Crypto exchange CoinFLEX is demanding that Blockchain.com return $4.3 million worth of FLEX coins or face legal action, claiming it loaned the Luxembourg-based financial firm a total of 3,000,000 FLEX coins last year, according to a demand notice obtained by Decrypt.
“This is completely false,” said Blockchain.com Decrypt in response.
The message, dated February 24, claims that Blockchain.com has until March 7 to confirm that it will pay back the FLEX coins, and sets a deadline of March 21 for Blockchain.com to send the funds. Otherwise, CoinFLEX says the exchange will face “initiation of legal proceedings, including but not limited to” a formal payment demand called a statutory demand.
From then on, Blockchain.com will still have another 21 days to repay the funds, which consist of four loans allegedly issued between March and June of last year, according to the document.
“You have failed, refused and/or neglected to repay the 3,000,000 FLEX coins that are long overdue,” the letter to Blockchain.com said. “If our client is compelled to enforce its legal rights against you […] it will naturally look against you for the maximum amount of interest and costs that can be recovered by law.”
The claim is based on an AMM+ (automated market maker) participation agreement allegedly entered into on April 12, 2022, when Bitcoin struggled to $40,000. Whether that agreement even exists is disputed.
“CoinFLEX has not provided any evidence, documentation or chain data to support their claims,” the Blockchain.com statement reads.
The letter allegedly sent to Blockchain.com was from a Singapore-based law firm called Nine Yards Chambers LLC, which lists CoinFLEX as its client in the notice. Nine Yards Chambers LLC did not immediately respond to requests for comment Decrypt.
“CoinFLEX’s claim is completely worthless and a work of fiction by an insolvent company currently being sued by its customers for dissolution,” Blockchain.com said. “In fact, CoinFLEX owes Blockchain.com for services rendered that remain unpaid at this time, and we will soon initiate collection.”
CoinFLEX went into restructuring proceedings in a Seychelles court last August, where it is seeking to raise $84 million to pay off its own debt. The exchange was co-founded in 2019 by Sudhu Arumugam and CEO Mark Lamb.
“We hope that common sense will prevail and that we will be repaid the FLEX we owe,” Lamb said Decrypt.
Meanwhile, Blockchain.com faces its own financial challenges. The company has been trying to sell some of its assets to fix a $270 million hole in its balance sheet, one stemming from cash and crypto it lent to bankrupt hedge fund Three Arrows Capital (3AC), Decrypt previously reported.
3AC co-founders Su Zhu and Kyle Davies have recently emerged as business partners to Arumugam and Lamb, all working together to establish a new venture called Open Exchange (OPNX).
A pitch deck leaked last month revealed the four wanted to raise $25 million to set up the company. It described the Open Exchange as a hub for customers looking to trade bankruptcy claims – particularly those related to a number of crypto companies that collapsed last year, such as the FTX exchange.
The leak stopped angry from some members of CoinFLEX’s official Telegram channel. “You don’t want to be associated with 3AC,” said one user. “Think this over carefully.”
3AC was one of the largest crypto-centric hedge funds when it imploded last summer, filing for bankruptcy after suffering heavy losses from the collapse of Terra’s UST stablecoin and governance token LUNA.
Weeks after the pitch deck began circulating, OPNX was official announced by Zhu, who said the FLEX coin will be “the primary token of the new exchange.”
FLEX coin was originally established as the initial token for CoinFLEX, providing “users with exclusive benefits such as [make] trade on CoinFLEX much better,” according to the exchange websitefor example, lower fees.
Although the coin has accumulated around 180% to $1.46 during the last 30 days, FLEX remains approx 80% down from the record high of $7.56 in December 2021, according to CoinGeckowhich also lists CoinFLEX as the only centralized exchange still supporting the token.
https://decrypt.co/107138/crypto-exchange-coinflex-plans-84m-restructuring-seychelles
While this latest letter addressed to Blockchain.com was reportedly sent to the company privately, Lamb has previously publicized a dispute involving CoinFlex’s lending practices.
One month after CoinFLEX froze withdrawal in May last year, cites “uncertainty involving a counterparty,” Lamb took to Twitter to claim that longtime Bitcoin evangelist Roger Ver owes CoinFLEX $47 million worth of stablecoin USDC, adding a default notice had been served.
Ver denied the allegations the same day, saying he was the one owed “a significant amount of money” and was taking steps to recover the money.
Lamb declined to comment on the state of his dispute with Ver. Ver did not immediately respond Decrypt their request for comment.
While Ver and Lamb’s argument continued, CoinFLEX announced last July that customers would be able to withdraw some funds from the exchange, but in a limited way. Withdrawals were limited to 10% of users’ funds and excluded the platform’s stablecoin, flexUSD.
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