CoinFLEX to Resume Withdrawals After $47M Token Offering

Cryptocurrency exchange CoinFLEX has decided to solve its liquidity issues and restart user withdrawals through a new $47 million token offering, the company said in a blog post on 28 June.

Called Recovery Value USD (rvUSD), the new token is designed to help the exchange recover $47 million in losses, which happened when a certain individual’s account was allowed to reach negative equity without being liquidated. Worth $1 each, the token’s issuance will begin on 28 June and continue until 1 July, with the exchange hoping to resume withdrawals on the platform on 30 June. CoinFLEX explained in the blog post:

“We are still targeting withdrawals for Thursday, June 30th 2022; however, this will be subject to receiving funds pursuant to the rvUSD issuance. If the rvUSD token issuance is fully subscribed, CoinFLEX will re-enable withdrawals and restore the platform to full functionality in an orderly manner.”

CoinFLEX temporarily paused all withdrawals on 24 June due to “extreme market conditions”, and allowing an unknown individual’s account to go into negative equity. Under normal circumstances, CoinFLEX liquidates accounts before they reach zero equity, but this was a one-of-a-kind “non-liquidation recourse account”. The exchange explained that this customer was a high integrity individual with “significant shareholdings in several unicorn private companies and a large portfolio”, who had liquidity issues due to the recent market crash.

According to CoinFLEX’s announcement, the new rvUSD token will be issued only to non-US resident Sophisticated Investors — those with an annual income of at least $200,000, total net worth of $1 million, and have passed CoinFLEX’s KYC procedures — with a minimum subscription of $100,000 per investor. The token also comes with a 20% annual percentage rate (APR), which will be paid daily in rvUSD. The company has also set aside 2.5 million FLEX tokens from its treasury, which will be distributed pro rata across all rvUSD holders once the individual has repaid the full amount.

The CEO of CoinFLEX, Mark Lamb, said in an interview with Bloomberg Technology that his exchange should emulate the transparency of major DeFi firms. With that goal, the company now plans to use an external auditing firm to boost its transparency for future positions, notional value of accounts, and margin. Lamb said:

“It has a damage to privacy, but we think that traders are going to find that worthwhile for the additional comfort that they get from knowing the risk and the leverage implicit in the system.”