United States’ Commodities and Futures Trading Commission is apparently investigating Bitmex according to unnamed sources. Bloomberg says:
“The months-long CFTC probe is focused on whether BitMEX broke rules by allowing Americans to trade on the platform, which isn’t registered with the agency, said one of the people who asked not to be named discussing the investigation, which hasn’t been made public.
The regulator considers virtual currencies like Bitcoin to be commodities, and it has jurisdiction over futures and other derivatives based on them.”
Bitmex is registered in Seychelles, based in Hong Kong with additional offices in San Francisco and doesn’t require any identification to sign up for trading.
That could allow American residents to easily bypass IP based restrictions through the use of VPN, with CFTC then able to exert jurisdiction if Americans are found to be trading on the platform.
CFTC does not have jurisdiction over bitcoin itself, but does have jurisdiction over bitcoin platforms that offer futures trading, as does Bitmex which provides up to 100x margins for traders.
Some $58 million shorts were liquidated there when bitcoin suddenly jumped by $1,000 in minutes.
There are now further allegations of market manipulation on Sunday when crypto prices fell, with eth in particular dropping from $270 to $190 in minutes.
There are suggestions that was due to a 15,000 eth (~$4 million) market sell order on Bitstamp.
Bitmex utilizes an index to calculate spot prices based on Bitstamp, Coinbase Pro (formerly GDAX) and Kraken.
As it happened, Kraken was down that day on the 14th of July for scheduled maintenance for quite a few hours:
The spot index therefore during that period appears to have been based just on Bitstamp and Coinbase, both relatively low liquidity exchanges as they lack any sophisticated trading tool like margins, options or futures.
Hence a long time eth trader alleges someone took the opportunity to lower the price on Bitmex by market selling on Bitstamp a pretty substantial amount of eth:
This is the latest somewhat evidence based suggestion of potential manipulation at Bitmex which handles an astonishing amount of unfiltered trading volumes at about $10 billion a day just for bitcoin.
Whether this is the sort of thing CFTC has in mind is not clear, but the exchange has long attracted complaints of system overload errors at what appear to be the most opportune time.
CFTC has not greenlighted any easily accessible crypto margins or futures as far as we are aware, with a test period on Coinbase leading to flash crashes and the removal of margins for sophisticated traders.
Europe has however greenlighted 50x futures on Kraken which is now one of the few regulated option for crypto traders, in addition to quite a few unregulated offerings from OKEx to Deribit and others.