BitMEX co-founder Ben Delo will face a class-action lawsuit in the United States, as ruled by New York District Court Judge Andrew Carter. The lawsuit accuses Delo of playing a pivotal role in a scheme that allegedly manipulated prices on the crypto exchange to BitMEX’s benefit. This decision comes after Delo sought to dismiss the lawsuit on the grounds that U.S. courts lack jurisdiction over him, a motion that Judge Carter has now firmly rejected.
Core Allegations and Judicial Findings
At the heart of the lawsuit is the accusation that Delo was instrumental in designing and implementing a liquidation system that purportedly allowed BitMEX to profit from manipulating market conditions. Filed in April 2020 by a group of BitMEX users, the lawsuit alleges that Delo, along with co-founders Arthur Hayes and Samuel Reed, had access to a trading desk equipped with “God Access” to customer accounts on BitMEX. This access allegedly enabled them to execute trades that would liquidate a significant number of user positions, thereby generating profits for the exchange.
The ‘God Access’ Trading Desk Controversy
The existence of this trading desk, which the plaintiffs argue was used to trade against BitMEX’s own customers, was confirmed by the exchange in April 2018 following scrutiny from an independent analyst. While BitMEX has maintained that the desk played a neutral market-making role, the lawsuit contends that the exchange continued to use burner accounts for trading against its users.
Judge Carter’s Order and Its Implications
In his ruling, Judge Carter highlighted Delo’s central involvement in the alleged manipulation, noting that Delo not only conceived and designed the controversial liquidation system but also personally traded on the platform, gaining from the purportedly unfair advantages. This, according to Judge Carter, placed Delo squarely within the jurisdiction of the United States, given his deliberate engagement with the forum through such activities.
Background and Context
The lawsuit’s progression to trial marks a significant moment in the ongoing scrutiny of cryptocurrency exchanges and their compliance with legal standards. Delo was sentenced to 30 months probation in June 2022 after pleading guilty to failing to maintain an Anti-Money Laundering (AML) program at BitMEX, a violation of the Bank Secrecy Act (BSA). His co-founders, Hayes and Reed, also pleaded guilty and received sentences reflecting their involvement.
As the legal proceedings against Delo and BitMEX unfold, the case is set to shed further light on the operational practices of cryptocurrency exchanges and their impact on market integrity and investor protection.
