Celsius Seeks 6,360 Bitcoins from BitMEX: Why Are the 2020 Liquidations Back in the Spotlight?

The entity managing Celsius’s bankruptcy proceedings is demanding the return of 6,360 BTC from BitMEX due to the 2020 Bitcoin liquidations.

Blockchain Recovery Investment Consortium filed a motion on behalf of Celsius assets on September 12 in the U.S. Bankruptcy Court for the Southern District of New York. The lawsuit was filed due to forced liquidations that occurred on BitMEX during the sharp coronavirus-induced crash in March 2020. The current value of the 6,360 BTC requested is calculated at approximately $495 million.

Celsius alleges that it lost 1,325.84 BTC in a single liquidation on March 12, 2020. The entity also seeks the return of a 5,034.33 BTC loss that occurred the following day, as part of the claims it took over from the investment fund JST. Both positions were structured to generate profits if Bitcoin maintained its value or increased.

BitMEX’s liquidation system under scrutiny

The complaint alleges that BitMEX controlled the system determining the conditions under which customers are liquidated and the growing insurance fund resulting from these transactions. Celsius also asserts that the liquidation procedures were designed to force the sale of customers’ collateral.

One of the notable aspects of the case is that Celsius previously marketed itself as a crypto lender using low-risk strategies. The company highlighted delta-neutral strategies such as arbitrage, generating income from funding rates, and carry trades. However, in its 2022 bankruptcy filing, it was stated that contrary to this narrative, the company conducted high-risk derivative and asset transactions.

Celsius went bankrupt in 2022. The defendants include HDR Global Trading, ABS Global Trading, Shine Effort, 100x Holdings, and HDR Global Services. The lawsuit is the second one filed against BitMEX after the exchange announced it would cease its trading activities on September 23.