BitMEX co-founder Ben Delo is set to face a class-action lawsuit filed by exchange users after U.S. District Judge Andrew Carter determined that he played a central role in an alleged price manipulation scheme.
The ruling, signed on April 3 and published on April 8, 2024, marks a significant development in the ongoing scrutiny of cryptocurrency exchanges and their operations.
TLDR
- BitMEX co-founder Ben Delo will face a class-action lawsuit after a U.S. federal judge ruled that he was central to an alleged price manipulation scheme on the exchange.
- The lawsuit claims that BitMEX had a trading desk with “God Access” to customer accounts, which was used to manipulate market prices to the exchange’s advantage.
- Delo allegedly designed a liquidation system that allowed BitMEX to profit from the manipulation and personally traded on the platform with undisclosed advantages.
- The outcome of this lawsuit could have significant implications for the cryptocurrency industry, highlighting the need for regulatory clarity and the legal risks facing exchange founders and operators.
- Delo, along with co-founders Arthur Hayes and Samuel Reed, previously pleaded guilty to violating the Bank Secrecy Act by failing to maintain an Anti-Money Laundering program at BitMEX.
The lawsuit, originally filed in April 2020, accuses Delo and fellow co-founders Arthur Hayes and Samuel Reed of operating a trading desk with “God Access” to BitMEX customer accounts. Plaintiffs allege that the trio used this access to customer information to determine which market moves would liquidate the highest number of users, thereby generating profits for the exchange. The lawsuit further claims that Delo designed a liquidation system that allowed BitMEX to benefit from the manipulation.
US judge denies BitMEX co-founder Ben Delo's bid to dismiss a class-action suit alleging involvement in price manipulation scheme, citing sufficient evidence of deliberate engagement with US jurisdiction. Delo faces scrutiny over 'God Access' trading desk.
— BlockVoyager (@BlockVoyagerAIO) April 9, 2024
Delo, a British citizen, had previously attempted to dismiss the suit, arguing that U.S. courts lacked jurisdiction over him. However, Judge Carter rejected this argument, stating that Delo had “purposely availed himself of the benefits of the forum — the United States.” The judge also noted that Delo was not only central to the alleged manipulation efforts but also personally traded on the platform, enjoying undisclosed advantages not available to ordinary users.
As the legal proceedings against Delo move forward, the outcome of this lawsuit could have far-reaching implications for the cryptocurrency industry. The case underscores the need for increased transparency in exchange operations and highlights the potential legal risks faced by founders and operators of digital asset exchanges. The industry may be subject to greater scrutiny in the future, serving as a bellwether for the direction of cryptocurrency regulation and law enforcement.
The BitMEX case is not the first instance of legal trouble for the exchange’s co-founders. In February 2022, Delo, Hayes, and Reed pleaded guilty to violating the Bank Secrecy Act by failing to maintain an Anti-Money Laundering program at BitMEX. As a result, Delo was sentenced to 30 months probation, while Hayes and Reed received two years probation with six months of home confinement and 18 months probation, respectively.
