BKX Services Inc. and trader David Namdar filed a proposed class action complaint against BitMEX in the US District Court for the Southern District of New York on July 23, alleging that the exchange's liquidation practices improperly cost them a combined 622.66 BTC. The complaint also accuses BitMEX of operating an internal trading desk that exploited confidential customer data.

BKX Services claims losses of at least 305.81 BTC, while Namdar alleges he lost more than 316.85 BTC through forced liquidations. Named defendants include HDR Global Trading Limited, the operator of BitMEX, along with several affiliated companies, co-founders Arthur Hayes, Benjamin Delo, and Samuel Reed, and former executive Gregory Dwyer. The filing initiates a civil proceeding and does not establish the truth of any allegation. The proposed class has not been certified, and the defendants will have the opportunity to challenge the claims.

The lawsuit arrives amid a broader wave of litigation and regulatory enforcement targeting major crypto exchanges. The same BitMEX co-founders named as defendants here previously pleaded guilty in 2022 to Bank Secrecy Act violations tied to the exchange's failure to implement adequate anti-money-laundering controls, receiving sentences of probation and home confinement. That case, brought by the Department of Justice alongside parallel civil actions by the CFTC and FinCEN that resulted in a $100 million settlement in 2021, centered on regulatory compliance failures rather than the liquidation and trading-desk conduct now alleged.

Liquidation Engine at the Center of the Dispute

BitMEX built its reputation on highly leveraged crypto derivatives, enabling traders to hold positions far exceeding their deposited collateral. When losses breach the exchange's maintenance margin threshold, the platform automatically liquidates the position to prevent the account from falling into a deficit the trader cannot cover.

The plaintiffs do not dispute that exchanges may liquidate undercollateralized positions. Instead, they contend that BitMEX closed certain trades while remaining collateral exceeded the amount necessary to cover the outstanding loss. According to the complaint, the Bitcoin remaining after those liquidations was diverted into BitMEX's insurance fund instead of being returned to customers. The plaintiffs argue this mechanism gave BitMEX a direct financial incentive to liquidate more positions than necessary.

Insurance funds are a standard feature at crypto derivatives exchanges, designed to absorb losses from socially liquidated positions and protect winning counterparties from non-payment. Most major platforms publish fund balances and accumulation policies. The complaint's core contention is that BitMEX's version of this mechanism systematically captured excess collateral that should have been returned to the liquidated trader.

The plaintiffs are seeking the return of the Bitcoin they say was improperly withheld, as well as compensatory and punitive damages. The proposed class would cover certain US customers who traded Bitcoin swap products on BitMEX starting from July 23, 2018.

Allegations of an Internal Trading Advantage

The lawsuit describes what it calls an "Insider Trading Desk," alleging that this proprietary operation had access to confidential data about customer positions and liquidation thresholds. Such information could reveal where a modest price movement might cascade into a cluster of forced closures—a pattern that could be exploited for profit.

The complaint further claims that internal trading accounts remained operational during server outages that locked out regular customers, preventing them from logging in, modifying orders, or closing positions.

The term "insider trading" as used in the filing does not refer to the conventional securities-law definition involving corporate secrets. Rather, the plaintiffs allege that a proprietary desk traded on BitMEX while possessing nonpublic information about other participants on the same platform. The court has not yet determined whether the alleged desk existed as described, whether it accessed customer data, or whether it influenced any liquidation events.

BitMEX Denies All Accusations

BitMEX has firmly rejected the claims. A company spokesperson told Cointelegraph that the exchange had previously faced similar allegations, characterizing the new filing as opportunistic and baseless. The company stated it would vigorously defend itself in court.

If the case advances, it is likely to hinge on technical evidence: how the liquidation engine functioned, where remaining collateral was routed, and what permissions internal trading accounts held. BitMEX may seek dismissal before discovery, a procedural step that tests whether the plaintiffs have stated legally viable claims rather than whether every factual assertion is accurate.

Previous Similar Case Ended Without Resolution

The current complaint follows an earlier proposed class action filed in 2020 by Brett Messieh, Drew Lee, and other BitMEX customers. That case raised overlapping allegations regarding forced liquidations, the insurance fund, and an internal desk with access to customer information.

The action was terminated on June 30, 2025. According to the final court order, the remaining plaintiff was dismissed after failing to respond to repeated inquiries about whether he intended to continue pursuing the case. The order also referenced a stipulation filed by the other parties. The case concluded without a trial or a ruling on the substance of the liquidation claims—meaning the closure was neither a judicial endorsement of the allegations nor a finding that the conduct in question never occurred.

Timing Coincides with BitMEX Exchange Shutdown

The complaint was filed on the same day BitMEX announced it would close its exchange after more than 11 years of operation. Under the official closure timetable, exchange services will end on September 23 at 04:00 UTC. The platform will switch to reduce-only mode on August 26, prohibiting users from opening new positions or increasing existing exposure.

BitMEX may begin closing positions during the interim period. Any positions still open when exchange services terminate will be force-closed. The concurrent timing of the lawsuit and the closure announcement places both events in the same news cycle, though available information does not establish any causal link between the complaint and the shutdown decision. BitMEX stated that its board reached the decision following a review of the business and the broader crypto industry.

BMEX Token and Open Interest Decline

BitMEX's BMEX token plummeted more than 90% following the shutdown announcement, falling to its lowest level since trading began in November 2022. Bitcoin open interest on the exchange had already declined sharply, dropping from nearly $3 billion at its 2024 peak to approximately $113 million. These metrics indicate that derivatives activity on the platform had weakened substantially before the final closure process was initiated. The market data neither supports nor undermines the specific claims raised in the lawsuit.

The collapse in open interest reflects a competitive landscape that shifted dramatically since BitMEX's peak. Exchanges such as Binance, Bybit, and OKX now dominate crypto derivatives volume, having adopted and expanded on the perpetual-swap model BitMEX introduced.

Industry Reflections

Binance co-founder Changpeng Zhao, widely known as CZ, said he was "sad to see BitMEX go" and credited the exchange with helping pioneer 100x crypto perpetual contracts—a product that later became a cornerstone of the crypto derivatives market. His remarks did not address the lawsuit or the plaintiffs' allegations.

What Comes Next

The defendants may respond to the complaint and could seek dismissal of some or all claims. Should the case survive that stage, the plaintiffs would then need to persuade the court that their claims warrant class-action treatment. Discovery could encompass records related to the liquidation engine, the insurance fund, server outages, customer data access, and internal account permissions. The case could also conclude through settlement, dismissal, or another procedural resolution before reaching trial.

For BitMEX users, the litigation does not alter the exchange's operational timeline. Traders must still manage open positions before the reduce-only deadline and withdraw their assets as the platform approaches its September closure.