coinflex to resort to arbitration to recover funds

The troubled crypto lending and savings platform CoinFLEX has announced that it will be taking further steps including international arbitration to recover a total of $87 million investors reportedly owe to the platform.

In a statement published a couple of days ago, the co-founders of the project, Mark Lamb and Sudhu Arumugam, stated that they are actively pursuing multiple initiatives to raise money for the platform so customers can progressively withdraw their funds as needed.

Among these initiatives, the developing team mentioned that they have approached companies and partners who may be interested in investing in CoinFLEX while they have also been trying to persuade depositors to convert their holdings into an equity stake.

Also read: How to Invest in Cryptocurrency in July 2022?

Finally, the team stated that they have commenced an arbitration procedure at the Hong Kong International Arbitration Center (HKIAC) to recover $84 million from an investor who has a signed agreement with the platform and who has not repaid his commitments as expected.

Such a process could take approximately 12 months to be settled, at which point the team will be able to “enforce the judgment” to collect the debt by accessing that customer’s worldwide assets.

“His liability to pay is a personal liability which means the individual is personally liable to pay the total amount, so our lawyers are very confident that we can enforce the award against him”, the statement said.

CoinFLEX claims that the “manual margin arrangement” that it signed with this counterparty is considered a regular practice in the brokerage industry. However, considering the amount of capital the platform committed to this single loan, it is evident that the firm failed to adopt proper risk management protocols that could prevent the collapse of its finances if that single client defaulted on his financial obligation.

CoinFLEX’s Balance Sheet Hole Is Larger Than Initially Estimated

This new $84 million estimate comes due to the addition of losses incurred as part of the liquidation of the investor’s portfolio of FLEX coins. Initially, CoinFLEX estimated that the total amount owed was $47 million.

The team clarified that “the vast majority” of the funds that the platform needs to collect to resume withdrawals are from this single debtor. However, they also warned that many other accounts will likely fall into the same situation as the price of FLEX Coin is expected to drop sharply once trading resumes, which would lead to a severe decline in the value of the collateral pledged to obtain the loans.

Even though CoinFLEX declined to refer to the individual investor who owes the firm such an amount on this occasion, the founder of the project, Mark Lamb, recently published a series of tweets in which he disclosed that the counterparty was Roger Ver – a prominent figure in the crypto industry.

Ver denied these allegations and claimed that the situation was the exact opposite of what Lamb stated as CoinFLEX owed money to him although he did not clarify the nature of the debt at the time.

The value of CoinFLEX’s native token FLEX has been fluctuating wildly in the past few weeks amid this back and forth. So far this year, the token accumulates a 93.2% loss after collapsing from $5.9 to just $0.40 per coin according to data from CoinMarketCap.

CoinFLEX Is Working to Free Up to 10% of Customers’ Funds

A plan is apparently in place to free up to 10% of customer funds for withdrawal in the next couple of weeks. The developing team also promised to publish an updated balance sheet of the project once all of the adjustments required are performed to accurately reflect the project’s financial situation.

In June, CoinFLEX also outlined a plan to raise capital by issuing a synthetic token called rvUSD that would be collateralized by the debt of the defaulted counterparty. The team did not provide updates in regards to how this plan went after the issuance period concluded on 1 July.

However, it did comment on it in this last blog post by stating: “Recovery Value USD (rvUSD) will most likely be used to improve our liquidity in either the original or modified format”.

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