Poloniex To Repay Lenders In Bitcoin After Funds Lost To Flash Crash

Traders on Poloniex have started receiving refunds of the funds they lost in May after the platform experienced a flash crash involving CLAM.  The announcement that the exchange has started crediting accounts belonging to lenders with the funds they lost came through an official blog post.

The exchange will pay back lenders by covering trading fees. The flash crash which hit the marketplace occurred on the 26th of May.

The crash was a result of the exchange allowing margin trading on CLAM, a coin which had been credited to traders who had holdings of Bitcoin, Dogecoin and Litecoin on the platform. CLAM lost 77% of its value in a 45-minute long market crash. The flash crash resulted in traders losing 1800 Bitcoin with a market value of $13.5 million during that period.

The total number of lenders who lost their funds on Poloniex is equal to 0.4% of Bitcoin holders and these lenders lost 16.2% of their holdings. The lost funds were held in a pool where they were meant to cover defaulted loans.

Cause Of the Crash and Remedies

According to Poloniex, the crash came about as a result of high-velocity sell orders, which combined with low levels of liquidity within CLAM’s trading margin. The low liquidity is a result of loan defaulters which the exchange says it was pursuing at the time. It is not clear whether the loans were paid back or whether Poloniex found another solution to the challenge.

After the crash, the exchange stopped margin trading on CLAM, MAID, BTS, and FCT. This was done to protect the exchange and its users from the possibility of losing more funds through another flash crash.

Repayment to lenders started on the 14th of June. The repayments started with 180 Bitcoins being shared among 10% of the lenders who lost their funds. The exchange has come up with a policy which dictates that lost funds will be replaced as trading fees.

Lenders who lost funds will not pay any trading fees until their lost funds are fully recovered.

One of the Best Crypto Exchanges

Back in January, Poloniex was given an A rating as one of the best crypto exchanges in the business. The rating was given by ICORating, an independent analyst which assessed 135 crypto exchanges across the world.

The exchanges considered have a daily trading volume in excess of $100,000, and the factors considered include web security, account security, DoS attack protection, and registrar.