The cryptocurrency exchange BitMEX, co-founded by the Reform UK donor Ben Delo, is facing a High Court claim for about £20m from a former customer who alleges it sold crypto derivatives in the UK without authorisation from the Financial Conduct Authority, the Guardian has reported.
Lewis Barber, a software engineer, claims he lost bitcoin worth £20m between 2018 and 2022 trading derivatives offered by the exchange, according to the newspaper. His case contends that under the Financial Services and Markets Act 2000 such contracts are void and that consumers are entitled to restitution of bitcoin lost on the trades.
The claim lands weeks after Delo gave £36m to Reform UK, reported as the largest donation ever made to a British political party, and as the Electoral Commission is asked by a Labour MP to say whether the money is permissible. It also comes after BitMEX shut down. The exchange closed on 23 September following what its owner, HDR Global Trading Limited, called a strategic review.
The Guardian reported that the claim has been filed at the High Court but not yet served. A BitMEX spokesperson told the newspaper: "No such claim has been served on HDR Global Trading Limited." HDR, which is incorporated in the Seychelles, is the exchange's owner and operator.
Barber's case rests partly on the FCA's own intervention. His claim states: "On or around 3 March 2020, the FCA issued a warning that the Defendant may have been conducting trading in regulated investments in the United Kingdom without FCA authorisation." The regulator published that warning in March 2020, saying the exchange appeared to be carrying out regulated activity without authorisation.
The claim also alleges that BitMEX marketed itself to British readers, stating: "The Defendant placed at least one advertisement in the Times (published on 3 January 2019) which promoted the Defendant". Barber is seeking the return of all bitcoin lost trading with BitMEX, or damages for trades going back a number of years, according to the Guardian.
Gareth Keillor, a partner at Seladore Legal, which represents Barber, said: "This is a substantial claim concerning losses sustained by Lewis over a number of years."
The period covered by the alleged losses straddles a further regulatory change. The FCA banned the sale of crypto derivatives to UK retail customers from 6 January 2021, after Sheldon Mills, then its interim executive director of strategy and competition, said trading in such products placed retail consumers "at a high risk of suffering losses" and that the regulator had "evidence of this happening on a significant scale".
The allegations in the claim are untested. BitMEX has not responded publicly to the substance of Barber's case beyond its statement on service.
Delo, who DeSmog describes as a co-founder and former executive of BitMEX, has a regulatory history with the exchange in the United States. In 2021 the BitMEX entities settled a case brought by the Commodity Futures Trading Commission with a $100m civil penalty, and in 2022 Delo and his two co-founders, Arthur Hayes and Samuel Reed, were each ordered to pay $10m. Delo pleaded guilty in 2022 to violating the US Bank Secrecy Act and was later pardoned by Donald Trump.
Delo has said he is retired and no longer involved in crypto. Writing in the Telegraph about his donation to Reform in September, he said: "If a few people like me are willing to contribute to creating a more level playing field that is not undermining democracy - it is supporting it, on behalf of millions of Britons that the establishment has let down".
The donation was reported by Bloomberg as the equivalent of £1m a month until August 2029. Christopher Harborne gave Reform a matching £36m the following day.
Phil Brickell, the Labour MP who chairs the all-party parliamentary group on anti-corruption, has written to the chief executive of the Electoral Commission asking whether the two donations are permissible, HuffPost UK reported. "The British public deserve complete confidence that all political donations are lawful, transparent and come with no strings attached," he said.
Barber's claim is separate from a class action filed in New York in July against HDR, Delo, Hayes and Reed, which seeks about 623 bitcoin, worth roughly $40m. BitMEX has said it will defend that case.
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