Cryptocurrency derivatives trading platform, BitMEX and its founders face another lawsuit for extortion, money laundering, and market manipulation.
Dmitry Dolgov, a resident of Moscow, Russia, filed suit in a northern district of California on Wednesday. He claims that HDR Global Trading Limited, the parent company of BitMEX, exchange founders, Arthur Hayes, Ben Delo, and Samuel Reed, and others, participated in and facilitated extortion activity “to give the accused billions of illegal profits.”
What the Lawsuit Entails
The new 188-page lawsuit alleges that defendants evaded their client’s knowledge of requirements (KYC) or anti-money laundering (AML) and received “unlimited funds from anyone without a single question.” Due to this lack of control, “hackers, tax evasion, money launderers, smugglers and drug dealers have flocked to BitMEX and flooded the platform with hot cash,” the lawsuit said.
Dolgov’s lawsuit also alleges that BitMEX was directly involved in and benefited financially from market manipulation and money laundering via internal and indirect trading departments.
As explained in the lawsuit, the (defendant) money launderer will open two exchanges – additional accounts on one or more exchanges used by BitMEX to calculate index prices (Coinbase Pro, Kraken, and BitStamp), and the winning account at BitMEX.
The (defendant) money launderer will then take a position on the primary leveraged derivative of BitMEX and immediately execute a market order from the Maximum Slip subsidiary account to move the index price in a promising direction.
Dolgov claims to have suffered “substantial damage” in an amount that will get proven at trial.
Pavel Pogodin of Consensus Law, the plaintiff’s attorney, said that they seek compensation equal to the amount shown during the trial and $ 50 million in damages.
BitMEX Series of Charges
The complaint comes two weeks after the exchange and its founders got hit by lawsuits from the Commodity Futures Trading Commission (CFTC) and the Department of Justice (DOJ). The DOJ accused BitMEX of deliberately failing to implement practical customer knowledge and money laundering programs that violate the Banking Secrecy Act.
However, in its blog post, BitMEX discussed the allegations against the exchange and its management and denied the charges. Bitmex also assured consumers that trading would continue as usual even though the DOJ apprehended at least one of Bitmex’s founders, Samuel Reed.
In a separate lawsuit filed in May, Puerto Rican BMA LLC also accused BitMEX of its development being purposefully to facilitate a myriad of illegal activities. However, HDR Global Trading spokesman said that the complaint developed from information culled from the internet. He added that they intend to defend themselves vigorously against this spurious claim.
The charges filed against BitMEX have sparked concerns regarding the future of the crypto industry. SEC commissioner Hester Peirce believes that legal action against BitMEX shows the global industry’s need to take AML regulations seriously.