CoinFLEX Takes Legal Action to Recover $84M From Single Customer

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  • After serv­ing for­mer Bitcoin.com CEO Roger Ver with a notice of default, Coin­FLEX now plans legal action
  • The arbi­tra­tion process in Hong Kong is expect­ed to take 12 months before judg­ment is reached

Cryp­to exchange Coin­FLEX is seek­ing to recov­er $84 mil­lion from a sin­gle cus­tomer and is in talks with anoth­er US exchange to enter a joint ven­ture in order to revive its business.

In late June, Coin­Flex said a coun­ter­par­ty owed the exchange $47 mil­lion and it was forced to halt with­drawals. CEO Mark Lamb iden­ti­fied the coun­ter­par­ty as Roger Ver, for­mer CEO of wal­let provider Bitcoin.com, and said he has been issued a notice of default.

After cal­cu­lat­ing the investor’s final “sig­nif­i­cant” loss­es in the exchange’s FLEX token, the total owed by the investor has now near­ly dou­bled, co-founders ​​Sud­hu Aru­muguam and Mark Lamb wrote in a blog post on Saturday.

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

The investor had coop­er­at­ed and promised to pay or increase col­lat­er­al to cov­er the short­fall, but that didn’t work out, they added.

Coin­FLEX has begun arbi­tra­tion pro­ceed­ings in Hong Kong to recov­er the $84 mil­lion “as the indi­vid­ual had a legal oblig­a­tion under the agree­ment to pay and has refused to do so,” they wrote. The legal process is expect­ed to take about a year before a judg­ment is reached. 

Ver, who became known as “Bit­coin Jesus” for his evan­ge­lism of the cryp­toas­set, addressed spec­u­la­tion that he default­ed on debt to a coun­ter­par­ty in a June 28 tweet, alleg­ing that the com­pa­ny owes him instead. He didn’t return Block­works’ request for com­ment by press time. Last month, he told Block­works via Telegram that he stood behind his tweet and that his lawyers would issue a state­ment soon. 

While the legal pro­ceed­ings take place, Coin­FLEX said it plans to raise funds from investors in the form of sta­ble­coin USDC. Depos­i­tors will also be asked if they want to help the busi­ness by “rolling some of their deposits into equity.”

The exchange’s new token — Recov­ery Val­ue USD (rvUSD) — will be used to improve liq­uid­i­ty in the orig­i­nal or mod­i­fied for­mat, the co-founders said. They also seek to make 10% of bal­ances avail­able for with­draw­al with­in a week.

The new token’s future val­ue is pred­i­cat­ed on suc­cess­ful recov­ery of funds from Ver, accord­ing to the company’s three-page whitepa­per.

Coin­FLEX, reg­is­tered in 2019 in Sey­chelles, is a derivates exchange that allows users to earn inter­est by hold­ing its sta­ble­coin flexUSD.


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  • Shali­ni Nagarajan

    Block­works

    Reporter

    Shali­ni is a cryp­to reporter from Ban­ga­lore, India who cov­ers devel­op­ments in the mar­ket, reg­u­la­tion, mar­ket struc­ture, and advice from insti­tu­tion­al experts. Pri­or to Block­works, she worked as a mar­kets reporter at Insid­er and a cor­re­spon­dent at Reuters News. She holds some bit­coin and ether. Reach her at [email pro­tect­ed]



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