A U.S. court lawsuit has been filed against crypto derivatives platform BitMEX, alleging offenses that include wire fraud and money laundering.
BitMEX now faces a new legal action in the U.S. District Court for the Northern District of California.
According to court papers filed on Saturday, May 16, the suit names the Seychelles-based crypto derivatives operator HDR Global Trading Limited, ABS Global Trading Limited, and the platform’s co-founders.
The company’s founders are Arthur Hayes (CEO), Samuel Reed (CTO), and Ben Delo.
Fraud and market manipulation allegations
The plaintiff in the case is BMA LLC, an entity that has previously filed suits against other crypto firms, including Ripple and a Binance-backed platform.
In the filing, BitMEX and its operators are accused of running a fraudulent enterprise, committing wire fraud, engaging in market manipulation, and facilitating money laundering.
The complaint further alleges that BitMEX provided services to U.S. customers while remaining unregistered as a money transmitter. It claims the platform’s high-risk products generated nearly $138 billion in 2019 and that more than 15% of that trading volume came from U.S. users.
BMA LLC requests a trial and contends that ABS Global, a U.S.-registered entity, is effectively controlled and operated by HDR Global Trading. The complaint asserts that ABS functions as an “alter ego” of the Seychelles-based BitMEX.
“Defendants, and each of them, specifically designed BitMEX to financially benefit from the alleged racketeering activity and other unlawful conduct, earning the defendants billions of dollars in illicit profits,” the complaint states.
Additional charges, including insider-like trading practices
The complaint alleges that BitMEX and the other defendants offered trading facilities allowing customers to access leverage up to 100x their capital.
It also accuses the platform of enabling “manipulators and money launderers” to avoid detection by permitting unlimited “check-free trading accounts.” The suit claims BitMEX used deliberate server freezes and system overloads to further fraudulent schemes.
BMA alleges that the company facilitated market manipulation, with large price swings originating on BitMEX and then spreading rapidly to other exchanges and crypto applications. The complaint characterizes the exchange as “an exquisite designer tool for unsavoury actors to manipulate cryptocurrency markets.”
This lawsuit arrives as BitMEX has experienced declining trading volumes and reputational damage following several high-profile incidents. In December 2019, a purported “technical issue” coincided with a rapid 50% plunge in the price of Bitcoin within hours, an event that harmed the exchange’s standing.
In March, when Bitcoin briefly fell to about $3,800, BitMEX’s Bitcoin holdings reportedly fell by 40% as investors withdrew significant amounts of cryptocurrency.