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- Two high-frequency traders reportedly made $43 million using a complex multi-account strategy.
- Bitget, the exchange involved, claims over $20 million in illicit profits and promises user reimbursements.
- The incident highlights how algorithmic trading can exploit minor pricing delays across exchanges.
A recent trading incident involving the VOXEL token shook the crypto world. Two high-frequency traders claim to have earned $43 million through a strategy that used 100 sub-accounts. They operated across multiple exchanges, including Bitget, during a brief window of intense market activity.
The practices, the traders assert, were strictly reliant on book trade and were strictly within the law. The controversy surrounds Bitget, which is one of the centralized exchanges where the majority of the trading took place.
Bitget claims the traders took advantage of an arbitrage and withdrew more than $20 million in so-called “abnormal profits.” The platform has suspended specific accounts and said that it will refund seized funds through airdrops to the impacted users.
The merchants, according to them, employed fair trading practices. They assert that they moved fast during a period of low volatility, noting a price difference between Bitget and Binance. This enabled them to place and cancel the trades within milliseconds, pocketing profits from small price imperfections.
Bitget Begins Legal Action to Recover Funds
The approach employed by the traders is not new. It is similar to a lead-lag strategy, where the traders compare price action between exchanges. The reference market in this instance was Binance.
Bitget lagged behind by fractions of a second, and opportunities were created. The traders purchased low on Bitget on the basis of the trend on Binance and then sold high when prices corrected. Their system renewed orders every 100 milliseconds.
They grew rapidly as the profits increased to 100 accounts during the price surge of VOXEL. As per their account, the system just outdid Bitget’s internal controls. They highlight there were no bugs, no hacks, and no server breaches, but just rapid execution.
Bitget disputes that. It contends that the kind of trading volume and pattern prompted its risk detection mechanism. Nonetheless, the controls did not react at the moment. By the time action was undertaken, considerable amounts had already been withdrawn. Bitget says it acted once it had confirmed unusual gains and has initiated the process of recovering the funds.
Traders Accuse Bitget of Unlawful Fund Seizure
The case is still awaiting its decision in court. The merchants indicate that they are ready to battle in court. They are represented by advocates and level allegations of illegal confiscation of funds against Bitget. Their major contention: the funds were derived from normal trading, as opposed to system abuse.
Bitget asserts the trades were unusual and damaged the integrity of the platform. It has committed to full transparency and has an upcoming incident report. The exchange also assures users no original deposits and fees were lost during the rollback.
The case highlights the thin line between high-frequency trading and exploitation. Exchanges and the regulator are likely to need clearer definitions of high-frequency trading as crypto markets develop.
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