The Celsius bankruptcy estate has sued five BitMEX-related entities, seeking the return of 6,360 BTC connected to liquidations during the March 2020 pandemic crash.
The complaint was filed September 12 in the U.S. Bankruptcy Court for the Southern District of New York by Blockchain Recovery Investment Consortium, the litigation administrator appointed in the Celsius case.
Celsius alleges that it lost 1,325.84 BTC in a March 12 liquidation. The estate is also pursuing claims assigned by investment fund JST involving another 5,034.33 BTC lost the following day.
At current prices, the combined Bitcoin is worth approximately $495 million, according to CoinDesk’s review of the complaint.
The lawsuit alleges fraud, market manipulation and wrongful liquidation. Celsius contends that BitMEX controlled both the system executing customer liquidations and the insurance fund that benefited when collateral was seized.
The allegations are unproven. BitMEX and the named entities will have an opportunity to dispute the claims, the calculation of damages and the estate’s legal standing.
The lawsuit also creates questions about Celsius’s former risk disclosures. The company marketed strategies as relatively low-risk and delta-neutral, while bankruptcy records later described highly speculative derivatives activity.
TOKEN RECON ASSESSMENT
This case could test whether an exchange’s liquidation engine and insurance fund created legally conflicting incentives during extreme volatility.
Recovering the full current value of the Bitcoin is not guaranteed. Courts may distinguish between the value at liquidation, the value when the complaint was filed and the value requested by the estate.
Watch BitMEX’s response, evidence concerning the liquidation engine, limitation defenses and whether the exchange’s wind-down affects the estate’s ability to collect.
