A Chinese court has thrown the book at several employees of the crypto exchange BKEX, declaring their contract trading operations as a form of illegal gambling.
Too much leverage
The People’s Court of Pingjiang County in Hunan Province made it clear that BKEX’s trading platform was more like an underground casino than a legitimate exchange, after they found that BKEX let users place bets using USDT while cranking up the stakes with leverage as high as 1,000 times.
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Talk about living on the edge, traders were wagering on the price swings of Bitcoin and Ether like it was a game of poker.
Essentially, future trading is when buyers and sellers agree to trade an asset at a predetermined price on a future date, and in the crypto realm, this means traders could bet big on price movements, which is rather risky business.
The court ruled that these activities were illegal under Chinese law because they involved gathering folks to place bets on financial outcomes.
Crime scene?
The court documents reveal some juicy backstory. Ji Jiaming, BKEX’s founder, kicked off this whole operation in 2018 through his tech company, and he played a bit of hide-and-seek with authorities by frequently changing the company’s registration until it was finally shut down.
Already sus, but there’s more. In 2021, Ji teamed up with Lei Le to launch perpetual contract trading, a move that attracted over 270,000 users and raked in profits exceeding 54.7 million USDT before regulators stepped in.
Eight persons faced criminal charges, and the sentences are nothing to laugh about.
Zheng Lei, who was a wallet engineer and department head, got hit with two years and one month behind bars plus a fine of 150,000 yuan, around $20,900.
Persons of interest
Wang, who was responsible for KYC verification and transactions in BKEX’s audit department, received a year and eleven months in prison along with a fine of 52,000 yuan.
And then there’s Dong, an agent who lured users in with QR codes, who earned $33,558 in commissions but now faces a suspended sentence of one year and six months plus a fine of 35,000 yuan.
This ruling is part of China’s ongoing crackdown on crypto activities that they view as a threat to financial stability, and honestly, the government has been pretty serious about this.
They’ve banned crypto trading multiple times over the years, starting with banks back in 2013 and ramping up with bans on ICOs and exchanges in 2017 and again in 2021.
