Clawback of over $400 million- on 4,168,515 Bitcoin Futures Contracts, froze all Accounts

On July 31 – There was a Clawback of over $400 million- on 4,168,515 . A user made an “enormous” gamble on futures, and Lost. OKEx (broker) froze the user’s account and initiated a Forced Liquidation.

An enormous long position in BTC0928 futures contract was force-liquidated at 20:17:14 July 31, 2018 (Hong Kong Time, UTC+8). Due to the sheer size of the order, our risk management system may be triggered to activate the societal loss risk management mechanism.

OKEx has adopted the societal loss risk management mechanism since launched and it has been working orderly as intended. When the insurance fund cannot cover the total margin call losses, a full account clawback 1 occurs. In such case, only users who have a net profit across all three contracts for that week will be subject to the clawback. We will take a portion of the profit in equal percentage from all profited traders only to cover the difference between the liquidated price and settled price.

After its insurance cover is taken into account, the loss to investors is around 1,200 BTC (around $8,800,000 at press time), which will “split proportionately by all profited traders’ realized + unrealized gains,” the spokesperson said.

OKEx said it had also injected 2,500 bitcoins into its insurance fund – worth around $18 million at press time – to limit the damage to traders.

A societal clawback happens when the platform’s insurance fund is not able to cover investors’ total margin call losses. In that case, counterpart investors – i.e. those who have short positions – will have to make up 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

To reduce the market risks induced by this incident, the following actions will be executed:

  1. Injecting 2500 BTC from OKEx’s own capital pool into the insurance fund.
  2. During the settlement at 4pm August 3, 2018 (HKT), if any attempts of malicious manipulation of the settlement price are found, we will delay the settlement process for 10 minutes and manually adjust the price back into a reasonable level before delivery or settlement. The account which made the malicious attempt will be suspended immediately.

There have been malicious rumors accusing them of manipulating the forced liquidation system. We hereby would like to point out the fact that, most of the similar price movements in the market are caused by forced liquidation orders, but they denied.

 

Source:

https://support.okex.com/hc/en-us/articles/360011941512-Regarding-the-Forced-Liquidation-Incident-on-Jul-31-2018