By CCN: U.S.-based cryptocurrency exchange Poloniex has revealed that its lenders lost $13.5 million in a sudden CLAM price crash. To cover its losses, the exchange slashed the principal of active BTC loans by approximately 16%. Now outraged Poloniex users are calling the move a “theft” and considering launching a lawsuit against the exchange.
An Eye-Popping 1,800 BTC Lost in Two Hours
On May 26, CLAM’s price fell from $20.30 to $6.10 in a two-hour flash crash. The sudden price crash caused a number of margin loans to default on Poloniex. As a result, Poloniex margin lenders lost 1,800 BTC (worth $13.5 million at the current market rates), the cryptocurrency exchange stated in a blog post yesterday.
Due to the velocity of the crash and the lack of liquidity, the exchange was unable to process any automatic liquidations of CLAM margin positions. According to the exchange:
“In addition, a significant amount of the total loan value was collateralized in CLAM, so both the borrowers’ positions and their collateral lost most of their value simultaneously. As a result, some borrowers were unable to repay their loans with the digital assets they held on Poloniex.”
Users Say 16.2% Haircut Is a ‘Theft’
To cover its losses, Poloniex took a 16.2% haircut from all active BTC loans on the platform and froze all defaulted borrower accounts until they repay their loans to the lenders. The loss impacts around 0.4% of the users.
While Poloniex stated that they would “pursue” defaulted borrowers to repay what they owe to lenders, users have become enraged by the loss.
“It’s just theft,” one Reddit user reacted. “Haircut… you mean theft?” another stated.
Others blamed Poloniex for the issue, saying that the cryptocurrency exchange was responsible for lender losses and not the users.
Users are considering lawsuits against Poloniex
Poloniex users have been talking about launching a lawsuit against the exchange. But they are rather pessimistic of the possible outcome considering Circle, which is backed by Goldman Sachs, owns the cryptocurrency exchange.
As socializing losses is illegal in the U.S. where the exchange is based, users still have a chance to win in a possible lawsuit against Poloniex.
To avoid any legal cases, Poloniex should take responsibility for the margin trading issue and refund the lenders’ haircut.
Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.