BitMEX

BitMEX
Founded	2014
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.
Employees	51-200 employees
Products	Cryptocurrency trading platform
Twitter	@BitMEXdotcom
StockTwits	bitmex
LinkedIn	Profile
Facebook	Page
Website	BitMEX Home
Blog	BitMEX

BitMEX is a cryptocurrency trading platform legally based on the island of Mahé in the Seychelles.

BitMEX offers bitcoin derivatives 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 might be involved in "systemic illegality." He said that BitMEX allowed its users to take on too much risk. He also said it was 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. 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.

Legal issues

Private actions

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 the trading platform that arose 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 June 2022, BitMEX Co-Founder Benjamin Delo was sentenced to 30 months probation for violating the Bank Secrecy Act, a U.S. anti-money-laundering law. He had pleaded guilty in February 2022 to one count of violating the Act. Prosecutors said Delo and other BitMEX founders willfully defied U.S. law by failing to set up know-your-customer procedures at the company. Two other BitMEX co-founders, Arthur Hayes and Samuel Reed, also pleaded guilty and Hayes was sentenced to six months of house arrest followed by two years of probation. Reed is scheduled to be sentenced in July. BitMEX’s first employee, Gregory Dwyer, pleaded not guilty.

Business matters

Technical outages

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.

Restructuring ("100x")

In July 2020 HDR Global Trading, the parent company of BitMEX, announced that it would restructure into a new holding company called 100x, 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 would 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.

Market Surveillance

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.

Doxxing breach

In a mass email distributed to its users on 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

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 block persons in Seychelles, Bermuda and Hong Kong, all locations where HDR Global Trading, BitMEX's parent, has offices.

Products and Services

Perpetual Contracts

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 "UP"/"DOWN"

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.

Options

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.

Trading Technologies

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."

BitMEX Mobile

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.

ETH Futures

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.

Background

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.

Key People

• Arthur Hayes, CEO, Co-founder
• Samuel Reed, CTO, Co-founder
• Benjamin Delo, CSO, Co-founder