Our Liquidation Engine — how we significantly reduced the likelihood of clawbacks from ever occurring

  1. OKEx saw this as business as usual: “OKEx has adopted the societal loss risk management mechanism since launched and it has been working orderly as intended.”
  2. OKEx’s attempt to address the situation: “Our risk management team immediately contacted the client, requesting the client several times to partially close the positions to reduce the overall market risks. However, the client refused to cooperate…”
  3. If OKEx was not going to be able to handle the order why did they let the client place it? OKEx’s risk systems are woefully inadequate.
  4. “Shortly after this preemptive action, unfortunately, the BTC price tumbled, causing the liquidation of the account.”
  5. OKEx seems not to be fully aware of why the BTC price tumbled. “Unfortunate” is one way of putting it; “in response to OKEx manually placing a $400m liquidation offer and hoping against hope someone would trade against it — but instead seeing the market update on the expected impact of the order” is another. OKEx caused the move that caused the clawback.
  6. “We will implement a series of risk management enhancements, which are in line with our futures roadmap released on July 17, 2018, to prevent any similar cases from occurring again.” So how has this new framework done?
  7. On 2018–11–23 OKEx clawed back 50% of profit from ETC futures, or over $1m.
  8. On 2018–09–07, OKEx clawed back 18% of profit from EOS futures, or over $3m.
  9. OKEx’s BSV futures went through a 6 week stretch from 2018–12–28 to 2019–02–01 where the average clawback was 42%.
  10. The now-delisted OKEx BTG futures went through periods of having over 80% clawbacks each week — meaning that nearly the entire trading in the futures was someone going bankrupt!
  11. And, infamously, a few days before the BCH fork OKEx emergency settled their futures early — without notice — to a marked to market price in a downlimit future trading against the wrong index, leading to roughly $20m of losses.
  12. Huobi’s product, HBDM, has not yet had clawbacks — to their credit. But their product is only a month old; and given that the product was copy-pasted from OKEx’s, it should not be expected to withstand the test of time.

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