14 Aug 2019 Pavel Petrov
Poloniex Refunds Investors With Over $18 Million Worth Of Bitcoin
Crypto exchange Poloniex announced that the company starts to credit impacted lenders in Poloniex' margin liquidity pool. Trading fees – around 1800 BTC (20 million USD) – will be sequentially returned to their owners. 10% of the balance was previously refunded on June 14th 2019.
Poloniex supports margin exchanging, a framework where clients lend their Bitcoin to a "loaning pool," allowing their other clients to borrow Bitcoin and trade with bigger stakes.
The loaning pool is mirroring the traditional crediting – lenders should receive interest for locking in their Bitcoin, and the borrower is obliged to repay their debts along with the interest. In late May, the crypto project CLAMS (which was accessible for margin exchanging through Poloniex) all of a sudden slumped down with 80 percent in less than 45 minutes.
The rapid fall usually triggers a mechanism of automatic closing of borrower positions in order to prevent lenders from losing money. As it turned out, CLAMS' fast, massive price fall caused algorithm breakdowns in Poloniex' mechanized liquidation framework, resulting in investor losses of 1,800 BTC (worth around $13.5 million at the time).
Poloniex would seek other strategies to redeem the investor funds in the margin pool.
Other crypto exchanges also had issues with sudden illiquidity. CoinbasePro experienced and issue in December 2018 when Ethereum briefly collapsed to $13 form its former $100 price level.
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