BitMEX Releases Policy Response to Lack of Compensation for XRP Futures

BitMEX’s response policy: refusing to compensate for “flash crashes”

BitMEX, one of the world’s largest cryptocurrency derivatives exchanges, today announced its response to the XRP/USD “flash crash” that occurred on February 14, 2020. The market plunged as a number of claims were triggered by forced liquidation of positions by some users, as the sudden instability gained momentum of its own.

Refusal of compensation

As outrage grew, demanding some form of punishment for the responsible parties, BitMEX was forced to respond. According to the exchange, the stops executed by “some traders” were not based on the index price, but on the actual last traded price. The entire purpose of the investigation seemed to be to clear their own name. The exchange quickly explained that there was nothing wrong with the system itself or the stop-loss mechanism itself.

BitMEX further stated that it would not roll back any trades or even refund anyone in this case, a stance the exchange has maintained despite numerous proposals for solutions, including financial compensation.

Investigations continue

A lawyer familiar with the cryptocurrency industry explained the matter briefly. BitMEX is not a registered company in the United States, Asia, and Japan. The problem is that most of its users are from these three regions. Therefore, users in the region will not receive any legal obligations or state protection. This is a cruel observation, but it is true anyway.

The CFTC even launched an investigation into BitMEX in July 2019. However, the regulator has yet to release its findings on the matter.

US exchange Kraken, which has experienced occasional flash crashes due to market disruptions, reportedly received a large number of investigative requests and subpoenas from the FBI in 2019. BitMEX is likely to see traders asking the CFTC to investigate them in an attempt to recover losses from flash crashes.

The direction of progress

What will happen now is uncertain, but another attorney speculated that BitMEX will cooperate with the CFTC’s investigative request whether it is obliged to or not.

Flash crashes are a relatively modern problem in today’s world, as the automated systems of exchanges cause the value of certain assets to drop rapidly. These events come in a variety of formats, and people must be careful to avoid losing their funds.

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