CoinFLEX, the troubled cryptocurrency exchange has an idea on how to compensate some investors, but not everyone is in favor of it.
After ceasing all withdrawals from CoinFLEX in June and then partially restarting them in July, CoinFLEX has submitted a proposal to be reformed to the Seychelles Islands’ government.
In actuality, the islands are home to the company’s headquarters.
Fallout Is Attributed to One Margin Call
According to reports, Roger Ver, a seasoned cryptocurrency investor, failed to meet a $47 million margin call at the start of the exchange’s problems. Ver was also reportedly having other problems, and CoinFLEX has subsequently sued him in an effort to recover a total loss of $84 million.
Internal actions were then taken to reduce operational costs by as much as 60%. The business has now been forced to take more serious action, though, as bottom lines continue to fall short.
With only 10% of customer funds available for withdrawal, CoinFLEX has now opted to go through a reorganization procedure in an effort to maintain itself and finally repay investors whose assets are frozen.
Application for rvUSD and FLEX Payout Approval
CoinFLEX has asked the government of Seychelles for permission to offer RecoveryUSD (rvUSD), stock, and the platform’s exclusive FLEX coin to worried users wishing to reclaim control of their cash after withdrawals were suspended. This is all part of the restructuring process.
The platform’s users, who would undoubtedly much prefer being able to withdraw the money they deposited in a currency of their choosing – a decision that is very much in keeping with the core goal of any cryptocurrency exchange – may not, however, be pleased with this answer.
According to Mark Lamb, CEO of CoinFLEX, the troubled cryptocurrency exchange is impatiently awaiting a new group of shareholders who would hopefully help it turn things around and repay depositors.
”We look forward to welcoming a new group of shareholders to CoinFLEX and are glad to be in a jurisdiction where we can quickly resolve this situation and return maximum value to depositors.”
Despite Mr. Lamb’s optimistic assessment of the situation, it is likely that the majority of depositors do not share it, particularly those who are domiciled in nations with strong legal frameworks and consumer protection legislation.
For instance, rvUSD was only available for 2-day purchases from knowledgeable non-US investors. A smart investor, often known as an accredited investor, is one who has a significant net worth and can take calculated risks. To qualify for CoinFLEX, an investor must have a net worth of at least $1 million, excluding their principal property, and an annual income of over $200,000.
However, these investors may find themselves in a difficult situation if CoinFLEX’s holdings were to be terminated by the exchange without recourse if outstanding liabilities were not fully recovered by the first of October 2023.
Whether Seychelles authorities would deem this course of action appropriate or encourage the platform to pursue a different path before restructuring is permitted is still up in the air.