Messieh v. HDR Global Trading Limited

Background

Brett Messieh and Drew Lee brought claims individually and on behalf of a putative class of investors who purchased Bitcoin and Ethereum products through the BitMEX exchange. The claims arise under the Commodity Exchange Act and related regulations and allege deceptive conduct, manipulation, price manipulation, principal-agent liability, and aiding and abetting. The alleged conduct concerns BitMEX’s liquidation system, insider trading desk, account lockouts, and manipulation of prices on other exchanges.

The opinion states that HDR Global Trading Limited owned BitMEX and operated it from an office in Manhattan. ABS Global Trading Limited, which Ben Delo helped found, was a Delaware corporation registered to do business in New York and handled technical aspects of the platform. The complaint alleged that Delo helped design the liquidation system, approved important financial and trading decisions, supervised employees operating in the United States, personally traded on BitMEX, and promoted the platform in New York. It also alleged that a significant portion of the affected traders were in the United States.

Motion and Legal Standard

Delo moved to dismiss the Second Amended Complaint for lack of personal jurisdiction. Personal jurisdiction is a court’s authority to exercise power over a defendant. Because the claims arise under the Commodity Exchange Act, the court applied a specific-jurisdiction test using the United States as the relevant forum. The test asks whether the defendant had sufficient minimum contacts with the forum and whether exercising jurisdiction would be reasonable.

At this stage, the plaintiffs needed only to make a preliminary showing of jurisdiction, which could be based solely on allegations. The court viewed the pleadings and supporting materials in the light most favorable to the plaintiffs.

Court’s Analysis

The court rejected Delo’s comparison to a prior case involving an executive of a foreign company. Unlike that situation, the court found that ABS, which Delo co-founded, was a U.S.-based company conducting business in New York and California and was intertwined with the alleged wrongdoing.

The court concluded that the plaintiffs sufficiently alleged that Delo purposefully took advantage of the benefits of conducting activities in the United States. The court relied on allegations that he designed important parts of the BitMEX website and platform, supervised U.S.-based employees involved in creating and maintaining the systems, helped operate companies connected to the alleged manipulation, and came to New York to promote BitMEX to U.S. customers.

The court also found a sufficient connection between Delo’s U.S. contacts and the plaintiffs’ claims. It stated that the required connection is an affiliation between the forum and the underlying controversy and does not require proof that the contacts directly caused the injuries. The court further held that Delo had not made the compelling showing needed to establish that exercising jurisdiction would be unreasonable.

Disposition

The court held that personal jurisdiction over Delo was appropriate and denied his motion to dismiss. The opinion addressed the court’s authority to hear claims against Delo; it did not decide the underlying allegations of market manipulation or the other claims’ merits.