Mark Lamb

CoinFLEX to begin arbitration for $84 million recovery and open limited withdrawals

CoinFLEX is moving quickly to retrieve as much liquidity as it can from a debacle that has left it $84 million short due to a delinquent account held by an unnamed whale.

Crypto investment platform CoinFLEX is moving forward with its plan to reclaim $84 million in funds by starting arbitration procedures in Hong Kong against an individual account holder.

Co-founders Sudhu Arumugam and Mark Lamb acknowledged in their Saturday announcement that the judgment would provide access to the individual’s “worldwide assets” and that their lawyers were “very confident” they could enforce the award:

“We have commenced arbitration in HKIAC for the recovery of this $84m as the individual had a legal obligation under the agreement to pay and has refused to do so.”

The firm, however, noted the process could take 12 months to get a judgment in Hong Kong.

“Thereafter, we will be able to enforce that judgment against his worldwide assets,” it added.

Though the “large individual customer” was not named in the Saturday announcement, Lamb has previously publicly stated that Bitcoin Cash (BCH) proponent Roger Ver was the defaulting customer in question.

Ver, however, has denied that he owes any money to the firm. He fired back at the rumors by stating that an unnamed counterparty owes him “a substantial sum of money.”

In the most recent update, Arumugam and Lamb said that the individual was “wasting time” by promising to replenish his account with funds that never arrived.

They added that liquidating his positions created significant slippage, which has increased the sum the firm says he owes. Initial estimates put the outstanding sum at $47 million, but that amount was increased to $84 million after liquidating his FLEX token positions.

FLEX is the native token of the CoinFLEX platform:

“Unfortunately, this customer failed to honor his obligations pursuant to this written agreement. Our lawyers believe that we have a very strong case and have commenced legal actions to recover debts owed to us pursuant to this agreement.”

Limited withdrawals soon?

Amid the drama between CoinFLEX and the individual whale depositor, withdrawals have been suspended since June 23. Lamb said he hoped to have them back up for users by the beginning of July.

Arumugam and Lamb stated that they now have plans to create “temporary liquidity for CoinFLEX depositors” by initially making 10% of their account balances available for withdrawal.

No date has been set for this to take place, but the duo expect withdrawals to take a week or less.

CoinFLEX has been working on ways to make up for the shortfall in funds left by the whale investor’s account.

The firm indicated at the end of June that in addition to liquidating accounts and pursuing legal action, part of its fund’s recovery plan involved issuing 47 million Recovery Value USD (rvUSD) tokens, which can be bought for $1.00 each. It may also offer some depositors the option to roll their deposits into equity in the company.

The firm is in “close discussions” with an unnamed large United States exchange to enter into a partnership that could help boost CoinFLEX’s viability.

The price of FLEX fell 71% on Saturday following the announcement to $0.27. It is currently trading at $0.30, according to CoinGecko.

CoinFlex CEO says withdrawals unlikely to resume on Thursday

CoinFlex CEO Mark Lamb said more time was needed before the exchange can reopen its platform for user withdrawals.

Crypto exchange CoinFlex is “unlikely” to resume withdrawals on Thursday as it had originally hoped, according to its CEO Mark Lamb, as the company continues to search for buyers of its $47 million bad debt.

Speaking to CNBC on Wednesday, Lamb said that more time was needed before it could reopen the platform for withdrawals, stating:

“We will need more time. And it’s unlikely that withdrawals will be re-enabled tomorrow.”

The crypto exchange had been banking on a $47 million token offering launched on Tuesday, which is known as Recovery Value USD (rvUSD). The token offering was created in an attempt to sell off its bad debt after one of its accounts went into negative equity.

In a statement on Tuesday, the company said it hoped withdrawals could restart as previously planned for Thursday, but admitted it would be subject to the token issuance being fully subscribed.

The company has not given any updates as to how many tokens have been subscribed to date, but Lamb noted on Wednesday that CoinFlex is in talks with several large funds to buy up the $47 million debt.

In a separate interview with MarketWatch, Lamb said it has been making “significant progress” on its token sale among distressed debt funds, existing customers and investors, adding that tens of millions of dollars in “soft commitments” have emerged.

The crypto investment platform halted user withdrawals on June 23, citing “extreme market conditions” and “uncertainty around a certain counterparty,” which was later revealed to be the result of a long-time customer of CoinFlex’s account that went into negative equity.

Days later, CoinFlex CEO Mark Lamb publicly pointed fingers at “Bitcoin Jesus” Roger Ver on Twitter, claiming that Ver owes the company $47 million USDC after allowing his account to go into negative equity.

On the same day, Ver — without mentioning CoinFlex by name — denied rumors that he “defaulted on a debt to a counter-party,” and instead alleged the crypto firm owed him “a substantial sum of money.” Ver was an early investor in the exchange and had favorable borrowing conditions.

Lamb continued their Twitter spat stating the “debt is 100% related to his account,” adding that his company “categorically denies that we have any debts owing to him.”

CoinFlex’s recent woes are just another example of a growing number of crypto investment firms and trading platforms facing liquidity issues amid an ongoing crypto bear market.

Crypto lending platform Celsius Network is staring down possible bankruptcy , while crypto hedge fund Three Arrows Capital has just been served a notice of default by Voyager Digital. It has also reportedly been ordered to liquidate by a court in the British Virgin Islands.