New York Judge Rules BitMEX Co-Founder Must Face Lawsuit for Illegal Access to Customer Accounts

According to a recent ruling from a United States federal judge, derivatives exchange co-founder Benjamin Delo must answer to a class-action lawsuit. A ruling entered by New York District Judge Andrew Carter states that Delo has to face the lawsuit because he was directly involved in a scheme that manipulated prices on the exchange.

Judge Carter Refuses to Dismiss BitMEX Co-founder’s Lawsuit

Judge Carter’s ruling is a response to Delo’s filing last May, which asked for a dismissal of the case. Delo, who is a British citizen, had filed to dismiss, arguing that courts in the US do not have the required jurisdiction over him. However, the Judge refused the motion to dismiss. According to Judge Carter, “plaintiffs have sufficiently alleged that Delo has purposely availed himself of the benefits of the forum – the United States”.

In April 2020, several BitMEX users sued the exchange and its co-founders, including Arthur Hayes, Samuel Reed, and Delo. The suit claimed that the trio had a trading desk that granted them “God Access” to customer accounts. According to the suit, the co-founders could use this trading desk to access customer information. They would then analyze the data to decide what moves would liquidate the highest number of user accounts. Knowing this would allow the exchange a profit, the trio allegedly conducted trades specifically for the purpose.

An excerpt from the lawsuit states that the co-founders operated BitMEX from New York with Delo supervising employees. The suit also says Delo traveled to New York and used a Lamborghini to market the exchange in the state.

According to the Judge’s order, Delo reaped some benefits by trading personally on the platform. In addition, Delo allegedly designed the liquidation system and was officially tasked with making “key financial and trading decisions” at BitMEX.

Exchange Accused of Wire Fraud, Money Laundering, Others

Filed in 2020, the BitMEX lawsuit accused the exchange of unlicensed money transmission, as well as cyber crimes like wire fraud, racketeering, and money laundering. The lawsuit alleged that the exchange was deliberately designed to support these activities. The accusation specifies that BitMEX had a daily trading average of $3 billion without a proper license in the US. Furthermore, the plaintiffs said that BitMEX took advantage of the inadequate crypto regulation by offering traders high leverage for volatile derivatives. In addition, BitMEX allegedly allows several unverified and anonymous accounts to trade and withdraw cryptocurrencies without limits.

On the liquidations, the initial lawsuit states that BitMEX deliberately uses artificial system overloads and server freezes to accept or reject trading orders when the market is volatile. The exchange allegedly did this to trigger maximum liquidations at the traders’ detriment.

In June 2022, a New York federal court sentenced Delo to 30 months probation for violating anti-money laundering (AML) law, including the Bank Secrecy Act (BSA). The ruling allowed Delo to return to his Hong Kong residence and did not require a home arrest. Delo got a much lighter sentence than co-founder Hayes, whose sentence included home confinement for six months. Prosecutors had asked the court for a prison term of one year for Delo or a similar ruling to Hayes’.