OKEx implements ‘clawback’ after faulty bet on Bitcoin, introduces new measures
The Hong Kong-based cryptocurrency exchange OKEx announced on Friday that they’ll have to claw back millions from their counterparties after a user placed a faulty bet on Bitcoin value. The user reportedly made massive gamble on bitcoin futures. Betting on the rise of Bitcoin, the trader gathered futures stake worth about $416.9 million using both cash and leverage. has had to trigger its societal loss risk management mechanism.”
The value of crypto soon fell, making the OKEx’s automatic liquidation function on the position of the user. The trader, as a result couldn’t repay the full amount borrowed. An OKEx spokesperson told CoinDesk, “Even with the force liquidation, the dropping price of bitcoin and the “sheer size of the order” mean it.”
OKEx on Friday revealed that it added Bitcoin worth $18.5 million to its insurance fund so that it can be used in such situations. However, the shortfall wouldn’t be covered with that alone. So, the exchange implemented societal clawback which happens when the insurance fund of the platform cannot cover investors’ total margin call losses. In such cases, the counterpart investors ( those with short positions) will have to make up for the shortfall.
“When the insurance fund cannot cover the total margin call losses, a full account clawback occurs. In such case, only users who have a net profit across all three contracts for the week will be subject to the clawback,” the exchange explained on Friday.
OKEx new rules
OKEx also added that new rules would be implemented to prevent such an incident in future. The exchange reportedly plans to follow ‘scaling margin ratio’ in which high opening bids will require a high down payment. OKEx is not the only firm to use this method. Previously, in 2016, another popular Hong Kong-based exchange Bitfinex lost around $72 million in a cyberattack. They decided to spread the losses among the users with an offer of “IOU” that it said was repaid in early 2017.
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