One of the world’s most recognizable derivatives exchanges for crypto, BitMEX, is now being accused in court for engaging in or aiding multiple illicit activities. Such allegations include participation in racketeering, wire fraud, money laundering, and even unlicensed money transmissions.
These allegations were made via a new lawsuit filed by the BMA LLC to the United States District Court in the Northern District of California on May 16th.
The plaintiff, who has remained anonymous, specifically accuses HDR Global Trading, the parent company of BitMEX, including the exchange’s top heads – Arthur Hayes, Samuel Reed, and Ben Delo.
The lawsuit firmly claims that these people have shamelessly engaged in said illegal activities on top of many other crimes which are truly staggering in nature.
The reason why the case is being pursued within California
According to BMA LLC, the executives of BitMEX persistently maintained close relationship with the US, specifically the Northern District of California, despite their multiple rebuttals. The plaintiff then cited numerous sources that almost 15% of BitMEX’s total 2019 trading volume is from US traders alone. That is approximately $138 billion or more.
The plaintiff then claimed that this is a representation of a record volume for such illicit activity within the history of the US monetary regulation in its entirety.
HDR Global Trading, the parent company of BitMEX, is reportedly listed within Seychelles. That said, the plaintiff noted that whenever someone asks why the business was integrated within that particularly country, Hayes will answer that Seychelles is much cheaper than the United States to bribe. And then whenever asked how much BitMEX pays to register within the country, Hayes will answer: ‘a coconut’. Again, these are based on the words of the plaintiff alone and have not been firmly confirmed.
The Allegations Directed ToBitMEX
BMA LLC has accused the defendants of deliberately conspiring for their businesses to conduct with an observable pattern of racketeering and engagement in crypto market manipulation, among many more high-degree illicit schemes.
According to the lawsuit, BitMEX gives traders with absurdly high trading leverage, even up to 100 times, for highly liquid derivatives. These are then reportedly calculated basing on the prices of two or three spot exchanges that are not readily convertible into cash.
This type of exchange allegedly enables money launderers and manipulators to do their crimes as it allows them to open unlimited anonymous and unverified accounts without having to worry about trading and withdrawal limits.
The lawsuit then claims that BitMEX utilizes server freezes – which they purportedly do intentionally – and deceitful system overload error events in order to accept or reject specific orders for trade during particular market conditions. By doing so, they are able to intensify major price fluctuations on top of triggering maximum liquidations. Mixing all that up, this allegedly deems BitMEX as an attractive tool for criminal minds to manipulate to their liking within the crypto market.
The lawsuit then pointed out the defendant’s own admission that the exchange does indeed operate its very own for-profit trading desk after denying the claim multiple times. With that, BitMEX has reportedly been trading against their own customers within the platform in which they could then use their inside information about the current trading positions of said customers for their own advantage.
Other controversies regarding BitMEX
As previously reported by Coinmod last March, BitMEX has continually lost both volume and open interest for Bitcoin (BTC) futures ever since the historic market crash this year. BitMEX has then been struggling to defend its very own market shares against noteworthy adversaries such as Binance Futures.
Following the “Black Thursday” market crash, BitMEX has watched its BTC holdings drop a whopping 40% within the platform in the dates in between March 13th and April 9th.
Countless controversies have then popped up regarding two distributed denial-of-service attacks (DDOS) that sparked a downtime within the exchange. This has even prompted some of the actors within the industry to accuse BitMEX of being the one responsible for the Bitcoin value to hit historic multi-month lows in the month of March.
As we may remember, BitMEX is also one of the seven cryptocurrency companies that have been implicated by a series of lawsuits that accuses them of US Security law violations.