OKX's Lending Mechanism Sparks User Outrage: Automatic Token Swaps Result in Massive Losses, $500,000 Liquidated Without Cause

Recently, a user expressed dissatisfaction with OKX’s lending mechanism after experiencing a confusing automatic currency swap incident. After participating in Tempo’s activities, the user returned home via Uber with great anticipation, preparing to transfer his $FLOKI to Binance to participate in the airdrop. However, he unexpectedly received a risk control notice from OKX, which made him feel confused and confused.

According to the user, Floki's currency price has not seen a significant increase recently, and his own lending health has remained between 69% and 72%, without touching any liquidation line. However, when he took a closer look at the transaction records, he discovered 51 pages of automatic currency swap buy and sell operations. These operations resulted in a short-term decoupling of the Floki price on the OKX platform, forcing users to buy Floki at a price higher than the market price.

After trying to communicate with OKX’s VIP customer service, the user only received a response requiring follow-up by a specialist. Later, he checked OKX's lending terms and learned about the so-called "automatic currency exchange terms." This mechanism is automatically triggered when the amount of borrowing of a specific digital currency exceeds the upper limit, and the system will sell the user's pledged currency to repay the currency to restore the lending ratio to a safe level.

The user raised three major questions:

1. Why not limit borrowing in advance? Users questioned that when they borrowed money, it was the maximum amount that could be borrowed in compliance with OKX terms, and the borrowing operation had been completed in the past few days. Why doesn’t OKX take steps to stop new lending when lending volume exceeds capacity to keep lending levels functioning normally?
2. What are the currency exchange standards? Users discovered that not all borrowers encountered automatic currency exchange operations. Although some users also participated in lending, they were not exchanged for coins, which made users feel unfair, especially those who had to buy Floki at a high price because of the currency exchange.
3. Why was there no advance notice? Users pointed out that OKX usually sends notifications when the lending health approaches the warning pledge rate to remind users to repay debts or replenish margins in a timely manner. However, the automatic currency exchange occurred suddenly without warning, leaving users unprepared and unable to take measures on their own to avoid losses.

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The user then added that he personally had more than $100,000 in $Floki in OKX and had enough cash to actively repay the debt. However, OKX forced the automatic currency purchase and repayment operation when the letter was sent. If there is Early warning can completely avoid financial losses caused by users' expensive purchases of Floki.

Although the financial losses caused by this incident were within the acceptable range of this user, many other users suffered similar losses due to his promotion of OKX’s lending mechanism within the community. The user hopes that OKX can compensate for the imperfect lending mechanism and remind other users to check their Floki orders to avoid similar incidents from happening again.

OKX's Floki trading pair has experienced a sudden increase in trading volume since 22:25 on August 29, 2024, causing some users to suffer losses due to the automatic currency swap mechanism. Users hope to use this incident to draw OKX’s attention and improve the transparency and fairness of its lending mechanism.

After seeing the user's tweet, okx CEO Star responded to OKX's lending mechanism:

1. OKX current mortgage loan is a C2C market between users. OKX only provides a platform to help match users with borrowing needs and currency earning needs.
2. 100% reserve is a basic principle of OKX. When the borrowing amount exceeds the deposit amount, the platform’s automatic currency exchange mechanism will be triggered due to the 100% reserve requirement.
3. Of course, OKX limits the maximum borrowing amount and does not allow it to exceed 100%.
4. Due to the market activity of this currency, a large number of depositors redeemed the currency at that time, causing the borrowing amount to exceed 100%, which triggered automatic currency exchange.
5. The health of the borrowed currency is an indicator of whether the collateral is sufficient. It is related to the currency price and has nothing to do with whether automatic currency exchange is triggered.
6. The OKX team will review the underlying design mechanism of the mortgage lending platform to see if there are any optimization plans. We welcome your comments.

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Subsequently, OKX officially explained the investigation on the FLOKI pledge loan mechanism. OKX’s current mortgage loan is a C2C market that matches currency deposit users and currency borrowing users. It is based on the basic operating principle of 100% reserves. When the platform When the borrowed currency amount/deposited currency amount reaches 100%, the platform's automatic currency exchange mechanism will be triggered.

The next step will be to optimize the email and notification system to ensure that email warning notifications are issued in advance before automatic currency exchange is triggered. At the same time, the display of the mortgage loan page will be optimized to clearly inform users of the automatic currency exchange and liquidation steps.