BitMEX hit with 623 BTC lawsuit after shutdown announcement

BitMEX is accused of allowing internal traders to access customer data while users were locked out due to server issues.

BKX Services Inc. and David Namdar have filed a class action lawsuit against BitMEX.

The plaintiffs accuse the exchange of market manipulation and misappropriation of nearly 623 BTC due to forced liquidations.

Lawsuit questions BitMEX liquidation practices

Filed the same day the exchange announced its shutdown, the two claim that BitMEX’s internal trading team accessed customers’ private information and continued trading while servers were down and users could not access the platform.

BitMEX has faced accusations regarding its liquidation practices and internal trading advantages in the past, with the latest lawsuit reigniting those allegations.

According to the complaint, the exchange offered its clients leveraged trades of up to 100 times their collateral, but allegedly liquidated their positions before all assets were exhausted. This resulted in users losing positions, while the remaining BTC collateral was worth more than the losses incurred.

Instead of reimbursing excess BTC to traders, BitMEX allegedly redirected the funds to its insurance pool, which plaintiffs allege allowed the platform to benefit financially from the forced liquidations.

“BitMEX deliberately developed a system that took advantage of liquidations,” the filing reads.

The filing also cites an old case from 2020 in which Brett Messieh and other traders sued the platform for similar offenses. Here, the group accused the company of rigging trading terms in its favor, resulting in financial losses for users. But the court dismissed the case due to lack of evidence.

Traders lost almost 623 BTC

Namdar claims to have lost over 316.85 BTC in the process, while BKX claims its losses were around 305.81 BTC. As a result, both are seeking to recover their seized crypto and damages. Additionally, the proposed lawsuit seeks to represent U.S. customers who traded BTC perpetual swap products in transactions dating back to July 23, 2018.

Earlier on Thursday, HDR Global Trading, owner of BitMEX, announced that it would close the exchange after a strategic review, with the decision expected to take effect on September 23. The platform has already suspended the registration of new accounts, with traders now only allowed to close existing positions.

Following this announcement, Arthur Hayes, co-founder of BitMEX, thanked its partners, employees and customers for their support over the years. “It was an incredible adventure,” he wrote, adding that he was proud that the exchange was closing “responsibly on our own terms.”