Derivatives exchange CoinFlex said it will pursue legal action against Roger Ver, which failed to repay a $47 million margin call on a leveraged position secured by the FLEX coin.
Ver was an early crypto investor and promoter of bitcoin, whose collateral for his leveraged position fell below the minimum threshold. This happened after major cryptocurrencies came under pressure following the collapse of stablecoin TerraUSD.
Last month, CoinFLEX reported that it was suspending trading in FLEX coins in perpetual swaps and spot trading because a client owed the company $47 million.
CEO Mark Lamb assured the public that the counterparty was not Three Arrows Capital, the struggling Singaporean hedge fund, or a loan company, excluding lenders BlockFi and Celsius. It later turned out to be Ver.
CoinFLEX pays out $84 million after liquidation
Ver was a manual margin client, which meant that unlike regular users who are automatically liquidated when their leverage ratio falls below a certain threshold, he has been granted a grace period to add more warranty.
Ver had asked the company to liquidate its position, promising to provide funds to take delivery of the futures contracts, but did not honor its promise. CoinFLEX liquidated its position, but ended up with an $84 million deficit.
The company is now pursuing a lawsuit against Ver, which is personally liable for the $84 million and has refused to pay. CoinFLEX attorneys believe the company has a strong case. The legal process is expected to take about 12 months before a judgment is rendered in Hong Kong.
Where now for CoinFLEX?
CoinFLEX fell victim to the crypto market rout that wiped around $2 trillion from the crypto market capitalization and left Celsius, Voyager Digital and Three Arrows Capital battling to stay afloat. Voyager Digital and Three Arrows Capital have both filed for bankruptcy.
CoinFLEX is in talks with a major US exchange regarding a potential partnership which it hopes to finalize as soon as funding is secured. Under the agreement, the US exchange would leverage CoinFLEX’s platform to provide access to US equity repo markets using an offshore license.
CoinFLEX has engaged large depositors willing to convert their deposits into shares.
As talks with new partners and investors take place, CoinFLEX is releasing liquidity for 10% of balances to be withdrawn, which comes with some caveats.
Locked assets, with the exception of FLEX and FlexUSD, can be sold to USDC to raise funds and cannot be withdrawn or used as collateral.
CoinFLEX expects all technology, legal, and operational work to take approximately one week.
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