Hassan Maishera
TL;DR
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The Celsius bankruptcy estate has sued BitMEX over March 2020 liquidations.
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The complaint seeks approximately 6,360 BTC, currently worth about $495 million.
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Celsius directly lost 1,325.84 BTC and is pursuing JST’s claim for another 5,034.33 BTC.
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The estate alleges BitMEX improperly designed its liquidation and insurance-fund systems.
The Celsius Network bankruptcy estate has sued BitMEX over cryptocurrency liquidations conducted during the March 2020 COVID-19-driven market crash.
The complaint seeks the return of approximately 6,360 BTC, currently valued at around $495 million.
Celsius alleges that BitMEX designed its liquidation system to improperly seize customer collateral and increase the value of an exchange-controlled insurance fund.
The claims have not been proven in court, and the defendants have not been found liable.
Celsius Lost 1,325 BTC During Covid Crash
Celsius alleges that it lost 1,325.84 BTC through a single forced liquidation on March 12, 2020, as Bitcoin and other risk assets declined sharply.
The estate is also pursuing claims assigned to it by investment fund JST, which allegedly lost another 5,034.33 BTC on the following day.
Both entities held leveraged positions that would generate profits if Bitcoin remained stable or increased. The rapid market collapse instead reduced the value of their collateral and triggered liquidations.
Combined, the disputed transactions involved approximately 6,360 BTC. Blockchain Recovery Investment Consortium filed the complaint on September 12 in the US Bankruptcy Court for the Southern District of New York.
The consortium serves as the litigation administrator appointed through Celsius’s bankruptcy proceedings.
Defendants include HDR Global Trading, ABS Global Trading, Shine Effort, 100x Holdings and HDR Global Services.
The entities operate across multiple jurisdictions, including Bermuda, the Cayman Islands, England, Hong Kong, Seychelles and the United States.
Celsius Challenges BitMEX Liquidation System
The complaint alleges that BitMEX controlled both the mechanism determining when customer positions were liquidated and the insurance fund that benefited from those liquidations.
Crypto derivatives exchanges use insurance funds to cover losses when liquidated positions cannot be closed before their collateral becomes insufficient. Celsius argues that BitMEX’s structure created conflicts and was intentionally designed to seize collateral from users.
These claims remain allegations and will need to be supported through the court process.
The case also draws attention to the difference between how Celsius marketed its investment practices and the risks it reportedly took.
Before collapsing in 2022, Celsius promoted strategies such as arbitrage, funding-rate trades and market-neutral positions as relatively low risk.
Bankruptcy filings later said the company had used highly speculative derivatives and asset-deployment strategies. A court-appointed examiner reached similar conclusions about the lender’s risk management and representations to customers.
A leveraged bullish Bitcoin position during the March 2020 market crash appears consistent with the type of speculative activity described in those reports.
BitMEX Prepares to Stop Trading
The Celsius action is the second lawsuit filed against BitMEX since the exchange announced in July that it would wind down.
BitMEX is scheduled to stop trading on September 23. The closure could add urgency to disputes involving former customers and parties seeking to recover assets from the exchange.
The Celsius complaint will proceed through the bankruptcy court, where the estate must prove that the liquidations were improper and establish its right to recover the disputed Bitcoin or equivalent damages.
