Is Blockchain.com CoinFLEX Flushing Almost $4.3 Million in FLEX Tokens?

Online publication Decrypt reports that cryptocurrency exchange CoinFLEX claims it gave Luxembourg-based financial services business Blockchain.com a total of 3,000,000 FLEX coins last year and is now asking it to refund $4.3 million worth of FLEX coins or face legal action.

In response, Blockchain.com stated: “This is completely wrong.”

The notice, issued on February 24, says that Blockchain.com has until March 7 to confirm that it will return the FLEX coins, and it has until March 21 to transfer the money. Otherwise, CoinFLEX claims that the exchange will be subject

Initiation of legal proceedings, including but not limited to a formal demand for payment known as a statutory demand.

According to the letter, Blockchain.com will then have another 21 days to repay the money, which consists of four loans allegedly made between March and June last year.

The letter to Blockchain.com claims that “You have failed, refused and/or ignored to repay the 3,000,000 FLEX coins that are long overdue.” “Our client will naturally look to you for the highest amount of interest and fees obtainable under the law” if it has to take legal action against you.

The claim is based on a participation agreement with an AMM+ (automated market maker) that was allegedly signed on April 12, 2022, when Bitcoin was struggling at $40,000. Whether or not such an agreement actually exists is disputed.

According to the Blockchain.com statement,

CoinFLEX has not offered any evidence, documentation or chain data to back up its claims.

A Singapore-based law firm called Nine Yards Chambers LLC reportedly delivered the letter to Blockchain.com, and the notice cites CoinFLEX as one of its clients.

Blockchain.com stated that CoinFLEX’s claim was

completely without foundation and a work of fiction from an insolvent company which is now being sued by its clients for dissolution. In truth, CoinFLEX owes Blockchain.com money for services rendered that have not yet been paid for; we will start collecting it soon.

In a Seychelles court, CoinFLEX began restructuring proceedings in August with the aim of raising $84 million to settle its own debts. CEO Mark Lamb and co-founder Sudhu Arumugam co-founded the exchange in 2019.

Lamb added: “We hope common sense will prevail and that we will be paid the money we were promised.”

However, Blockchain.com has its own financial difficulties. To plug a $270 million hole in its balance sheet caused by cash and cryptocurrency it lent to insolvent hedge fund Three Arrows Capital, the company has sought to liquidate some of its assets (3AC).

Su Zhu and Kyle Davies, the co-founders of 3AC, have recently been revealed to be Arumugam and Lamb’s business partners. The three are working together to launch a new company called Open Exchange (OPNX).

The four sought $25 million to launch the firm, according to a pitch deck leaked last month. It identified Open Exchange as a hub for users looking to trade bankruptcy claims, particularly those relating to several cryptocurrency businesses that failed last year, including the exchange FTX.

Several users of CoinFLEX’s official Telegram channel were angered by the revelation. One user said: “You do not want to be associated with 3AC. Think carefully about this.”

When 3AC collapsed last summer, it was one of the largest crypto-focused hedge funds. It filed for bankruptcy after suffering significant losses as a result of the collapse of Terra’s UST stablecoin and LUNA governance token.

FLEX currency will be the “main token of the new exchange,” according to Zhu, who made the formal announcement of OPNX a few weeks after the pitch deck began circulating.

13/ it is with humility that we announce that the waiting list for claims is now open, with beta testing of the site’s UI/UX coming soon:

& for those who asked, yes $FLEX will be the primary token of the new exchange

— Zhu Su 朱方 (@zhusu) 9 February 2023

According to the exchange’s website, FLEX currency was first introduced as the initial token for CoinFLEX, and offers “users with specific benefits that [make] trade on CoinFLEX much better,” such as reduced costs.

Despite the coin’s recent 180% rise to $1.46 over the past 30 days, CoinGecko estimates that FLEX is still about 80% behind its all-time high of $7.56 in December 2021. CoinGecko also identifies CoinFLEX as the only centralized exchange currently offering the token.

Lamb had already issued a public complaint against CoinFlex’s lending practices, although this latest letter addressed to Blockchain.com is said to have been delivered to the firm discreetly.

Lamb said on Twitter that longtime Bitcoin supporter Roger Ver owed CoinFLEX $47 million worth of stablecoin USDC, and that a default notice had been filed a month after CoinFLEX blocked withdrawals last May, citing “uncertainty regarding a counterparty.”

Roger Ver owes CoinFLEX $47 million USDC. We have a written contract with him that commits him to personally guarantee any negative equity in his CoinFLEX account and replenish margin regularly. He has been in default of this agreement and we have issued a notice of default.

— Mark Lamb 💪 (@MarkDavidLamb) 28 June 2022

The next day, Ver refuted the accusations, claiming he was the one who owed “a large amount of money” and took action to have the money repaid.

Recently, there have been some rumors
spread that I have defaulted one
debt to a counterparty. These rumors
are fake. Not only do I have no debt
to this counterparty, but this counterparty
party owes me a considerable sum of
money and I am currently applying
return of my funds.

— Roger Ver (@rogerkver) 28 June 2022

On the status of his disagreement with Ver, Lamb chose not to comment.

CoinFLEX declared last July that users would be allowed to withdraw money from the exchange, but in a limited way, as Ver and Lamb’s dispute continued. Users could only withdraw up to 10% of their funds, and flexUSD, the platform’s stablecoin, was not included.

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