OKEx Claws Back Unrealized Profits From Futures Traders To Stem Massive Bad Betbr>
A bitcoin futures bet that has gone awry has forced OKEx to give an 18% unrealized profits haircut to customers in order to cover its position.
A futures trader was unable to cover losses on the $416 million futures bet, causing the disruption at the Hong Kong exchange. OKEx tried to liquidate the position earlier this week, but was unable to cover the trader’s shortfall after bitcoin prices slumped.
OKEx has a “socialized clawback” policy for such instances, resulting in the futures traders with unrealized gains to give up about 18 percent of their profits.
The exchange identified the problem trader by the ID number 2051247. It said the position was initiated at 2 a.m. Hong Kong time on July 31.
“Our risk management team immediately contacted the client, requesting the client several times to partially close the positions to reduce the overall market risks,” OKEx said. “However, the client refused to cooperate, which lead to our decision of freezing the client’s account to prevent further positions increasing. Shortly after this preemptive action, unfortunately, the BTC price tumbled, causing the liquidation of the account.”
OKEx said it injected 2,500 Bitcoins into an insurance fund to help minimize the impact on clients. The company also said it would institute new rules to its margin system and liquidation procedures. Currently, clients are allowed to leverage their position up to 20 times.