BitMEX Has a Shutdown Date and a New Lawsuit — Bitcoin Theft and Insider Trading Are the Allegations

BitMEX announced its shutdown Thursday, giving users until September 23 to close positions and withdraw funds. Around the same time as the disclosure, a proposed class action lawsuit landed alleging the exchange stole Bitcoin (BTC) from its own customers and operated an internal trading desk that exploited private user data.

The Liquidation System Was the Weapon 

The lawsuit was filed by BKX Services and investor David Namdar, who allege they lost Bitcoin through forced liquidations on the platform. BKX Services claims losses of at least 305 Bitcoin. Namdar separately alleges 622 Bitcoin in losses.

The complaint names BitMEX parent company HDR Global Trading alongside co-founders Arthur Hayes, Ben Delo, and Samuel Reed as respondents.

The core allegation is that BitMEX deliberately engineered its liquidation system to retain customers’ collateral and route the remaining Bitcoin into the platform’s own insurance fund rather than returning it to the traders whose positions were closed. 

In plain terms, the lawsuit claims the exchange was designed to keep money that should have gone back to users. The insider trading allegation adds a separate layer to the case. 

The filing states that BitMEX maintained an internal trading desk with access to private customer information and that this desk could continue executing trades during server freezes — periods when other users were locked out and unable to close their own positions. 

If accurate, that would mean the exchange’s own traders could act on information unavailable to the market while ordinary customers were frozen out of the very positions they needed to exit.

BitMEX allowed traders to use leverage of up to 100 times their collateral — meaning a trader could control a position 100 times larger than the funds they deposited. 

That level of leverage amplifies both gains and losses, and forced liquidations under those conditions can wipe out a position entirely before a trader has any opportunity to respond. 

The lawsuit’s theory is that the liquidation mechanism was not a neutral risk management tool but a revenue generator for the exchange at customers’ expense.

Every US BitMEX User Since 2018 Could Be Part of The Lawsuit 

The plaintiffs are seeking class action status on behalf of all US users who traded Bitcoin swap products on BitMEX since July 23, 2018. They are asking for the return of their Bitcoin, compensatory damages, and punitive damages — with the filing specifically noting that BitMEX’s conduct was willful, intentional, and demonstrated malice toward the plaintiff class. 

Co-founders Hayes, Delo, and Reed were charged by US authorities in 2020 with violating the Bank Secrecy Act by failing to implement anti-money laundering controls. Hayes pleaded guilty in 2022 and received two years of probation. 

The new lawsuit reopens questions about the exchange’s conduct during its peak years — a period when it was the dominant venue for Bitcoin derivatives globally and processed billions of dollars in daily volume before competitors absorbed most of its market share.

Featured image generated with OpenArt.