To be honest, not sure why Bitfinex should cover losses if someone placed an order and it executed as set... Even if they or some whales are manipulating 'the market', that's the game all these 'leverage traders' are playing, right? However, if it's a fault of their trading engine, they should consider rolling trades back or something like that.
...
I concede that the users, who trade these more or less obscure altcoins on margin (as if this wasn´t speculative enough without leverage)
should have known the risk.
However, this really seems to have been a problem of the Bitfinex platform. Because if the platform worked perfectly the price of e.g. NEO would have never dropped
to 4 $, because the arbitrage bots would have prevented the flash crash by arbing against the exchanges where NEO was still trading for +25$ / NEO or more.
I would have handled the situation like Coinbase did with their ETH flash crash:
https://techcrunch.com/2017/06/24/coinbase-is-reimbursing-losses-caused-by-the-ethereum-flash-crash/Earlier this week, GDAX, the digital currency exchange run by Coinbase, experienced a flash crash in its USD – Ethereum market.
Within seconds the price of ETH crashed from ~$320 to as low as $0.10. While the price recovered quickly, the rapid price movement caused many traders to experience margin calls or stop loss orders, resulting in potentially severe losses.
However, yesterday they announced that the exchange will be using company funds to reimburse customers who suffered losses as the result of a margin call or stop loss order executed.
I know that Bitfinex isn´t obligated to do this, but with the profits that they are making in legimate and unlegitimate ways it should be easy to pay out the
people affected by this using a similar accommodating arrangement.