CoinDesk
Celsius Network's bankruptcy estate is suing BitMEX for the return of 6,360 BTC, now worth roughly $495 million, over forced liquidations during the March 2020 Covid crash. The complaint was filed Sept. 12 in the U.S. Bankruptcy Court for the Southern District of New York by Blockchain Recovery Investment Consortium, the court-appointed litigation administrator. Defendants include HDR Global Trading, ABS Global Trading, Shine Effort, 100x Holdings and HDR Global Services, entities spanning Bermuda, the Cayman Islands, England, Hong Kong, the Seychelles and the U.S.
Celsius says it lost 1,325.84 BTC in a single liquidation on March 12, 2020, and is also pursuing claims assigned by fund JST, which lost 5,034.33 BTC the following day. The filing alleges BitMEX controlled both the system deciding when customers were liquidated and the insurance fund that grew from those liquidations. "BitMEX intentionally designed its platform and liquidation procedures to cause liquidations of collateral and defraud its own customers," the complaint says.
Why it matters
The suit is the second filed against BitMEX since it announced in July that it would wind down, and the estate has only 11 days to press claims before the exchange stops trading on Sept. 23. Suing a defendant in active wind-down puts recovery prospects in question, but it also revives scrutiny of the 2020 crash mechanics at a venue regulators have already penalized.
There is an uncomfortable mirror here too. Celsius marketed low-risk, delta-neutral strategies to depositors, yet its own July 2022 bankruptcy filing described "several highly speculative derivative and asset deployment mechanisms," a finding echoed by the court-appointed examiner. A leveraged long into the Covid crash, funded from a pooled customer book, fits that description.
Market impact
The allegations are unproven, and BitMEX has not yet responded. For creditors, the $495 million claim is a meaningful addition to the recovery pool if it succeeds.
Frequently asked questions
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How much is Celsius suing BitMEX for?
The Celsius bankruptcy estate is seeking the return of 6,360 BTC, worth roughly $495 million, over forced liquidations during the March 2020 Covid crash.
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What does the lawsuit allege BitMEX did wrong?
The complaint alleges fraud, market manipulation and wrongful liquidations, claiming BitMEX controlled both the system deciding when customers were liquidated and the insurance fund that grew from those liquidations.
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How much Bitcoin did Celsius lose in the March 2020 crash?
Celsius says it lost 1,325.84 BTC in a single liquidation on March 12, 2020. It also pursues claims from fund JST, which lost 5,034.33 BTC the following day.
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Why is the timing of the Celsius vs. BitMEX lawsuit significant?
BitMEX stops trading on Sept. 23 after announcing a wind-down in July, giving the estate only 11 days to act against a defendant that is shutting down. This is the second suit filed since the wind-down announcement.
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Why does the lawsuit embarrass Celsius as well as BitMEX?
Celsius marketed delta-neutral, low-risk strategies to depositors, yet its own 2022 bankruptcy filings described highly speculative derivative mechanisms. A leveraged long into the Covid crash funded from a pooled customer book fits that description.
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