Class Action Alleges BitMEX Designed System To Profit From Customer Losses
By CU Today Staff —
NEW YORK— BitMEX, one of the world's largest cryptocurrency exchanges, deliberately designed its trading platform to force customer liquidations and seize their bitcoin, according to a proposed class-action lawsuit filed Thursday in the U.S. District Court for the Southern District of New York.
CoinDesk, citing the complaint, reported plaintiffs BKX Services Inc. and David Namdar allege they lost a combined 622.66 bitcoin—worth approximately $40.7 million when the suit was filed—through what they describe as fraudulent liquidation practices.
According to CoinDesk and the court complaint, BitMEX allegedly offered customers leverage of up to 100 times their collateral, then liquidated positions before all collateral had been exhausted. Rather than returning the remaining bitcoin to customers, the lawsuit claims the exchange transferred those assets into a BitMEX-controlled insurance fund. BKX alleges it lost 305.81 bitcoin, while Namdar claims losses of more than 316.85 bitcoin.
The complaint, according to CoinDesk, further alleges BitMEX operated a secret internal trading desk that had access to confidential customer trading information and could continue trading during server outages that locked ordinary customers out of their accounts. The suit names BitMEX parent HDR Global Trading Ltd., affiliated entities and co-founders Arthur Hayes, Ben Delo and Samuel Reed as defendants, seeking the return of the allegedly seized bitcoin, compensatory and punitive damages, and class-action status for U.S. customers who traded BitMEX bitcoin swap products beginning July 23, 2018. Court records show the case was filed in the Southern District of New York.
The lawsuit comes just one day after BitMEX announced it will cease operations on Sept. 23.
Originally reported by CU Today.