BitMEX and several of its co-founders are facing a new proposed class action alleging that the crypto derivatives exchange secretly traded against its own customers and triggered forced liquidations during periods of market volatility.

The lawsuit was filed by two former BitMEX customers in the U.S. District Court for the Southern District of New York. BKX Services Inc. and David Namdar brought the case against HDR Global Trading Limited, affiliated entities, and BitMEX co-founders Arthur Hayes, Samuel Reed, and Benjamin Delo. Former head of business development Gregory Dwyer is also named as a defendant.

The filing came on the same day BitMEX announced that it plans to permanently cease operations on September 23, 2026, after 11 years in business. At its peak in 2018, BitMEX was among the highest-volume crypto derivatives platforms globally, and its XBTUSD perpetual swap contract helped popularize inverse perpetuals across the industry. The wind-down plan adds a layer of complexity for litigants seeking asset recovery, as the outcome of the case may depend on which entity or entities remain solvent and subject to U.S. court jurisdiction after operations end.

Former Customers Allege Undisclosed Trading Operation

The plaintiffs allege that BitMEX operated an undisclosed “Insider Trading Desk” that used private customer account information. According to the complaint, the desk traded against users while BitMEX represented itself as a neutral marketplace.

The lawsuit also claims BitMEX used hidden internal accounts associated with generic email addresses to conceal its own trading activity. The plaintiffs say customers believed they were trading only against other market participants, not against the exchange itself.

BKX Services and Namdar allege that BitMEX had access to customer order data, liquidation points, and so-called “hidden orders.” The complaint says the internal desk used that information to identify price movements that would liquidate the largest number of customers.

According to the lawsuit, Dwyer ran the alleged trading desk from BitMEX’s Manhattan office during 2018. The plaintiffs claim the desk placed trades intended to move prices and trigger liquidations against users on the platform.

Complaint Focuses on Liquidation Practices

The complaint also challenges BitMEX’s liquidation practices. Plaintiffs allege the exchange liquidated positions when unrealized losses reached about half of posted collateral. They argue that the remaining collateral still exceeded those losses, and that BitMEX did not need to close positions at that level.

The lawsuit says collateral seized through liquidations flowed into BitMEX’s Insurance Fund. Plaintiffs claim this structure allowed the exchange to profit from liquidations while also collecting trading fees from customer activity.

The filing also cites the March 13, 2020 market crash. Customers were allegedly locked out of BitMEX for about 25 minutes while roughly $800 million in leveraged positions were liquidated.

BitMEX previously attributed the disruption to a hardware issue and later to distributed denial-of-service attacks. The lawsuit alleges the freezes were deliberate and says affected customers were not compensated.

Plaintiffs Seek Return of Bitcoin

BKX Services claims it lost at least 305.8 BTC through 13 liquidations between July and August 2018. Namdar claims losses of about 316.9 BTC across 14 named liquidations and at least 69 smaller liquidations from August 2019 to May 2020.

Together, the plaintiffs allege total losses of about 622.66 BTC, valued near $40.7 million based on the stated estimate. They are seeking the return of Bitcoin itself, rather than only cash damages.

The lawsuit includes claims for replevin and fraud. Replevin is a claim seeking the return of specific property, meaning the plaintiffs want the Bitcoin returned in kind.

The proposed class covers users who bought Bitcoin swap products on BitMEX in domestic U.S. transactions from July 23, 2018 onward. Plaintiffs estimate that the class could include tens of thousands of members and that aggregate claims exceed $5 million.

The complaint says BitMEX generated more than $1 billion in transaction fees between November 2014 and October 2024. It also says the exchange’s flagship XBTUSD perpetual contract processed more than $2 trillion in trading volume during that period.

BitMEX has previously faced legal action involving anti-money laundering and Bank Secrecy Act violations. In 2022, Hayes, Reed, Delo, and Dwyer each pleaded guilty to related BSA charges and received sentences ranging from probation to home confinement. A similar civil case filed in 2020 was voluntarily dismissed without prejudice in June 2025. The new plaintiffs argue that the statute of limitations was paused during that earlier litigation.