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(Bloomberg) — CoinFlex said it has taken legal action to recover $84 million in losses from a single customer and is in talks to sign a joint venture with another crypto exchange in a bid to revive its fortunes.
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The crypto exchange paused withdrawals on its platform last month after a counterparty, which it later identified as longtime crypto investor Roger Ver, failed to repay $47 million from a margin call.
CoinFlex said in a blog post on Saturday the total owed by the investor had since risen after calculating a final tally of losses from “significant” positions in the exchange’s native FLEX token. The blog post didn’t mention Ver by name.
“The individual first asked us to liquidate his account, but then continued to tell us for some considerable time afterwards that he wanted to send significant funds to the exchange to take physical delivery of the futures positions,” CoinFlex Co-Founders Sudhu Arumugam and Mark Lamb wrote in the post on Saturday. “It is clear to us now that he was wasting time and hoping for a bounce in the market that never materialized.”
The pair said CoinFlex had commenced arbitration proceedings in Hong Kong to recover the $84 million, a process which they expect could take approximately 12 months before a judgment is reached.
Ver, who earned the nickname “Bitcoin Jesus” for his early investment in crypto, declined to comment on the case. He told Bloomberg last month that he had no outstanding debt with CoinFlex. In a June 28 tweet he said that an unidentified counterparty owed him “a substantial sum of money.”
CoinFlex is one of several crypto platforms struggling to operate amid a major market downturn that’s wiped around $2 trillion off the total value of cryptocurrencies, and several players have suspended withdrawals or filed for bankruptcy. The crisis has exposed a web of contagion across the sector, where one firm’s failure causes a domino effect across numerous others.
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A plan to raise enough outside funding in USDC — a stablecoin tied to the value of the US dollar — to cover the missing liquidity and resume withdrawals is ongoing, Sudhu and Lamb said in the blog post. This includes asking some customers whether they might help the business by “rolling some of their deposits into equity.”
CoinFlex is also in discussions with “a large US exchange” about entering a joint venture once that financing process is concluded, they said. The resulting deal would see the other exchange use CoinFlex’s platform to offer access to the US equities repo market and deliverable perpetual futures, initially through offshore licenses before migrating to the US.
For the moment, CoinFlex will seek to make 10% of customer balances available for withdrawal within a week, Sudhu and Lamb added.
“This is not a position we ever envisioned we would be in,” they wrote in the post.
Founded in 2019, CoinFlex is a smaller crypto exchange focused on derivatives trading. It had around $145 million in total value locked on its platform on Saturday.
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