CoinFLEX outlines plan to recover $84 million, raise capital from new investors

Quick Take

  • The company is looking to raise capital from new investors and to resume client withdrawals.
  • CoinFLEX estimates it will take about 12 months to get a judgement in Hong Kong that can be enforced against the client’s worldwide assets.

Crypto exchange CoinFLEX has begun arbitration proceedings in Hong Kong to recover $84 million in losses from a client, it said in a blog post today.

The company paused withdrawals last month after CoinFLEX CEO Mark Lamb said that investor Roger Ver had defaulted on a loan agreement worth $47 million in USDC. Lamb said on Twitter at the time that the contract required Ver to "guarantee any negative equity" and that he had been served a notice of default.

Seemingly in response, Ver wrote on Twitter that rumors that he had defaulted on a loan were false.

According to CoinFlex, the deficit was larger than anticipated because of the associated slippage cost of liquidating the counterparties’ collateral, which was tied up in the firm’s thinly traded native token.

CoinFLEX co-founders Lamb and Sudhu Arumugam said in today’s blog post that after liquidating collateral, “there still remains a significant deficit of about US$84 million so we have commenced action to recover this debt.” The original “estimate of $47m which we communicated did not include the significant loss in liquidating his significant FLEX coin positions,” the post said, without identifying the client by name.

“The individual first asked us to liquidate his account, but then continued to tell us for some considerable time afterwards that he wanted to send significant funds to the exchange to take physical delivery of the futures positions. It is clear to us now that he was wasting time and hoping for a bounce in the market that never materialized,” the blog post said.

The two said in the post that they estimated it would take about 12 months to get a judgement in Hong Kong that could then be enforced against the client’s worldwide assets.

Meanwhile, the company is looking to raise capital from new investors and eventually to resume withdrawals, the post said, adding that CoinFLEX is looking to make 10% of its clients’ balances available for withdrawal within a week.

In 2019, CoinFLEX emerged as a platform for physically delivered futures. It overhauled its strategy in 2020 to focus on building a repo market for crypto. Its backers include Polychain Capital and Digital Currency Group.

© 2022 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

About Author

Mike Millard has worked as an editor for Bloomberg and Reuters, various newspapers and websites. He lived in Asia for more than two decades and now calls the Greek island of Corfu home. He is the author of three books.