In their statement, the founders of CoinFlex said, “We initiated arbitration at HKIAC for the recovery of this $84 million, as the individual had a legal obligation to pay under the agreement and refused to His liability to pay is a personal liability which means the individual is personally liable to pay the full amount, so our lawyers are very confident that we can enforce the award against him.”
The case:
According to the founders, a large individual client had a written manual margin agreement with CoinFLEX. Unlike normal users who are automatically liquidated when their margin ratio falls below the minimum requirements, manual margin users have a grace period to post more collateral in support of their positions before they are liquidated.
“With client privilege came the requirement that the client indemnify us personally for deficiencies in their account following the liquidation of their positions,” the founders said.
However, CoinFlex alleges that the client failed to honor its obligations under this written agreement.
The founders of CoinFlex stated that “there is still a significant deficit of approximately $84 million, so we have taken action to collect this debt.”
The first estimate was $47 million, which CoinFlex says “we communicated did not include the large loss related to the liquidation of its large FLEX coin positions.
After issuing a bid for this size, CoinFlex said the liquidations created a final deficit of $84 million for the account.
CoinFlex claimed that the individual requested to liquidate his account, but blocked the process.
The founders revealed that the individual asked the exchange to liquidate his account, adding, “but for a considerable time thereafter 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 market rebound that never materialized,” the founders added.
Further, they said: “We tried to liquidate his account cautiously using exchange counterparties, but since the positions were so large they involved slippage as any large order or series of large orders could reasonably create. .”
The founders of CoinFlex said that they kept the individual fully informed and cooperated with them and even promised to pay or increase the collateral to cover the shortfall, but in the end, “the promise turned out to be empty”.
At the end of the process, the founders said: “The arbitration process is not a fast process and we estimate that it will take about 12 months before obtaining a judgment in Hong Kong. Afterwards, we we can enforce that judgment against its global assets.”
According to media reports, the accused investor is believed to be an early Bitcoin investor and also Bitcoin Cash promoter Roger Ver. However, Ver, also referred to as “Bitcoin Jesus”, has denied the allegations.
The impact:
Currently, CoinFlex’s primary assets are in FLEX coins and it holds over 26 million units in inventory.
The price of FLEX will be impacted if trading resumes. Last month, CoinFlex halted withdrawals on its platform after a large investor failed to pay $47 million from a margin call.
“We are concerned that when trading resumes, the price of FLEX Coin may be volatile, which could have implications for the value of our other clients’ collateral,” the founders said.
Further, they stated, “We believe that the debt recovery will help build confidence and solidify the trading price of FLEX Coin. In the meantime, we hope that by providing a more complete picture and raising capital, our customers will regain confidence in the prospects of FLEX Coin.”
The vast majority of claims on CoinFlex’s balance sheet come from the debtor, however, there are also many other accounts which Sudhu and Mark say will “unfortunately become claims due to the expected sharp decline in the price of FLEX Coin upon recovery. exchanges. These are accounts using FLEX Coin as collateral.”
“We will publish our balance sheet as soon as we are allowed to do so,” the duo said.
To solve the problem, CoinFlex plans to raise a significant amount of funds from investors. The exchange is in talks with depositors looking to help the company by turning some of their deposits into equity.
“There are a number of investors in this group of large depositors who have indicated that they may be able to help the company move forward if we can all find a workable solution. We remain extremely encouraged by these conversations,” the founders said. .
The recovery value USD (rvUSD) will most likely be used to improve liquidity in the original or modified format, they added.
FUTURE PLANS:
The founders of CoinFlex revealed that they are in close discussions with a major US exchange/ATS which intends to enter into a formal joint venture with the company as soon as funding is secured.
The duo said: “We are excited about this potential joint venture agreement as it would see the launch of an equity repo market (US stocks) and deliverable perpetual futures platform, leveraging of CoinFLEX’s unique IP and technology platform.”
Securities lending is a $2.5 trillion market controlled by a small handful of blue chip brokers, and the founders said: “We see great potential because there is no such thing as an exchange platform for securities lending today”.
The company expects the joint venture to be launched through its partner’s already established offshore license with the intention of migrating to the United States using the multiple licenses our partner already has in place. The joint venture will eventually start using the offshore license. And, CoinFlex plans to migrate to the US (onshore) using multiple licenses over time.
The deal will also provide a source for security holders to earn yield in the same way flexUSD earns yield, the founders said.
