Kraken Users Outraged After Flash-Crash Liquidations, Demand Refunds
The Kraken users are furious with the exchange and demand refunds after a flash-crash triggered liquidation while the exchange was inaccessible for the users, as we can see in today’s report in our crypto news.
Kraken users demand compensation after the harsh flash crash localized to the exchange which resulted in leveraged trades that were liquidated amid the sharp retracements that were recorded across crypto markets. Yesterday, we saw the biggest daily candle in the history of bitcoin and ethereum when BTC dropped by almost $10,000 from its high of $57,500 while ETH dropped by $400 from $1940 within the span of 24 hours on Coinbase.
The connectivity issues have been resolved and we're fully operational again. We thank you for your patience. Stay up to date with Kraken's real-time status updates here: https://t.co/SiYH5aAlw0
— Kraken Support (@krakensupport) February 22, 2021
It seems that the combination of weak buy support and flash-crash liquidations resulted in a heavy loss for Kraken with BTC falling 22% to less than $45,000 while ETH dropped by 64% to find support at $700. The public reaction on the subreddit r/KrakenSupport saw many traders voice their frustrations and some traders even wanted to take legal action against the exchange with one user claiming to have lost most of their life savings:
“I lost most of my life savings and haven’t received a response from a human. I’d think they would refund or they would lose all their customers. I’m sick to my stomach but will join the lawsuit with plenty of proof(screenshots) if not refunded.”
You forcefully liquidated my position at a false price while the app and site were non-functional. You need to refund our money!!!
— singhverse (@cantdoevil) February 22, 2021
The fallout seems to have extended beyond losses and into debt so one user even said that their balance indicated they now owe Kraken money as a result of the liquidations:
“Somehow I now owe them 120 dollars. How does an account go into the negative? I had plenty in margin to cover all the other platform drops, but who can cover a 90 percent bogus drop?”
Despite the calls for compensation for the flash-crash, social media commentaries suggested that the exchange will not be refunding the traders for their losses. To protect against liquidation in the future, many platforms used index prices to determine margin calls. Nexo on the other hand indicated that they will refund users for the losses that happened during the dip
A service disruption at an exchange partner’s end resulting in trading anomalies has led to some Nexo clients’ ETH balances getting incorrectly liquidated. These liquidations will be reversed. We apologize & will keep you updated.
Your funds are safe.
— Nexo (@NexoFinance) February 22, 2021
Liquidations are not rare in the crypto space in times of price volatility. About 11% drop in the price of ETH caused $1.89 billion worth of liquidations across the crypto market and most of them happened on Binance.