Key Takeaways Two customers allege that BitMEX liquidations cost them a combined 622.66 BTC. The proposed class action also claims […]
The post BitMEX Faces 623 BTC Lawsuit for Theft and Insider Trading appeared first on Coindoo.
Key Takeaways
- Two customers allege that BitMEX liquidations cost them a combined 622.66 BTC.
- The proposed class action also claims that an internal trading desk used confidential customer information.
- BitMEX rejects the allegations and says it will defend the case.
- A similar case ended in 2025 without a ruling on the underlying liquidation claims.
BKX Services Inc. and trader David Namdar filed the complaint in the US District Court for the Southern District of New York on July 23.
The plaintiffs say they lost a combined 622.66 BTC through forced liquidations. BKX claims losses of at least 305.81 BTC, while Namdar alleges that he lost more than 316.85 BTC.
The defendants include BitMEX operator HDR Global Trading Limited, several related companies, co-founders Arthur Hayes, Benjamin Delo and Samuel Reed, and former executive Gregory Dwyer.
The filing opens a civil case but does not establish that any of the allegations are true. The proposed class has not been certified, and the defendants will have an opportunity to challenge the claims.
Why the Liquidation System Is Central to the Case
BitMEX became known for offering highly leveraged crypto derivatives, allowing traders to control positions much larger than the collateral deposited into their accounts.
When losses push a leveraged position beyond the exchange’s maintenance threshold, the platform can liquidate it automatically. That process is intended to prevent the account from developing a deficit that the trader cannot cover.
The plaintiffs are not arguing that exchanges have no right to liquidate undercollateralized positions. Their complaint instead claims that BitMEX closed certain trades while the remaining collateral was still worth more than the loss that needed to be covered.
According to the filing, Bitcoin left after those liquidations was transferred into the exchange’s insurance fund rather than returned to the customer. The plaintiffs allege that this arrangement gave BitMEX a financial interest in liquidating additional positions.
They are seeking the return of the Bitcoin they say was improperly retained, along with compensatory and punitive damages. The proposed class would include certain US customers who traded Bitcoin swap products on BitMEX beginning July 23, 2018.
The Complaint Alleges an Internal Trading Advantage
The lawsuit also describes an operation it calls the “Insider Trading Desk.”
The plaintiffs allege that the desk could access confidential information about customer positions and liquidation levels. Such data could reveal where a relatively small price movement might trigger a larger group of forced closures.
They also claim that internal trading accounts could remain active during server outages that prevented regular customers from logging in, modifying orders or closing positions.
In this case, “insider trading” is not being used in the conventional stock-market sense of trading company shares with confidential corporate information. The complaint alleges that a proprietary desk traded on BitMEX while holding nonpublic information about other users on the same venue.
The court has not determined whether the alleged desk existed in the form described, accessed customer information or influenced liquidation events.
BitMEX Rejects the Claims
BitMEX has denied the accusations.
A company spokesperson told Cointelegraph that the exchange had previously dealt with similar allegations. The spokesperson described the new filing as an opportunistic and baseless claim and said the company would vigorously defend itself.
If the case proceeds, the dispute could turn on technical records showing how the liquidation engine operated, where remaining collateral was transferred and what account permissions were available to any internal trading operation.
BitMEX may first ask the court to dismiss the complaint before the parties reach discovery. A dismissal request would test whether the plaintiffs have presented legally sufficient claims, not necessarily whether every factual allegation is correct.
An Earlier Case Ended Without Resolving Similar Claims
The new complaint follows a separate proposed class action filed in 2020 by Brett Messieh, Drew Lee and other BitMEX customers.
That case also raised allegations involving forced liquidations, the exchange’s insurance fund and an internal trading desk with access to customer information.
The action was terminated on June 30, 2025. According to the final court order, the remaining plaintiff was dismissed after failing to respond to repeated instructions asking whether he intended to continue the case. The order also referred to a stipulation filed by the other parties.
The case therefore ended without a trial or a ruling on the truth of the liquidation allegations. Its closure was neither a judicial confirmation of the claims nor a finding that the disputed conduct never occurred.
The Filing Came as BitMEX Began Its Final Wind-Down
The complaint was filed on the same day BitMEX announced that its exchange would close after more than 11 years of operation.
Under the official closure timetable, exchange services will end on September 23 at 04:00 UTC. The platform will become reduce-only on August 26, meaning users will no longer be able to open new positions or increase existing exposure.
BitMEX may begin closing positions during the period between those dates. Any positions still open when exchange services end will be force-closed.
Our guide to the BitMEX shutdown deadlines explains the withdrawal process, the reduce-only period and the fees that may apply to balances left on the platform.
The timing puts the lawsuit and the closure in the same news cycle, but the available information does not establish that the complaint caused the exchange to shut down. BitMEX said its board reached the decision after reviewing the business and the wider crypto industry.
BMEX and Open Interest Fell After the Closure News
The market response added to the pressure surrounding the exchange.
BitMEX’s BMEX token fell more than 90% after the shutdown announcement, reaching its lowest level since trading began in November 2022. Bitcoin open interest on the exchange had also fallen from almost $3 billion at its 2024 peak to approximately $113 million.
Our analysis of the BMEX decline and contraction in BitMEX open interest shows that derivatives activity had already weakened considerably before the final closure process began.
Those market moves help explain the condition of the platform as it enters its wind-down. They do not provide evidence for or against the claims made in the lawsuit.
CZ Reflects on the Exchange’s Crypto Legacy
Binance co-founder Changpeng Zhao, known as CZ, said he was “sad to see BitMEX go” and credited the exchange with helping pioneer 100x crypto perpetual contracts.
His reaction reflects BitMEX’s influence on a product that later became central to crypto derivatives trading. It did not address the new complaint or express a view on the plaintiffs’ allegations.
What Happens Next
The defendants can respond to the complaint and may seek to have some or all of the claims dismissed. If the case survives that stage, the plaintiffs would still need to convince the court that their claims are suitable for treatment as a class action.
Discovery could then involve records related to the liquidation engine, the insurance fund, server outages, customer data and internal account permissions. The case could also end through dismissal, settlement or another procedural outcome before reaching trial.
For BitMEX users, the court process does not change the exchange’s operational deadlines. Traders still need to manage open positions before the platform becomes reduce-only and withdraw their assets as BitMEX moves toward its September closure.
This article is provided for informational purposes only and does not constitute financial, investment or legal advice.
The post BitMEX Faces 623 BTC Lawsuit for Theft and Insider Trading appeared first on Coindoo.
Source: https://coindoo.com/bitmex-faces-lawsuit-theft-insider-trading/
More Crypto News
Check our Market Overview
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always conduct your own research (DYOR).
