Traders urge California judge to keep BitMEX $440M fraud lawsuit alive

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Plaintiffs in a lawsuit against the top leaders at embattled digital currency exchange BitMEX want the presiding judge to keep the suit alive. BitMEX had filed a motion to dismiss, but the plaintiffs have fought back and want the culprits held accountable.

The plaintiffs, BMA LLC, Yaroslav Kolchim and Vitaly Dubinin, filed the lawsuit in October 2020. They alleged that Arthur Hayes, Samuel Reed and Ben Delo collectively looted over $440 million from accounts of HDR Global, the company that owns BitMEX. This money was allegedly the proceeds of nefarious activities that took place on the exchange.

BitMEX fought back, urging the Northern District of California to dismiss the lawsuit. However, the plaintiffs now want Judge William Orrick to dismiss the exchange’s efforts. As Law360 details, they claimed in their memo that the key facts in their lawsuit are simple and easy to understand.

As per the lawsuit, the three executives divided the money they allegedly looted equally among themselves, with each receiving $139.4 million. They distributed the funds on October 15, November 19 and the rest in January 2021. The three looted HDR to make its funds unavailable for the collection of future judgments against it, they alleged.

The lawsuit builds on an earlier one by Bitcoin Manipulation Abatement LLC (BMA) in May 2020 which accused the executives of wire fraud, racketeering and money laundering. It alleged that BitMEX was purposely established to X “engage in, facilitate, aid, abet, counsel, induce and/or procure a myriad of illegal activities.”

However, at the time, BitMEX fought back by attacking the plaintiff as “a serial filer of claims against companies operating in the cryptocurrency space, and is widely recognized for operating just like a patent troll.”

It cited previous lawsuits by BMA against Ripple for securities violations and FTX exchange for market manipulation.

BitMEX has been on the receiving end of a number of lawsuits in the past few months. Its biggest legal issue is with the U.S. Commodities Futures Trading Commission (CFTC) which last year charged it with violating the Bank Secrecy Act. The lawsuit led to the resignation of key leaders who were implicated, including CEO Arthur Hayes. CTO Samuel Reed was arrested, but later released on a $5 million appearance bond. The exchange has strived to make up for its crimes by hiring new compliance executives and freshly verifying its user base.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift and Ethereum—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.