CoinFLEX has proposed a restructuring plan that would see creditors own 65% of the company.
Update: Following the voting period for the CoinFLEX restructuring proposal, investors appear to be in favor of the move that would see them take a majority holding in the company. The voting, which ends on Sept. 27, currently has 99.96% votes in favor as of Sept 25.
The plan, which faces a vote next week, would result in series A shareholders losing their stake in the company. Series B holders would do rather better, retaining their stake in the company as well as future equity.
The company also plans to issue its creditors with the USDC stablecoin and 83.4 million rvUSD tokens, which may later accrue value depending on the outcome of an upcoming legal case.
According to the company RV stands for Recovery Value, and not the subject of its upcoming litigation case, the defendant Roger Ver.
Winners and losers
In a statement from the company, CoinFLEX quickly conceded that the reorganization plan would offer pain for some. The brunt of that misery would seem to fall on the heads of ordinary shareholders.
“As with any reorganization, unfortunately, most shareholders get wiped out,” said CoinFLEX. “This situation is no different; with all existing Ordinary and series A shareholders of the Company losing their equity stakes, including us. You will see as you read further that the series B shareholders will continue to be shareholders and the reasons behind that decision.”
The news that series A shareholders will be left out in the cold is perhaps not as extreme for corporate interests. According to data held by Crunchbase, the seed round series A investors in the company were Polychain, Digital Currency Group and Struck Crypto.
Of these three corporations, only Struck Crypto refrained from investment in the second, series B, venture round. It therefore seems that ordinary investors and Struck Crypto will be the hardest hit by the plan.
As part of the proposed deal CoinFLEX, employees will also be taken care of.
“The team will be allocated 15% in the form of an employee share option plan (ESOP) which will vest over time. It is important that the team gets CoinFLEX back on track and grows the business with all your support,” said CoinFLEX.
According to company CEO Mark Lamb, CoinFLEX “believe the proposal outlined here is a great outcome for all parties.”
The proposal will now be put to the vote through the issuance of CoinFLEX vote tokens (CFV) and voted upon through their governance forum the Commonwealth.
The crypto futures exchange temporarily suspended all withdrawals in June citing “extreme market conditions and continued uncertainty involving a counterparty.”
As previously reported by Be[In]Crypto, a significant proportion of CoinFLEX’s ills is being laid at the door of Roger Ver, the crypto evangelist also known as Bitcoin Jesus. To CoinFLEX shareholders however, Ver is not the son of God; he’s a very naughty boy.
Earlier this year it was revealed that Ver had been a customer of CoinFLEX holding a manual margin account. This allowed Ver a certain grace period to add more capital in the event of a liquidation.
Having worn out that grace period and failed to stump up the cash the company was placed in a significant financial black hole. According to CoinFLEX “this customer failed to honor his obligations.”
The company now intends to pursue Ver for $84 million through the courts. Should the company be successful in their case the value of their win should accrue to the rvUSD token minus legal costs. Ordinary investors will, therefore, be watching the case with interest.