On May 16, 2020, BitMEX, one of the world’s most popular cryptocurrency exchanges, was accused of engaging in or abetting crimes that include racketeering, money laundering, wire fraud and unlicensed money transmission.
The allegations were made in a major new lawsuit filed by BMA LLC in the United States District Court for the Northern District of California.
The plaintiff names BitMEX’s parent company, HDR Global Trading Limited, and co-founders Arthur Hayes, Ben Delo, and Samuel Reed, accusing them of facilitating “a myriad of illegal activities.”
The lawsuit also alleged that BitMEX illegally offered its high-risk trading services of about $138 billion to U.S. citizens. That staggering amount of trades on BitMEX was conducted without obtaining a money transmitting license in the U.S.
In response, a spokesperson for HDR Global Trading Limited, the owner and operator of the BitMEX cryptocurrency derivatives trading platform, confirmed that the exchange was aware of the complaint filed by BMA LLC, formerly known as Bitcoin Manipulation Abatement, LLC.
He went on to say that BitMEX will deal with the complaint via a standard litigation process and he is entirely confident the court will see the claim for what it is.
“Having reviewed a draft version of their complaint, which is clearly rehashed from information culled from the internet, we confirm we will be defending ourselves vigorously against this spurious claim,” he concluded.
BMA has lately emerged as a serial filer of legal claims against businesses operating in the crypto space, and is widely known for operating just like a patent troll.
Other Allegations: Market Manipulation
The lawsuit also notes that BitMEX provides traders with extremely high trading leverage (100x) for highly liquid derivatives, which are allegedly calculated based on prices of “2 or 3 illiquid spot exchanges.”
Moreover, the exchange purportedly enables manipulators and money launderers to operate illicitly by allowing them to open an unlimited number of anonymous and unverified accounts, without trading or withdrawal limits.
The document claims that BitMEX utilizes deliberate server freezes and fraudulent “system overload” events to accept or reject specific trading orders during volatile market conditions to worsen price fluctuations and trigger maximum liquidations.
All this allegedly makes BitMEX an exquisite ‘designer’ tool for unsavoury actors to manipulate cryptocurrency markets.
BitMEX has lost half of its market share in the past six months. A massive crypto withdrawal ensued on March 12 after a “technical issue” on the exchange crashed the bitcoin price by almost 40 % overnight.
BitMEX is No Stranger to Controversies
As recently reported, BitMEX is currently facing its early investors in a separate $540M lawsuit. In that case, the plaintiffs have accused the exchange and founder Hayes of cynically seeking to deny them their returns.
Similarly, controversies have surrounded two DDoS attacks, which triggered downtime on the exchange and have even prompted some industry actors to accuse BitMEX of being responsible for the crash of bitcoin prices in March. BitMEX was also one of the seven crypto firms implicated in a series of new lawsuits alleging violations of U.S. securities laws.