Celsius sues BitMEX for $495 million over 2020 crash liquidations

Bankrupt crypto lender Celsius Network’s estate has sued BitMEX over forced liquidations during the March 2020 Covid crash, seeking the return of 6,360 BTC now worth roughly $495 million.

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 litigation administrator appointed in the Celsius bankruptcy. 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 pursuing claims assigned to it by investment fund JST, which lost 5,034.33 BTC the following day. Both held positions that profited only if bitcoin held or rose. The complaint 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 filing says.

The claim sits awkwardly with how Celsius sold itself. The lender, which paid yield on user deposits and collapsed in 2022, marketed low-risk, delta-neutral strategies — arbitrage, funding-rate harvesting, carry trades. A July 2022 filing in its bankruptcy said that behind those claims the firm ran “several highly speculative derivative and asset deployment mechanisms,” a finding echoed in the court-appointed examiner’s final report. A leveraged long into the Covid crash, funded from a pooled customer book, is the kind of position those filings describe.

The allegations are unproven. It is the second suit filed against BitMEX since it announced in July that it would wind down. The exchange stops trading Sept. 23.