Celsius Initiates $495 Million Lawsuit Against BitMEX for 2020 Liquidations

FinanceCelsius Initiates $495 Million Lawsuit Against BitMEX for 2020 Liquidations

The bankruptcy estate is pursuing 6,360 BTC lost during the Covid crash, linked to a leveraged long position that contradicts the lender's delta-neutral strategy.

By Oliver Knight|Edited by Cheyenne Ligon

Bankrupt crypto lender Celsius Network has filed a lawsuit against BitMEX, seeking to reclaim 6,360 BTC, valued at approximately $495 million, lost due to forced liquidations during the market crash in March 2020.

The lawsuit was lodged on September 12 in the U.S. Bankruptcy Court for the Southern District of New York, with the Blockchain Recovery Investment Consortium acting as the litigation administrator for the Celsius bankruptcy. The defendants include multiple BitMEX entities: HDR Global Trading, ABS Global Trading, Shine Effort, 100x Holdings, and HDR Global Services, which are incorporated in various jurisdictions including Bermuda, the Cayman Islands, England, Hong Kong, the Seychelles, and the United States.

Celsius claims it lost 1,325.84 BTC in a liquidation event on March 12, 2020, and is also pursuing claims from investment fund JST, which experienced a loss of 5,034.33 BTC the day after. Both Celsius and JST had positions that would only profit if Bitcoin maintained or increased its value. The lawsuit asserts that BitMEX had control over the liquidation processes and the insurance fund benefited from those liquidations.

According to the filing, "BitMEX intentionally designed its platform and liquidation procedures to cause liquidations of collateral and defraud its own customers."

This lawsuit is particularly noteworthy as it appears contradictory to Celsius's marketing narrative. The firm, which had collapsed in 2022 after offering yields on user deposits, had promoted low-risk, delta-neutral investment strategies, such as arbitrage and funding-rate harvesting. However, a July 2022 filing revealed that behind these claims, the company operated "several highly speculative derivative and asset deployment mechanisms," a conclusion echoed in the court-appointed examiner's final report. Engaging in a leveraged long position during the Covid crash, funded through a customer pool, aligns with the descriptions found in those filings.

The allegations remain unproven, and this is the second lawsuit against BitMEX since its announcement in July to cease operations. The exchange is set to stop trading on September 23.