before Chief U.S. District Judge Laura T. Swain, and will be sentenced by U.S. District Judge John G. Koeltl.  The other two founders of BitMEX, Arthur Hayes and Benjamin Delo, previously pled guilty to the same offense in February 2022.

U.S. Attorney Damian Williams said:  “Samuel Reed has now joined his co-founders, Arthur Hayes and Benjamin Delo, in admitting that they caused BitMEX to commit criminal violations of the anti-money laundering laws that govern financial institutions operating in the United States.  As today’s guilty plea reflects, this Office will not permit cryptocurrency exchanges to operate as a shadow financial system that enables criminal actors to move their illicit proceeds without detection, and will vigorously investigate and prosecute the operators of such exchanges who deliberately flout U.S. law.”

According to the Indictment, public court filings, and statements made in court:[1]

REED, together with Arthur Hayes and Benjamin Delo, was one of the three co-founders and the long-time Chief Technology Officer of BitMEX.  BitMEX is an online cryptocurrency derivatives exchange that, during the relevant time period, had U.S.-based operations and served thousands of U.S. customers, notwithstanding false representations to the contrary by the company.  From at least September 2015, and continuing at least through the time of the Indictment in September 2020, REED willfully caused BitMEX to fail to establish and maintain an AML program, including a program for verifying the identify of BitMEX’s customers (or a “know your customer” or “KYC” program).  As a result of its willful failure to implement AML and KYC programs, BitMEX was in effect a money laundering platform.  For example, in about May 2018, REED was notified of allegations that BitMEX was being used to launder the proceeds of a cryptocurrency hack.  Neither REED nor the company filed a suspicious activity report thereafter (indeed, BitMEX filed no suspicious activity reports at all between 2014 and September 2020), nor did BitMEX implement an AML or KYC program in response. 

REED failed to institute AML or KYC programs at BitMEX despite closely following U.S. regulatory developments that made clear his legal obligation to do so if BitMEX operated in the United States, which it did.  Despite repeatedly stating that BitMEX did not serve U.S. customers, including to individuals outside of BitMEX, REED knew that BitMEX’s purported withdrawal from the U.S. market in or about September 2015 was a sham, and that purported “controls” BitMEX put in place to prevent U.S. trading were an ineffective facade that did not, in fact, prevent users from accessing or trading on BitMEX from the United States.  REED not only understood that U.S. customers continued to trade on BitMEX, but derived substantial profits from BitMEX as a result of U.S.-based trading. 

REED, 32, of Massachusetts, pled guilty to one count of violating the Bank Secrecy Act, which carries a maximum penalty of 5 years in prison.  The maximum potential sentence in this case is prescribed by Congress and is provided here for informational purposes only, as any sentencing of the defendant will be determined by the judge.

Mr. Williams praised the outstanding investigative work of the FBI’s New York Money Laundering Investigation Squad, and thanked the attorneys and investigators at the Commodity Futures Trading Commission whose expertise and diligence were integral to the development of this investigation.

[1] Two of REED’s co-defendants, Arthur Hayes and Benjamin Delo, pled guilty to violating the BSA in February 2022. As to REED’s remaining co-defendant, the entirety of the text of the Indictment, and the description of the Indictment set forth herein, constitute only allegations, and every fact described should be treated as an allegation.

Attorney General James and State Police Superintendent Bruen Announce Arrest of Phony Attorney

 

Andrew Schnorr Allegedly Posed as Attorney and Defrauded Individuals Out of More Than $22,000 in Legal Fees

 New York Attorney General Letitia James and New York State Police Superintendent Kevin Bruen today announced the arrest and arraignment of Andrew Schnorr, 39, for practicing law without a license and defrauding New Yorkers in Buffalo out of more than $22,000 in legal fees. Despite never graduating from a law school nor passing a bar exam, Schnorr allegedly posed as a licensed attorney and even represented clients at numerous legal proceedings. Schnorr was charged with Unauthorized Practice of Law (a Class E felony) and Grand Larceny in the Third Degree (a Class D felony). If convicted, he faces up to 2 1/3 to 7 years in state prison. 

“Practicing law without a license undermines the integrity of our judicial system and jeopardizes the fate of New Yorkers who need legal services,” said Attorney General James. “This individual tricked vulnerable people by posing as an attorney who could help them, but instead cheated them out of tens of thousands of dollars while risking their future. New Yorkers must be able to trust that the professionals representing them are qualified and serving in their best interest.”

“This suspect lied about his credentials and as a result stole thousands from unsuspecting victims who were counting on him for legal advice based on education and training that he didn’t have,” said State Police Superintendent Bruen. “I commend our members and the Office of the Attorney General for their work to hold this suspect accountable for his actions.”

Today’s charges are the result of a joint investigation by the Office of the Attorney General’s (OAG) Criminal Enforcement and Financial Crimes Bureau and the New York State Police. The investigation began in the summer of 2019 when OAG received a complaint from an attorney concerning Schnorr’s lack of competence during a legal proceeding. As outlined in today’s complaint, the investigation revealed that Schnorr was in fact, not a licensed attorney, and that he had lied about graduating from New York University School of Law and lied about passing the bar exams in New York and California.

Schnorr secured his job at a Buffalo law firm by submitting a resume with fake credentials. He worked as an associate attorney at the firm and was tasked with civil matters involving depositions and settlement conferences. Altogether, he represented at least nine clients at the law firm beginning in 2019.

The OAG’s investigation remains ongoing. Any New Yorker who believes that they have been a victim of this type of crime or have additional information regarding this matter are encouraged to contact OAG at (716) 853-8400.

By law, attorneys must be licensed in New York state by the New York State Unified Court System’s Office of Court Administration (OCA). If possible, before meeting or retaining an attorney, individuals should confirm the person’s license on OCA’s website. For legal representation outside of New York state, individuals should contact the respective state's licensing authority to confirm whether a person is licensed to practice law in that jurisdiction.

Today’s charges against Schnorr are allegations and he is presumed innocent unless and until proven guilty.

MAYOR ADAMS’ STATEMENT ON INCLUDING THE EQUAL ACT IN CONGRESS’ OMNIBUS SPENDING PACKAGE

 

 New York City Mayor Eric Adams today issued the following statement in support of the EQUAL Act — which would end the federal sentencing disparity between drug offenses involving crack cocaine and powder cocaine — in the upcoming spending omnibus package currently being negotiated by the U.S. Senate:

 

“Safety and justice go hand in hand, and the EQUAL Act of 2021 would correct a longstanding injustice that has devastated Black and Brown communities across the country. The sentencing disparity between crack and powder cocaine offenses is one of the worst vestiges of the war on drugs, and I’m pleased to join members of New York’s congressional delegation, civil rights groups, and law enforcement organizations in supporting this critical piece of legislation.” 

MANHATTAN MAN INDICTED FOR DRAGGING NYPD OFFICER WITH HIS VEHICLE DURING TRAFFIC STOP

 

Officer Suffered a Fractured Ankle in Attack Caught on Body Camera Footage

 Bronx District Attorney Darcel D. Clark today announced that a Manhattan man has been indicted on Aggravated Assault Upon a Police or a Peace Officer, first-degree Assault and numerous other charges for injuring an NYPD officer with his vehicle during a traffic stop.

 District Attorney Clark said, “The defendant was allegedly weaving through oncoming traffic and driving through red lights. When Police stopped the defendant and entered the vehicle, he allegedly put the car in drive and accelerated, dragging the officer, and injuring her. His alleged actions not only recklessly put the officers at risk, but also members of the community.”

 District Attorney Clark said the defendant, Usman Haruna, 23, of Manhattan, was arraigned today on Aggravated Assault Upon a Police or a Peace Officer, first-degree Assault, Assault on a Peace Officer, Police Officer, Fireman, or Emergency Medical Services Professional; four counts of second-degree Assault, second-degree Unlawful Fleeing a Police Officer in a Motor Vehicle, third-degree Unlawful Fleeing a Police Officer in a Motor Vehicle, three counts of thirddegree Assault, second-degree Reckless Endangerment, fourth-degree Criminal Possession of a Weapon, second-degree Obstructing Governmental Administration, Resisting Arrest, Reckless Driving, second-degree Aggravated Unlicensed Operation of a Motor Vehicle, third-degree Aggravated Unlicensed Operation of a Motor Vehicle, and Violations of the Vehicle and Traffic Law before Bronx Supreme Court Justice Beth Beller.

 According to the investigation on December 12, 2021, in the Fordham section of the Bronx, the defendant allegedly refused to pull over during a traffic stop near 194th Street and Marion Avenue. Haruna allegedly drove into oncoming traffic, through red lights, speeding, and at one point steered onto the sidewalk in an effort to avoid traffic. Police approached the vehicle, and the defendant allegedly punched one officer who attempted to put the vehicle in park. Another officer tried to open the front driver side door, and the defendant allegedly pushed her out of the vehicle, put the car into drive, accelerated and ran over the officer’s foot. He then crashed into another car. The officer sustained a fractured ankle and was taken to a local hospital for treatment.

 District Attorney Clark also thanked NYPD Detective Daniel Trancucci of the 52nd Precinct for his assistance in the investigation.

 An indictment is an accusatory instrument and is not proof of a defendant’s guilt.

Governor Hochul Announces Lincoln Center's $550 Million David Geffen Hall to be Completed in October 2022

 

Project Complements Efforts to Revitalize New York State's Tourism Industry

New York State Providing $6.5 Million to Accelerate Completion and Support Major Expansion of Public Space

Expanded Public Space to Host Free Community-Based Public Programming

Renderings Available Here

 Governor Kathy Hochul today joined Lincoln Center leadership to announce that the $550 million renovation of Lincoln Center for the Performing Arts' new David Geffen Hall will be completed in October 2022, two years ahead of schedule. The hall is being reimagined from the inside out with expanded access to public space for the community, supported by a $6.5 million grant from Empire State Development. The project will transform the storied concert hall and home of the renowned New York Philharmonic into a world-class venue and destination that will further support New York City's post-pandemic economic recovery. 

"Lincoln Center is a central piece of New York's cultural heart and the new David Geffen Hall, complete with expanded public and community spaces, will make that heart beat even stronger," Governor Hochul said. "New York's comeback is just getting started and this project is a crucial part of that comeback, creating jobs and giving New Yorkers and visitors from across the globe the opportunity to experience world-class entertainment in a state-of-the-art venue. I look forward to seeing this magnificent facility introduce the next generation to the joy of the arts."

Empire State Development is providing up to $6.5 million to accelerate the transformation of David Geffen Hall, including approximately 21,000 square feet of renovated and expanded public space in and around the hall. Through this project, Lincoln Center has committed to creating 114 new full-time jobs. Additionally, the iconic venue plans to host new community-based public programming in the public space and launch a diversity and arts job training program that will provide paid fellowships to support the community-based programming.  

The reimagined David Geffen Hall will be the premier home for the New York Philharmonic and will improve the overall concert-goer experience, which will include a state-of-the-art theater for artists and audiences. The public spaces will expand by tens of thousands of square feet to create a deeper connection with the audience and community. This will improve the quality of the experience for both ticket holders and the general public, with a focus on equitable access to arts programming. Additional components of the public spaces project include: 

• The main lobby will double in size and open on three sides to connect with the campus to allow community activity to flow. 
• A media streaming wall at the core of the new lobby will show concerts and events for free in real time as well as other digital material.  
• A new Welcome Center on Broadway will offer a portal to Lincoln Center for the public.   
• The reconfigured and reenergized Grand Promenade will create one of the largest gathering spaces at a performance facility in New York City, with ability to welcome more than 1,000 people for an event.  
• The Sidewalk Studio, visible from the street on the corner of 65th Street and Broadway, will be a home for educational, artistic, and community activities, and provide a window into the performers and ideas that live on campus.  

Empire State Development Acting Commissioner and President and CEO-designate Hope Knight said, "Lincoln Center is an iconic destination for New York's residents and visitors alike, and this expansion reflects the renewed energy of the city's cultural core. ESD's investment in David Geffen Hall will help to create jobs and support our tourism economy with new and expanded spaces that invite even more people to enjoy and explore Lincoln Center."  

The accelerated completion of David Geffen Hall furthers Governor Hochul's commitment to revitalize tourism in New York State. The tourism industry was among the hardest hit by the COVID-19 pandemic, which saw significant losses in visitation, direct spending and economic impact. In November, Governor Hochul announced the "Bring Back Tourism, Bring Back Jobs" inclusive recovery package, featuring targeted programs and initiatives designed to support the industry's economic rebuild.  

Governor Hochul also recently announced the launch of new global I LOVE NY ads, representing the state's first paid tourism advertising to overseas markets. The new 30-second ad features a mix of newer attractions and iconic favorites from across New York City - including Lincoln Center - and encourages residents and visitors alike to plan a first-time trip or a return visit to find what they love and come be a part of all that New York State has to offer.  

LEGISLATORS RENEW CALL FOR INDEPENDENT STATEWIDE UTILITY CONSUMER ADVOCATE AFTER BILL SPIKES HIT NEW YORKERS

 

The Department of Public Service Office of Consumer Services, which was cited as part of both veto memos for legislation to create a Utility Consumer Advocate in New York, has so far refused to advocate for consumers who try to file complaints about bill spikes from Con Edison.

 As reports of spiking energy bills from Con Edison continue to come in throughout New York, a group of legislators are renewing their push for the creation of a new, statewide Office of the Utility Consumer Advocate. A letter to the Governor asking to work together on strengthening New York State’s ability to directly advocate for consumers, was sent by Assemblyman Jeffrey Dinowitz and State Senator Diane Savino, who are the two main sponsors of legislation to create such an office, as well as Assemblywoman Amy Paulin (Chair of the Assembly Committee on Corporations, Authorities, and Commissions which has oversight of the Public Service Commission and utility companies) and State Senator Michael Gianaris.

Legislation to create such an office has been vetoed twice by the Governor’s Office, in 2019 and 2021, with both veto memos citing redundant or duplicative roles between the proposed Utility Consumer Advocate and the Department of Public Service’s role in consumer advocacy. However, consumer experiences with the Public Service Commission in response to the recent bill spikes from Con Edison have offered a different perspective.

 

In multiple responses to utility consumer complaints about Con Edison bill spikes, the Department of Public Service offered a “brief explanation” and directed consumers to assistance programs or deferred payment agreements. DPS did not appear to include any complaint number that would indicate that the consumer complaint is being registered, investigated, or resolved.

 

The vetoed legislation is being reintroduced in 2022, with legislators hopeful that the Governor’s Office will engage in a productive dialogue about how to address concerns about redundancy between the proposed Utility Consumer Advocate and existing offices such as the DPS Office of Consumer Services and the Department of State’s Utility Intervention Unit.

 

Assemblyman Jeffrey Dinowitz said: “If one thing is clear after the debacle that utility consumers have experienced with Con Edison’s extreme bills, our state does not have sufficient representation of consumer voices in our oversight of utility companies. The reality is that the Department of Public Service is not intended to advocate for the sole interests of utility consumers — their job is to focus on the whole system, which by its nature means that they have to also represent the interests of utility companies. A new, independent Office of the Utility Consumer Advocate would provide this dedicated voice for consumers and it would be insulated from the political preferences of utility companies and their lobbyists. I am hopeful that Governor Hochul will continue her trend of collaborating with the Legislature and that we can finally reach a consensus on how to create and office that more than forty other states already have in place.”

PUBLIC ADVOCATE CALLS FOR NON-POLICE MENTAL HEALTH CRISIS RESPONSE AND SUPPORT SERVICES IN BUDGET TESTIMONY

 

New York City Public Advocate Jumaane D. Williams today continued his call to address mental health needs and crises more holistically and by funding non-police alternatives in the city’s upcoming budget. He also emphasized the need for greater investments in city services for disabled New Yorkers. In testimony submitted to a hearing of the Committees on Health and on Mental Health, Disabilities, and Addiction, the Public Advocate outlined several programs and initiatives that need expanded city funding to best serve the community. 

“New Yorkers have experienced an unprecedented crisis over the past two years, with many in our city experiencing heightened stress and trauma,” said Public Advocate Jumaane D. Williams in his testimony. "Many have become newly disabled by the effects of long COVID. Combined with the high numbers of people who already needed mental health resources and treatment and accessibility services prior to the pandemic, it is critically important to prioritize accessible, affordable services for people with mental health needs and disabilities."

The Public Advocate pointed to the need and opportunity to expand several successful city programs that serve New Yorkers struggling with mental illness. He cited the successes of Mobile Crisis Teams, which provide non-police alternatives for New Yorkers experiencing acute mental health crises; and NYC Well, which provides support to prevent those crises in the first place. He also argued for more Respite Care Centers, which “provide an alternative to hospitalization for those in crisis… Developing a new center in an area with high volumes of 911 calls would provide these critical services to those who need them.” In addition to expanding already successful programs, he argued the city should create a three digit number for individuals to call for non-police alternatives for a New Yorker in crisis. 

When police do engage with individuals in a mental health crisis, he called for a prioritization of Support and Connection centers, which he said “provide police officers with alternatives to arrests and hospitalization for people with mental health needs who do not pose a risk to public safety ... When police interact with people in crisis or people for whom mental health needs appear to be the cause of unusual behavior, police can bring them to these 24-hour diversion centers to receive services, and they will not be arrested or booked."

These calls build on the Public Advocate's 2019 report on mental health crisis response, which centered non-police alternatives.

New Yorkers with disabilities have faced disproportionate obstacles throughout the pandemic, and so the Public Advocate called for expanding “programs like NYC: ATWORK, an employment program that recruits, pre-screens, and connects New Yorkers with disabilities to jobs and internships, and EmpoweredNYC, which provides free and confidential financial counseling for people with disabilities.” He also asked for additional resources for children who lost access to disability services while quarantined at home.

The Public Advocate's full testimony is below.

TESTIMONY OF PUBLIC ADVOCATE JUMAANE D. WILLIAMS TO THE NEW YORK CITY COUNCIL HEALTH COMMITTEE JOINT WITH COMMITTEE ON MENTAL HEALTH, DISABILITIES AND ADDICTION

MARCH 9, 2022

Good morning, 

My name is Jumaane D. Williams, and I am the Public Advocate for the City of New York. Thank you to Chair Linda Lee, Chair Lynn Schulman, and the members of the Committees on Health and on Mental Health, Disabilities, and Addiction for holding this hearing today.

New Yorkers have experienced an unprecedented crisis over the past two years, with many in our city experiencing heightened stress and trauma. Many have become newly disabled by the effects of long COVID. Combined with the high numbers of people who already needed mental health resources and treatment and accessibility services prior to the pandemic, it is critically important to prioritize accessible, affordable services for people with mental health needs and disabilities. 

I request that New York City invests in expanding its Mobile Crisis Teams and NYC Well, allocating $26 million for 18 new teams and a 50 percent increase in NYC Well resources. The city should also invest $7 million for two new Respite Care Centers. Respite Care Centers provide an alternative to hospitalization for those in crisis. Offering stays for up to one week in supportive settings that allow individuals to maintain their regular schedules and have guests visit while receiving services that resolve crisis situations. Currently there are only eight centers operating in the city. Developing a new center in an area with high volumes of 911 calls would provide these critical services to those who need them. The city should also fund a three-digit number that New Yorkers in crisis can call to receive emergency mental health services from trained non-police providers.

HealingNYC directs government efforts to address the opioid crisis and provide substance use treatment. I recommend $5 million to expand this program. Support and Connection centers provide police officers with alternatives to arrests and hospitalization for people with mental health needs who do not pose a risk to public safety. When police interact with people in crisis or people for whom mental health needs appear to be the cause of unusual behavior, police can bring them to these 24-hour diversion centers to receive services, and they will not be arrested or booked. The budget should include $20 million for four new Support and Connection Centers. 

These investments will expand resources and services for some of New York City’s most vulnerable, who need them now more than ever—for example, Mayor Adams and Governor Hochul recently announced their plan to remove people experiencing homelessness from the subways, many of whom will need to be connected with mental health and substance use treatment services in addition to housing. 

With this new budget, New York City has an opportunity to prioritize its disabled residents, who face numerous challenges at work, school, in the community, and on public transportation. The city should expand programs like NYC: ATWORK, an employment program that recruits, pre-screens, and connects New Yorkers with disabilities to jobs and internships, and EmpoweredNYC, which provides free and confidential financial counseling for people with disabilities.

School- and preschool-age children with disabilities and other health needs experienced significant disruptions to their services due to the pandemic, with many not receiving any services to which they were entitled for many months or even years. The budget must specifically address early intervention services for young children with disabilities and fund compensatory services so children can begin making up for the time they have lost.

It is imperative that our city’s new mayor and City Council make those with disabilities and mental health needs a priority. For too long these New Yorkers have been overlooked and underfunded. I hope that we can work together to ensure that the budget reflects our commitment to the most vulnerable in our city. 

Thank you.

NYPD OFFICER INDICTED FOR RECKLESS ENDANGERMENT FOR FIRING AT FLEEING VEHICLE

 

Shooting Occurred on Crowded Street During Rush Hour

 Bronx District Attorney Darcel D. Clark today announced that a New York City Police Officer has been indicted on second-degree Reckless Endangerment for firing his gun at a fleeing car in a busy Bronx intersection during rush hour.

 District Attorney Clark said, “The defendant allegedly fired six times at a vehicle fleeing from a car stop at 6:30 in the evening, while multiple people were walking on the street and there was rush-hour traffic. This created a substantial risk of serious physical injury to the pedestrians and drivers.”

 District Attorney Clark said the defendant, Richard Delahanty, 29, was arraigned before Bronx Supreme Court Justice Beth Beller on an indictment charging second-degree Reckless Endangerment, an A misdemeanor. He is due back in court on May 18, 2022.

 According to the investigation, On February 16, 2021, at approximately 6:25 p.m., Police Officer Richard Delahanty and two partners, all assigned to Public Safety in the 44th Precinct, were on patrol in an unmarked police car travelling north on Gerard Avenue when they saw a gray Dodge Charger with excessive tinted windows and loud exhaust. Officer Delahanty, the driver of the police vehicle, activated lights and siren and attempted to pull the Charger over. The Charger’s windows and windshield were darkly tinted, such that none of the officers could see inside the car during their interaction with it. The Charger slowed to a stop on East 167th Street and when the officers were exiting their vehicle to approach, the Charger sped away and led the officers on a brief chase eastward on East 167th Street toward the Grand Concourse.

 The officers caught the Charger at East 167th Street and Walton Avenue and exited their vehicles to approach. The Charger then reversed, executed a K-turn, and drove past where Officer Delahanty was standing. As Officer Delahanty reached towards the door, his hand got caught in the partially opened window causing a laceration. As the Charger drove away, Officer Delahanty fired his police-issued pistol six times, with civilians on the street running away and those in nearby vehicles ducking for cover.

 The driver of the Charger, Luis Cabrera, 28, was arrested hours later and charged with Aggravated Unlicensed Operation of a Motor Vehicle. He pleaded guilty to that charge and paid a $200 fine.

 District Attorney Clark thanked NYPD Detective Robert Simms and Sergeant Bruno Pomponio of the NYPD Force Investigation Division for their assistance in the case.

 An indictment is an accusatory instrument and not proof of a defendant’s guilt.