OKX Commits to Compensating Users After OKB Token Flash Crash

In addition to OKX’s repayments, Radiant Capital has started repaying its debts, while Crowd Machine and Metavine were ordered to pay $20M in disgorgement.

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Good news for crypto users this week as there are a number of repayments on the horizon. OKX announced a compensation plan after a flash crash of its OKB token, which resulted in a big market value loss. Meanwhile, Radiant Capital started repaying debts after a flash loan exploit led to a $4.5 million loss, with plans to utilize DAO Treasury funds for debt recovery. In a separate development, a California court ruled against Crowd Machine and Metavine, the issuers of Crowd Machine Compute Tokens (CMCT), ordering over $20 million in penalties related to a 2018 ICO deemed fraudulent by the SEC.

OKX Announces Compensation Plan

Crypto exchange OKX announced plans to compensate users affected by a flash crash of its OKB token that happened on Jan. 23. The crash saw OKB's price plunge by 48% from $46.80 to $25.10 in less than 15 minutes, resulting in a $6.5 billion loss in diluted market capitalization, before the token eventually recovered to $45.94.

The crash was attributed to the liquidation of several large leverage positions after OKB hit 48.36 USDT, according to OKX staff. This initial drop triggered a domino effect, causing further liquidations in pledged loans, leverage transactions, and cross-currency transactions, leading to the sharp decline in price.

In response to this incident, OKX has committed to fully compensating users for any additional losses that occurred due to this abnormal liquidation. A detailed compensation plan is expected to be announced within 72 hours of the crash.

The broader cryptocurrency market also experienced some volatility on the same day. This was partly driven by actions from the Grayscale Bitcoin Trust (GBTC), which sold a huge amount of Bitcoin BTC to meet investor redemption demands for its exchange-traded fund (ETF). Additionally, FTX liquidated almost $1 billion worth of GBTC ETF shares as part of its efforts to repay its creditors. This sale certainly contributed to the overall market instability.

Radiant Capital Begins Debt Repayment

Meanwhile, Radiant Capital , a blockchain-based cross-chain lending platform, recently announced its progress in repaying debts after a flash loan exploit that resulted in a loss of $4.5 million earlier this month. The exploit targeted Radiant's USD Coin lending pool on the Arbitrum network, with the attacker leveraging a rounding issue in Radiant's codebase. This flaw led to a precision error, which allowed the attacker to execute repeated deposit and withdrawal operations, eventually draining 1.3% of Radiant's total value locked.

In response, Radiant Capital has initiated its repayment process. As of Jan. 23, they have successfully repaid 1,190 Ether (equivalent to about $2.6 million), leaving around 720 ETH ($1.6 million) of bad debt. The repayments are being made in accordance with the RFP-27 proposal, which was passed by a majority (73%) of users. This proposal involves using funds from the Radiant DAO Treasury and operating expenditures to offset the bad debt. At the time of the proposal's passing, the Radiant DAO Treasury held $5.2 million, with monthly protocol revenues around $500,000.

Radiant's staff have outlined a 90-day plan for repaying the remaining debt, utilizing Operational Expenditure (OpEx) funds as outlined in RFP-27. They also suggested the possibility of leveraging DAO reserve funds if they become available sooner. This approach aims to recapitalize the protocol and ensure unrestricted access to deposits for all users.

Blockchain analytics firm Beosin commented on the incident, pointing out that the exploit was not a new type of attack but rather one that took advantage of a vulnerability when a new market is activated in a lending market, a model similar to those used by popular platforms like Compound and Aave.

CMCT ICO Fallout: Over $20 Million in Penalties

Users of the Crowd Machine Compute Tokens are also being payed back. A California court has ordered Crowd Machine and Metavine, issuers of Crowd Machine Compute Tokens (CMCT), to pay over $20 million in disgorgement, interest, and penalties. This ruling concludes a case that began more than two years ago. Additionally, Craig Sproule, the founder of these companies, has been found liable in this matter.

The root of these legal issues dates back to January of 2022, when the U.S. Securities and Exchange Commission (SEC) sued Sproule. The SEC's lawsuit centered around the 2018 initial coin offering (ICO) of CMCT, labeling it as a "fraudulent and unregistered" securities sale. Sproule also faced allegations of misusing and losing $5.8 million out of the $33 million raised through this ICO.

CMCT was conceptualized as a way to compensate people for using their computing power and to reward programmers for their coding contributions. However, the tokens never reached operational status.

In a subsequent ruling, Sproule was fined $195,047 and was directed to cease CMCT operations and remove it from its only cryptocurrency exchange listing. Notably, the defendants neither admitted nor denied any allegations of wrongdoing in this case.

The situation escalated when, on Jan. 17, the District Court of Northern California issued an amended final judgment. This ruling required the defendants to disgorge $19,676,401.27, along with $3.4 million in prejudgment interest. Metavine was held accountable for $5 million of this total amount. Each defendant was also ordered to pay civil penalties amounting to $600,000. The SEC, in a statement dated Jan. 24, clarified that the prior consent judgments had resolved the Commission's actions against Mr. Sproule, leaving the Court to decide the monetary penalties for the remaining defendants.