Arthur Hayes is an African-American entrepreneur and banker born in 1985, and one of the co-founders of the cryptocurrency exchange BitMEX. BitMEX is one of the largest cryptocurrency derivatives exchanges in the world, specializing in futures, options and perpetual contracts for cryptocurrencies such as Bitcoin. Together with the founders of BitMEX, he invented the perpetual contract that changed the Crypto trading landscape.
Hayes graduated from the famous Wharton School of Business of the University of Pennsylvania in 2008. He worked as a trader in a bank in his early years. After getting in touch with Bitcoin, he chose to join the forefront of the cryptocurrency revolution and founded an exchange. He was once worth more than 1 billion U.S. dollars, becoming the largest in history. The youngest African-American Billionaire. In 2022, Hayes was indicted by the Department of Justice for violating the U.S. Bank Secrecy Act, pleaded guilty soon after, and was eventually sentenced to six months of home confinement, two years of probation, and a $10 million fine. Today's Hayes has earned enough money, has enough youthful frivolity, has gone to court, and has squatted in the bureau. He has left the bitter seas of the United States, deeply cultivated in Asia, and went to find a comfortable place to write small compositions.
This article combines multiple materials and narrates Hayes' career story in a humorous tone. It can be clearly seen that it is his excellent educational background, bold and careful thinking, the values of pursuing high risks and high returns, and his rebellious adventurer character that have created Hayes today.
The Early Years of a Financial Wizard
Although Hayes' family conditions are not good, they are by no means poor. He was born in a middle-class American family, and his parents were both employees of General Motors. He was born in Detroit. In order for his children to go to a good school, his parents sent him to a private school in Buffalo, New York next door.
Hayes showed athleticism in middle school. He once participated in the school tennis team and was also a member of the school cross-country running (Cross country running, a kind of middle and long-distance running in the wild natural environment, usually with a short track, no more than 12 kilometers). Hayes also used his athletic achievements to win scholarships, and later in college, he also won a place in the "Mr. Penn" school bodybuilding competition.
He showed his ambitions in college. After being admitted to Penn University in 2004, Hayes and his friends went to the Penn University Gym (next to Wharton Business School) every morning at 5:30 to exercise🏋️. According to an interview with NY magazine, Hayes said that they would use this dawn time to conceive of their future, to have a "daydream" and fantasize about becoming a billionaire.
A friend who trained with him once said: "I think he saw himself as a financial wizard, a financier, more like Gordon Gecko than Mark Zuckerberg .”
I don't want to be in Buffalo, I want to go to China
He was never willing to follow the rules. Hayes, who has a rebellious personality, believes that going to Manhattan or Wall Street after graduation will become no different from other students, and he will not see a new and interesting way out, so he decides to find another way. In the summer vacation of his junior year (2007), he finally won an internship opportunity at Deutsche Bank in Hong Kong. Then Hayes embarked on a flight to Hong Kong, starting his trip to Asia.
Hayes: "Buffalo old hats ain't leaving here, I don't want to be in Buffalo."
Reporter: "How about going to Manhattan?"
Hayes: "Why do the same things as my classmates? I will get the same results as them."
As an intern who has not yet graduated, Hayes, who has just arrived in Hong Kong, is also responsible for buying lunch for his leaders in addition to his own work. Interestingly, he once mentioned this experience in one of his blog posts: "I charge a considerable tip on every meal and make a few hundred dollars a week in profit from it. To avoid making you I feel that my behavior is unethical, but everyone in the trading department knows what I am doing and acquiesces. I know it well."
Going to the nightclub "Pu" can also be exchanged for a formal job? Hayes is like that. When the graduation season was approaching, Deutsche Bank appointed several recruiters to come to the big recruitment. During the interview, Hayes said that he likes to play in nightclubs in Hong Kong, and one of the interviewers asked him what interesting nightlife there is in Philadelphia. He recommended some places. The final result was that all of them drank unconsciously at Philly House in Philadelphia, and Hayes also got his first official job after graduation as a trader in the Hong Kong branch of Deutsche Bank as he wished.
Hayes' open and flamboyant personality has been on display since his internship. Casual Friday, which has been popular in Hong Kong in recent years, means that employees can not wear formal clothes on Friday, and it was the same in Hayes' bank at that time. According to his own blog post, he was an analyst intern at the time. One Friday, an executive passed by his desk and saw him, and asked his immediate leader: Who the fuck is that? (Who is this tm?) The immediate leader looked up: Hayes was wearing a pink skinny polo shirt, washed-out jeans, and bright yellow sneakers. So since then the whole department has no Casual Friday anymore. This kid is always tempting on the edge of danger.
A First Look at Bitcoin
In 2013, Hayes first learned what Bitcoin is. At that time, he had switched from Deutsche Bank to Citibank, but was soon laid off by Citibank. According to his own memories, his first transaction was to buy BTC spot from the Mt Gox exchange, then deposit it in the ICBIT exchange (the exchange that invented the currency standard contract), and then sell a premium at a premium that expires in June of the same year. The BTC/USD currency-based futures contract, the net profit is as high as 200%, making thousands of dollars at once. After that, it was out of control.
At that time, the Chinese government had strict control over funds, and the market price of Bitcoin in the mainland had a significant premium compared to that in Hong Kong. After Hayes discovered this, he began to buy bitcoins at low prices from exchanges in Hong Kong, and then sold them on exchanges in mainland China. He also directly withdraws the profits he earned to a fake mainland bank account, and then takes a minibus to cross the border to Shenzhen, takes out a full amount of cash, stuffs it all into a backpack and carries it back to Hong Kong. This repeated experience aroused the suspicion of Hong Kong authorities, and on one occasion border agents detained him on suspicion of suspicious Bitcoin transactions. Hayes could only let him go by lying about being a victim of the deal.
The Rise of BitMEX
After the collapse of Mt Gox, which once had an 80% market share, China's three largest exchanges: Huobi, OKCoin, and BTC China absorbed most of the market share. There are also overseas exchanges such as Bitfinex, ICBIT and Bitstamp occupying a share outside the Chinese market. The market is highly competitive, and each company has its own way of survival: Bitfinex relies on the p2p lending market and the support of USDT, ICBIT invented the reverse futures contract (that is, the currency standard contract), Bitstamp...has stolen 5 million Having said that, Coinbase is more retail-friendly, and it was a thriving new exchange that had just opened for a year.
Facing such a market environment, Hayes can still see his own opportunities. At Deutsche and Citibank, he is best at trading futures contracts. He believes that the exchanges on the market are not professional enough. He wanted to give a similar Bitcoin trading experience to big traders who are used to trading stocks on Wall Street. So there was the idea of opening a bitcoin derivatives exchange. He imagined that this platform only accepts Bitcoin, looks a bit like a Bloomberg terminal, and has similar functions. Trading Bitcoin is as professional as trading stocks on Wall Street. So he approached Ben Delo and Sam Reed, both of whom are passionate about crypto. The three of them registered a company in Seychelles in 2014 and officially established BitMEX. The full name is Bitcoin Mercantile Exchange. A tribute to the Chicago Mercantile Exchange (CME), Hayes himself serves as CEO. On the first day the exchange was officially launched, it set a trading volume of $50m.
Although the opening was very fast, the business in the first half year was not ideal. Until the spring of 2015, Hayes had the idea of giving up, and suggested to the two partners: Hong Kong’s second-hand electronic products are booming, why don’t we start the business of reselling second-hand iPhones? The two partners did not agree. In the end, they decided to use high-risk and high-return as their own characteristics to attract users. The reason why futures trading has super high profits is because of the added leverage, that is, you can borrow some extra funds after mortgaging certain assets. The more you lend, the greater the leverage, but the greater the risk. Hayes and the team decided to increase the leverage of BitMEX to 50 times, that is, a maximum position of 1 BTC as margin can be opened to 50 BTC. Then they increased the leverage to 100 times. At that time, this far exceeded the leverage level of competitors, making BitMEX the gathering place for the most "loose waves" gamblers in the market, and miraculously turned BitMEX from loss to profit. Ultra-high leverage has since become the core of the BitMEX brand, and even the name of the parent company was changed to 100x Group.
Invention of perpetual contracts
Hayes once said in a YouTube video: "Some competing products that are similar to ours focus on retail investors. Why don't we win retail investors?" A group of leeks who don’t understand derivatives at all come to BitMEX to trade, only to find that they don’t understand how to play, and when the contract expires, they watch their money disappear inexplicably.
A real and interesting example, according to an interview with NY magazine, many retail investors would always send emails to Hayes to complain that their contracts "disappeared suddenly, gone." In fact, their contracts expired. So these retail investors complained that Hayes and BitMEX were big liars.
Delo was the first person who thought of improving this product: can we make a futures contract that does not expire? Doesn't this solve the problem of retail investors? As a result, several founders continued to dig along this inspiration. When their thoughts flowed like a spring, they could even write their ideas along a napkin in a noisy bar.
The result was BitMEX's greatest and most iconic innovation: Perpetual Swap. It can use ingenious methods to avoid the shortcomings of traditional futures that always have an expiration date (a 24x7 market always has an expiration limit is a big trouble), and also satisfies the function of traditional futures contracts: let long People profit when prices go up, and short sellers make money when prices go down.
Perpetual Swap, also known as Perp, is a futures contract transaction without an expiration date. It cleverly uses capital fees to anchor the contract price and spot price, so that investors can not only enjoy the leverage convenience of contract transactions, but also avoid The trouble of changing positions at maturity. For more about Perp, please refer to: What is a perpetual contract?
Since BitMEX launched its first perpetual contract product XBTUSD perp in May 2016, more and more exchanges have followed in the footsteps of BitMEX and launched perpetual products one after another. Bybit and OKEx launched in December 2018, while FTX and Binance launched in October and December 2019, respectively. Interestingly, when Binance launched the futures contract testnet, BitMEX once tweeted and mocked: Congratulations to Binance for launching the futures contract testnet. Seeing you copying our documents is as happy as writing our own documents. I am really happy for you !
Although the perpetual contract did not explode all of a sudden, this excellent product eventually triggered a market change. Today, the quarterly transaction volume of the derivatives market has exceeded 660 billion US dollars, of which perpetual contracts account for more than 90%.
swagger
In 2017, BitMEX was doing well, they made a lot of money, and someone wanted to buy them. Hayes and the BitMEX founders turned down an acquisition offer from a venture capital firm. "A valuation of $600 million is too little," Hayes thought. When BitMEX was first established, the founders struggled to raise funds, and now, of course, they all choose to keep their equity. The following year entered a bear market, which caused people to trade on their platform more frequently. In the summer of that year, BitMEX had a single-day trading volume of up to 8 billion U.S. dollars, which brought BitMEX a profit of 4 million U.S. dollars on that day, and its ability to attract money was outstanding.
In 2018, Hayes turned into a promising young man and returned to his hometown to show off his wealth. In May, Hayes went to New York to participate in the Crypto event Consensus, and became the focus of the audience before entering the venue: three Lamborghinis of BitMEX directly parked outside the venue in Midtown, Manhattan in violation of regulations. Hayes laughed at himself as "guerrilla marketing", and generously admitted that it might indeed be "a little bit gauche". The funny thing is that these luxury cars were rented, and there was a fine of about $1000 for parking violations. okay, this is in line with Hayes' ostentatious, rich and self-willed character.
Getting rich overnight made Ye Hayes the target of public criticism in the Crypto circle, making countless people envious of him as if it was really easy to make money. At that time, there was a joke in the currency circle: Hayes made money when others made money, and Hayes made money when others lost money. There is also an interesting meme, a message that seems to be sent by Hayes to his company employees: "Stop the loss for the leeks, I want to buy a Ferrari." Insinuating that Hayes manipulated the market and competed with users plate.
However, Hayes did not stop pretending. At the end of 2018, Hayes tweeted a photo of himself donating an ambulance to Seychelles at BitMEX. In the photo, Hayes was wearing sunglasses, which made people uncomfortable. And the highlight of this photo is the sticker below, which reads: "My other car is a Lamborghini."
The 2019 Tangle in Taipei debate is another highlight that has to be mentioned when Hayes is mentioned. From a few classic quotes in this debate, you can feel what it looks like to be crazy to a certain extent. At the time, Hayes and Nouriel Roubini, a well-known economist and writer against cryptocurrencies, had a heated debate on Bitcoin and BitMEX in this program.
From the dress, the two seem to be tit for tat: Roubini, wearing a suit, represents the traditional conservative, while Hayes, wearing skinny jeans with large holes in the knees, represents the rebellious avant-garde. In less than 10 minutes of the opening, the arrogant Hayes spoke amazingly. When asked why the company was registered in Seychelles, Hayes replied: "I can't learn to bend down." The original text is: "didn't want to bow down and take an ass-fucking from the US government just because It's regulated." When asked what the difference between the U.S. and Seychelles regulators was, Hayes said even more: "They (the U.S.) are just more expensive to bribe." What about Seychelles? How much does it cost? "Just a coconut."
Get on fire
We Chinese have an old saying that "make a fortune with a dull voice". Excessive ostentation and always probing on the edge of danger have made Hayes countless enemies. After the 2019 Tangle Taipei debate, he was gradually counterattacked by his enemies, even the US government.
On July 19, 2019, just one week after the show, the CFTC, the U.S. Commodity Futures Trading Association, began investigating BitMEX, suspecting that BitMEX was suspected of providing trading services to American users. According to US law, BitMEX, which is only registered in Seychelles, cannot provide services to US users. Naturally, the U.S. government can't understand this kind of "jumping clown" who threatens its own authority and flouts the law. This is the same reason that Ant Financial has no chance to go public after Ma Yun made wild remarks at the summit.
In less than a day after this incident, BitMEX’s net bitcoin outflow was as high as $73 million. Throughout July, BitMEX’s bitcoin net outflow exceeded $500 million, a record high (it had never exceeded $100 million in a single month before).
What followed were various thorny issues: On November 1, BitMEX accidentally leaked a large number of users’ email addresses, making the situation gradually develop in an uncontrollable direction. Immediately afterwards, hackers hacked into the BitMEX Twitter account and posted two tweets jokingly: “Take your BTC and run. Last day for withdrawals,” and “Hacked.” But they were quickly deleted. What's more, he directly created a new Twitter account and began to leak user IDs and email addresses continuously. However, BitMEX can only claim that Funds are safe.
The lawsuit is overwhelming
After entering 2020, BitMEX has not recovered from the 3.12 incident, and things have happened again. On May 16, BitMEX received a lawsuit from California-based BMA LLC (Bitcoin Manipulation Abatement) for accusing BitMEX, Hayes and other executives of a series of crimes including money laundering, fraud, and unlicensed operation of cryptocurrency exchanges. Behavior. The plaintiff also emphasized that in 2019, about 15% of BitMEX's trading volume, about US$138 billion, came from US users, claiming that this is the "highest record for illegal transactions in the United States." As the saying goes, when you recite a little bit, drinking water will clog your teeth. When BitMEX was entangled in this lawsuit, it experienced a series of bad things such as shutting down the service of the Japanese station, and the server went offline.
But in fact, the plaintiff has nothing to do with BitMEX. After all, BitMEX is deliberately registered in Seychelles to avoid US supervision. BMA can only indirectly prove that BitMEX has operations in the United States from the customer's email information. This insignificant evidence was later used by BitMEX people to ridicule: I registered in Seychelles, come and fuck me! They are still crazy.
But unfortunately, the next step is for the government to get real. Since the financial crisis in 2008, the emergence of Bitcoin has obviously aroused the concerns of governments of various countries. Whenever the bull market of Bitcoin comes, the central banks of various countries will be afraid that Bitcoin will move their cheese, especially in the year of the 2020 epidemic. From Mirco Strategy's crazy increase in BTC, to the Nigerian government's fear of losing control after seeing people betting $140 million in Bitcoin and having to ban transactions, and to Musk's sale of Tesla stock in exchange for Bitcoin, this series of signals , Let the Fed feel that it is really flustered not to do anything. It happened that Hayes was the happiest dancer at this time, so they aimed at BitMEX and Hayes. This guy is the perfect early bird: young, ostentatious, rich overnight, rich in ill-gotten wealth, and a black man, Isn't this a hit on the muzzle?
In October 2020, at the beginning of a new round of bull market, Hayes and the other two BitMEX founders received a joint accusation from the US Department of Justice and CFTC. Plus suspected of illegal money laundering, thus violating the Bank Secrecy Act of 1970, also known as the Currency and Foreign Exchange Transactions Reporting Act. BitMEX has since become the first cryptocurrency exchange to be sued for violating the Bank Secrecy Act. In fact, the reason why Hayes was involved was that when he dealt with the CFTC earlier, he did not hand over his customer information to the CFTC, and the CFTC also had a certain intention of retaliation. According to reports, within 48 hours of the CFTC’s indictment, more than 45,000 BTC were withdrawn and flowed to other exchanges.
As soon as this happened, Hayes responded quickly. He directly resigned from the CEO position, and jointly created a new entity 100x Group with Reed and Delo to manage BitMEX more safely. New CEO Alexander Hoptner also said he was ready for prosecution. According to reports, on the day Hayes resigned, BitMEX directly lost about $400 million in user deposits, and it seems that the general trend is over.
Honolulu Surrenders
On April 6, 2021, a private plane from Singapore slowly landed in Honolulu, Hawaii. Hayes was arrested at the airport wearing a casual T-shirt. The FBI went straight to the plane and verified his fingerprints and saliva. Agents in bulletproof vests then handcuffed Hayes and took him to court. This is Hayes' second visit to the United States since 2018, but this time it is very different from him driving a Lamborghini in New York.
Although surrendered, Hayes did not plead guilty in court. This is also the best decision after adopting the lawyer's advice: Hayes is still struggling to resist. As early as March, another founder, Ben Delo, surrendered to the Supreme Court in New York and also pleaded not guilty. After the Hayes team paid a bail of 10 million US dollars, it was followed by more than ten days of detention and isolation. Finally, after a series of discussions were completed, Hayes embarked on a flight back to Singapore. During the subsequent epidemic , Hayes has been staying in Singapore. A few months later, in August, BitMEX finally reached a settlement with the CFTC and agreed to pay a fine of US$100 million, which seemed to be a near miss.
Since then, the first two founders have both surrendered to the authorities, and Reed from Wisconsin is in a more miserable situation: Reed was actually arrested in October. At that time, he was living in the suburbs south of Boston with his wife and three child of the month. According to media descriptions, at 6:00 in the morning, more than a dozen FBI agents and policemen kicked down the door with guns and directly handcuffed him to a chair. Follow-up Reed was taken to a mysterious federal authority building, detained in a dark and damp basement for up to ten hours, and was even handcuffed.
I don't know if the prison life is too horrible, or for some reason, Hayes finally surrendered. In February 2022, two other founders, including Hayes, pleaded guilty to "contempt" of the Bank Secrecy Act and failure to enforce anti-money laundering regulations, and are willing to pay an additional $10 million each fine. U.S. Attorneys for the Southern District of New York told the court that BitMEX was a “tool for money laundering and criminal activity” that conducted more than $200 million in suspicious criminal transactions, and that it failed to report anything to the government as required. On one occasion, prosecutors allege, Hayes unfrozen the accounts of a suspected hacker, allowing them to withdraw what appeared to be stolen bitcoins. Because the company did not ask traders to provide identifying details of their accounts, "the full picture of BitMEX's criminal activities will never be known," prosecutors wrote.
Justice Department attorney Damian Williams said: "Arthur Hayes and Benjamin Delo have created a platform that flagrantly defies the law; and they have voluntarily ignored the most basic anti-money laundering regulations."
Now that all kinds of evidence have been presented, the prosecutor naturally asked the court to impose a heavier punishment. Hayes himself tried to show some contrition: "Although BitMEX's achievements do make me proud, I do regret participating in these criminal activities." Novogratz's testimony: "Let's not forget that Arthur is a young, successful black man. Our country and our industry need black men like that."
In May 2022, under the pressure of racial public opinion and other parties, the judge still chose a lighter punishment, allowing Hayes to avoid prison, but he still faces a 6-month home confinement.
The past sucks, let him go
According to media reports, Hayes was imprisoned in a luxurious white three-bedroom suite in Miami's South Beach (it was indeed his own property), with a huge balcony overlooking the entire Biscayne Bay. Hayes is here looking at the skyline of Miami, blowing the sea breeze, doing yoga and fitness every day, or going out to play ball and swim (according to his own description, he is allowed to go out for a few hours a day to exercise), even when he goes out to buy coffee. Fans will recognize it. Hayes loves writing. He rented a WeWork office nearby to meet the needs of office work and writing small essays. He even occasionally dined out to meet members of the local crypto native community.
However, Hayes' resistance to the United States can be seen from many details of his life. On the surface, being under house arrest here is like a vacation, but he himself is particularly nervous. "In the United States, I am very worried about my personal safety, because people can hold guns." He was even so sensitive that he wanted to vent his anger on small bugs. He felt that the swimming pool on the first floor was useless due to too many mosquitoes, so he complained: "In Singapore, they will do insecticide." In the report, he also complained about many shortcomings of the United States: the time difference with other countries Too big, American food is too disgusting, etc., the resistance to the United States is everywhere, and it has penetrated to the level of cultural disgust. "I don't plan to go back to the United States, probably never."
In a blink of an eye, in early 2023, Hayes has been playing in Hokkaido for a while. According to his self-report, we can feel that he has indeed laid down a lot: "I don't have any vision now, let's protect the customers' money first, and don't lose their bitcoins."
Write at the end
Once upon a time, there was a young man who was intelligent, received higher education, and worked in traditional finance for several years. The trader felt unhappy and came out to work on the exchange by himself. He became rich overnight, became a Twitter celebrity, and attracted the attention of everyone, so he led the banner of crypto and was crowned successfully. Later, he confronted the U.S. government and became a rebellious entrepreneur, attracting people from outside the circle to watch. He was arrogant and arrogant, and finally met his retribution, and the US government launched a counterattack. He also tried to resist, but was defeated in the end. He also changed Crypto.
This story is very familiar. SBF: It's not me. User: This is you. Hayes: It's obviously me.
Of course, although they have similar experiences, their differences are also obvious: one is later and the other is earlier. One is whiter and the other is blacker. One was from a wealthy family, and the other was a car repairman. A dead fat house, a big muscle bully. Of course, there is another important point: one took the customer's money and the evidence is solid, and the other, although facing numerous charges, has never been charged with misappropriating user deposits.
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Arthur Hayes Character History: From Financial Calf to Encryption Maniac
Arthur Hayes is an African-American entrepreneur and banker born in 1985, and one of the co-founders of the cryptocurrency exchange BitMEX. BitMEX is one of the largest cryptocurrency derivatives exchanges in the world, specializing in futures, options and perpetual contracts for cryptocurrencies such as Bitcoin. Together with the founders of BitMEX, he invented the perpetual contract that changed the Crypto trading landscape.
Hayes graduated from the famous Wharton School of Business of the University of Pennsylvania in 2008. He worked as a trader in a bank in his early years. After getting in touch with Bitcoin, he chose to join the forefront of the cryptocurrency revolution and founded an exchange. He was once worth more than 1 billion U.S. dollars, becoming the largest in history. The youngest African-American Billionaire. In 2022, Hayes was indicted by the Department of Justice for violating the U.S. Bank Secrecy Act, pleaded guilty soon after, and was eventually sentenced to six months of home confinement, two years of probation, and a $10 million fine. Today's Hayes has earned enough money, has enough youthful frivolity, has gone to court, and has squatted in the bureau. He has left the bitter seas of the United States, deeply cultivated in Asia, and went to find a comfortable place to write small compositions.
This article combines multiple materials and narrates Hayes' career story in a humorous tone. It can be clearly seen that it is his excellent educational background, bold and careful thinking, the values of pursuing high risks and high returns, and his rebellious adventurer character that have created Hayes today.
The Early Years of a Financial Wizard
Although Hayes' family conditions are not good, they are by no means poor. He was born in a middle-class American family, and his parents were both employees of General Motors. He was born in Detroit. In order for his children to go to a good school, his parents sent him to a private school in Buffalo, New York next door.
Hayes showed athleticism in middle school. He once participated in the school tennis team and was also a member of the school cross-country running (Cross country running, a kind of middle and long-distance running in the wild natural environment, usually with a short track, no more than 12 kilometers). Hayes also used his athletic achievements to win scholarships, and later in college, he also won a place in the "Mr. Penn" school bodybuilding competition.
He showed his ambitions in college. After being admitted to Penn University in 2004, Hayes and his friends went to the Penn University Gym (next to Wharton Business School) every morning at 5:30 to exercise🏋️. According to an interview with NY magazine, Hayes said that they would use this dawn time to conceive of their future, to have a "daydream" and fantasize about becoming a billionaire.
I don't want to be in Buffalo, I want to go to China
He was never willing to follow the rules. Hayes, who has a rebellious personality, believes that going to Manhattan or Wall Street after graduation will become no different from other students, and he will not see a new and interesting way out, so he decides to find another way. In the summer vacation of his junior year (2007), he finally won an internship opportunity at Deutsche Bank in Hong Kong. Then Hayes embarked on a flight to Hong Kong, starting his trip to Asia.
As an intern who has not yet graduated, Hayes, who has just arrived in Hong Kong, is also responsible for buying lunch for his leaders in addition to his own work. Interestingly, he once mentioned this experience in one of his blog posts: "I charge a considerable tip on every meal and make a few hundred dollars a week in profit from it. To avoid making you I feel that my behavior is unethical, but everyone in the trading department knows what I am doing and acquiesces. I know it well."
Going to the nightclub "Pu" can also be exchanged for a formal job? Hayes is like that. When the graduation season was approaching, Deutsche Bank appointed several recruiters to come to the big recruitment. During the interview, Hayes said that he likes to play in nightclubs in Hong Kong, and one of the interviewers asked him what interesting nightlife there is in Philadelphia. He recommended some places. The final result was that all of them drank unconsciously at Philly House in Philadelphia, and Hayes also got his first official job after graduation as a trader in the Hong Kong branch of Deutsche Bank as he wished.
Hayes' open and flamboyant personality has been on display since his internship. Casual Friday, which has been popular in Hong Kong in recent years, means that employees can not wear formal clothes on Friday, and it was the same in Hayes' bank at that time. According to his own blog post, he was an analyst intern at the time. One Friday, an executive passed by his desk and saw him, and asked his immediate leader: Who the fuck is that? (Who is this tm?) The immediate leader looked up: Hayes was wearing a pink skinny polo shirt, washed-out jeans, and bright yellow sneakers. So since then the whole department has no Casual Friday anymore. This kid is always tempting on the edge of danger.
A First Look at Bitcoin
In 2013, Hayes first learned what Bitcoin is. At that time, he had switched from Deutsche Bank to Citibank, but was soon laid off by Citibank. According to his own memories, his first transaction was to buy BTC spot from the Mt Gox exchange, then deposit it in the ICBIT exchange (the exchange that invented the currency standard contract), and then sell a premium at a premium that expires in June of the same year. The BTC/USD currency-based futures contract, the net profit is as high as 200%, making thousands of dollars at once. After that, it was out of control.
At that time, the Chinese government had strict control over funds, and the market price of Bitcoin in the mainland had a significant premium compared to that in Hong Kong. After Hayes discovered this, he began to buy bitcoins at low prices from exchanges in Hong Kong, and then sold them on exchanges in mainland China. He also directly withdraws the profits he earned to a fake mainland bank account, and then takes a minibus to cross the border to Shenzhen, takes out a full amount of cash, stuffs it all into a backpack and carries it back to Hong Kong. This repeated experience aroused the suspicion of Hong Kong authorities, and on one occasion border agents detained him on suspicion of suspicious Bitcoin transactions. Hayes could only let him go by lying about being a victim of the deal.
The Rise of BitMEX
After the collapse of Mt Gox, which once had an 80% market share, China's three largest exchanges: Huobi, OKCoin, and BTC China absorbed most of the market share. There are also overseas exchanges such as Bitfinex, ICBIT and Bitstamp occupying a share outside the Chinese market. The market is highly competitive, and each company has its own way of survival: Bitfinex relies on the p2p lending market and the support of USDT, ICBIT invented the reverse futures contract (that is, the currency standard contract), Bitstamp...has stolen 5 million Having said that, Coinbase is more retail-friendly, and it was a thriving new exchange that had just opened for a year.
Facing such a market environment, Hayes can still see his own opportunities. At Deutsche and Citibank, he is best at trading futures contracts. He believes that the exchanges on the market are not professional enough. He wanted to give a similar Bitcoin trading experience to big traders who are used to trading stocks on Wall Street. So there was the idea of opening a bitcoin derivatives exchange. He imagined that this platform only accepts Bitcoin, looks a bit like a Bloomberg terminal, and has similar functions. Trading Bitcoin is as professional as trading stocks on Wall Street. So he approached Ben Delo and Sam Reed, both of whom are passionate about crypto. The three of them registered a company in Seychelles in 2014 and officially established BitMEX. The full name is Bitcoin Mercantile Exchange. A tribute to the Chicago Mercantile Exchange (CME), Hayes himself serves as CEO. On the first day the exchange was officially launched, it set a trading volume of $50m.
Although the opening was very fast, the business in the first half year was not ideal. Until the spring of 2015, Hayes had the idea of giving up, and suggested to the two partners: Hong Kong’s second-hand electronic products are booming, why don’t we start the business of reselling second-hand iPhones? The two partners did not agree. In the end, they decided to use high-risk and high-return as their own characteristics to attract users. The reason why futures trading has super high profits is because of the added leverage, that is, you can borrow some extra funds after mortgaging certain assets. The more you lend, the greater the leverage, but the greater the risk. Hayes and the team decided to increase the leverage of BitMEX to 50 times, that is, a maximum position of 1 BTC as margin can be opened to 50 BTC. Then they increased the leverage to 100 times. At that time, this far exceeded the leverage level of competitors, making BitMEX the gathering place for the most "loose waves" gamblers in the market, and miraculously turned BitMEX from loss to profit. Ultra-high leverage has since become the core of the BitMEX brand, and even the name of the parent company was changed to 100x Group.
Invention of perpetual contracts
Hayes once said in a YouTube video: "Some competing products that are similar to ours focus on retail investors. Why don't we win retail investors?" A group of leeks who don’t understand derivatives at all come to BitMEX to trade, only to find that they don’t understand how to play, and when the contract expires, they watch their money disappear inexplicably.
Delo was the first person who thought of improving this product: can we make a futures contract that does not expire? Doesn't this solve the problem of retail investors? As a result, several founders continued to dig along this inspiration. When their thoughts flowed like a spring, they could even write their ideas along a napkin in a noisy bar.
The result was BitMEX's greatest and most iconic innovation: Perpetual Swap. It can use ingenious methods to avoid the shortcomings of traditional futures that always have an expiration date (a 24x7 market always has an expiration limit is a big trouble), and also satisfies the function of traditional futures contracts: let long People profit when prices go up, and short sellers make money when prices go down.
Since BitMEX launched its first perpetual contract product XBTUSD perp in May 2016, more and more exchanges have followed in the footsteps of BitMEX and launched perpetual products one after another. Bybit and OKEx launched in December 2018, while FTX and Binance launched in October and December 2019, respectively. Interestingly, when Binance launched the futures contract testnet, BitMEX once tweeted and mocked: Congratulations to Binance for launching the futures contract testnet. Seeing you copying our documents is as happy as writing our own documents. I am really happy for you !
Although the perpetual contract did not explode all of a sudden, this excellent product eventually triggered a market change. Today, the quarterly transaction volume of the derivatives market has exceeded 660 billion US dollars, of which perpetual contracts account for more than 90%.
swagger
In 2017, BitMEX was doing well, they made a lot of money, and someone wanted to buy them. Hayes and the BitMEX founders turned down an acquisition offer from a venture capital firm. "A valuation of $600 million is too little," Hayes thought. When BitMEX was first established, the founders struggled to raise funds, and now, of course, they all choose to keep their equity. The following year entered a bear market, which caused people to trade on their platform more frequently. In the summer of that year, BitMEX had a single-day trading volume of up to 8 billion U.S. dollars, which brought BitMEX a profit of 4 million U.S. dollars on that day, and its ability to attract money was outstanding.
In 2018, Hayes turned into a promising young man and returned to his hometown to show off his wealth. In May, Hayes went to New York to participate in the Crypto event Consensus, and became the focus of the audience before entering the venue: three Lamborghinis of BitMEX directly parked outside the venue in Midtown, Manhattan in violation of regulations. Hayes laughed at himself as "guerrilla marketing", and generously admitted that it might indeed be "a little bit gauche". The funny thing is that these luxury cars were rented, and there was a fine of about $1000 for parking violations. okay, this is in line with Hayes' ostentatious, rich and self-willed character.
Getting rich overnight made Ye Hayes the target of public criticism in the Crypto circle, making countless people envious of him as if it was really easy to make money. At that time, there was a joke in the currency circle: Hayes made money when others made money, and Hayes made money when others lost money. There is also an interesting meme, a message that seems to be sent by Hayes to his company employees: "Stop the loss for the leeks, I want to buy a Ferrari." Insinuating that Hayes manipulated the market and competed with users plate.
However, Hayes did not stop pretending. At the end of 2018, Hayes tweeted a photo of himself donating an ambulance to Seychelles at BitMEX. In the photo, Hayes was wearing sunglasses, which made people uncomfortable. And the highlight of this photo is the sticker below, which reads: "My other car is a Lamborghini."
The 2019 Tangle in Taipei debate is another highlight that has to be mentioned when Hayes is mentioned. From a few classic quotes in this debate, you can feel what it looks like to be crazy to a certain extent. At the time, Hayes and Nouriel Roubini, a well-known economist and writer against cryptocurrencies, had a heated debate on Bitcoin and BitMEX in this program.
From the dress, the two seem to be tit for tat: Roubini, wearing a suit, represents the traditional conservative, while Hayes, wearing skinny jeans with large holes in the knees, represents the rebellious avant-garde. In less than 10 minutes of the opening, the arrogant Hayes spoke amazingly. When asked why the company was registered in Seychelles, Hayes replied: "I can't learn to bend down." The original text is: "didn't want to bow down and take an ass-fucking from the US government just because It's regulated." When asked what the difference between the U.S. and Seychelles regulators was, Hayes said even more: "They (the U.S.) are just more expensive to bribe." What about Seychelles? How much does it cost? "Just a coconut."
Get on fire
We Chinese have an old saying that "make a fortune with a dull voice". Excessive ostentation and always probing on the edge of danger have made Hayes countless enemies. After the 2019 Tangle Taipei debate, he was gradually counterattacked by his enemies, even the US government.
On July 19, 2019, just one week after the show, the CFTC, the U.S. Commodity Futures Trading Association, began investigating BitMEX, suspecting that BitMEX was suspected of providing trading services to American users. According to US law, BitMEX, which is only registered in Seychelles, cannot provide services to US users. Naturally, the U.S. government can't understand this kind of "jumping clown" who threatens its own authority and flouts the law. This is the same reason that Ant Financial has no chance to go public after Ma Yun made wild remarks at the summit.
In less than a day after this incident, BitMEX’s net bitcoin outflow was as high as $73 million. Throughout July, BitMEX’s bitcoin net outflow exceeded $500 million, a record high (it had never exceeded $100 million in a single month before).
What followed were various thorny issues: On November 1, BitMEX accidentally leaked a large number of users’ email addresses, making the situation gradually develop in an uncontrollable direction. Immediately afterwards, hackers hacked into the BitMEX Twitter account and posted two tweets jokingly: “Take your BTC and run. Last day for withdrawals,” and “Hacked.” But they were quickly deleted. What's more, he directly created a new Twitter account and began to leak user IDs and email addresses continuously. However, BitMEX can only claim that Funds are safe.
The lawsuit is overwhelming
After entering 2020, BitMEX has not recovered from the 3.12 incident, and things have happened again. On May 16, BitMEX received a lawsuit from California-based BMA LLC (Bitcoin Manipulation Abatement) for accusing BitMEX, Hayes and other executives of a series of crimes including money laundering, fraud, and unlicensed operation of cryptocurrency exchanges. Behavior. The plaintiff also emphasized that in 2019, about 15% of BitMEX's trading volume, about US$138 billion, came from US users, claiming that this is the "highest record for illegal transactions in the United States." As the saying goes, when you recite a little bit, drinking water will clog your teeth. When BitMEX was entangled in this lawsuit, it experienced a series of bad things such as shutting down the service of the Japanese station, and the server went offline.
But in fact, the plaintiff has nothing to do with BitMEX. After all, BitMEX is deliberately registered in Seychelles to avoid US supervision. BMA can only indirectly prove that BitMEX has operations in the United States from the customer's email information. This insignificant evidence was later used by BitMEX people to ridicule: I registered in Seychelles, come and fuck me! They are still crazy.
But unfortunately, the next step is for the government to get real. Since the financial crisis in 2008, the emergence of Bitcoin has obviously aroused the concerns of governments of various countries. Whenever the bull market of Bitcoin comes, the central banks of various countries will be afraid that Bitcoin will move their cheese, especially in the year of the 2020 epidemic. From Mirco Strategy's crazy increase in BTC, to the Nigerian government's fear of losing control after seeing people betting $140 million in Bitcoin and having to ban transactions, and to Musk's sale of Tesla stock in exchange for Bitcoin, this series of signals , Let the Fed feel that it is really flustered not to do anything. It happened that Hayes was the happiest dancer at this time, so they aimed at BitMEX and Hayes. This guy is the perfect early bird: young, ostentatious, rich overnight, rich in ill-gotten wealth, and a black man, Isn't this a hit on the muzzle?
In October 2020, at the beginning of a new round of bull market, Hayes and the other two BitMEX founders received a joint accusation from the US Department of Justice and CFTC. Plus suspected of illegal money laundering, thus violating the Bank Secrecy Act of 1970, also known as the Currency and Foreign Exchange Transactions Reporting Act. BitMEX has since become the first cryptocurrency exchange to be sued for violating the Bank Secrecy Act. In fact, the reason why Hayes was involved was that when he dealt with the CFTC earlier, he did not hand over his customer information to the CFTC, and the CFTC also had a certain intention of retaliation. According to reports, within 48 hours of the CFTC’s indictment, more than 45,000 BTC were withdrawn and flowed to other exchanges.
As soon as this happened, Hayes responded quickly. He directly resigned from the CEO position, and jointly created a new entity 100x Group with Reed and Delo to manage BitMEX more safely. New CEO Alexander Hoptner also said he was ready for prosecution. According to reports, on the day Hayes resigned, BitMEX directly lost about $400 million in user deposits, and it seems that the general trend is over.
Honolulu Surrenders
On April 6, 2021, a private plane from Singapore slowly landed in Honolulu, Hawaii. Hayes was arrested at the airport wearing a casual T-shirt. The FBI went straight to the plane and verified his fingerprints and saliva. Agents in bulletproof vests then handcuffed Hayes and took him to court. This is Hayes' second visit to the United States since 2018, but this time it is very different from him driving a Lamborghini in New York.
Although surrendered, Hayes did not plead guilty in court. This is also the best decision after adopting the lawyer's advice: Hayes is still struggling to resist. As early as March, another founder, Ben Delo, surrendered to the Supreme Court in New York and also pleaded not guilty. After the Hayes team paid a bail of 10 million US dollars, it was followed by more than ten days of detention and isolation. Finally, after a series of discussions were completed, Hayes embarked on a flight back to Singapore. During the subsequent epidemic , Hayes has been staying in Singapore. A few months later, in August, BitMEX finally reached a settlement with the CFTC and agreed to pay a fine of US$100 million, which seemed to be a near miss.
I don't know if the prison life is too horrible, or for some reason, Hayes finally surrendered. In February 2022, two other founders, including Hayes, pleaded guilty to "contempt" of the Bank Secrecy Act and failure to enforce anti-money laundering regulations, and are willing to pay an additional $10 million each fine. U.S. Attorneys for the Southern District of New York told the court that BitMEX was a “tool for money laundering and criminal activity” that conducted more than $200 million in suspicious criminal transactions, and that it failed to report anything to the government as required. On one occasion, prosecutors allege, Hayes unfrozen the accounts of a suspected hacker, allowing them to withdraw what appeared to be stolen bitcoins. Because the company did not ask traders to provide identifying details of their accounts, "the full picture of BitMEX's criminal activities will never be known," prosecutors wrote.
Now that all kinds of evidence have been presented, the prosecutor naturally asked the court to impose a heavier punishment. Hayes himself tried to show some contrition: "Although BitMEX's achievements do make me proud, I do regret participating in these criminal activities." Novogratz's testimony: "Let's not forget that Arthur is a young, successful black man. Our country and our industry need black men like that."
In May 2022, under the pressure of racial public opinion and other parties, the judge still chose a lighter punishment, allowing Hayes to avoid prison, but he still faces a 6-month home confinement.
The past sucks, let him go
According to media reports, Hayes was imprisoned in a luxurious white three-bedroom suite in Miami's South Beach (it was indeed his own property), with a huge balcony overlooking the entire Biscayne Bay. Hayes is here looking at the skyline of Miami, blowing the sea breeze, doing yoga and fitness every day, or going out to play ball and swim (according to his own description, he is allowed to go out for a few hours a day to exercise), even when he goes out to buy coffee. Fans will recognize it. Hayes loves writing. He rented a WeWork office nearby to meet the needs of office work and writing small essays. He even occasionally dined out to meet members of the local crypto native community.
However, Hayes' resistance to the United States can be seen from many details of his life. On the surface, being under house arrest here is like a vacation, but he himself is particularly nervous. "In the United States, I am very worried about my personal safety, because people can hold guns." He was even so sensitive that he wanted to vent his anger on small bugs. He felt that the swimming pool on the first floor was useless due to too many mosquitoes, so he complained: "In Singapore, they will do insecticide." In the report, he also complained about many shortcomings of the United States: the time difference with other countries Too big, American food is too disgusting, etc., the resistance to the United States is everywhere, and it has penetrated to the level of cultural disgust. "I don't plan to go back to the United States, probably never."
In a blink of an eye, in early 2023, Hayes has been playing in Hokkaido for a while. According to his self-report, we can feel that he has indeed laid down a lot: "I don't have any vision now, let's protect the customers' money first, and don't lose their bitcoins."
Write at the end
Once upon a time, there was a young man who was intelligent, received higher education, and worked in traditional finance for several years. The trader felt unhappy and came out to work on the exchange by himself. He became rich overnight, became a Twitter celebrity, and attracted the attention of everyone, so he led the banner of crypto and was crowned successfully. Later, he confronted the U.S. government and became a rebellious entrepreneur, attracting people from outside the circle to watch. He was arrogant and arrogant, and finally met his retribution, and the US government launched a counterattack. He also tried to resist, but was defeated in the end. He also changed Crypto.
This story is very familiar. SBF: It's not me. User: This is you. Hayes: It's obviously me.
Of course, although they have similar experiences, their differences are also obvious: one is later and the other is earlier. One is whiter and the other is blacker. One was from a wealthy family, and the other was a car repairman. A dead fat house, a big muscle bully. Of course, there is another important point: one took the customer's money and the evidence is solid, and the other, although facing numerous charges, has never been charged with misappropriating user deposits.