Margin lenders lost $13.5 million in May to Poloniex crypto crash
On May 26, the price of CLAM had a flash crash, losing more than two thirds of its value in a day. This caused a number of margin loans to default, the exchange explained on its blog post. The result was a generalized loss of 1,800 SegWitCoin (BTC) in the Poloniex BTC margin lending pool.
The losses affected 0.4% of all Poloniex users. These lenders will see the reduction in their accounts once they log in to the platform. Consequently, the principal of all active BTC loans was reduced by 16.202%. The exchange also froze the accounts of all the defaulters and will only reactivate them once they repay their loans.
Poloniex attributed the losses to several reasons, the first of which was the low liquidity in the CLAM market. This “made it impossible for all of the automatic liquidations of CLAM margin positions to process as they normally would in a liquid market.”
The exchange further explained: “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.”
Poloniex assured its margin lenders that it was pursuing the defaulted borrowers to ensure they repay what they owe. As soon as it recovers the funds, it will refund the lenders. It’s also exploring other ways to help offset the losses, it stated but declined from giving any further details.