- The plot thickens after BitMEX’s surprising wind-down, as a new lawsuit alleges it used software to trade against its customers’ positions.
BitMEX, a pioneer in crypto derivatives exchange, informed the public last week that it has started winding down its operations. It comes in preparation for the closure of its operations on September 23, 2026.
Interestingly, the exchange was mum on the exact reason why it’s shuttering its operations. Changpeng “CZ” Zhao, founder and former CEO of Binance, blamed it on BitMEX’s reputational and financial losses during the Biden admin’s “war on crypto.” Others attributed it simply to harsh market headwinds and tightening competition.
However, a new angle emerged as to why the platform had suddenly decided to abandon ship. A new lawsuit exposed that it had engaged in market manipulation using software that preyed on its own customers.
BitMEX and Founders Face a New Lawsuit
A new court filing in the Southern District of New York alleged that BitMEX, including parent company HDR Global Trading, holding firm 100x Group, former CEO Arthur Hayes, former COO Samuel Reed, former CTO Benjamin Delo, and former Head of Business Development Gregory Dwer, had orchestrated an elaborate scam that robbed its own customers. The submission coincided with the day the company released its notice to wind down its operations, which made some people suspect that there’s likely more behind the business’s decision than what it’s telling the public.
BKR Services and David Namdar filed the class action lawsuit claiming that BitMEX stole customers’ assets, including Bitcoin (BTC). The two entities allegedly lost 305.81 BTC and 316.85 BTC, respectively, for a total of 622.66 BTC. The plaintiffs sought to recover the funds worth more than $40 million at prevailing rates.
Allegations Claim BitMEX Preys on Its Own Customers
The complaints revealed that Hayes’ group designed software that determined which price moves would liquidate most people. They purportedly ran an internal trading desk using the system, where they could see hidden orders, particularly users’ liquidation prices. It also exposed other vital customer information.
Additionally, the lawsuit revealed that whenever the system forced liquidations, it would retain customers’ collateral and transfer remaining Bitcoin to the platform’s insurance fund. This amplified their actual losses, while fattening the exchange’s reserves.
What’s more, the plaintiffs highlighted that the same system worked even during server freezes while users were unable to close their positions. One specific instance was during the March 2020 crash, which locked out customers’ access to their accounts on BitMEX. The internal trading desk resumed operations, resulting in massive losses for users. Meanwhile, the company conveniently used a “hardware issue” with its cloud service provider and two distributed denial-of-service (DDoS) attacks as an excuse.
To date, neither the company nor the rest of the accused have released their statements regarding the matter.
