CoinFLEX users are not in the clear- Fresh concerns hot off the press
In a recent announcement dated 9 July, co-founders of CoinFLEX,
Sudhu Arumugam and Mark Lamb outlined steps they intend to take in order to help the exchange out of its current liquidity crisis.
An unfortunate impact of the general bearish outlook of the cryptocurrency market so far this year has been the liquidity problems it has caused for a handful of crypto service providers.
In an announcement blog published by CoinFLEX on 23 June, citing “extreme market conditions and continued uncertainty involving a counterparty,
” the exchange informed its users of the suspension of withdrawals on the platform.
In a later update on 27 June, the exchange announced the launch of a recovery token called Recovery Value USD (rvUSD),
through which it had hoped to monetize the personal collateral of the alleged customer whose account ran into negative equity.
In the new announcement, CoinFLEX noted that due to a written manual margin arrangement with “a large individual customer,”
the customer was obligated to send more collateral to the exchange to support its positions before liquidation.
There was also an arrangement to personally indemnify the exchange for shortfalls in the account following the liquidations of its positions.
CoinFLEX alleged that liquidating the collaterals in a bear market was a difficult task leading it to incur a deficit of $84 million which the customer allegedly failed to pay back.
Arbitration proceedings in Hong Kong
The exchange, in its update, informed users that it had initiated an arbitration proceeding against the customer in question before the Hong Kong International Arbitration Centre for the recovery of this $84 million.
Noting the impact of the liquidity crisis on the exchange’s FLEX coin, co-founders Arumugam and Lamb stated,