CoinFLEX creditors vote in restructuring plan giving them 65% ownership

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CoinFLEX, a troubled digital asset futures exchange that suspended withdrawals earlier this year, could be on its way to recovery after its creditors voted overwhelmingly in favor of a proposed restructuring plan that gives them 65% ownership of the exchange.

Founder Mark Lamb proposed the restructuring plan, and it wiped out the stakes held by the founders and some of the early backers.

“As with any reorganization, unfortunately, most shareholders get wiped out. This situation is no different; with all existing Ordinary and Series A shareholders of the Company losing their equity stakes, including us,” the proposal stated.

Creditors at the exchange will now be the majority owners, getting 65% of CoinFLEX. The team will own 15% in the form of an employee share option plan (ESOP). Series B investors who invested in the exchange just before the liquidity issues cropped up will also get a portion of the exchange and will be incentivized with future equity depending on the value they can add to the company in the future.

The proposal was overwhelmingly supported by 98.63% of the creditors. 

Important Update: From 8 AM UTC on 9/25 to 4 AM UTC 9/27, 168 CoinFLEX creditors participated in CoinFLEX’s first governance vote. The vote was successful, with 98.63% voting in favor of the proposal.

— CoinFLEX (@CoinFLEXdotcom) September 27, 2022

The team is set to present the vote, along with the term sheet and supporting documents to the Seychelles Courts to approve the restructuring. If the courts give the go-ahead, the exchange will begin the process of coming out of reorganization, which is expected to take six weeks.

“We fully recognize that this has been a traumatic experience for all our depositors and stakeholders. We hope that with a successful reorganization, we will return to the path of growing and becoming a successful exchange,” Lamb, alongside cofounder Sudhu Arumugam, stated.

CoinFLEX suspended withdrawals for all traders in late June after a row with one of its biggest clients and part owner, Roger Ver. Ver’s $47 million margin call obligations (which accumulated to $84 million in time) proved too big a blow for the exchange to overcome. The two parties have been trading accusations since then.

CoinFLEX founders have been exploring several solutions to the cash crunch, including raising “a significant amount of funds from investors,” laying off 60% of its staff members, and partnering with a U.S. exchange. They have also proposed selling all the locked assets to make 10% of the user balances available for withdrawal.

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