Bankrupt Celsius sues BitMEX over 2020 crash liquidations, seeking $495 million
Celsius estate files $495 million fraud suit against BitMEX
The bankruptcy estate of Celsius Network has filed a lawsuit against BitMEX and five of its affiliated companies. The suit, lodged on September 12 in the U.S. Bankruptcy Court for the Southern District of New York, seeks the return of 6,360 Bitcoin (BTC) that Celsius lost during the market crash in March 2020.
At today's prices, the Bitcoin being chased is worth roughly $495 million. The complaint alleges that BitMEX intentionally designed its platform and liquidation procedures to defraud customers and cause their collateral to be seized during the pandemic-driven crash.
Key numbers in the lawsuit
- Bitcoin total: The suit claims 6,360 BTC in total. Celsius itself lost 1,325.84 BTC on March 12, 2020, while an investment fund called JST lost 5,034.33 BTC on March 13. The JST claims were assigned to the Celsius estate.
- Financial value: The 6,360 BTC is valued at approximately $495 million.
- Defendants: The lawsuit names five entities: HDR Global Trading, ABS Global Trading, Shine Effort, 100x Holdings, and HDR Global Services. These companies are based in Bermuda, the Cayman Islands, England, Hong Kong, the Seychelles, and the U.S.
- Timeline: BitMEX has announced it will stop trading on September 23, giving the estate only 11 days to proceed before the exchange winds down its operations.
Conflicts with Celsius's public image
The lawsuit highlights a contradiction in how Celsius operated. The lender marketed itself as using low-risk, “delta-neutral” strategies, which generally aim to profit from small pricing differences rather than betting on the direction of Bitcoin's price. However, the positions Celsius is now suing over were leveraged long bets, which profit only if Bitcoin's price rises. A leveraged long position involves borrowing money to buy an asset, amplifying both gains and losses.
This specific type of risky trading aligns with findings from Celsius’s own bankruptcy proceedings. A July 2022 court filing acknowledged that the firm ran “highly speculative derivative and asset deployment mechanisms” behind its low-risk marketing. A final report by a court-appointed examiner also described these same speculative activities.
Unproven allegations and wider context
The fraud allegations in the lawsuit remain unproven. This marks the second legal action filed against BitMEX since the exchange announced its wind-down in July. The lawsuit claims BitMEX controlled both the system that decides when to liquidate customer accounts and the insurance fund that benefits from those liquidations.
BitMEX is currently in the process of closing down, with trading set to halt on September 23.
Why this matters for crypto investors
The case brings attention to the risks of using centralized exchanges for leveraged trading. It also raises questions about the transparency of how exchanges manage liquidations and insurance funds, especially during periods of extreme market volatility. For holders of assets on Celsius, the outcome could determine how much value is recovered from the exchange’s collapse.