BKX Services Inc. and David Namdar have filed a proposed class action lawsuit against BitMEX, accusing the crypto derivatives exchange of market manipulation and the misappropriation of nearly 623 BTC through forced liquidations.

Lawsuit Challenges BitMEX Liquidation Practices

The lawsuit was filed on the same day BitMEX announced plans to shut down. The plaintiffs allege that the exchange's internal trading team had access to customers' private information and continued trading during periods when servers were down and users could not access the platform.

BitMEX, once one of the largest crypto derivatives exchanges by trading volume, has previously faced allegations involving its liquidation practices and internal trading advantages. In 2021, the exchange agreed to pay $100 million to settle charges from the CFTC and FinCEN related to operating an unregistered trading platform and anti-money-laundering violations. The new complaint revives similar claims, focusing on how the exchange allegedly handled leveraged positions and customer collateral.

According to the complaint, BitMEX offered customers leveraged trading of up to 100 times their collateral. The plaintiffs allege that the platform liquidated customer positions before all available collateral had been exhausted. As a result, users allegedly lost their positions even when the remaining BTC collateral was worth more than the losses incurred.

Rather than returning the excess BTC to traders, BitMEX allegedly directed the funds into its insurance pool. The plaintiffs claim this structure enabled the platform to financially benefit from forced liquidations.

"BitMEX deliberately developed a system that profited from the liquidations," the filing said.

The complaint also refers to a 2020 lawsuit brought by Brett Messieh and other traders against the platform over similar allegations. In that case, the plaintiffs accused BitMEX of rigging trading conditions in its favor, causing financial losses for users. The court dismissed the case due to a lack of evidence.

Plaintiffs Claim Nearly 623 BTC in Losses

Namdar claims to have lost more than 316.85 BTC through the alleged conduct, while BKX says its losses totaled approximately 305.81 BTC. Together, the claimed losses amount to nearly 623 BTC. The plaintiffs are seeking to recover the allegedly seized crypto as well as damages.

The proposed class action seeks to represent U.S. customers who traded BTC perpetual swap products in transactions dating back to July 23, 2018.

Earlier on Thursday, HDR Global Trading, the owner of BitMEX, said it would shut down the exchange following a strategic review. The shutdown is expected to take effect on September 23. BitMEX has already suspended new account registrations, and traders are now permitted only to close existing positions.

After the announcement, BitMEX co-founder Arthur Hayes thanked his partners, employees, and customers for their support over the years. "It was an amazing ride," he wrote, adding that he was proud the exchange was shutting down "responsibly on our own terms."