ARTHUR Hayes – co-founder of BitMEX – created a cryptocurrency exchange that has traded trillions of dollars.
But in 2022, Hayes was sentenced to two years on probation with six months of home confinement and fined $10million.
Here’s the story behind the BitMEX founder.
Who is Arthur Hayes?
Arthur Hayes was born to middle-class parents in 1985 in Detroit, Michigan but grew up in Buffalo, New York.
He attended Nichols School and went on to achieve a BS in economics and finance from Wharton School of Business at the University of Pennsylvania.
Hayes then moved to Hong Kong in 2008, to start his investment banking career.
He worked for Deutsche Bank, as an equity derivatives trader before moving to Citibank in 2011 where he became the head ETF market maker.
Hayes’ interest in Bitcoin started in 2013, after he read Satoshi Nakamoto’s white paper.
Hayes started small, buying Bitcoin in one market and then selling it at a premium in another.
But in 2013 he had problems accessing coins he had sent to Mt. Gox, a Tokyo-based Bitcoin exchange that helped users convert their holdings into fiat money – traditional legal tender such as the dollar and pound.
In early 2014, Mt. Gox declared hackers had stolen nearly $500 million from its users but unlike most other depositors – around 24,000 – Hayes managed to get his money out.
When he heard Bitcoin was trading higher on the Chinese mainland, he bought Bitcoin, transferred the coins to an exchange in China, and swapped them for yuan.
He said: “Over a period of days, I physically crossed the border by bus to Shenzhen with some friends, had lunch, and came back over the border carrying legal amounts of cash.”
But this got Hayes thinking.
Why not build an online exchange where people could really profit off of their Bitcoin by using derivatives? (A derivative is a financial contract whose value is based on the performance of an agreed-upon underlying asset – in this case, cryptocurrency.)
In 2014, Hayes met with Ben Delo, a British mathematician and programmer.
After graduating in 2005, Delo worked for IBM, followed by two hedge funds, and JPMorgan in Hong Kong.
As the pair worked out what it would take to turn Hayes’s vision into reality, Delo said they needed a front-end web developer to handle the consumer-facing side of things.
Hayes brought in Sam Reed, an American coder who he’d met after a speech Reed gave warning people not to join start-ups because owners often exploited their coders.
But when Hayes pitched his idea to Reed he signed up immediately.
Reed worked for a large defense contractor and a number of start-ups before making his way to Hong Kong in 2013.
Hayes, Delo, and Reed began working on what they termed the Bitcoin Mercantile Exchange (BitMEX) in 2014.
Arthur Hayes was the CEO, Ben Delo the COO, and Sam Reed the chief technology officer (CTO).
BitMEX was billed as “a peer-to-peer trading platform that offers leveraged contracts that are bought and sold in Bitcoin.”
For example, a customer with $10,000 in their BitMEX account could execute a trade worth $1 million.
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In a blog entry, Hayes said: “Trading without leverage is like driving a Lamborghini in first gear: you know it’s safer, but that’s not why you bought it.”
On June 27, 2019, the company announced it had set a new daily record, trading $16 billion worth of cryptocurrency.
Two days later Hayes tweeted: “One Trillion Dollars traded in a year; the stats don’t lie.”
But in January 2021, the United States Commodity Futures Trading Commission (CFTC) filed civil charges against Arthur Hayes for violating federal anti-manipulation laws.
The CFTC said Hayes engaged in “spoofing” – which is entering and cancelling orders to manipulate prices for Bitcoin futures contracts.
The CFTC also said BitMEX engaged in a number of illegal activities, including operating an unregistered derivatives trading platform and violating anti-money laundering laws.
On May 5, 2022, Arthur Hayes alongside his co-founders pleaded guilty to these charges and were sentenced to pay $10 million each, and two years probation with six months of home confinement.
What is Arthur Hayes’ net worth?
Hayes’ net worth is estimated to be over $500 million based on his public wallet, private investments and earnings from founding BitMEX.
