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Unlikely to resume withdrawals on Thursday

Bitcoin and other cryptocurrencies are in freefall.

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Struggling cryptocurrency exchange CoinFlex is unlikely to be able to allow customers to withdraw cash again on Thursday as originally planned, CEO Mark Lamb said Wednesday.

“We will need more time. And withdrawals are unlikely to be reactivated tomorrow,” Lamb told CNBC.

However, CoinFlex is in talks with several large funds interested in buying the $47 million in debt allegedly owed by investor Roger Ver, Lamb added.

CoinFlex is the latest victim of the cryptocurrency price crash that saw billions of dollars wiped from the market during the last “crypto winter”. Bitcoin has lost over 50% of its value this year and is down around 70% from its all-time high last November, while Ether is down 70% this year and over 75%. % from its peak.

The cryptocurrency exchange suspended withdrawals for customers last week citing “extreme market conditions”, and said an individual investor owed it around $47 million. Initially, CoinFlex did not name the client, but on Tuesday Lamb claimed the investor was Roger Ver, who was dubbed “Bitcoin Jesus” for his evangelical views on cryptocurrency in the early days of the industry.

Ver denied that he owed the money to CoinFlex. Ver was not immediately available to comment for this story when contacted by CNBC.

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CoinFlex claimed that Ver’s account entered “negative equity”. Normally, the exchange would liquidate an investor’s position in this situation. But Ver had a particular deal that meant that didn’t happen, the exchange said.

To fill the $47 million hole in CoinFlex’s balance sheet, the company is issuing a token called Recovery Value USD, or rvUSD, and attracting investors with a 20% interest rate for holding the virtual currency. Lamb said the ability to pay that interest rate would come from recovering Ver’s funds plus a “funding charge” imposed on it.

Lamb said “we don’t know what’s going to happen next if he doesn’t repay or if he repays, our focus right now is to…get…those funds raised.”

He added that he was convinced “that one way or another this recovery is going to happen”.

Lamb said the company is talking to several funds that buy distressed debt from companies, which could potentially buy the full $47 million.

“The good news is that the number of players interested in this debt offering and this token offering is extremely well capitalized,” Lamb said, adding that some of the funds that came in contact are over $10 billion. in assets under management.

Lamb said some of the requests came from traditional funds rather than crypto-focused funds, but declined to name any.

“We’re talking tens of millions (of dollars). This comes from a mix of distressed debt funds, existing users of the platform, and investors in CoinFlex,” Lamb told CNBC.

Spit between CoinFlex and ‘Bitcoin Jesus’

The spat between Lamb and Ver marks the latest crypto market saga amid falling digital coin prices.

Lamb said this week that Ver received a default notice. The CoinFlex CEO told CNBC that the goal is to “continue to speak with him (Ver) and resolve this matter amicably.” However, Lamb said there are other legal remedies.

“We also have an obligation to go through the appropriate legal channels as well,” he said.

The agreement between CoinFlex and Ver meant that if the investor failed to meet a margin call, their positions would not be automatically liquidated as they normally would.

A margin call is a situation where an investor must commit more funds to avoid losses on a trade made with borrowed money.

Lamb said CoinFlex felt comfortable entering into such a deal because of the “data we had seen around its capitalization.”

But CoinFlex will now eliminate those deals, Lamb said.

“In hindsight, it certainly would have been better not to have any non-liquidation agreements,” Lamb said.


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