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8 August 2022
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Broker stops withdrawals and accuses Bitcoin Cash creator of defaulting on $ 47 million

CoinFLEX, one of several cryptocurrency trading platforms that froze customer withdrawals this month, is not facing a common liquidity issue.

Instead, the broker’s CEO, Mark Lamb, claims that there is one man responsible for the company’s financial problems: Roger Ver. The former Bitcoin (BTC) advocate who eventually converted to create and promote Bitcoin Cash (BCH) — a hard fork of bitcoin — reportedly defaulted on the exchange of $47 million.

“Roger Ver owes CoinFLEX $47 million USDC,” Lamb tweeted on Tuesday. “We have a written agreement with him, obliging him to be personally responsible for any negative balance in his CoinFLEX account and to top up the margin on a regular basis.”

Lamb claims that Ver, who earned the nickname “Bitcoin Jesus” for being a longtime cryptocurrency advocate and angel investor, has not complied with that contract and CoinFLEX has already issued a default notice.

The CEO’s comments confirm rumors initially leaked by a Twitter user known as “FatManTerra” — known for the extensive list of accusations he made during the collapse of the Earth ecosystem. When the rumors started to surface, Ver took to Twitter to deny the allegations.

“These rumors are false. Not only do I have no debts to this counterparty, but this counterparty owes me a substantial amount of money, and I am currently seeking my funds back.” tweeted See this Tuesday.

Lamb responded indirectly to Ver’s accusations, calling them “blatantly false”. “It is a pity that Roger Ver has to resort to such tactics to deflect his obligations and responsibilities,” added Lamb.

CoinFLEX CEO initially decided to keep the identity of his counterparty private. When discussing the liquidity problem and the platform’s recovery plan through the sale of a new token on Monday (27), Lamb had only identified the source of the problem as “a certain individual with a high net worth”.

CoinFLEX Recovery Plan

In a post shared on Monday, Lamb detailed the company’s plans for a new liability token called “Recovery Value USD” (rvUSD), which CoinFLEX intends to sell to raise $47 million.

That’s the amount needed to re-release withdrawals to his customers, and exactly the same amount of money that Lamb claims Ver owes the company.

“rvUSD is a token issued by CoinFLEX and related to outstanding debt by a certain high net worth individual to CoinFLEX,” the token’s whitepaper reads.

The text explains that recently the “individual” account hit a negative balance and failed to provide the necessary liquidity to meet its margin call.

However, a prior agreement with this individual prevented CoinFLEX from liquidating his position, something that would have already been done under normal circumstances. The situation caused CoinFLEX to freeze withdrawals on its exchange last week — a move the exchange loosely attributed to “uncertainty involving a counterparty” at the time.

However, CoinFLEX clarified that the counterparty was not the infamous Three Arrows Capital hedge fund or any crypto lending companies such as Celsius and BlockFi that are experiencing liquidity problems at this point.

“This condition required the individual to present high personal guarantees for account balances and margin calls in exchange for avoiding their liquidation,” Lamb explained in Monday’s post. The new rvUSD token is an attempt to “monetize this personal collateral” in the form of a liability.

The idea is that this will allow CoinFLEX to raise the $47 million needed to resume withdrawals while giving the counterparty, which Lamb claims is Ver, more time to pay. In the meantime, a 20% annual return will be offered, which the company hopes will be very attractive to buyers of rvUSD tokens.

“We’ve been talking [com Ver] often in calls about this situation with the aim of resolving it,” Lamb said on Twitter. “We would still like to resolve it.”

Scratchs?

According to Lamb, the exchange has already spoken to many large buyers and generated “huge interest” in the token — which is expected to begin issuance this Tuesday.

However, CryptoTwitter’s response to the new debt instrument was far less optimistic. The anonymous FatManTerra called the offer “incredibly degen” — term that can refer to an investment (or person making an investment) that is quite risky.

“They are using terms like ‘margin call’ and ‘negative balance’ to distract from the truth of this situation,” he tweeted. “In this case, there was nothing to settle and the loan is outstanding.”

Several other users responded to Lamb’s plans by calling them “nonsense” and “pyramid”, while referring to CoinFLEX as a “casino”.

“We wanted to make all the assets match up and we wanted to pass that risk on to investors who understand what the risk is and who crave that risk,” Lamb explained to Bloomberg.

*Translated by Daniela Pereira do Nascimento with permission from decrypt.co.

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