BitMEX sued as shutdown nears over alleged insider trading desk
A proposed class action alleging BitMEX operated a secret desk to trade against its own customers threatens to complicate the exchange's planned 2026 wind-down and prolong legal scrutiny of its founders.
Two former customers filed a proposed class action in a New York federal court against BitMEX and its co-founders, including Arthur Hayes. The lawsuit accuses the exchange of running a covert trading desk that used proprietary customer data to trade against its own users. The filing arrived the same day BitMEX announced it would permanently cease operations in September 2026 after 11 years.
The complaint alleges that Gregory Dwyer, BitMEX’s former head of business development, managed the secret desk from the company’s Manhattan office throughout 2018. Plaintiffs claim the operation utilized software to calculate which specific price movements would trigger mass customer liquidations, then executed trades to engineer those exact market moves. The exchange allegedly concealed this by routing trades through burner accounts paired with generic email addresses, directly contradicting public assurances that user liquidation points and hidden orders were strictly private.
Beyond front-running, the suit challenges BitMEX’s fundamental risk engine. Plaintiffs assert the exchange liquidated positions when unrealized losses reached roughly half of the posted collateral, even when remaining funds easily covered the deficit. The complaint alleges BitMEX seized this excess margin and routed it into its own Insurance Fund. The lawsuit also points to the March 2020 market crash, noting a 25-minute platform lockout that coincided with roughly $800 million in liquidated leveraged positions. BitMEX attributed the outage to hardware issues and denial-of-service attacks, but the plaintiffs allege the freeze was deliberate.
BKX Services and David Namdar claim combined losses of approximately 623 bitcoin across dozens of liquidations between 2018 and 2020. Notably, the plaintiffs are pursuing replevin—a legal remedy requiring the return of specific property—rather than cash damages. This tactic allows them to demand the physical return of the bitcoin, a significant distinction given the asset's substantial appreciation since the alleged liquidations occurred. The proposed class covers tens of thousands of U.S. users who traded bitcoin swaps from July 2018 onward, with aggregate claims estimated above $5 million.
For market professionals, the allegations underscore the historical counterparty risks embedded in leveraged crypto trading, where exchanges often acted as opaque principals rather than neutral venues. The legal action complicates BitMEX's planned wind-down. The exchange pleaded guilty in 2024 to violating the Bank Secrecy Act and paid an additional $100 million fine in January 2025. Although President Donald Trump pardoned the co-founders in March 2025, this civil suit revives scrutiny, leveraging a statute of limitations argument from a nearly identical 2020 case that was dismissed without prejudice in June 2025.
