Kraken exchange was testing an unreleased advanced order type on 14 September, which encountered a Kraken order book Bug resulting in the order’s prices being matched against the wrong side of the book. This allowed traders to buy BTC at $8k and sell it for $12k without clearing the intervening liquidity.
On their official Twitter handle, the exchange addressed the issue. The post said that the bug gave an impression that the liquidity was exhausted between $8k-$12k; however, the wicks on either side were hollow. Traders went through with their trade at the high and low, but the trades were not made throughout. Apart from that, there were no other orders that were mismatched.
The twitter thread also talked about the triggering of Stop market orders between the same range of $8k-$12k, however, the exchange claimed that Stop market orders were correctly filled at market price (best bid/ask available).
Kraken decided not to roll back those orders which resulted in traders buying BTC at $8k and selling it to the exchange for $12k, and bear the losses themselves. People lauded the effort of Kraken order book Bug for addressing the issue and bearing the losses instead of rolling it back. Dovey Wan, founding partner of Primitive Crypto also lauded the efforts of Kraken and tweeted,
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