Derivatives exchange CoinFlex has said it will pursue legal action against Roger Ver, who failed to repay a $47 million margin call on a leveraged position collateralized by FLEX coin.
Ver was an early crypto investor and promoter of bitcoin, whose collateral for his leveraged position had fallen below the minimum threshold. This came after major cryptocurrencies came under pressure following the TerraUSD stablecoin collapse.
Last month, CoinFLEX reported that it was pausing FLEX coin trading in perpetual swaps and spot trading because a customer had owed the company $47 million.
CEO Mark Lamb assured the public that the counterparty was not Three Arrows Capital, the embattled Singaporean hedge fund, nor was it a lending firm, ruling out lenders BlockFi and Celsius. It later turned out to be Ver.
CoinFLEX is $84M out of pocket after liquidation
Ver was a customer with a manual margin, which meant that, unlike regular users who are automatically liquidated when their leverage ratio falls below a certain threshold, he was granted a grace period to add more collateral.
Ver had asked the company to liquidate his position, promising to provide funds to take delivery of futures contracts, but failed to honor the promise. CoinFLEX liquidated his position, but was left with a deficit of $84 million.
The company is now pursuing legal action against Ver, who is personally liable for the $84 million and has refused to pay. CoinFLEX’s lawyers believe the company has a strong case. The litigation process is expected to take about 12 months before a judgment is issued in Hong Kong.
Where now for CoinFLEX?
CoinFLEX became a victim of the crypto market rout that wiped about $2 trillion off the crypto market cap and left Celsius, Voyager Digital, and Three Arrows Capital battling to stay afloat. Voyager Digital and Three Arrows Capital have both filed for bankruptcy.
CoinFLEX is in discussions with a large U.S. exchange regarding a potential partnership it hopes to finalize as soon as funding is secured. Under the agreement, the U.S. exchange would leverage CoinFLEX’s platform to offer access to U.S. equities repo markets using an offshore license.
CoinFLEX has engaged large depositors willing to convert their deposits into equities.
While talks with new partners and investors take place, CoinFLEX is unlocking liquidity for 10% of balances for withdrawal, which comes with a few caveats.
Locked assets except FLEX and FlexUSD may be sold for USDC to raise funds and cannot be withdrawn or used for collateral.
CoinFLEX expects all technological, legal, and operational work to take about a week.