Unregulated OKEx Derivatives Impacting $400 Million in Trades

In a recent controversy brought to light by Amber AI, Hong Kong-based cryptocurrency exchange OKEx has been allegedly engaging in "Market manipulation and fraud," impacting $400 million in trades.

At the moment, there is very little incentive to impose an outright ban on crypto trading or exchange in the city, unlike in Mainland China.

While the move was widely regarded as a step forward for the industry in China, many failed to notice a key point in the announcement: The new approach would not accept platform operators trading digital assets, such as futures, derivatives, and other contracts.

On Nov. 26, the South China Morning Post said that the Seychelles-registered exchange was under fire last week after three of its future settlements for Bitcoin Cash were delivered earlier than scheduled.

These contracts affected trades worth more than $400 million.

It seems that in cases of derivatives and futures, fund managers and traders need to carefully weigh their options and assess the risks themselves, as any remuneration from the courts seems unlikely.

In more troubling news, Amber AI, an algorithmic trading firm, claims that these trades were not simply a mistake.

In a Medium post, the firm claims that OKEx was trading against its clients' positions in the futures markets and profiting at their expense.

Back in July of 2018, the exchange took a portion of the gains from all of its traders in a clawback mechanism used to plug clients' margin call losses.

In this regulatory environment, the best traders can do is remain vigilant and avoid these unregulated securities, and if these practices continue, vote with their dollars and trade somewhere else.