Withdrawals are unlikely to resume on Thursday

The combated cryptocurrency exchange CoinFlex will probably not be able to let customers withdraw money again on Thursday as it was originally planned, said CEO Mark Lamb on Wednesday.

“We will need more time. And it is unlikely that withdrawals will be reactivated tomorrow,” Lamb told CNBC.

However, CoinFlex is in talks with several large funds interested in buying the $ 47 million in debt allegedly owed by investor Roger Ver, added Lamb.

CoinFlex is the latest victim of the cryptocurrency price crash that has seen billions of dollars wiped out of the market in the last “cryptocurrency winter”. Bitcoin has lost more than 50% of its value this year, and is about 70% lower than its peak in November last year, while ether is down 70% this year and more than 75% from the top.

The cryptocurrency exchange stopped withdrawing for customers last week, citing “extreme market conditions”, saying that an individual investor owed it around $ 47 million. Initially, CoinFlex did not name the customer, but on Tuesday, Lamb claimed that the investor is Roger Ver, who has been called “Bitcoin Jesus” for his evangelical view of cryptocurrency in the early days of the industry.

Ver has denied that he owes CoinFlex the money. Ver was not immediately available for comment on this story when he was contacted by CNBC.

CoinFlex claimed that Ver’s account went into “negative equity.” Normally, the stock exchange will liquidate an investor’s position in this situation. But Ver had a special agreement that prevented this from happening, the stock exchange said.

To fix the $ 47 million gap in CoinFlex’s balance sheet, the company issues a symbol called Recovery Value USD, or rvUSD, and entices investors with a 20% interest rate to hold the virtual currency. Lamb said the ability to pay that interest would come from getting the funds back from Ver plus a “financing fee” that has been imposed on him.

Lamb said “we do not know what will happen if he does not pay back or if he pays back, our focus right now is on … getting … these funds raised.”

He added that he is confident that “one way or another, this recovery is going to happen.”

Lamb said that the company is talking to several funds that buy distressed debt from companies, and that can potentially buy as much as 47 million dollars.

“The good news is that the number of players who have contacted who are interested in this debt offer and this symbolic offer is extremely well capitalized,” said Lamb, adding that some of the funds that have come into contact have more than $ 10 billion. in funds under management.

Lamb said some of the inquiries came from traditional funds instead of crypto-focused funds, but declined to name any of them.

“We are talking about tens of millions (of dollars). It comes from a mix of distressed debt funds, existing users of the platform and investors in CoinFlex,” Lamb told CNBC.

The language between Lamb and Ver marks the latest saga in the crypto market in the midst of a decline in digital coin prices.

Lamb said this week that Ver has received a notice of default. The CoinFlex boss told CNBC that the goal is to “keep talking to him (Ver) and resolve this amicably.” Lamb said, however, that there are other avenues for legal action.

“We also have an obligation to go through the appropriate legal channels as well,” he said.

The agreement between CoinFlex and Ver meant that if the investor failed to meet a margin call, his positions would not be automatically liquidated as normal.

A margin call is a situation where an investor must commit to more funds to avoid losses on a trade made with borrowed cash.

Lamb said CoinFlex felt comfortable entering into such an agreement because of “the data we had seen around his capitalization.”

But CoinFlex will now eliminate such agreements, Lamb said.

“In retrospect, it would definitely be better not to have any non-liquidation agreements,” Lamb said.