The exchange would have manipulated the market and laundering assets to appropriate money from its users.
BitMEX already has complaints for not complying with KYC protocols and for operating without a license in the US.
A lawsuit for money laundering, extortion and market manipulation fell on the founders of the Bitcoin (BTC) and cryptocurrency exchange BitMEX. The whistleblower would have lost 247.94 BTC ($ 4.4 million at the time of writing). Furthermore, it is estimated that the exchange would have appropriated around USD 427 million in total, improperly.
The lawsuit was filed in the Northern District Court of California by Păun Gabriel-Razvan, a citizen and resident of Romania. He accuses the exchange and its founders, Arthur Hayes, Ben Delo and Samuel Reed, of facilitate organized crime activities.
The complainant alleges that the defendants avoided implementing KYC protocols (know your customer) or against money laundering. Because of this, they accepted “unlimited funds from anyone, without asking a single question.”
It details the claim that “hackers, tax evaders, money launderers, smugglers, drug dealers, flocked to BitMEX and flooded the platform with hot money.”
Also, Gabriel-Razvan’s complaint assures that the exchange manipulates the market for its own benefit. For this, as he says by way of example, someone with the intention of laundering money can open two accounts: a main one in BitMEX and another auxiliary in another exchange.
“The money launderer would then enter a large leveraged derivatives position on BitMEX and immediately execute market orders from the auxiliary account with maximum slippage to move the index price in a favorable direction.”
The extensive network with which the company would act, according to the complaint, included the disclosure of false information to encourage traders to open buy-sell positions; the deposit of a large volume of money in order to move the price and cause orders to be settled; and the simulation of system crashes that prevented access to the platform.
An extensive network would have allowed BitMEX to misappropriate users’ money, through market manipulation. Source: tbstat.com
According to Pavel Pogodin, the complainant’s lawyer, the exchange’s allegedly negligent action in manipulating the market harmed its client. They seek an economic compensation of USD 12 million.
The complaint explains that “Bitcoin derivatives remain little traded, which makes them particularly susceptible to pumps and dumps, Barts, stop loss searches, and liquidation cascades, among other forms of market manipulation.” Through graphics, each of these actions are exemplified and it is added that exchanges know how to take advantage of them, so your incentive to manipulate the market is very strong.
The complaint details different ways of manipulating the market, allegedly used by exchanges. Source: tbstat.com
“We encourage anyone who has suffered losses at BitMEX to come forward and seek fair compensation,” Pogodin wrote on Twitter. This lawyer had previously filed complaints against the companies Ripple and FTX.
This complaint is in addition to the one BitMEX received in early October. As CriptoNoticias reported, the United States Commodity Futures Trading Commission accused the exchange of violating anti-money laundering regulations and operating without a license in that country.
In an attempt to fix bugs at the last minute, BitMEX last week hired Malcolm Wright as Compliance Manager. Wright has experience implementing the recommendations of the Financial Action Task Force (FATF).