Arthur Hayes’ BitMEX Faces Lawsuit Over Insider Trading Amid Shutdown of Operations

Crypto derivatives trading exchange BitMEX, established by Arthur Hayes, is facing a class action lawsuit in the U.S. as it seeks to cease operations after 11 years. The matter was lodged on Thursday, the very day BitMEX announced it would cease its exchange activities forever. The lawsuit brings new attention to the company, shortly before it starts to suspend trading services to customers.

Arthur Hayes-Backed BitMEX Slapped With Lawsuit

For context, BKX Services Inc. and David Namdar filed the lawsuit in the US District Court for the Southern District of New York. The plaintiffs allege that BitMEX is mismanaging customer liquidations in a way that it can take the Bitcoin (BTC) collateral.

Their total losses amount to 622.66 BTC, BKX attributing at least 305.81 BTC and Namdar at least 316.85 BTC, per the filing. This translates to a monetary figure of over $40 million, according to current BTC price trends.

The complaint alleges that BitMEX has created its liquidation engine to profit from customer losses. It further claims that there was an inside trading floor that had access to private client information and could carry on trading when the server was frozen. Whereas, regular customers were not able to trade, and could not close any trades on their accounts, they added.

“BitMEX deliberately developed a system that profited from the liquidations,” the plaintiffs alleged.

The filing also alleges that BitMEX allowed traders to trade with up to 100 times their collateral. It claims jobs were eliminated even if there remained about twice the amount of collateral to be had.

The extra BTC was supposedly moved to BitMEX’s insurance fund. Thereafter, the crypto derivatives exchange was allegedly able to generate benefits from forced liquidations.

Plaintiffs are asking for reimbursement of the allegedly stolen Bitcoin and damages, including punitive. They also aim to act on behalf of US customer who have been involved in Bitcoin and crypto swapping deals since July 23, 2018.

The lawsuit brings back issues raised against the Arthur Hayes-backed exchange before. It refers to a class action lawsuit against BitMEX that was filed in 2020 by Brett Messieh and other traders pursuant to the Commodity Exchange Act.

Cessation of Operations & Offical Statement On Lawsuit

The legal action comes just after the company’s parent, HDR Global Trading completed a strategic assessment. It has announced the cessation of operations for BitMEX.

For this, the exchange has already closed its user registration. All services will come to an end on September 23. Further, customers will no longer be able to open new positions from August 26, 2026. The announcement of the shutdown also caused the platform’s BMEX crypto, a utility token, to drop by nearly 90%.

Meanwhile, BitMEX has denied the claims and responded that it will defend against the lawsuit. A spokesperson said, “BitMEX has had many such claims against the platform in our history and has successfully dealt with each and every one. This is yet another opportunistic claim with no basis; we look forward to vigorously defending ourselves again this time.”