The OKEx debacle shows us that exchanges are dropping the ball when it comes to preventative risk management, helping the case for regulated Bitcoin futures and exchange-traded funds (ETF).
Anyone getting involved with leveraged trading must assume upon themselves the risks associated with the potentially highly rewarding practice. A recent event should remind traders that, sometimes, even when the trade goes your way, you can still take a hit. Okex socialized one trader’s massive loss on BTC futures with a clawback.
Okex, the Chinese-run cryptocurrency exchange based in Hong Kong, has announced on Friday that “an enormous long position” in BTC0928 futures contract was force-liquidated on July 31, 2018. And due to the sheer size of the order, worth over $ 400 million, the uncovered loss (about $ 9 million) will need to be socialized with a clawback.
In easily one of the biggest stories of the past week, cryptocurrency exchange giant OKEx was forced to perform a $ 9 million clawback to cover substantial losses from a $ 416 million Bitcoin trade gone wrong.
$ 416 Million Losing Bet
On July 31, 2018 (Tuesday), a Bitcoin trader, “ID 2051247,” opened an enormous BTC futures bet of more than 4 million contracts. With each contract having a notional value of $ 100, the trader’s bet stood at over $ 400 million. The trader offered both cash and leverage, betting that the price of BTC would increase.
The Maltese government is gradually building a global market for cryptocurrencies as it continues to assert itself as the world’s blockchain island with crypto-friendly regulations. Thanks to such accommodating legislation, cryptocurrency companies like Binance and OKEx have flocked to the country to build out their services.
Helping to further build these services, the Malta Stock Exchange (MSE) just announced the launch of its MSX PLC, an investment vehicle that will partner with leading crypto exchanges to create joint ventures in the country. For MSX PLC’s flagship partnership, MSE signed a Memorandum of Understanding (MoU) with digital asset exchange OKEx.
Cryptocurrency industry commentators have reacted suspiciously to news the CEO of Hong Kong exchange OKEx abruptly stepped down May 14.
CEO ‘Starting A New Life’
As Bloomberg reports citing both an emailed statement and private statement from Chris Lee’s spokeswoman, the executive suddenly left his post in order to “start a new life.”
It was his “greatest pleasure and honour” to work with the exchange, his spokeswoman reportedly quoted Lee as saying.
The news comes following a troubling period in OKEx’s history. At the end of March, unusual activity in its futures markets forced staff to roll back futures contracts after it emerged many had suddenly liquidated and a large number of users had lost millions of dollars.
OKEx, one of the largest exchanges in the world, has announced plans to move to the European island, Malta. This announcement came quickly after a similar announcement made by Binance, one of OKEx’s main competitors.
In an attempt to gain an understanding of the political climate around cryptocurrencies in Malta, OKEx’s executives met with the Maltese government. While many EU countries are taking a standoff-ish, if not downright hostile, approach to cryptocurrency, Malta – which aims to become a ‘global pioneer’ for cryptocurrency – has proven to be extremely welcoming to crypto and blockchain businesses.
The Maltese government’s plan to bring more international cryptocurrency business to booster the local economy, by positioning itself as a hospitable jurisdiction within the EU, appears to be paying off. Following Binance moving to the island just last month, Malta has now succeeded in attracting yet another exchange, Okex.
Maltese Blockchain Ecosystem
Okex, the Chinese-run cryptocurrency exchange based in Hong Kong, has announced today that it will be expanding to the European island nation of Malta. The country’s Prime Minister, Joseph Muscat, commented: “We welcome Okex, a world-leading digital exchange, to our growing blockchain ecosystem. Malta is fast becoming the jurisdiction of choice for Distributed Ledger Technology companies in the European Union and globally.”
Okex has made another announcement regarding its decision to roll back futures contracts after clients were hurt by massive liquidations. The company apologized again for the inconvenience, tried to address rumors regarding the incident and threatened to sue anyone spreading them.
BTC Futures Manipulated
Okex, the Chinese-run cryptocurrency exchange based in Hong Kong, is trying to fend off rumors circulating in the region’s online bitcoin trading community. The company has issued a new clarification of recent events it hopes will restore clients’ confidence in its operation. Accusations regarding its recent rollback of BTC futures contracts, alleging that Okex intentionally triggered forced liquidations by manipulating prices, were the team’s top concern.
Hong Kong–based cryptocurrency trading platform OKEx announced on March 30 that it was rolling back on all futures transactions due to what executives deemed an “irregular sell-off.”
The exchange issued the following statement on its support page:
To prevent forced-liquidations due to price differences after the settlements in ‘bi-weekly’ and ‘quarterly’ futures contracts, we will rollback the transactions as mentioned, and all futures contracts will be delivered at 00:00 Mar 31, 2018 (Hong Kong Time). Further announcement will be made if there are any changes in delivery time.
Digital asset exchange OKEx has launched a Token Trading Loyalty Program with 250 million OKB as incentives. The packages for Phase one, with an estimated supply of 1 million, were fully subscribed within two minutes. The program was then oversubscribed by more than 100% 26 minutes later and ended due to exceeding the total subscription limit. A number of customers have expressed a desire to subscribe to the program in the following phases.
OKEx Token Trading Loyalty Program is a pre-paid point system for settling token trading fees. 1 package = 100 points, which costs 100 USDT. For example, if 1 package is purchased, it will cost 100 USDT and will award 100 loyalty points and a certain amount of OKB for free (100 OKB for first phase, 83 OKB for second, 66 OKB for third).