OKEx Confirms $9 Million USD Clawback After Huge Bitcoin Future Fails
The Hong Kong-based exchange OKEx has recently needed to claw back millions from counterparties after a user made a huge gamble on Bitcoin futures and lost. According to the exchange, it had to liquidate an unusually large long position of 4,168,515 Bitcoin futures contracts held by a client of the group when he declined to lower his positions.
As each futures contract had a value of $100 USD, the user had a total of $400 million USD invested. The company decided to freeze the account of the user and to liquidate its assets. The spokesperson of the company told the media that OKEx had no choice but to liquidate the contracts because of the size of the order.
The risk was simply too high if the price of Bitcoin dropped, according to sources, so it had to trigger this choice. After insurance cover, the loss of the investors will be of almost $9 million USD, that is, 1,200 BTC. The loss will be split proportionately by all the traders.
OKEx Maintains Order in the Futures Market by Injecting 2500 BTChttps://t.co/TQUS9MoRPb
— OKEx (@OKEx_) August 3, 2018
According to OKEx, it had injected 2,500 Bitcoins into its insurance fund, which was worth $18 million USD at the time, to limit the possible damages to the company and investors.
A societal clawback is when the insurance fund of a certain platform is not able to cover the margin call losses of the investors. When this happens, the counterpart investors, the ones with the short positions, have to make up for the shortfall.
According to the spokesman, a full account clawback needs to happen when the insurance fund cannot cover the total margin call losses and this is what happened, as the other users did not have a net profit across all the contracts.
.@OKEx_ shouldn't have allowed a position to be 50% of the Open Interest in the first place, they have put themselves in a delicate position after that position got liquidated.
clawback is 17%, means even those who shorted the move paid for OKex mess.
— Blues Crypto (@BluesCrypto) August 3, 2018
This is how hard I have been fucked over by their socialized loss system, @OKCoin @OKEx_ Their risk management is intended they say. Retweet so the world knows. #bitcoin #btc #cryptotrading pic.twitter.com/sNvfgJxxaP
— ibankbitcoins (@ibankbitcoins) August 3, 2018
Summary of Unfilled Liquidation resolution:
– OKex injected 2,500 BTC to bring clawback for the period to 17% (would have been up to 40% otherwise)
– Resulting rebased position from $8020 to $7483 got gobbled up by market within first 3 minutes of post-settlement trading pic.twitter.com/3Eqc7h9kOv
— Whalepool (@whalepool) August 3, 2018