The Celsius bankruptcy estate has sued five BitMEX-linked companies, alleging fraud, market manipulation and wrongful liquidations during the March 2020 market crash.

The complaint was filed on Sept. 12 in the US Bankruptcy Court for the Southern District of New York by Celsius entities acting through estate representative Blockchain Recovery Investment Consortium (BRIC). The defendants are HDR Global Trading, ABS Global Trading, Shine Effort, 100x Holdings and HDR Global Services. Celsius froze customer withdrawals in June 2022 and filed for Chapter 11 bankruptcy the following month, and its estate pursues asset recoveries for creditors.

According to the filing, BitMEX wrongfully liquidated and seized 1,325.84 BTC in collateral from on March 12, 2020, and 5,034.33 BTC from investment fund JST the following day. JST subsequently assigned the related claims to the estate. The liquidations occurred during the COVID-19-driven sell-off of March 12 and 13, 2020, known in the industry as “Black Thursday.”

The lawsuit seeks the recovery of Bitcoin worth nearly $490 million at the time of writing. It was filed 11 days before BitMEX is scheduled to stop exchange services on Sept. 23.

Cointelegraph reached out to both the Celsius estate and BitMEX for comment but did not receive a response before publication.

Celsius alleges BitMEX intensified the 2020 sell-off

The estate alleges that BitMEX controlled the prices used to trigger liquidations, the engine that executed them and the insurance fund that received proceeds from some liquidated positions.

According to the complaint, some liquidation sell orders were placed at prices more than 24% below the next-best ask available on the platform. The filing also alleges that Bitcoin traded at a lower price on BitMEX than on competing exchanges as the liquidation cycle intensified.

The estate cites the timing of BitMEX's March 13, 2020, service disruption as evidence that the exchange's liquidation engine intensified the sell-off. It alleges that liquidation orders stopped when the platform became unavailable and that Bitcoin's price then recovered — indicating, in the estate's view, that forced selling on BitMEX had been suppressing the price.

On March 16, 2020, BitMEX [said it experienced two distributed denial-of-service attackshttps://www.bitmex.com/blog/how-we-are-responding-to-last-weeks-ddos-attacks) on March 13, at 02:16 UTC and 12:56 UTC.

The estate is seeking actual damages of at least 6,360.16 BTC or its current value, along with the return of the Bitcoin in kind or its equivalent market value. The complaint also requests statutory damages, punitive and any applicable treble damages, profits BitMEX allegedly earned from the liquidations, and legal fees and costs. The filing does not quantify the additional claims, saying the amounts should be determined at trial.

Related litigation and BitMEX wind-down

The Celsius complaint is the second liquidation-focused legal claim against BitMEX in recent months. Earlier in July, BitMEX delisted 65 trading pairs and derivatives amid the exchange's shutdown process.

On July 23, BKX Services and David Namdar filed a separate proposed class action, alleging they lost a combined 622.66 BTC through forced liquidations. That complaint alleged that an internal trading desk could access private customer information and continue trading during server freezes.

Responding to the July case, a BitMEX spokesperson told Cointelegraph that it was an “opportunistic claim with no basis” and said the company would vigorously defend itself. The statement concerned the July lawsuit and was not a response to the Celsius complaint.

Source: Cointelegraph