By Frances Yue
Crypto exchange CoinFlex, which has halted user withdrawals since June 23, will not lift the freeze on Thursday as originally planned, Mark Lamb, the company’s chief executive, told MarketWatch.
The exchange has been trying to raise $47 million in stablecoin USDC /zigman2/quotes/226472410/realtime USDCUSD -0.0100% since Tuesday through the sale of a token called Recovery Value USD, or rvUSD, in an attempt to allow withdrawals to resume, the company said earlier in a Monday blog post .
CoinFlex said it expects its token fundraising efforts to operate over four days and to conclude this Friday, in the rvUSD white paper . The company’s blog post earlier this week said the aim was to resume honoring user withdrawals on Thursday, subject to receiving funds from the rvUSD issuance.
The crypto exchange has engaged in talks with distressed debt funds, existing customers and investors about the token sale, and is “making significant progress,” Lamb told MarketWatch. He declined to reveal how many tokens have been subscribed, but said tens of millions of dollars “in soft commitments” have emerged.
Lamb said the company will update the market with its fundraising status on Thursday and “continue towards the path of solution.”
On Tuesday, Lamb tweeted that the Roger Ver, an early crypto investor, founder of bitcoin.com and a vocal supporter of Bitcoin cash /zigman2/quotes/108573970/realtime BCHUSD +1.00% , had defaulted on financial commitments to CoinFlex, alleging that Ver owes the exchange $47 million USDC. Ver also is an investor in CoinFlex.
Ver tweeted on Tuesday that false rumors were being spread that he defaulted on debt to a counterparty. “Not only do I not have a debt to this counterparty, but this counterparty owes me a substantial sum of money, and I am currently seeking the return of my funds,” Ver wrote. Ver did not identify the counterparty.
When asked Wednesday about Lamb’s claims about his default, Ver said: “I stand by my original tweet,” in an email to MarketWatch. “I’ll make more information public as soon as possible,” he wrote.
Lamb — and the white paper — pointed to a default of a major CoinFlex customer as a catalyst for the platform’s liquidity woes. Lamb said he revealed Ver’s identity as the relevant customer because of Ver’s denial in a tweet, but also to clear the air for the token issuance. “Since we revealed those details, there have been a significant number of external potential buyers that have come out of the woodwork because of who the counterparty is,” Lamb told MarketWatch.
Investors of rvUSD are essentially betting that the defaulted individual would repay the debt and relevant interests to CoinFlex. rvUSD token could offer up to 20% annual return, according to its white paper.
The white paper also stated that token holders have the option to be repaid directly through CoinFlex, if the company could not fully recover the liabilities in 15 months. When asked if it would bring more risks to the exchange, Lamb said the company is still finalizing the final terms with token buyers, while they are also “very confident in being able to recover these assets.”
Lamb said CoinFlex remains in talks with the defaulted individual. “We’re also going to take all the appropriate actions we need to take to resolve this matter, but we’re still speaking to him, and we would like to come to an amicable agreement on this.”
Lamb said CoinFlex chose to raise the tokens in a bid to resume honoring withdrawals because options for a legal action could be lengthy, and the situation could be “much worse for customers in terms of the speed of recovering some or all of their funds.”
“In this situation, we can pursue a different path where through tokenization, we can get users back, ideally their entire funds, and that can be done quickly,” Lamb said.
CoinFlex’s native token FlexUSD is trading at around $0.40 Wednesday, down 30% from 24 hours ago and down 60% from seven days ago, according to data from CoinGecko.