(Yicai Global) Jan. 4 -- The Bank of China has been ordered to bear the burden of the huge losses incurred by investors in its infamous Crude Oil Treasure futures product that spectacularly backfired when oil prices turned negative overnight last April due to the Covid-19 pandemic in the first civil lawsuit on the case.

BOC must repay customers 20 percent of their initial investment and shoulder all losses in excess to the principal investment, the court in Nanjing, southeastern Jiangsu province said on Dec. 31.

More than 60,000 customers saw CNY4.2 billion (USD650 million) evaporate due to cratering oil prices on an oil futures product that was due to mature in May. Moreover, as the West Texas Intermediate crude futures crashed to minus USD37.63 a barrel, the lender said investors also owed CNY5.8 billion (USD897.4 million) for the negative value of their holdings to the bank, leading to a public outcry.

BOC failed to take into consideration the extreme situation should the price of crude oil turn negative when designing the product, the court said. It failed to warn investors of the risks brought by negative oil prices in the course of trading and it failed to liquidate the product when the margin adequacy ratio fell to less than 20 percent as stated in the agreement.

The Crude Oil Treasure product had a 100 percent margin and did not have the typical characteristics of leveraged futures trading, it said.

BOC was already slapped with a CNY50.5 million (USD7.8 million) fine last month by China’s banking and insurance regulator over its mishandling of the Crude Oil Treasure incident.

Editor: Kim Taylor