If the pictures of Lamborghinis lined up outside bitcoin conferences in Manhattan or jet skis bobbing in the crystal clear waters of Bermuda are anything to go by, working at leading cryptocurrency exchange and derivatives trading platform BitMEX was a sweet gig.
That was especially so for its first employee, Australian born and raised Greg Dwyer. Joining BitMEX in 2015, which grew into a $US3 billion ($3.9 billion) financial behemoth in just a few years, must have seemed like the opportunity of a lifetime for Dwyer. Until it all came crashing down last year.
Last October, the exchange’s four owners were accused by US authorities of flouting sanctions with Iran and allowing organised criminals to launder potentially billions of dollars through their exchange. The disappearance of the public face of BitMEX, its charismatic and telegenic founder Arthur Hayes, has captivated the American financial media and inspired a Vanity Fair feature.
What has not been revealed until now is the involvement of an Australian in the BitMEX saga. For the first time, The Age and The Sydney Morning Herald can tell the story of how a 37-year-old maths whiz from the Sydney suburb of Gordon, a graduate of the prestigious St Ignatius College, Riverview and Sydney University, is at the centre of one of the biggest scandals in the cryptocurrency world’s short history.
Dwyer is still “at large” after being charged in October by the US Department of Justice with conspiring to breach US banking secrecy laws and anti-money laundering laws.
His lawyers Sean Hecker and Jenna Dabbs of Manhattan law firm Kaplan Hecker & Fink did not respond to a series of questions from this masthead and instead sent a statement via a New York crisis public relations firm.
“We have been in ongoing discussions with the prosecutors in Manhattan about scheduling his appearance to face these charges and look forward to being able to contest them, because they are unwarranted,” a spokeswoman says. Dwyer declined to be interviewed.
BitMEX has been described by regulators as a “platform for money laundering” that operated in “the shadows of the financial markets”.
The size of BitMEX and its operation cannot be underestimated, in 2020 more than $US956 billion flowed through its platform and it is alleged to have more than 85,000 US customers alone.
The indictment sent shockwaves through the cryptocurrency community where the newly billionaire founders of BitMEX had been treated like celebrities, particularly Hayes.
Yet despite the profound impact the arrests of the BitMEX crew had on the industry, the scandal has not put a dent in the stratospheric rise of cryptocurrencies, particularly bitcoin. This week, it hit fresh highs above $60,000 following the news that Elon Musk’s Tesla had parked $US1.5 billion in idle cash in the cryptocurrency, boosting its credentials as a store of value. At the same time there has been a boom in retail investors, many of whom are young and excited about how cryptocurrencies are changing finance.
The rise of BitMEX
BitMEX was an early mover in the glitzy cryptocurrency scene. Rather than simply allowing customers to buy and sell cryptocurrencies like other exchanges, it provided a platform to allow customers to bet on the price of different bitcoins using risky (and illegal in the US) financial derivatives that allow punters to magnify the value of their bet by up to 100 times.
In this sense, BitMEX was similar to Australian companies that sell similar products based on shares and currencies known as contracts for difference.
According to the US criminal indictment, Dwyer worked as a senior executive within the group from 2015, running its Manhattan office and as head of business development. In 2019, he moved to work at BitMEX’s offices in Bermuda.
Dwyer grew up on Sydney’s upper north shore. After graduating from St Ignatius in 2001, he went on to study at the University of Sydney. He graduated in 2008 with first class honours in his Bachelor of Commerce as well as a Bachelor of Science.
Company records show Dwyer was also an early investor in his brother Tim’s buy now, pay later business Limepay, which is slated for a float on the ASX next month – though he no longer directly holds any shares in the group. Tim Dwyer and Limepay are not in any way associated with BitMEX. The Limepay founder did not respond to requests for comment.
Dwyer is described as a “long time friend and former colleague of Hayes” in court documents. The Sydneysider met Hayes while both were working at Deutsche Bank’s Hong Kong office in 2011. At the time Hayes was also working as a trance DJ known as “DJBD”.
At Deutsche, Dwyer and Hayes cut their teeth in the financial sector as “synthetic equity traders”, brokers of exotic and risky financial derivatives that are basically bets on various financial assets.
His experience at Deutsche Bank would come in handy at BitMEX which specialises in exotic betting products on various cryptocurrencies and indices.
BitMEX capitalised on the increasing interest in cryptocurrencies and the scarcity of actual hard currencies. The financial derivatives BitMEX sells allows customers to access a market for bitcoins and other crypto-coins without necessarily owning any.
The fresh-faced, well-spoken Australian was a key player in the group’s development and push towards being a more mainstream product, appearing on television and in other media to promote BitMEX.
In 2018, Dwyer was interviewed on Business Insider TV in the US where he talked up crypto moving from the fringes of finance to the mainstream after the historic Chicago Mercantile Exchange (known as the CME) and the Cboe Futures Exchange (CFE) opened up their exchanges to crypto.
“Bitcoin now trades, pretty much, on unregulated markets,” he said in the interview.
“The fact that it’s going to start trading on the CME and CFE brings an air of legitimacy to the space because it’s going to bring in mainstream and professional investors, and have them be more comfortable participating in the futures market which is more regulated.”
“This is a big endorsement for the digital currency trading space.”
But while Dwyer was a central character in BitMEX’s story, his profile was dwarfed by that of Hayes with his sharp tongue and movie-star good looks.
In 2019, Hayes hit the mainstream media headlines after picking a fight at a conference in Taiwan with respected economist and anti-cryptocurrency campaigner Nouriel Roubini, known as Dr Doom for predicting the US housing bubble that led to the global financial crisis. The confrontation would become known in bitcoin circles as the Tangle in Taipei.
Roubini’s argument was BitMEX was operating a business that was flouting US laws by not being properly licensed and selling its leverage products to US customers despite it being illegal to do so. “It is just an example of everything that is sick and rotten in this particular industry,” Roubini would remark, according to a video of the event.
While Hayes claimed victory on the day and was cheered by industry press, Roubini’s comments would spark a major investigation by one of America’s key market regulators, the Commodities Futures Trading Commission.
The US indictment is the result of this investigation. CFTC is also pursuing civil charges against BitMEX, its founders and a range of associated entities including 100x Group. The civil suit does not name Dwyer.
In regards to the civil matter a spokesman for 100x says: “We strongly disagree with the US government’s heavy-handed decision to bring these charges, and intend to defend the allegations vigorously. From our early days as a startup, we have always sought to comply with applicable US laws, as those laws were understood at the time and based on available guidance.”
The company’s spokesman declined requests for an interview and did not respond to the allegations in the criminal matter. The four men accused in the criminal indictment have all stepped aside from their roles.
‘It is just an example of everything that is sick and rotten in this particular industry.’
Nouriel Roubini on BitMEX
The criminal indictment must have been difficult reading for fans of the group. It outlines the allegedly extraordinary lengths BitMEX’s founders and Dwyer took to illegally sell banned financial betting products to US customers despite knowing they did not have the appropriate licences.
More seriously the group is accused of wilfully flouting “know your customer” rules and thus anti-money laundering laws – some of the most important laws in finance – by allowing its customers to set up accounts anonymously via the dark web. It also deliberately flouted anti-money laundering laws, the indictment alleges.
Dwyer and co-founder Ben Delo are also accused of personally allowing people to use fake identification to set up accounts.
“Dwyer and Delo allowed one of these customers to access BitMEX using a non-US passport in the name of a third party that did not belong to this customer.
Dwyer and his colleagues are also accused of being directly aware that some of BitMEX’s clients were from Iran despite US sanctions being in place at the time.
Sources at 100x were keen to point out that the indictment does not specifically charge the company’s representatives with sanction busting. The same sources added there was no formal allegation of money laundering by the senior staff at BitMEX.
The spokeswoman for Dwyer’s lawyers denied allegations by US authorities that he helped design and implement BitMEX’s deliberately flawed anti-money laundering processes.
“Greg Dwyer was not responsible for setting up BitMEX’s AML program but always worked collaboratively with his colleagues, and in good faith, to comply with all applicable regulations and requirements.”
Dark side of finance
Cryptocurrencies have long been the reserve currency of the dark web, which allows criminals of all persuasions – from drug runners, to arms dealers, and terrorists – to launder money.
US authorities allege BitMEX had already been used by its customers to launder proceeds of crime after making “itself available as a vehicle for money laundering and sanctions violations”.
“For example, in or about May 2018, Arthur Hayes, the defendant, was notified of claims that BitMEX was being used to launder the proceeds of a cryptocurrency hack. BitMEX did not implement a formal AML policy in response to this notification,” the indictment says.
“Further, internal BitMEX reports identified that customers located in Iran, who are subject to US sanctions, traded on the platform from at least in or about November 2017 through at least in or about April 2018.”
US authorities allege the four accused developed deliberately flawed anti-money laundering processes to make it appear that they were not selling products to Americans. It also moved to the Seychelles to avoid US regulations, with Hayes allegedly remarking it cost less to bribe Seychellois authorities – “just a coconut” – than American ones.
Most of the business for BitMEX was conducted out of New York and later in Bermuda.
Since charges were laid at the start of October, Dwyer’s public accounts have been silent. And it’s not exactly clear where in the world he is right now. Repeated questions about his whereabouts sent to the crisis communications firm hired by his lawyers were not answered.
As recently as July, social media posts suggested Dwyer was in Bermuda, and enjoying all it had to offer.
Retweeting a Bloomberg News tweet about the island he wrote: “Come join us on the jetskis” above a photo of the vehicle on aquamarine waters.
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Sarah Danckert is a business reporter who specialises in investigations and corporate wrongdoing. She is a two-time Walkley Award winner, and has won four Quill Awards and two Kennedy Awards.