CoinFlex Proposes a Restructuring Plan
According to reports on the Bitcode Method Official site, Low-fee cryptocurrency exchange CoinFlex has filed a restructuring plan to seek quick solutions to its legal troubles. CoinFlex is the home of crypto yield and is committed to providing institutions and retail investors with an easily accessible platform to earn and trade crypto. CoinFlex is incorporated in Seychelles and has a customer base around the world.
Early this year, CoinFlex made headlines after it paused withdrawals amidst a wave of liquidations and bankruptcies that shook the whole industry. The exchange claimed that they discarded any risk management models in favour of maximizing short-term gains, and that has resulted in the current predicament they are in. The short-term, risk-averse strategy allowed CoinFlex to lend out $47 million to Crypto bigshot Roger Ver. However, Ver refuted the allegations against him and claimed that the investment platform owed him money. CoinFlex subsequently filed arbitration proceedings against Ver in a Hong Kong court, where they revised the amount from $47 million to $84 million for failing to make a margin call payment on his loan. It could take up to 12 months for CoinFlex to get justice in the case, which would allow them to attempt to recoup some of that alleged $84 million owed by Ver.
Roger Ver, is one of the earliest, most vocal, and most controversial cryptocurrency investors. An investor in various crypto and blockchain projects, including Kraken, purse.io, Blockchain.com, bitcoinstore.com, and Ripple, he’s best known for managing Bitcoin.com. That being said, Ver is pro-Bitcoin cash and notoriously known for his libertarian views and issues with the government.
The risk-averse stance has forced CoinFlex to restrict withdrawals on the platform and has made available 10% of balances for the withdrawal with certain limitations. The user’s deposits remain inaccessible; they can view the balances as locked funds but will not be available for withdrawal or count as collateral. The day the Locked Funds Plan is implemented, it will temporarily halt trading and resume only after verification.
Despite their careful consideration of cutting down on withdrawals, CoinFlex was forced to discharge a significant number of its team across all departments and geographies. In a blog post, CoinFlex said that “the staff cuts and non-staff costs that we have made will reduce our cost base by approximately 50-60%. Most of the remaining team focuses on product and technology, which remains the core of our business. We will monitor costs to ensure we operate as efficiently as possible and scale as volumes come back. The intention is to remain right-sized for any entity considering a potential acquisition or partnership opportunity with CoinFlex.” In addition, CoinFlex went on to say that “we periodically review our market offerings to offer users the best possible experience on CoinFlex. When certain assets no longer meet our listing standards, or the market environment has shifted significantly, these offerings may be modified or removed entirely to maintain relevant liquid markets.”
The restructuring plan proposal and next steps
So far, CoinFlex seems to be trying its best to stay afloat, testing different measures so that it doesn’t sink or close down like other exchanges due to the volatility in the crypto market. In the restructuring plan, it is stated that they will be enabling the issuing of rvUSD tokens, equity, and locked FLEX tokens to depositors. The proposed plan is meant to make the exchange more community-led and to allow it to return to a more profitable model. The vote on the proposal will need creditors’ approval and will only be approved if the majority agrees. If the proposal passes, the exchange will present the term sheet and supporting documents to the Seychelles Courts to approve the reorganization. If it doesn’t, the stakeholders will have to modify the terms and then return to all creditors for a second round of voting to seek approval. If it all goes to plan and the restructuring is given the green light by creditors, stakeholders, and the courts, the estimated time to implement the plan will take up to six weeks.