"They had full control over our trades that’s the only way they could have forced those liquidations," said one affected trader as a new lawsuit accuses BitMEX of exploiting deep insider privileges to manipulate user positions. According to the complaint, former BitMEX executives, including co-founders Arthur Hayes and Samuel Reed, are charged with running a covert insider desk that traded directly against their customers while holding what’s described as 'god access' to private data.
Filed in the Southern District of New York by BKX Services and David Namdar, the lawsuit alleges that throughout 2018, the exchange was deliberately freezing servers during volatile moments to lock users out of adjusting positions. This enabled the insider desk, purportedly managed by Gregory Dwyer, then Head of Business Development, to place strategic trades via burner accounts and trigger forced liquidations. Disturbingly, the complaint highlights that BitMEX's liquidation engine confiscated 100% of customer collateral even when losses were only half that amount, funneling excess funds into the exchange’s insurance pool for potential profits.
The plaintiffs are pushing for class-action status to recover more than 600 BTC lost in these manipulated liquidations, alongside damages and legal fees. This lawsuit arrives after BitMEX’s costly 2025 settlement with the US Department of Justice, where the exchange paid $100 million for failing to maintain an adequate anti-money laundering program. It paints a troubling picture of an exchange that not only skirted regulatory requirements but allegedly turned its platform into a profit center by trading against its own users.
As BitMEX prepares to wind down operations by late September, these legal battles add mounting pressure to its unraveling reputation. Investors and market participants will be watching closely, especially given the high stakes and complex manipulations involved. BitMEX’s story serves as a stark reminder of the risks posed by centralized exchanges wielding unchecked authority over user funds.
