"They engineered liquidations to squeeze out more collateral," said one plaintiff's representative, accusing BitMEX of deliberately causing traders to lose their Bitcoin holdings. The lawsuit, filed in the Southern District of New York on the very day BitMEX announced it was shutting down, alleges that the exchange’s liquidation system was rigged to seize excess Bitcoin collateral instead of returning it to traders.
The complaint centers on 622.66 BTC allegedly wrongfully taken from two plaintiffs: BKX Services Inc., which claims losses exceeding 305 BTC, and investor David Namdar, who reportedly lost more than 316 BTC. Unlike conventional liquidations triggered solely by market conditions, this suit contends that BitMEX’s system triggered forced liquidations even when traders' remaining collateral should have covered their positions. The exchange then kept those excess Bitcoins instead of refunding them after closing the trades.
By offering leveraged trading up to 100x, BitMEX made it possible for traders to control vast positions relative to their deposits, increasing both risk and reward. However, according to the lawsuit, the platform’s liquidation engine seems designed to benefit BitMEX disproportionately, exploiting price volatility and even server issues during high-stress market moments to trigger unnecessary liquidations. The plaintiffs are demanding damages and other relief, arguing these practices caused significant losses across multiple trades.
This controversy adds pressure to BitMEX’s winding down amid a string of legal and regulatory setbacks. It shows ongoing scrutiny over aggressive liquidation mechanics on crypto derivatives platforms, much like debates seen recently in other sectors of the crypto market. Meanwhile, traders continue to face unpredictable risks, as exchanges may retain funds beyond their role as mere intermediaries.
