Celsius Estate Targets BitMEX With Legal Action Before Platform Shutdown
Celsius bankruptcy representatives claim BitMEX improperly liquidated positions and confiscated 6,360 BTC valued at approximately $490 million during March 2020's crypto market turbulence.
Five companies connected to BitMEX are now facing legal action from the Celsius bankruptcy estate, with allegations including fraud, manipulation of market conditions, and improper liquidations that occurred during March 2020's cryptocurrency market collapse.
On Sept. 12, Celsius entities submitted the complaint to the US Bankruptcy Court for the Southern District of New York, operating through their estate representative known as Blockchain Recovery Investment Consortium (BRIC). The named defendants are HDR Global Trading, ABS Global Trading, Shine Effort, 100x Holdings and HDR Global Services.
According to the bankruptcy estate's allegations, BitMEX improperly liquidated positions and confiscated 1,325.84 BTC in collateral that belonged to Celsius on March 12, 2020, followed by the seizure of 5,034.33 BTC from the investment fund JST on the subsequent day. The filing indicates that JST later transferred the associated claims to the estate.
With Bitcoin valued at current market rates, the legal action aims to recover nearly $490 million worth of the cryptocurrency, and the filing came just 11 days prior to BitMEX's planned cessation of exchange operations on Sept. 23.
Attempts by Cointelegraph to obtain statements from both the Celsius estate and BitMEX were unsuccessful, with neither party providing responses prior to the publication of this report.
Celsius alleges BitMEX intensified 2020 sell-off
According to the Celsius estate's claims, BitMEX maintained control over the pricing mechanisms that triggered liquidations, operated the execution engine that carried them out, and managed the insurance fund that collected proceeds from certain liquidated positions.
The complaint states that certain liquidation sell orders were executed at price points exceeding 24% below the nearest available ask price on the exchange platform. Additionally, the estate contends that Bitcoin's trading price on BitMEX fell below prices on rival exchanges as the liquidation cascade gained momentum.
The estate points to the specific timing of BitMEX's service interruption on March 13, 2020, as supporting evidence for their assertion that the platform's liquidation engine accelerated the market downturn. The estate's argument suggests that liquidation orders ceased when the exchange went offline, after which Bitcoin's price began recovering, suggesting in their interpretation that BitMEX's forced selling had been artificially depressing market prices.
In a statement dated March 16, 2020, BitMEX disclosed that it had suffered two distributed denial-of-service attacks on March 13, occurring at 02:16 UTC and 12:56 UTC.
The bankruptcy estate demands actual damages amounting to no less than 6,360.16 BTC or its present-day value, in addition to requesting the return of the Bitcoin itself or compensation equivalent to its current market value. The legal complaint additionally seeks statutory damages, punitive measures and any relevant treble damages, profits that BitMEX purportedly generated from the liquidations, plus legal fees and associated costs.
The specific monetary amounts for the supplementary claims remain unspecified in the filing, with the document stating that such amounts should be established during trial proceedings.
In a separate but related matter on July 23, BKX Services and David Namdar submitted a proposed class action lawsuit, claiming combined losses of 622.66 BTC resulting from forced liquidations. Their complaint suggested that an internal trading operation had access to confidential customer data and maintained trading capabilities during periods when servers were frozen.
When addressing the July lawsuit, a BitMEX spokesperson provided a statement to Cointelegraph characterizing it as an "opportunistic claim with no basis" and confirmed the company's intention to mount a vigorous defense. This statement specifically referenced the July legal action and did not constitute a response to the Celsius complaint.