|Headquarters||Eden Island, Mahé; Hong Kong|
|Key People||Arthur Hayes, CEO, Co-founder; Samuel Reed, CTO, Co-founder; Ben Dolo, CSO, Co-founder; Gregory Dwyer, Head of Business Development.|
|Products||Cryptocurrency trading platform|
- 1 Overview
- 2 Legal issues
- 3 Business matters
- 4 Doxxing breach
- 5 Geographical Access Restrictions
- 6 Products and Services
- 7 Background
- 8 Key People
- 9 References
BitMEX offers bitcoin derivitives trading, including margin trading and liquidation services. It is one of the largest cryptocurrency trading platforms in the world. In April 2019, it was ranked third by traded volume according to reported trading volumes by CoinMarketCap.
In August 2018, BitMEX moved into the 45th floor of the Cheung Kong Center in Hong Kong, one of the most expensive office buildings in the world. Around the same time as the move-in, BitMEX servers went down for scheduled maintenance. Almost immediately, bitcoin prices increased by 4%. This ended up adding $10 billion to the market cap of all cryptocurrency assets.
In a February 2019 blog post, BitMEX reported that it had traded a $1 trillion notional worth of cryptocurrency contracts in 2018. In the same blog post BitMEX described the functioning of its insurance fund, which supports their leveraged contracts. In August 2019, The Block Crypto reported that The BitMEX insurance fund had increased in value by about 50% since January 1, 2019.
In May 2019, BitMEX wrote on its blog that, although the company offers a maximum of 100x leverage on its derivatives trading, the majority of traders do not trade at maximum leverage. BitMEX CEO Arthur Hayes said that this reflected "quite responsible" behavior on the part of BitMEX's customers. According to BitMEX's data, the average leverage used by BitMEX traders is 29x on long positions and 26x on short positions.
In July 2019 Nouriel Roubini released a report in which he suggested that BitMEX may be involved in "systemic illegality." He said that BitMEX allows its users to take on too much risk. He also said that it's possible that liquidation of user accounts may contribute significantly to the trading platform's income, and that BitMEX may trade against its clients, citing a widely-circulated post on Medium from 2018. Though representatives from BitMEX denied these claims, Roubini wrote that Hayes, BitMEX, and anybody else facilitating cryptocurrency trading from overseas regulatory "safe havens" should be investigated.
Over the first half of 2019, BitMEX's Insurance Fund increased by over 50 percent. The platform held nearly 0.15 percent of the world's total supply of bitcoins by late August.
By late 2019, globally bitcoin derivatives accounted for $5-10 billion worth of trade volume per day - more than 10 times the volume created by bitcoin spot trading. BitMEX accounted for a large percentage of it, trading an average of $1.82 billion bitcoin per day.
BitMEX was targeted in a U.S. federal class action suit filed on April 3, 2020 in the Southern District of New York complaining that BitMEX manipulated other spot markets in order to affect settlement prices used in BitMEX's contract settlements. The complaint also alleged that BitMEX offered unregistered securities to U.S. residents.
The parent company, HDR Global Trading, was sued in the Northern District of California federal court on May 16, 2020 for numerous violations of U.S. law by BMA (Bitcoin Manipulation Abatement) LLC. The suit was brought by an entity called BMA LLC (AKA Bitcoin Manipulation Abatement). BMA LLC had also sued FTX and Ripple in the recent past. In November of that year, a resident of Bucuresti, Romania named Păun Gabriel-Razvan filed a similar lawsuit against HDR Global Trading.
U.S. federal actions
Against a backdrop of rumors that the CFTC was investigating BitMEX less than a year into the job, COO Angelina Kwan abruptly left her position. Kwan had previously been a senior regulatory executive at the Stock Exchange of Hong Kong.
On October 1, 2020 both the CFTC and the U.S. Department of Justice (DOJ) announced charges against HDR Holdings and its subsidiaries and affiliates which together operate BitMEX parent, as well as HDR's owner founders, Arthur Hayes, Ben Delo, and Samuel Reed. In its civil complaint, the CFTC accused the defendants of operating an unregistered derivatives trading platform that solicited business from and conducted business with U.S. residents. The CFTC also alleged that BitMEX did not comply with U.S. anti-money laundering requirements. In its indictment that was unsealed the same day, the DOJ charged HDR Holdings, its subsidiaries and affiliates, the three owner founders of HDR, and Gregory Dwyer, the head of business development, with violating and conspiring to violate the Bank Secrecy Act by not implementing an anti-money laundering program. Reed, the CTO, was taken into custody in Massachusetts by federal law enforcement on October 1, 2020, while the other executives remained "at large" in the DOJ's terminology. A week later, BitMEX announced that it had made changes to its leadership, which included Arthur Hayes stepping down as CEO.
In March 2021, a court filing revealed that Hayes had discussed surrendering to U.S. authorities on April 6, 2021; the court filing was tweeted about on Wednesday, March 3 by Pavel Pogodin, a representative for the plaintiffs in civil proceedings against BitMEX and its founders. Hayes, who resides in Singapore, was in the process of discussing arrangements that would allow him to remain living abroad and travel to Hawaii to appear remotely in New York for court appearances, eventually appearing in New York personally, according to a court transcript of Jessica Greenwood, assistant U.S. attorney in Manhattan.
On March 13, 2020, the trading platform experienced two distributed denial of service (DDoS) attacks, ten hours apart, which interfered with the internal message queuing. In both cases, trading was halted. The company attributed the first trading halt to a hardware failure in a tweet: "Between 02:16 and 02:40 UTC 13 March 2020 we became aware of a hardware issue with our cloud service provider causing BitMEX requests to be delayed. Normal service resumed at 03:00 UTC. As a reminder, latest system updates can be found on our status page https://status.bitmex.com." BitMEX said later that it had refunded a total of approximately 40 bitcoin to 156 customers whose positions were erroneously liquidated as a result of the outage. According to a BitMEX report posted on the company's website, by the time the second attack occurred ten hours later it realized that the first outage was caused by a DDoS and moved quickly to resolve performance issues caused by the DDoS attack. BitMEX also reported that not only were both attacks executed by the same party but also that that party had conducted an earlier attack in February.
The trading engine went down for about an hour-and-a-half on May 19, 2020, from 12.13 UTC to 13.40 UTC, according to its Telegram message feed. No reason was given, but the customers were assured that their funds were safe.
In July 2020 HDR Global Trading, the parent company of BitMEX, announced that it would restructure into a new holding company called the 100x Group, which would be the new holding company for the BitMEX platform and its related assets. The announcement said that with the new corporate structure 100x would "pursue a broader vision to reshape the modern digital financial system into one which is inclusive and empowering." Many interpreted this as a sign that BitMEX was gearing up to branch out, making new products and offering new services outside of the cryptocurrency trading space.
In a blog post on BitMEX's website, CEO Arthur Hayes said the new structure of the company will provide BitMEX with "more freedom to explore, incubate and pursue new opportunities and investments, whilst remaining entirely committed to enhancing BitMEX’s leadership position." He also said that the legal structure of BitMEX would not change.
In November 2020 Eventus Systems, a company specializing in market risk and multi-asset class trade surveillance, announced that the 100x Group had selected Eventus to support its trading platforms by providing trade surveillance and anti-money laundering (AML) services via a cloud-based version of Eventus' Validus platform.
On May 12, 2021, Tesla CEO Elon Musk tweeted an announcement that the company would no longer accept bitcoin as a method of payment for its products until the cryptocurrency industry shifted towards mining practices that were more eco-friendly, and less harmful to the environment. On May 13, FTX founder and CEO Sam Bankman-Fried posted a lengthy analysis of bitcoin's carbon footprint. He concluded that the environmental problems posed by bitcoin mining could be offset "pretty easily" by donating $0.0026 to a charity called Cool Earth for every $1 spent on blockchain fees - if his calculations were accurate.
On May 21, 2021, BitMEX announced that it had committed to becoming carbon neutral, and would begin donating "at least $0.0026 for every $1 of blockchain fees our clients pay out." The announcement credited Sam Bankman-Fried with the idea.
In a mass email distribution published November 1, 2019, BitMEX inadvertently published the email addresses of up to 30,000 of its users. According to press sources, the company distributed the email through "cc:" functionality instead of "bcc:", which blinds all other recipients. The company notified its users of the breach by email.
Geographical Access Restrictions
Also in July 2019, Bloomberg reported that BitMEX was under investigation by the CFTC, the federal regulatory agency that oversees commodity and futures marketplaces in the U.S. for permitting U.S residents to trade on its platform without BitMEX being registered as a designated contract market. On July 20th, numerous Twitter users began tweeting that BitMEX's trading volume had fallen by 33%.
On August 19 BitMEX announced it would also block persons in Seychelles, Bermuda and Hong Kong, all locations where HDR Global Trading, BitMEX's parent, has offices.
Products and Services
BitMEX offers what it calls "perpetual" contracts, which are similar to futures contracts. The difference between perpetual contracts and futures is that, unlike futures, perpetual contracts do not have expiry dates, allowing the trader to hold on to a position until the trader chooses to end it. In a Tweet on February 4, CEO Hayes announced that BitMEX would launch trading of Ripple/USD swaps the next day, saying, "Is it called Ripple, XRP, or dog[*]? Who knows, who cares. It’s worth more than zero so it’s time to trade the USD pair on BitMEX. Boo-Yaka-sha!"
BitMEX also offers options that it calls "BitMEX DOWN" and "BitMEX UP" contracts. Buying "BitMEX DOWN" contracts lets holders participate in a market decline, and buying "BitMEX UP" contracts lets purchasers participate in a market rally. In both cases, an customer's potential loss is limited to the initial payment, taking the form of a premium paid on a specified trade date in bitcoin (BTC). Gains are paid out in BTC. Investors cannot sell these contracts.
CEO and Founder Arthur Hayes revealed in a podcast in mid April 2019 that BitMEX was developing an options trading platform that would be launched a year to a year-and-a-half later. Hayes said that BitMEX was working with university professors on the design.
In April 2019, the Chicago-based trading software developer Trading Technologies (TT) announced a new partnership with HDR Global Trading, owner of BitMEX. TT said in a blog post that through this partnership, TT's users eligible to trade at BitMEX will have full access to BitMEX's products, including its XBT/USD Perpetual Swap. Arthur Hayes, the CEO of BitMEX, said that this new partnership will "advance our mutual vision to unlock access to cutting-edge cryptocurrency products."
The company announced on September 1, 2020 that it had launched a mobile application, "BitMEX Mobile," which provides access to all of BitMEX's trading platforms. The application was available for download in 140 countries.
In April 2020, BitMEX announced the launch of Ethereum (ETH) futures trading with up to 50X leverage on its platform. The contracts have a fixed bitcoin multiplier of 0.000001 bitcoin per 1 USD, so for each 1 USD move, the contract pays out 0.000001 bitcoin regardless of the USD price of ETH.
BitMEX was founded in 2014 by Hayes, a former Citigroup equities trader who wanted to create a bitcoin derivatives exchange. Hayes was reportedly bored by the traditional financial services industry, and became interested in cryptocurrency asset trading, which he regards as similar to traditional asset trading in the '80s and '90s.
- Arthur Hayes, former CEO, Co-founder
- Samuel Reed, CTO, Co-founder
- Ben Dolo, CSO, Co-founder
- BitMEX. Linkedin.
- BitMEX. BitMEX.
- Top 100 Cryptocurrency Exchanges by Trade Volume. CoinMarketCap.
- Crypto Exchange BitMEX Rents World’s Most Expensive Offices in Hong Kong. CCN.
- Newsflash: Bitcoin Price Spikes Near $6,900 as BitMEX Goes Offline. CCN.
- Bitcoin spiked after a major trading platform went down, and it created a golden opportunity for traders. Business Insider.
- Crypto Market Adds 4% After BitMEX Experiences Temporary Outage. NewsBTC.
- The BitMEX Insurance Fund. BitMEX.
- The BitMEX Insurance Fund is up 50% since the beginning of 2019; holds more than $300 million. The Block Crypto.
- Crypto Exchange BitMEX Reveals Most of Its Users Don’t Use Maximum Leverage. Cointelegraph.
- Nouriel Roubini Ramps Up Campaign Against Crypto Exchange BitMEX. Bloomberg.
- The Great Crypto Heist. Project Syndicate.
- The BitMEX Insurance Fund is up 50% since the beginning of 2019; holds more than $300 million. The Block.
- Bitcoin Speculators Gain Upper Hand as Derivative Trading Surges. Bloomberg.
- Top crypto exchanges, token issuers named in Friday barrage of U.S. class-action lawsuits. The Block Crypto.
- BitMEX accused of money laundering, market manipulation in new lawsuit. The Block Crypto.
- BitMEX and founders face yet another lawsuit alleging money laundering and market manipulation. The Block Crypto.
- Crypto Firm COO Exits After Less Than a Year in Role. Bloomberg.
- Press Release Number 8270-20. U.S. Commodity Futures Trading Commission.
- Press Release Number:20-218. U.S. Attorney's office of the Southern District of New York.
- BitMEX Co-Founders Charged With U.S. Rules Violations. Wall Street Journal.
- BitMEX announces leadership changes after U.S. government charges, Arthur Hayes no longer CEO. The Block.
- Latest BitMEX news: Arthur Hayes is expected to surrender to US in Hawaii on April 6. Greg Dwyer declined to surrender and US launched extradition proceedings for him from Bermuda. Ben Delo will surrender in NY before end of March.. Twitter.
- BitMEX’s Arthur Hayes Proposes Surrender to U.S. Authorities. Bloomberg.
- U.S. prosecutors discussing surrender agreement with former BitMEX CEO Arthur Hayes. The Block.
- @BitMEXDOTCOM. Twitter.
- How We Are Responding to the 13 March DDoS Attacks. BitMEX.
- Sudden ‘Major’ Outage Sparks Serious Bitcoin Exchange Warning. Forbes.
- The parent company of BitMEX has restructured, and it points to ambitions outside of crypto. The Block.
- HDR Global Trading announces new holding structure, 100x Group. PR Newswire.
- Introducing the 100x Group. BitMEX.
- Eventus Systems to provide trade surveillance, AML transaction monitoring for BitMEX. BitMEX.
- Tesla & Bitcoin. Twitter.
- 1) Ok, so how much CO2 does BTC actually create? How much of a worry is it? Quote Tweet. Twitter.
- BitMEX Commits to Carbon Neutrality. BitMEX.
- BitMEX Exchange Exposes User Base in Email Mishap. CoinDesk.
- Statement on Email Privacy Issue Impacting Our Users. BitMEX.
- U.S. Regulator Probing Crypto Exchange BitMEX Over Client Trades. Bloomberg.
- BitMEX Bitcoin Volume Slumps 33% After CFTC Investigation. NewsBTC.
- BitMEX to Block Users in Hong Kong, Bermuda and Seychelles. CoinDesk.
- @CryptoHayes. Twitter.
- FAQ: Contracts. BitMEX.
- BitMEX CEO Arthur Hayes Reveals Plans to Open Crypto Options Platform. CoinDesk.
- A Chicago trading tech firm is partnering with BitMEX to unleash crypto derivatives on professional traders. The Block.
- Trading Technologies Launches Direct Market Access to Leading Bitcoin-based Trading Venue BitMEX Through the TT® Trading Platform. Trading Technologies Blog.
- Introducing BitMEX Mobile. BitMEX.
- BitMEX is launching new ether/USD futures, which settle in bitcoin. The Block.
- BitMEX. Linkedin.
- Bored With Banking, This Former Citi Trader Went Full Crypto. Bloomberg.