A US Court has filed a lawsuit against crypto derivatives platform BitMEX, with accusations ranging from wire fraud and money laundering.
BitMEX could be facing another court battle after a new lawsuit was filed against it at the US District Court for the Northern District of California.
According to court documents filed Saturday, May 16th, the lawsuit is against the Seychelles-based crypto platform, operator HDR Global Trading Limited, ABS Global Trading Limited, and its co-founders.
The company’s founders are Arthur Hayes (CEO), Samuel Reed (CTO), and Ben Delo.
Fraud and market manipulation
BMA LLC, a little known company that has recently brought lawsuits against Ripple and a Binance-backed platform, is the plaintiff.
According to the filing, BitMEX operators are being accused of several illegalities, among them running a fraudulent business, committing wire fraud, market manipulation, and money laundering.
Among the allegations, it is claimed that BitMEX has been illegally offering services to users in the US despite being unregistered as a money transmitting company. As such, the platform’s high-risk products that raked in almost $138 billion in 2019 had over 15% of its trading volume from US citizens.
BMA LLC has asked that the court grants a trial, alleging that ABS Global, which is registered in the US, is wholly controlled and operated by HDR. Specifically, it purports that ABS is just ‘an alter ego” of the Seychelles-based BitMEX.
“Defendants, and each of them, specifically designed BitMEX to financially benefit from the alleged racketeering activity and other unlawful conduct, earning the defendants billions of dollars in illicit profits,” the plaintiff claims.
Other illegalities, including insider trading
The prosecutor states that BitMEX and the other defendants offer trading facilities that see customers accessing leverage 100x over their capital.
It is also claimed that BitMEX has enabled “manipulators and money launderers” to evade any detection by allowing them access to unlimited numbers of “check-free trading accounts.” It is believed that the platform has used intentional freezes of its servers and system overloads to advance fraudulent schemes.
The BMA alleges that the company has aided in market manipulation, with massive price fluctuations starting on BitMEX and spreading “like forest fires” to other exchanges. In effect, the exchange has become “an exquisite designer tool for unsavoury actors to manipulate cryptocurrency markets.”
The lawsuit against BitMEX comes as the exchange continues to see a decline in trading volumes. The exchange’s reputation suffered a huge blow in December 2019 when a supposed “technical issue” triggered a 50% crash in Bitcoin (BTC) price within hours.
In March, when the Bitcoin (BTC) price crashed to lows of $3,800, BitMEX saw its BTC holdings drop by 40% as investors began to withdraw crypto worth millions of dollars.