The complaint, which includes former BitMEX CEO Arthur Hayes and former CTO Samuel Reed as defendants, alleges that the exchange operated a fraudulent scheme from an insider desk managed by Head of Business Development Gregory Dwyer to trade against its users.
Key Takeaways
- BitMEX and its founders face a NY lawsuit accusing the exchange of manipulating trades to steal collateral.
- Plaintiffs claim BitMEX used server freezes and secret insider accounts to intentionally force liquidations.
- The lawsuit seeks class-action status and the recovery of over 600 BTC lost to these forced liquidations.
BitMEX Accused of Trading Against Its Users in New Complaint
BitMEX, the cryptocurrency exchange that recently announced it would wind down operations by September 23, has been hit by a lawsuit in the Southern District of New York for conducting fraudulent trading practices.
The complaint, filed on Thursday by BKX Services, a Nevada corporation operating out of New York, and David Namdar, claims that the exchange manipulated crypto derivatives trading against its customers to seize their collateral.
Arthur Hayes, co-founder and former CEO; Samuel Reed, co-founder and former CTO; Benjamin Delo, co-founder; and Gregory Dwyer, former Head of Business Development, are also listed as defendants.
Plaintiffs accuse BitMEX of running an insider trading desk, managed largely by Gregory Dwyer throughout 2018, which leveraged so-called “god access” to private customer data to engage in trading against the exchange’s users. BitMEX allegedly employed burner accounts to place strategic trades and cause mass liquidation.
The lawsuit stresses that BitMEX intentionally froze its servers during volatile market periods and maintained insider access to manipulate and place trades, while locked-out customers were unable to adjust their collateral or modify their positions.
Allegations also indicate that, at the time, BitMEX’s liquidation engine seized 100% of customers’ collateral even as losses only reached 50% of the funds posted, funneling the profits into an insurance fund that could be emptied for the exchange’s profit.
BKX Services and Namdar seek class certification of the complaint and in-kind recovery of over 600 BTC that were lost in forced liquidations executed by the exchange, in addition to compensatory damages for BitMEX’s conduct and the recovery of legal fees and costs.
In January 2025, BitMEX settled a case of Bank Secrecy Act (BSA) violations, agreeing to pay $100 million in fines after the DOJ stressed that it willfully failed “to establish, implement, and maintain an adequate anti-money laundering program.”