LA contract "pin" turmoil: Gate.io The data source is abnormal, but the user can only bear the loss?

Author: momo, ChainCatcher

Recently, Gate.io was caught in a storm due to the abnormal "pin" of the $LA/USDT contract. A number of users alleged that Gate.io was suspected of manipulation during the period of sharp fluctuations in contract prices, resulting in many users' positions being abnormally liquidated or even liquidated, resulting in heavy losses.

Although Gate.io has responded to the cause of the accident and the compensation plan, the community users do not seem to be buying it. Drew asked Gate.io for further responses to user queries, but Gate.io the key causes of the accident and the compensation planThe reply is basically the same as in the announcement, and there are no new details.

Gate.io bought in?

At 8 p.m. on June 4 (UTC+8), Gate.io launched the $LA/USDT swap 。 About 4 minutes after the market opened, the price of $LA skyrocketed from around 0.36 USDT to 27 USDT in a matter of seconds It then flashed to around 0.2 USDT. During this period, the spot price of LA and the on-chain price on other exchanges with the same currency are mostly around 1 USDT.

This "pin" phenomenon that deviates from normal fluctuations has led to a large number of users liquidating their positions in a short period of time, and some accounts have even lost their positions. Crypto KOLs @Elizabethofyou said they lost $20,000 in the event USDT, while @BTC_Alert_ said it lost 100,000 USDT and owed 12 to the platform 10,000 USDT, and no additional or closed positions can be performed during the period.

Gate.io The contract was then withdrawn, and at around 9:28 p.m. that night, it announced that it would compensate for the outstretched part.

@BTC_Alert_, @Elizabethofyou and other users reported that the delivery order of the transaction was tampered with after the Gate.io issued the compensation for liquidation. @Elizabethofyou said that there were 3 trading orders with a total trading volume of 4,994USDT, 7,999 USDT, 13,990 USDT, which was changed to 49.94USDT and 79., respectively 99USDT、139.34USDT。

As a result, some of the damaged users questioned Gate.io platform for suspected "malicious trading" or problems with the platform's risk control.

On June 5, Gate.ioCBO Kevin Lee further responded to the abnormal trading of the contract, saying that the cause of the incident was the abnormal source data of the contract index and the superposition effect of the automatic risk control mechanism. There is no internal operation, and there is no "single point liquidation" or deliberate user explosion. Gate.io also denied that the platform had tampered with user transaction data.

In terms of the compensation plan, Gate.io still only pays all the parts of the position. The amount of the loss payout, plus the fact that all users are allowed to keep the profits they have made, Gate.io bear a total payout of about $30 million.

But many users don't buy it. First, it is considered that the compensation plan is unreasonable. The user believes that whether it is liquidation or liquidation, it is caused by the price deviation from the normal fluctuation caused by problems on the platform, why only compensate for the liquidation part, but not for the losses of liquidated users?

Second, it is not convincing to attribute the cause of the accident to the abnormality of the data source. Some users suggested that the platform should disclose the index source composition and exception logs to prove that there was no internal manipulation.

In addition, throughout the Gate.io incident, affected users expressed dissatisfaction with the platform's feedback and response speed and attitude. For example, why did you respond to the AMA why users were not allowed to go to the microphone and only opened an English AMA?

Under the platform vulnerability, what is the basis for Gate.io not to pay for liquidation?

In response to the user's concerns in the Gate.io response, Chain Chaincher sent a message to G ate.io sought further responses, removing some duplicates from the announcement, and Gate.io's key response is as follows:

1、ChainCatcher:Gate.io there is a lack of clarification on the specifics of the index source anomaly, such as which data source is the problem? Why can't platform risk control detect anomalies in advance? Is there market manipulation involved? Can you provide further evidence and elaborate?

Gate.io did not provide further evidence and clarification. (Because the content of the reply is basically the same as the announcement, it will not be specifically presented)

2, ChainCAtcher: Due to the abnormal transaction of the user due to the abnormal data source of the Gate.io, why only pay for the liquidation and not the liquidation part? On what basis?

Gate.io: All LAUSDT after technical inquiryContract transactions are executed in strict accordance with the predetermined trading rules, and the matching and liquidation mechanisms are triggered normally based on the index price rules, and no system abnormalities are found, so the losses caused by liquidation are not within the scope of the platform's compensation.

In addition, the loss of liquidation is usually borne by the user, and other platforms in the industry follow similar rules. However, this compensation is an additional subsidy that the platform takes the initiative to bear, and it is a reflection of its responsibility for the systematic liquidation results caused by extreme markets.

3. ChainAtcher: fromAccording to the feedback from platform X, many Chinese users have suffered a lot of losses due to the abnormal $LA/USDT contract. Why did Gate only choose to respond with an AMA in English? And why was the user's microphone request denied and the reply limit for that tweet was set? Considering another Chinese AMA response?

Gate.io: The AMA took place on 24 of the eventIt will be held within hours, and the primary goal is to quickly respond to market concerns and convey the platform's position in a timely manner. Given that Gate users are widely distributed around the world, we prioritise the arrangement of English AMAs to ensure that the information can reach the majority of affected users as soon as possible. We also attach great importance to the voices and demands of Chinese users, and have simultaneously strengthened communication with Chinese users through multiple channels such as internal messages, communities and customer service.

If the community or users have further needs, we are willing to arrange an AMA specifically for Chinese users in the near future to provide more direct and open communication opportunities.

Our decision not to open the microphone and reply privileges is mainly for the balance of maintaining the pace of the discussion and avoiding the escalation of the dispute, and there is no intention of avoiding communication. We will refine the questioning mechanism in the follow-up arrangements to achieve fuller interaction and response.

4、ChainCatcher:@Elizabethofyou、 @BTC_Alert_ more than one user reported that the order was tampered with, and the user did not accept it after you responded that there was no tampering, do you have any further verification and detailed explanation for the user's abnormal order feedback?

Gate.io:We attach great importance to the abnormal feedback of individual users in the community on the order records, and the technical team carried out a case-by-case verification at the first time, and has not found any cases of human tampering with the order. The price jump shown in the screenshots of some users is actually a normal result of the amplification of the difference between the transaction price and the mark price in extreme markets.

We welcome users to provide more detailed original records (such as order IDs, transaction screenshots, etc.), and we will continue to cooperate with the survey and provide targeted feedback to each user who raises questions.

5、ChainCatcher:Users affected by the $LA/USDT futures incident still have questions about Gate's payouts and responses, do you have any new responses and compensation plans?

Gate.io: There is currently no new unified compensation plan, if there are other questions or special circumstances outside the existing mechanism, we welcome users to continue to submit information.

CEX contracts, a crisis of confidence after frequent accidents

, are the core profitable business of CEX. However, the controversy caused by the Bitget VOXEL contract turmoil and the Gate.io LA contract anomaly reflects the technical and risk control challenges faced by CEXs in high-leverage and high-risk contract trading. However, there are problems such as lack of transparency and insufficient guarantee of user rights and interests in CEX crisis management, which further leads to the loss of users Crisis of confidence.

In a highly competitive market, CEX may be the only way to rebuild user trust by responding more actively to user demands and making up for various shortcomings such as risk control.