Crypto trading platform CoinFLEX has detailed its strategy to combat the company’s current liquidity crisis, which for almost three weeks has prevented users from withdrawing funds.
In a blog post Saturday, co-founders Sudhu Arumugam and Mark Lamb announced that the company has entered arbitration in Hong Kong to recover $84 million in losses from a “large individual customer,” who, late last month, CoinFLEX claimed was prominent Bitcoin evangelist Roger Ver.
The customer in question allegedly defaulted on a massive position last month and failed to honor a contract with CoinFLEX requiring him to guarantee any negative equity on his account. CoinFLEX has previously stated that it was this single customer’s failure to cover a debt that forced the company to freeze withdrawals platform-wide in late June.
Arumugam and Lamb stated they expect a verdict in the arbitration case to take up to 12 months. Because the liability in question is a personal one, though, the two are optimistic the case will result in a substantial recuperation for CoinFLEX. “The individual is personally liable to pay the total amount,” wrote Arumugam and Lamb, “so our lawyers are very confident that we can enforce the award against him.”
Though Saturday’s blog post never once referred to Ver by name, Lamb recently stated outright that Ver—an early Bitcoin adopter and longtime advocate known to many as “Bitcoin Jesus”— is the customer in question. Ver shortly thereafter denied the allegations, claiming instead that CoinFLEX owed him money.
Recently some rumors have been
spreading that I have defaulted on a
debt to a counter-party. These rumors
are false. Not only do I not have a debt
to this counter-party, but this counter-
party owes me a substantial sum of
money, and I am currently seeking the
return of my funds.
— Roger Ver (@rogerkver) June 28, 2022
CoinFLEX previously claimed that the deficit stemming from Ver’s losses amounted to $47 million, but on Saturday Arumugam and Lamb updated that to $84 million. According to Arumugam and Lamb, once CoinFLEX liquidated Ver’s massive positions on FLEX, the company’s native token, CoinFLEX’s losses nearly doubled. FLEX crashed some 66% in value on June 23, upon news of CoinFLEX’s withdrawal freeze, and has since struggled to recover, according to data from CoinMarketCap.
Ver’s alleged default ended up pummeling the company twice, first forcing a platform-wide withdrawal freeze, then incurring huge losses when Ver’s massive FLEX positions were sold off to cover the loss.
Per CoinFLEX, the two parties have been in constant communication for weeks, but Ver continually failed to follow through on promises to pay collateral, forcing CoinFLEX to enter arbitration: “Throughout the process, we kept the individual fully informed and he had cooperated with us and promised to pay or increase collateral to cover the shortfall but at the end, the promise proved empty.”
In addition to announcing its arbitration case, the company said that at some point in the next week it hopes to make 10% of customers’ balances available for withdrawal. Doing so, however, will require CoinFLEX to sell all non-native assets currently locked on the platform into USDC. It will also require the company to temporarily pause all trading and close all futures positions.
The company also said that it’s looking to raise “a significant amount of funds” from investors, and that it’s currently in conversations with multiple “large” CoinFLEX customers about converting their deposits into equity.