CoinFLEX exchange is taking legal action against one of its “large individual customers” who failed to honor his margin call obligations. The exchange is seeking to recover $84 million from this customer, and while it didn’t name him in its announcement, one of the founders has previously revealed its BCH-linked Roger Ver.
In a blog post, CoinFLEX founders Sudhu Arumugam and Mark Lamb announced that it was taking the matter to the Hong Kong International Arbitration Centre (HKIAC), an alternative dispute resolution institution.
Previously, the founders had claimed that the individual owed the exchange $47 million in margin call obligations. However, as the new announcement reveals, Ver owes the exchange almost twice that amount due to changes in the market values of his tokens.
“Unfortunately, there still remains a significant deficit of about US$84 million so we have commenced action to recover this debt. The first estimate of $47m which we communicated did not include the significant loss in liquidating his significant FLEX coin positions,” the founders said in the blog post.
CoinFLEX is confident that it has the upper hand in the legal action, saying that its lawyers “believe that we have a very strong case.”
Despite its conviction that the outcome of the arbitration would be in its favor, the exchange acknowledged that it would take quite some time before the matter concluded.
“The arbitration process is not a quick process and we estimate that it will take approximately 12 months prior to getting a judgment in Hong Kong. Thereafter, we will be able to enforce that judgment against his worldwide assets,” it said.
As CoinGeek reported, the Hong Kong-based digital asset derivatives exchange came out last month to reveal the extent of its financial woes, pointing to Ver as the cause of all its troubles. Ver reportedly had a written manual margin arrangement with the exchange. Unlike normal users who are liquidated automatically when the margin ratio dips below the threshold, clients like Ver are allowed some time to sort the mess.
CoinFLEX founders claim that Ver has been making empty promises on when he will meet his obligations, and they are now tired and are taking legal action.
Ver, who is also an early investor in the exchange alongside DCG and Polychain Capital, has denied the allegations. He even claimed that the exchange owed him money and that he would pursue his dues.
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
Raising funds and 10% partial withdrawals
The Ver-CoinFLEX saga has most affected the traders who, though no fault of their own, lost access to their funds at the exchange in late June. CoinFLEX announced on June 23 that it had suspended withdrawals as it worked on the margin default issue.
The founders have revealed that they are looking to make 10% of the user balances available for withdrawal. In order to do so, the exchange will sell all the locked assets it holds for USDC, other than FLEX and flexUSD tokens. It will also temporarily close off all long and short futures positions against each other.
FLEX, the native token for the exchange, has taken a massive hit since it went public with the Ver saga. Since June 23, when it announced it would pause withdrawals, the token has lost 94% of its value as investor confidence wanes.
In the blog post, the founders also claimed that they are working to find a solution to their liquidity crisis.
“We are looking to raise a significant amount of funds from investors. We are also speaking with CoinFLEX depositors who are looking to help the business by rolling some of their deposits into equity.”
They also claimed to be in discussions with a large U.S. exchange, with the agreement expected to allow the platform to offer U.S. equities, repo markets, and deliverable perpetual futures.
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