CFTC Probe of BitMEX a Result of Roubini Vs. Hayes Taipei Tangle?

Seychelles-based cryptocurrency exchange BitMEX is reportedly in trouble. Soon after Nouriel Roubini, a New York University professor of economics and anti-cryptocurrency pundit, criticized BitMEX of violating regulations, it was reported on July 19 that United States Commodity Futures Trading Commission (CFTC) is opening an investigation into BitMEX on whether it broke the law by allowing U.S. residents to trade on its platform.

A day later, an additional finding by London-based blockchain data provider TokenAnalyst revealed that BitMEX has experienced major Bitcoin (BTC) outflows to the tune of $73 million after news of the regulatory investigation surfaced.

The Tangle in Taipei and regulations 

It may be possible to take a look at BitMEX’s stance on regulations from The Tangle in Taipei, the debate between an American economist Nouriel Roubini and BitMEX CEO Arthur Hayes on July 3. One of the topics they disagreed over is whether cryptocurrency exchanges should be regulated.

Speaking on BitMEX’s maximum 100x leverage, Roubini found it problematic that not only accredited investors but almost anybody can conduct high-risk trades on a platform that is unregulated: 

“If the price moves even in 0.5%, you are wiped out of your position and guess what? There is a nice tweet called ‘BitMEX Rekt.’ [...] Every other second somebody has been liquidated by these guys and thousands of them have gone into financial ruin. Of course, this thing is not regulated anywhere. It is set up in the Seychelles.” 

Roubini also suggested that U.S. investors are not allowed to conduct such kind of leveraged trading because of U.S. regulation, but “anyone with VPN can avoid the IP and go and do investments with you guys [BitMEX].” He concluded, “It is just an example of everything that is sick and rotten in this particular industry.”

The BitMEX CEO replied to this sentiment, after admitting that he doesn’t want to call Roubini a professor, and insisted that “it makes 100 times leverage, so what?” He continued: 

“I don’t want to force anyone to use BitMEX. We just have a website and don’t do any marketing. Somehow a few thousand people have found a little oasis and started trading. [...] Roubini thinks New York DFS and New York AG is the only game in town.”

Being asked by Andrew Neil, a veteran journalist who hosted the debate, whether the regulatory authorities in the U.S. or the United Kingdom and the Seychelles are slightly different in scale, Aurtur replied, “It just costs more to bribe them.”

Roubini vs. Hayes debate aftermath

In addition to the fact that there was no live broadcast of the debate, Roubini was apparently not satisfied with Arthur’s answers regarding the regulations. On July 16, around two weeks after the debate, he wrote an essay entitled “The Great Crypto Heist” and insisted once more that BitMEX was violating securities laws and regulations. 

Then, on July 19, Bloomberg reported on the CFTC’s probe of BitMEX. Although the probe would reportedly take a number of months, Mati Greenspan, a senior market analyst at eToro, suspected that the Tangel in Taipei might have motivated the U.S. to probe BitMEX. In his newsletter for his clients, Greenspan stated: 

“Hayes is not acting as a representative of the crypto community and most of the critical arguments that he used were clearly in defense of himself as an alleged illegal casino operator and not the typical arguments one would use in favor of free and fair money.” 

In his comment to Cointelegraph, Greenspan elaborated the point. At the Tangle in Taipei, Hayes defended Bitcoin in terms of financial privacy. But for Greenspan, it is not a typical argument people to use in defense of Bitcoin. He continued: 

“Everyone already knows that Bitcoin is not a private