“It feels like the owners will just keep that money,” said one trader after BitMEX revealed it’s shutting down with about $270 million locked in its insurance fund. The fund holds roughly $239 million in Bitcoin and $31 million in USDT, accumulated mostly from customers' losses on leveraged trades. Yet, the exchange has stayed silent on what will happen to this sizable pot once it closes for good on September 23.
Unlike traditional insurance, BitMEX’s fund isn’t backed by premiums or shareholder contributions. Instead, it’s built from liquidated customer positions the assets seized when traders lost bets using the platform's use. While the fund has covered some losses during downturns, its owners never clarified to users what the plan would be if BitMEX ceased operations. This ambiguity has fueled suspicions, especially given that a major fund rebalancing last November drained most of its assets.
Social media buzzed with speculation that BitMEX’s owners might keep the insurance fund for themselves. One recent lawsuit accuses the exchange of operating an internal trading desk with nearly unrestricted access to customer liquidation data, alleging losses exceeding 622 BTC for the plaintiffs. They seek to represent US-based customers who traded since mid-2018, demanding their funds back plus fees. Previous class actions, including one in 2020, have been dismissed, but this new case adds fresh allegations just as BitMEX prepares to shut down.
Meanwhile, BitMEX’s proprietary token BMEX has plunged 96% this year, signaling dwindling confidence as the closure nears. Customers and observers are left wondering about the fate of the insurance fund and the exchange’s remaining assets. The controversy shows the risks in crypto platforms repurposing terms like “insurance” while blurring lines between customer funds and company assets.
