CoinFLEX Files Restructuring Case in Seychelles Court

Following the halt to all CoinFLEX withdrawals in June – and the subsequent partial restart in July – CoinFLEX has filed a motion to be restructured with the authorities in the Seychelles Islands.

In fact, the company’s headquarters are based in the islands.

Fallout Blamed on a Single Margin Call

The exchange’s troubles allegedly began due to longtime crypto investor Roger Ver failing to meet a margin call of $47 million. This was not the only reported issue with Ver – and CoinFLEX has since taken him to court in an attempt to recoup a total loss of $84 million.

What followed was a set of internal measures taken to cut operational costs by up to 60%. However, as bottom lines still came up short, the company has now been forced to take more drastic measures.

As reported by Bloomberg, CoinFLEX has now decided to undergo a restructuring process in a bid to stay afloat and eventually pay back investors whose funds are locked, with only 10% of customer funds available for withdrawal.

Seeking Approval for rvUSD and FLEX Payouts

As part of the restructuring process, CoinFLEX has requested approval from the Seychelles government to issue RecoveryUSD (rvUSD), equity, and the platform’s proprietary FLEX coin to anxious customers looking to regain control of their funds after withdrawals were halted.

This solution, however, may not be well-received by the platform’s users, who would probably much prefer being allowed to withdraw the funds they deposited in a currency of their choice – a choice very much in line with the central purpose of any crypto exchange.

According to Mark Lamb – the CEO of CoinFLEX – the beleaguered crypto exchange is eagerly waiting for a fresh set of shareholders that will hopefully allow CoinFLEX to recover and pay back 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.”

In spite of Mr. Lamb’s positive outlook on the situation, it’s a safe bet that many depositors do not share his cheery outlook – especially those based in countries with robust legal systems and consumer protection laws.

rvUSD, for instance, could only be purchased by non-US sophisticated investors over a 2-day period. A sophisticated, also known as an accredited investor, is characterized by a high net worth that allows them to make informed yet risky bets. In CoinFLEX’s case, this means an annual income of over $200k and a net worth of over $1 million, excluding the investor’s primary residence.

However, in the event of outstanding liabilities not being fully recovered by CoinFLEX by the 1st of October 2023, these investors’ positions could be closed by the exchange with no recourse, leaving them in a sticky situation.

It remains to be seen whether Seychelles authorities will consider this course of action appropriate or push the platform to seek out a different procedure before restructuring is approved.

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Source: https://cryptopotato.com/coinflex-files-restructuring-case-in-seychelles-court/