Okex Publicized $400M Loss With Clawback
For anyone participating in leveraged trading, all known risks related to a potentially incredibly profitable activity must be acknowledged. In addition to this, traders must constantly remember that no matter how successful one transaction or trade is, room for the downfall is always present. Okex has recently socialized one user’s massive losses on the platform in Bitcoin futures with a retrieval of funds paid, also known as a clawback.
Based in China, cryptocurrency exchange Okex announced on the 3rd of August that a massive BTC future contract was force-liquidated, essentially sold, and given its gigantic size in value over $400M, around $9M of uncovered losses will be required to be socialized.
As per the risk management solution within the venue, a complete clawback is initiated in case insufficient funds are present when attempting to cover total losses. As a result of this, any participants with profits from the three contracts of that week will experience a clawback. The company will acquire a certain amount of the profit from traders strictly to cover losses.
The exchange described the incident, stated that a specific user initiated a massive number of contracts in the millions on the 31st of July and triggered the risk alarm system. The user was immediately confronted and asked to tone down on the number of contracts also the user did refuse to cease any transactions and forced the exchange to temporarily halt all services and freeze his account. The price of Bitcoin then quickly dipped, liquidating the user's assets in the process.
Additionally, as per Okex, to prepare and stop any further socializing clawbacks, the company has been relentlessly developing its risk assessment protocols by introducing limitations on prices, more efficient forced selling and price correction. Several negative rumors have directed accusations towards the exchange, claiming that it was abused forced liquidation. As a means of protecting the market, the exchange then stated that 2500 Bitcoins will be invested from its own capital into an insurance fund and will overlook the transaction as a precautionary measure.
Additional upgrades are being introduced to the risk management protocol to prevent any further cases of the same type from happening ever again. A new anti-tampering rule has been implemented, price marking scheduled to launch at the end of this month and much more throughout 2018.