Celsius sued BitMEX for 6,360 Bitcoin eleven days before the exchange closed
Celsius Network filed a lawsuit in the U.S. Bankruptcy Court for the Southern District of New York, case number 26-01091, seeking to recover 6,360.1666 Bitcoin, worth approximately $495 million at the time of filing.
9/18/20264 min read
Allegations of structural
The main issue in the lawsuit is not that BitMEX's liquidation system performed poorly under stressful conditions, but rather that BitMEX designed a system in which the entity operating the liquidation also profited.
BitMEX's insurance fund suffers losses when a liquidated position cannot be closed at a price sufficient to cover its obligations, and earns a surplus when the liquidation is completed at a price better than the bankruptcy. Celsius alleges that BitMEX controls both the system of forced liquidation and the insurance fund's aggressive profit-making from executing those liquidations, viewing it as a revenue-generating scheme by exploiting customers.
The lawsuit states: "Instead of maintaining an orderly market, BitMEX deliberately designed its platform and liquidation process to cause collateral liquidation and defraud its own customers." The lawsuit also separately alleges that while BitMEX repeatedly claimed to maintain an orderly market for its derivatives contracts, it knew those claims were false.
That wording transforms a dispute over performance quality under extremely volatile conditions into an accusation of design fraud, which is both more difficult to prove and significantly more valuable if proven.
Black Thursday and the Power Outage
March 12, 2020 remains the most severe single-day disruption in Bitcoin trading history. Prices plummeted by approximately 50% in just a few hours as Covid-19 panic led to liquidations across all asset classes, and leveraged cryptocurrency positions were liquidated in a chain reaction, each forced sale pushing prices lower and triggering further liquidations.
BitMEX was the dominant Bitcoin derivatives exchange at the time, and its role in that day's price movement has been debated ever since it occurred. The exchange was down during the crash, an incident BitMEX attributed to a DDoS attack. Bitcoin prices recovered strongly while trading was suspended.
The lawsuit links the power outage to a temporary halt in liquidation, followed by a rapid price recovery—a chain of events that has fueled years of speculation about whether the outage prevented a chain reaction of further declines to zero, or whether it occurred conveniently after BitMEX's order book had been liquidated. Celsius is now asking the court to consider that question under its right to gather evidence. The complaint also refers to the XBTM20 contract, a Bitcoin futures contract expiring in June 2020, as the specific product into which the leveraged positions were placed.
This lawsuit predates the company's dissolution.
This timing leads to the obvious inference that Celsius hastily filed before BitMEX disappeared. However, the filing further complicates this understanding. A bankruptcy filing by Celsius in October 2023 listed HDR Global Trading among the entities facing allegations of negligence, fraud, and market manipulation, meaning the asset class identified BitMEX as a target of litigation nearly three years before filing and reserved the dispute through Chapter 11 proceedings.
What the July 2026 dissolution notice may have done is turn a reserved option into an urgent one. A defendant continuing operations can be sued freely within the statutory timeframe. A defendant dissolving their exchange business would create a timeframe, because existing assets may have been distributed, transferred, or mortgaged by the time the judgment is rendered.
CryptoSlate has correctly raised that question: whether Celsius will seek to preserve its assets during the dissolution process, meaning that a bailout or asset seizure procedure would be necessary instead of simply proceeding with scheduled litigation.
The lawsuit concerning Celsius's estate.
Celsius froze withdrawals in June 2022 and filed for Chapter 11 bankruptcy protection in the same SDNY court currently handling this case. The estate has distributed recoveries to creditors through a process that has lasted more than four years.
Recovering 6,360 Bitcoin would be significant. This also comes amid intense criticism of FTX's asset distribution for calculating debts based on November 2022 asset prices, while Bitcoin has increased fivefold since then, leaving creditors nominally fully compensated but economically at a much greater disadvantage than holding Bitcoin.
Celsius's creditors also face a similar calculation. The Bitcoin seized in March 2020 was worth approximately $5,000 each. The same amount of Bitcoin is now worth approximately $76,000. Valuing compensation at the time of the loss or at its current value is a matter of fifteenfold difference, and the fact that the lawsuit is seeking the return of 6,360 Bitcoin instead of a monetary sum suggests that the heirs are pursuing the asset itself, not its value in 2020.
Assessment and Conclusion
Regardless of the outcome of the lawsuit, this allegation highlights a structural characteristic of leveraged cryptocurrency trading that has never been fully resolved. Every derivatives exchange operating an automated liquidation system faces the contradiction that Celsius describes. The exchange decides when a position is liquidated, at what price, and how quickly the position is closed. The exchange also typically operates or benefits from hedging mechanisms that absorb or capture the difference between the liquidation price and the bankruptcy price.
Traditional futures exchanges separate these functions through clearinghouses with their own capital and governance requirements, precisely because centralizing them creates the incentive that Celsius alleges has been exploited. Cryptocurrency derivatives exchanges generally do not adopt such separation, and many have yet to do so.
A court ruling that this combination constitutes fraud, rather than merely an offensive design, would have implications far beyond BitMEX for every exchange using the same architecture.
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