{"id":9255,"date":"2026-07-28T02:15:37","date_gmt":"2026-07-27T23:15:37","guid":{"rendered":"https:\/\/handoli.com\/index.php\/2026\/07\/28\/inside-the-mystery-of-bitmexs-insurance-fund\/"},"modified":"2026-07-28T02:15:37","modified_gmt":"2026-07-27T23:15:37","slug":"inside-the-mystery-of-bitmexs-insurance-fund","status":"publish","type":"post","link":"https:\/\/handoli.com\/index.php\/2026\/07\/28\/inside-the-mystery-of-bitmexs-insurance-fund\/","title":{"rendered":"Inside the mystery of BitMEX\u2019s insurance fund"},"content":{"rendered":"
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Crypto exchange BitMEX is<\/a> winding down with roughly $270 million sitting in a house insurance fund that customers now<\/a> suspect<\/a> its<\/a> owners<\/a> will<\/a> simply<\/a> keep<\/a>.\u00a0<\/p>\n

The fund holds<\/a> about $239 million worth of BTC and $31 million in USDT. A lot of that came from customers\u2019 trading losses<\/a>.<\/p>\n

The exchange hasn\u2019t disclosed where the money will go after its doors close on September 23 and BitMEX declined to comment on its plans for the fund.<\/p>\n

To be clear, the fund is owned by BitMEX, not customers, and the exchange never told customers what it would do with the fund if it ultimately closed for business.<\/p>\n

Moreover, the fund has paid out to customers during certain loss events, honoring the exchange\u2018s original promise.<\/p>\n

Still, plenty of people are upset given the substantial size of the fund and a November 2025 rebalancing that drained<\/a> it of the overwhelming majority of its assets at the time. <\/p>\n

The exchange\u2019s proprietary token also seems to have little promise of retaining much value after September. It\u2019s already lost 96% of its value year-to-date after a steep crash on the closure news.<\/p>\n

\"\"<\/a>
Chart of BMEX token, year to date. Source: TradingView<\/figcaption><\/figure>\n

BitMEX\u2019s insurance fund goes viral<\/h2>\n

Speculation about BitMEX owners overtaking the insurance fund is rampant on social media, as allegations earned hundreds of thousands of impressions on the trending<\/a> topic.<\/p>\n

For context, BitMEX\u2019s use of the word insurance is repurposed, a common practice<\/a> by the crypto industry. Its borrowed name doesn\u2019t actually mean insurance by conventional understanding.<\/p>\n

Rather than funding it with policyholders\u2019 insurance premiums or stockholders\u2019 paid-in capital, by and large, BitMEX funded its so-called insurance fund with liquidated assets from customers<\/strong> who lost money trading using BitMEX-provided leverage.<\/p>\n

Immediately incensed, plaintiffs filed<\/a> a proposed class action the same day as BitMEX\u2019s closure announcement.<\/p>\n

Plaintiffs alleged that BitMEX\u2019s fund grew quickly during downside volatility and times of stress when customers would have appreciated insurance payouts.<\/p>\n

Instead of shrinking during adverse events to offset losses as other insurance funds might have, the fund grew as BitMEX force-closed leveraged bets by its customers.<\/p>\n

Although no court has reviewed the allegations, plaintiffs BKX Services and David Namdar say the exchange liquidated their positions. The two say they lost over 622 BTC between them and want to add claims representing similarly situated US customers who traded on BitMEX since July 2018.<\/p>\n

Like other lawsuits before, they are seeking the return of their assets plus fees. Prior lawsuits have ended in dismissal, such as a 2020 class action led by Brett Messieh.<\/p>\n

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BitMEX to close, but what about its $270M insurance fund?<\/a><\/p><\/blockquote>\n<\/div>\n<\/figure>\n

Read more: The history of crypto exchanges trading against their own customers<\/a><\/em><\/p>\n

From 36,400 BTC to 3,600<\/h2>\n

This week\u2019s new lawsuit piles on allegations, describing an in-house trading desk with what it calls \u201cGod access\u201d to hidden orders and customers\u2019 liquidation points.<\/p>\n

In-house traders, plaintiffs allege, were uniquely able to trade during the server freezes that locked out most other customers.<\/p>\n

A civil complaint is merely a document making allegations. Readers shouldn\u2019t interpret claims by plaintiffs seeking money as true nor probable until a court adjudicates the evidence.<\/p>\n

For years, the insurance fund held tens of thousands of BTC, peaking above 36,400<\/a> during the March 2020 crash. Then came the crypto crash<\/a> of October 10-11, 2025.<\/p>\n

A surprise 100% China tariff threat and flash-crash prices on several Binance trading pairs helped erase more than $19 billion<\/a> in leveraged positions industry-wide. BitMEX said its fund absorbed only about $2 million<\/a> in losses during the incident, sailing through relatively unscathed.<\/p>\n

Weeks later, it shrank the fund by roughly 90%.<\/p>\n

Specifically, on November 18, 2025, BitMEX announced<\/a> it would rebalance its insurance fund to \u201capproximately 3,600 BTC and just over 30,000,000 USDT\u201d to \u201cbetter reflect the risks in its markets.\u201d The rebalancing, it promised, would have \u201cno impact on our traders.\u201d\u00a0<\/p>\n

It didn\u2019t say what happened to the tens of thousands of BTC it supposedly no longer needed after that rebalancing.<\/p>\n

The math is unforgiving. At today\u2019s BTC price near $64,000, the old fund would have been worth $2 billion. The rebalanced version is worth about $270 million \u2014 and it\u2019s going away entirely after September.<\/p>\n

At the 52-week high of BTC above $126,000, the value of BitMEX\u2019s pre-rebalanced insurance fund topped $4.5 billion.<\/p>\n

Taking their money after taking their money<\/h2>\n

\u201cThere used to be 36,000 BTC in the BitMEX insurance fund, now 3,600. Are they the ones selling I wonder,\u201d posted<\/a> one skeptic.<\/p>\n

\u201cI guess last year they \u2018rebalanced\u2019 the insurance fund down from 13-14k to 3,600 ie they pocketed 10k BTC,\u201d alleged<\/a> another.<\/p>\n

The business closure news sharpened suspicions. \u201cWow.. Arthur Hayes and his partners will profit around $270 million bucks Is this the reason BitMex is shutting down? To collect this Insurance Fund cash?\u201d asked<\/a> Aaron Bennett.<\/p>\n

Neither BitMEX nor Arthur Hayes have answered their questions. <\/p>\n

Protos previously documented<\/a> how the exchange ran a for-profit market maker and paid a $100 million<\/a> settlement with the Commodity Futures Trading Commission.<\/p>\n

Founders Hayes and Benjamin Delo later pleaded<\/a> guilty to a Bank Secrecy Act violation, before a Trump pardon<\/a> erased their legal jeopardy.<\/p>\n

None of this is new to the courts. Traders have sued and lost<\/a> against BitMEX over market-manipulation claims before, and the founders remain free men. <\/p>\n

What is new is the deadline.\u00a0After September 23, 2026, the customers who filled the insurance fund one liquidation at a time will have no exchange left to ask where their BTC went.<\/p>\n

Got a tip? Send us an email securely via\u00a0Protos Leaks<\/em><\/a>. For more informed news and investigations, follow us on\u00a0X<\/a>,\u00a0Bluesky<\/em><\/a>, and\u00a0Google News<\/em><\/a>, or subscribe to our\u00a0YouTube<\/em><\/a>\u00a0channel.<\/em><\/p>\n

The post Inside the mystery of BitMEX\u2019s insurance fund<\/a> appeared first on Protos<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

Crypto exchange BitMEX is winding down with roughly $270 million sitting in a house insurance fund that customers now suspect its owners will simply keep.\u00a0 The fund holds about $239 million worth of BTC and $31 million in USDT. A lot of that came from customers\u2019 trading losses. The exchange hasn\u2019t disclosed where the money […]<\/p>\n","protected":false},"author":1,"featured_media":9256,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"rop_custom_images_group":[],"rop_custom_messages_group":[],"rop_publish_now":"initial","rop_publish_now_accounts":[],"rop_publish_now_history":[],"rop_publish_now_status":"pending","footnotes":""},"categories":[147],"tags":[],"class_list":["post-9255","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-invest"],"_links":{"self":[{"href":"https:\/\/handoli.com\/index.php\/wp-json\/wp\/v2\/posts\/9255","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/handoli.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/handoli.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/handoli.com\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/handoli.com\/index.php\/wp-json\/wp\/v2\/comments?post=9255"}],"version-history":[{"count":0,"href":"https:\/\/handoli.com\/index.php\/wp-json\/wp\/v2\/posts\/9255\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/handoli.com\/index.php\/wp-json\/wp\/v2\/media\/9256"}],"wp:attachment":[{"href":"https:\/\/handoli.com\/index.php\/wp-json\/wp\/v2\/media?parent=9255"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/handoli.com\/index.php\/wp-json\/wp\/v2\/categories?post=9255"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/handoli.com\/index.php\/wp-json\/wp\/v2\/tags?post=9255"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}