Digital currency exchange CoinFLEX hit the headlines in June after it paused withdrawals amidst a wave of liquidations and bankruptcies that shook the industry to its core.
The exchange claimed that BCH leader Roger Ver had failed to make a margin call on a $47 million loan, meaning it was unable to honor withdrawals.
CoinFLEX has posted a blog detailing how it has filed for restructuring in Seychelles. This will enable it to issue rvUSD tokens, equity, and locked FLEX tokens to depositors.
It states that this will make the exchange more “community-led” and will allow it to return to profitability. The plan will be voted on by CoinFLEX depositors and will not be approved unless the majority agrees to it.
What happened to CoinFLEX?
CoinFlex, like many other digital currency exchanges and lending platforms in recent times, was a victim of reckless greed and its own failure to properly manage risk.
During the 2020-2021 bull market, many companies, CoinFLEX included, appear to have discarded any risk management models in favor of maximizing short-term gains. This led to it lending one individual, who they have named Roger Ver, $47 million, leaving it extremely vulnerable to counterparty risk.
CoinFLEX said Ver failed to make a margin call payment on his loan. After initially asking the company to liquidate his position, they say he gave them the runaround, repeatedly promising the deposit of substantial funds but never delivering. They subsequently filed arbitration proceedings against him in a Hong Kong court for $84 million.
As markets continued to crash, hedge funds like Three Arrows Capital (3AC) went under, lending platforms like Celsius Network and Voyager Digital filed for bankruptcy, and CoinFLEX had no choice but to pause withdrawals. So far, it’s one of the few companies that has presented a theoretically workable plan to its depositors.
Can anyone really trust Roger Ver?
It’s important to note that, in all this, Ver denies that he owes CoinFLEX any money. Although it’s unclear why the firm would make an easily disprovable allegation against a prominent figure in the industry and would then go on to file legal proceedings against him when the facts are bound to come to light in court, Ver is maintaining his denial for now.
Ver has been an outspoken critic of Dr. Craig Wright in recent years, calling him a “liar and a fraud” on multiple occasions. Although Ver initially sided with Dr. Wright during the BTC-BCH split in 2017 and has remained a steadfast believer in Bitcoin as a peer-to-peer electronic cash system, he quickly turned against Bitcoin’s inventor when he realized he was committed to an enterprise-friendly, law-abiding version of the protocol.
Can Ver, a convicted felon who expresses open disdain for the law, be trusted? The CoinFLEX legal proceedings against him will speak volumes about his integrity and how truthful his public statements really are.
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