Traders have reportedly incurred losses after Hong Kong-based cryptocurrency exchange OKEx settled bitcoin cash futures contracts almost without warning ahead of last week’s hard fork.
According to a Bloomberg report Monday, the decision by OKEx resulted in significant losses for some investors, including Qiao Changhe, founder of a firm called Consensus Technologies, who said his fund was down $700,000 because the exchange closed the contracts at a level that did not reflect market prices at the time.
As a result, he suggested he is likely to reduce the $5 million fund’s utilization of the exchange.
“OKEx is losing its credibility. The futures contract became something nonsense, not something we could use to hedge,” Changhe was quoted as saying.
Four other unnamed traders also reportedly said that they would reduce their exposure to OKEx or even stop dealing with the exchange entirely. One of the four has complained to the country’s financial watchdog, the Securities and Futures Commission, Bloomberg says.
On Nov. 14, the day before the hard fork of the bitcoin cash blockchain, OKEx posted an announcement on its blog, giving short notice that all BCH futures would stop trading “at 9:05am and be delivered at 10:00am Nov 14, 2018 CET (UTC +1) due to the upcoming hard fork. We will provide a detailed explanation shortly.”
In an announcement later the same day, it said it had opted to use the last traded prices as the delivery prices since there was no trading pair with bitcoin cash with “enough market depth and trading volume to compose an index for delivery.”
Calling the pre-fork situation an “extremely special case,” OKEx continued:
“It has come to our concern that an early announcement may make room for market manipulation and cause loss to our users. Therefore, we decided to give a short notice in order to maintain the fairness and stability of the market.”
It also explained why it had chosen a delivery time one hour after the halt of trading, saying that to have both at the same time could have caused a flood of ask orders that “could have crushed the BCH spot market and caused huge volatility.”
This is not the first time OKEx has made such a decision. Back in August, OKEx froze one of its users’ account and initiated a forced liquidation after the client made an “enormous” long position of 4,168,515 bitcoin futures contracts and declined the exchange’s request to lower the position.
OKEx app image via Shutterstock