BitMEX insiders caught in a web of lies

Matthew Collins
7 min readMay 20, 2018


Update May 24

Thanks to the 15k+ readers for for sharing tips and content. This story about greed and scandal is now getting picked up by mainstream media and translated into Russian, Japanese, and Korean.

After months of rumours about misconduct behind the scenes, BitMEX founders Arthur Hayes, Samuel Reed and Ben Delo have finally admitted (well, not quite) to giving unfair trading advantages to insiders, a practice they had previously denied.

They have also been engaging in unprofitable trading to artificially inflate exchange volumes (aka wash trading), outlined below.

To understand how unscrupulous actors try to squeeze every extra buck out of retail customers and fool potential investors in the (unregulated) Wild West of crypto, read on…

Ain’t that the truth

Admission of guilt

Last week marked 2018’s marquee cryptocurrency gathering / giant circle-jerkathon, Consensus. Arthur Hayes, BitMEX CEO, was snapped posing in front of a bright orange Lamborghini. Later that week, he was the face of CNBC’s Fast Money.

BitMEX‘s rented Lambo / PR stunt

Two weeks earlier, the BitMEX team were in a huddle discussing how to slip under the radar an admission they’d been engaging in unethical and probably illegal activity.

On April 30, a groundbreaking post surfaced on the BitMEX blog, admitting that the exchange operates its own (previously undisclosed) for-profit trading arm. This subsidiary trades against customers on their own exchange, and enjoys unfair advantages not available to other customers.

The in-house trading arm and ‘anchor market maker’ vaguely referenced in the past, is staffed by their long-term friend and employee, Nick Andrianov.

Nick’s LinkedIn profile pegs him as the current BitMEX Business Development Manager.

TFW ‘Business Development’ is actually privileged insider trading

And of course we all remember Nick from back in November 2017 as part of the ‘Deutsche Bank Connection’.

Special trading privileges when you’re on the inside

While making money trading against BitMEX’s own customers, the anchor market maker receives many special trading privileges that aren’t available to other exchange users. Below are 3 concrete examples of this:

  1. Off-exchange cash kickbacks disguised as ‘service fees’

BitMEX claims:

The truth is:

If the BitMEX market maker loses money, the BitMEX exchange backdoors them cash payments (the economic equivalent of fee-free trading). This encourages the market maker to participate in unprofitable trading to artificially inflate exchange volume.

2. Unique status allowing them to short-sell options

BitMEX claims:

The truth is:

They are indeed the only market participant allowed to short sell the new UP and DOWN option contracts. This is a hugely profitable advantage (in the order of tens of thousands of $$$ per day according to one source).

A recent newsletter from Deribit (competing crypto options exchange) outlined that the BitMEX options are 5–10x the fair market price. The insider market maker (the only person allowed to sell) is one plump hog!

3. Additional API request bandwidth denied to competitors

BitMEX claims:

The truth is:

A large market-maker and trading firm informed me that BitMEX repeatedly denied them increased API request allowances (how many orders-per-second their algo is allowed to send). Meanwhile, the privileged BitMEX market maker probably operates with far fewer order limit restrictions.

With all these special benefits, the BitMEX subsidiary and in-house market maker is in a fantastic position to fleece the exchange’s customers. This Nick Andrianov guy (Arthur’s old friend and BitMEX insider) is sitting on a gold mine! But at least we can rest easy knowing ‘[h]is integrity is unquestionable’.

But why male models?

All of the information in the April 30 blog post is a revelation that runs contrary to the party line, which has always been a deny, deny, deny.

So naturally, we have to wonder what prompted the truth to spill out after months (years) of deceiving market participants.

2 days earlier…

It was a rainy afternoon in the Principality of Sealand when an anonymous tipster contacted me.

He was a young CS student trying to put his programming skills into practice by writing code to run a trading bot on BitMEX. But he noticed something odd in the data. There appeared to be another bot that was making consistently unprofitable trades, and could get orders in the market faster than anyone else during those dreadful exchange overloads.

The infamous ‘503 error’

I decided to dig a little deeper and hear what BitMEX had to say on the issue.

The initial request for truth

Straight from the horse’s mouth…

Well, except for those pesky off-exchange cash payments. And the ability to go short. And increased throttle. Although technically, their own trading subsidiary isn’t a ‘customer’…

Given the timing of this email (2 days before the blog post), we have to wonder if BitMEX staffers were spooked (and / or obliged to consult legal counsel), thus leading to their admission of guilt.

The plot thickens

Yet more behaviour by BitMEX suggests they didn’t want to bring attention to this blog post.

For example, the post did not appear on the RSS feed like most other posts. it also did not appear as an ‘exchange announcement’, which would alert users.

Additionally, while the April 30 blog post claims BitMEX have ‘updated our Terms of Service’, there is no mention of the privileged for-profit insider market making subsidiary anywhere on the ToS page.

Outrage on reddit

Understandably, angry posts have started appearing on reddit. Nettlesome ‘customers’ are asking for the same trading privileges as the BitMEX internal market-making desk…the nerve!

This guy fucks

Where do we go from here?

Does BitMEX’s deceitful conduct teach us anything new about the cryptocurrency landscape / greedy ex-bankers? It’s a wasteland rife with dishonesty, avarice and playing footsie with the law.

Being registered in the Seychelles, it’s doubtful any legal action will be taken, but in any regulated market this privileged trading and on-record lying would surely not be tolerated.

First runner-up. Fixed that for you

As an ex-lawyer, I’m surprised the ‘outside counsel’ (Hodgson Russ or Addleshaw Goddard?) are comfortable with the conflict of interest apparent in operating both an exchange and an insider trading operation on that exchange.

The ‘service fee’ paid to the BitMEX market maker naturally creates an incentive to churn otherwise unprofitable volume. Receiving off-exchange cash kickbacks not available to other customers effectively reduces the trading fee to zero, with an explicit goal to inflate turnover. This is akin to wash trading (so I was informed by an experienced electronic market maker).

Wash trading illustrated. Without the special off-exchange ‘service fee’ kickbacks, this behaviour would be wildly unprofitable after fees

Wrapping up

After the truth about the ethical standards of the BitMEX founders has been exposed, the CFTC / SEC will need to dig deeper before even considering US approval of the exchange.

An immediate and obvious corrective action by BitMEX would be to remove all unfair trading privileges given to their friends and business partners. Further, BitMEX should discontinue deceiving their customers, and discontinue entertaining the conflict-of-interest between the exchange vs in-house, for-profit trading arm.

Please forward any further tips / info to

I’ve recently received information about BitMEX’s market-making desk front-running OTC orders. More in the next article. @ BitMEX if you would like to respond on record, please get in touch.

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Matthew Collins