Liquidation due to lack of funding?

Hello, im a general partner in a LATAM crypto fund and we are heavily invested in the bonfida ecosystem since day one. We’ve been doing a lot of funding for our yield fund between bonfida and drift and so far it has been a great experience. I started following the same strategy with my own funds and everything was going fine until a couple of days ago when something really weird happened and i need some help understanding how it happened and why.

So i had a 277.36SOL net long position and kept it there to receive funding, everytime funding fees reached a certain level (couple of hundred $) i withdrew the funds and kept the long position intact. NEVER used leverage, not even a single cent (I can demonstrate this with my wallet address). A couple of days ago I went into BONFIDA to check mine and the fund’s position and my personal position was nowhere to be found. I started doing some digging around and asking in the telegram channel and they told me my position had been liquidated, which seemed really odd given the fact that i’ve never in my life used any leverage. So i started looking at the tx ID and i think i understand what happened, it looks like in one of the flash crashes, funding rates turned positive in BONFIDA and the net long position was charged the corresponding funding fee and since i had recently taken out the accumulated fees, there was no money in the account and the system decided to liquidate the position. If this is the case, i can understand that, it doesn’t make a whole lot of sense (one would think you would liquidate only enough position in order to fulfill the funding payment) but i can understand. The part that i don’t understand is why the funds dissappeared completely. It’s as if i was leveraged, the price crashed and i was underwater so you liquidated the position and took the money in order to cover the balance. If you needed to liquidate the position due to lack of funds to pay for the funding fee, then you should liquidate, charge the owed money and leave the funds intact within the account, but that is not what happened and now im missing about 27K USD and no one in the team seems to have an answer as to what happened. Don’t get me wrong, the attention has been great, they’ve been very supportive but i think this is an issue that surpasses the regular admin’s knowledge. So i would appreciate very much if one of the devs could give me a hand in understanding what happened.

Thanks!

Notes:
Liquidation TX ID: Explorer | Solana

2 Likes

I am sorry to hear about this. You are correct, funding is debited/credited directly from the user account. If the user account does not have enough funds to cover funding the position is liquidated https://docs.bonfida.org/collection/v/help/audaces-perpetuals/funding#extracting-funding

When a position is closed it’s removed from the critbit tree of positions and closed against the vAMM entirely.

There is warning on the withdraw modal to warn about risk of liquidation in case of lack of funds to cover funding.

Screenshot 2022-01-24 at 9.51.03 PM

Ok, understood, but liquidation usually means you take what you’re owed and then leave the remaining assets in the account. If the account is overdrawn (you are leveraged and you owe more money than the entire balance of assets) then your money dissapears as the exchange needs to get paid for the assets they lent. But in this case there was no leverage, it was just a liquidation in order to provide assets for the funding payment. So the question remains, where are the remaining assets currently held? Because a position of 277SOL at a price of roughly $85 per SOL imputes a value of around 24K USD. As there was no leverage, the only amount of money you should be taking out of those liquidated assets is whatever you were owed in funding payment, that mustn’t have been any more than a couple of hundred dollars at the most, where are the remaining assets?

And the link to which you referred me explicitly says that the assets will be liquidated “in order to pay for funding”

So if you can help me identify where the remaining assets are held and how to recover them, I would very much appreciate it.

All best.

When a user cannot cover funding with the funds left on his user account he is fully liquidated and the funds are split between the cranker (i.e the wallet that sent the liquidation tx) and the insurance fund audaces-perps/funding_extraction.rs at main · AudacesFoundation/audaces-perps · GitHub

Wow. So let me get this straight, if i had 1MM USD invested in SOL and for whatever reason funding rates flipped and I don’t have liquidity to pay for, let’s imagine a wild scenario, $100 worth of funding, you have the right to liquidate my entire position and keep it? That is honestly the most unfair and criminal policy I have ever seen, specially considering that the network was down during the time and even if i tried to fund my wallet it wouldn’t have been possible. I’m a partner at a 3BN AUM Family Office, so i’ve had my share of dealing with Wall Street, and this level of abuse would put even Wall Street to shame. I lead the team in charge of developing our entire crypto arm and we have been betting on Bonfida’s ecosystem for a while, my engineers and research team have been interacting with your team since early on and we were heavily invested in your dex in one of our funds. Thank god this happened with my personal money and not my investor’s. Needless to say we are withdrawing all of our funds and highly recommending anyone who would listen to stay away from bonfida perps while this manner of dealing with liquidations is still in place.

All best to the team, you guys are great people and i honestly think that this is something you should guys take seriously into consideration in order to keep growing and keep investors comfortable and confident that their assets are safe and dealt with in a truly honest and well intentioned manner.

ILKV.

2 Likes

Jumping in the convo to say that from a trading POV this is extremely capital inefficient and will keep away most of the volume/traders which are arbing the perp rate around.

It is ridiculous and unpleasant when the user gets liquidated on a 100% position to meet 1bps of payments. Mango and Drift currently do not have this problem and funding payment are correctly removed from equity.

Hello @ilkv88, I’m a Bonfida core dev.
Let me first start by saying I am sorry about not giving anything enough attention to your situation here. I’d like to resolve this situation in a satisfactory manner. I think what you are saying makes a lot of sense, and I think you’re definitely pointing out something that needs to be fixed.
The funding liquidation mechanism was designed with the idea that it is reasonable to expect that in most cases it is easy to ensure that an account is sufficiently funded for this not to happen. Looking at your particular case and the size of your positions, this assumption was actually unreasonable.
In general we have been aware for a while now that funding is not ideal in the current system. This is why this problem will essentially vanish in the upcoming v2 of the Audaces protocol. Having said that, I’d like to propose two things:

  • Could you please send me by DM any information that might help me assess the quantity of assets that have been liquidated? This might include tx ids, owner pubkeys, Audaces user accounts, etc. We would like to pay back the lost assets.
  • I will be working on a hotfix in order to make funding liquidation more lenient (ie taking from position collateral before liquidating entire positions). I’ll report back here once I am done.
1 Like

@ellttBen

You need to go through all liquidation history and reimburse users that lost funds via this mechanic PRONTO. Totally unacceptable. I’m so glad this never happened to me.

This borderline negligence will have a profound impact on your product’s adoption.

2 Likes

Hey @ellttBen thanks a lot for the response. I’d be glad to share that info with you.

The tx ID of the liquidation was sent to me by admin Majik Hana via telegrama, unfortunately I erased that convo, but he should have no problem finding it again with my pubkey information (that’s the way he did it in the first place). Whatever else you need in order to check my allegations, I would be happy to share.

Should I DM you here?

All best.

Yes, should be able to DM me on discourse.

Great. Just sent you a DM over there.

Proof of Bonfida censoring information. deleting post and not talking about this. This is the program the bonfida will not go through themselves and insure that the people who use their site are respectfully paid. Solscan

image
This also happened in their discord, you can see there has been on ongoing theme with the Bonfida team.

so lets get this straight all of this is now only important because you guys are being called out, yet you’re still trying to not refund people for stuff. Everything you guys have scammed is documented.

1 Like

No censorship, just not the relevant thread is all.

This is very relevant and you too are censoring, why was his OG post deleted? If I didn’t start pming people about this post, would anything have happened? it didn’t seem like it until i started getting people to actually look at this, big people, who all agree that you guys are in the wrong. I don’t think it should take people who you guys know have money to attempt to tackle issues. Why not just come out and say, there is an issue and we are going to do everything to make sure all parties are refunded then actually execute. Which brings us to that program, why do people have to fight to get be paid? @bonfida Said you guys were going to write a post about that program, what happened? How many people have you guys actively tried to refund.

The point is, as of right now it seems like you guys do not care about the actual users at all, and will not put any effort towards making stuff right. I hope this is a wake up call for what the market is demanding. We want people who we can trust on this network, not people who seem like they just want to cash grab. AKA you guys charge people to delist their domain purchases, first it was .5 sol and now it’s .1 sol. Greed.

relevance

Hi, I submitted a post with a similar issue 2 weeks ago. It is still pending. I reached out to the telegram and I was told I would be contacted by a dev. Can we please connect so we can resolve the problem?

Want to DM me your pubkey so I can have a look?

This user can’t accept DMs, but I submitted a message to moderators. Let me know if we can chat through there

Let me send you a DM

Hi, I have similar problems, can you (or any other dev) reach me up by DM as well?