Today we will talk about two controversial exchanges that allow you to do "margin trading" by operating on the leverage.
BitMEX (founded in 2014 by Arthur Hayes, Ben Delo and Samuel Reed) is one of the most controversial exchanges since in the past it has been accused of insider trading, wash trading and special treatments for some privileged investors. According to the United Kingdom's Financial Conduct Authority, the exchange is not in accordance with the provision of financial services. BitMex has been repeatedly accused of illegally manipulating the cryptocurrency market (directly and indirectly). Basically it is a platform for exchange and trading in derivatives.
In 2018 they were accused of insider trading having favored the development of economic transactions, artfully created to inflate the volumes exchanged in the exchange itself. Some users were warned of some market movements.
It must be said that there are other accusations against BitMEX, including that of guaranteeing special APIs only for particular categories of traders, an advantage that is not guaranteed to others; they were also accused of providing cashback, always and only to specific insiders, to fuel exchanges and liquidity.
Again through conniving traders who therefore receive refunds and special treatments, only apparent exchanges would be made to inflate the liquidity of the exchange (wash trading).Wash trading refers to an investor who simultaneously sells and purchases the same financial instruments to create artificial assets on the market and change their price. In July 2019, the rumor spread that the exchange was also involved in illegal activities.
A few months ago, some platform traders lost huge sums of money due to an XRP flash crash.
The accident occurred on February 13: the XRP / USD price on BitMEX plunged 60% (from $ 0.33 to $ 0.13) for a few seconds.
Traders argue that the platform measures designed to prevent the liquidation of bulk positions have not been activated and that BitMEX has liquidated all their positions.
It is important to underline that BitMEX offers the possibility to trade with extremely high financial levers: in the case of XRP, up to 50x.
After the crash, XRP went back almost instantly to $ 0.33, the highest value in the past seven months.
Even following the March 13, 2020 slump (with Bitcoin trading at $ 3,500), many had accused BitMEX of dropping the price (many positions were liquidated).
Bitfinex founded in 2012 is remembered for losing over 1,500 BTC during a breach. In August 2016, the same exchange underwent a new "theft" for over 100,000 Bitcoins ($ 800 million)
The exchange "cut" the balances of its customers by about 36% (including the accounts of those who did not suffer any type of theft). In return, Bitfinex provided them with a cryptocurrency called BFX (a shared token worth $ 1).
In the following years, Bitfinex continued to accumulate customers and also problems with regulators and banks. In 2017, in fact, Wells Fargo and a Taiwanese bank ended their operations with the exchange.
After the platform closed all relationships with Wells Fargo and the partner bank in Taiwan, Bitfinex declared that it no longer allowed the possibility to withdraw its dollar funds and that each bank transfer had been cut out of the Taiwanese bank.
After a few months, to allow users to make transfers to the exchange, Bitfinex decided to forge relationships with other banks, without however revealing where the funds were actually deposited.
In April 2019, they are accused of having withdrawn money from the reserves of his Stable Coin "Tether" (about $ 850 million).
After suffering numerous charges for financial crimes, Crypto Capital funds are frozen by the authorities. The exchange allegedly took hundreds of millions of dollars from Tether's reserves, in order to hide the losses from investors and mask their inability to process customer withdrawals. The documents explain how Bitfinex no longer has access to over $ 850 million in combined customers and corporate funds that it has sold, without any written contract or guarantee, to a company called Crypto Capital Corp.
Bitfinex has never disclosed to investors the risks of these transfers of large sums in unsecured transactions. In order to make up for the loss, Bitfinex and Tether executives instead engaged, according to the prosecution, in a series of corporate transactions with which Bitfinex gave access to $ 900 million of Tether's treasury reserves (which for years instead he had repeatedly told investors that he had fully used to guarantee the virtual currency on a 1: 1 basis with the dollar).
Other exchanges that always use leverage (Bittrex) before Halving have encouraged members with emails to buy Bitcoins before Halving. This mail notified that the exchange had increased its credit card limits just for BTC Halving.
Bybit instead (high leverage derivates exchange) has published a report for examine the state of the market pre-halving (bull run).