Crypto exchange BitMEX co-founder Ben Delo is set to face a class-action lawsuit from exchange users after a United States federal judge determined the suit sufficiently showed he was key to an alleged price manipulation plot.
Delo, a British citizen, had asked to dismiss the suit last May, claiming U.S. courts have no jurisdiction over him, but New York District Court Judge Andrew Carter shot that down in an order signed on April 3 and published on April 8.
“Plaintiffs have sufficiently alleged that Delo has purposely availed himself of the benefits of the forum — the United States,” Judge Carter wrote.
The order — taking facts from the investor suit which Judge Carter “presumed to be true" — stated Delo “was central” to alleged manipulation efforts and “conceived of and designed” a liquidation system allowing BitMEX “to profit from the manipulation.”
A group of BitMEX users filed the lawsuit in April 2020 against BitMEX and co-founders Delo, Arthur Hayes and Samuel Reed, claiming BitMEX had a trading desk with “God Access” to customer accounts.
The trio used customer information to determine which market moves would liquidate the highest number of users — which would net the exchange a profit — and would conduct trades to make that happen, the lawsuit claimed.
BitMEX revealed the desk in April 2018 after pressure from an independent analyst, the lawsuit said. The exchange claimed the desk had a neutral market-making role, but the suit alleges BitMEX continued trading against its customers on burner accounts.
Along with designing BitMEX’s liquidation system, the judge wrote the lawsuit showed Delo’s role at the exchange meant he would approve “key financial and trading decisions,” including the operation of the trading desk.
“Delo personally traded on the platform, benefitting from these same undisclosed advantages,” the order stated.
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On April 3, Judge Carter denied a motion to dismiss from BitMEX and its Seychelles-based parent firm, HDR Global Trading, finding the suit “sufficiently alleged” the trading desk operated from BitMEX’s office in Manhattan.
Delo was sentenced to 30 months probation in June 2022 after pleading guilty that February to “willfully failing to establish, implement, and maintain an Anti-Money Laundering (“AML”) program at BitMEX,” according to the Justice Department.
Hayes and Reed also pleaded guilty alongside Delo. Hayes was given two years probation with six months of home confinement, while Reed was given 18 months probation.
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Update (April 21, 11:15 pm UTC): This article has been updated to clarify in the first and second paragraphs that Judge Carter's order used information from the investor lawsuit.