Cryptocurrency exchange CoinFlex is planning to raise funds by issuing a new token that will offer 20% annualized returns in an effort to resume withdrawals after a customer failed to repay a $47 million loan.
The platform said it will begin issuing $47 million worth of “recovery value USD” tokens. The resumption of withdrawals, targeted for June 30, will depend on the level of demand for the new token.
“During the recent market volatility, a long-time client of CoinFlex’s account went into negative equity, meaning the individual account currently has a negative balance. In response, CoinFLEX posted a statement on June 23. , decided to stop user withdrawals from 2022,” the company explained in a blog post.
According to the statement, the token sale is only eligible for non-US, sophisticated investors. Founded in 2019, CoinFlex is a small cryptocurrency Exchange focused on derivatives trading.
“We are still targeting withdrawals for Thursday, June 30th 2022; however, this will be subject to funds being received as per the rvUSD issuance. CoinFlex withdrawals if the rvUSD token issue is fully subscribed and restore the platform to full functionality in an orderly manner,” the company said.
CoinFlex halted withdrawals last Thursday after an unnamed counterparty said a high-net-worth individual with “substantial shareholding in several unicorn private companies and a large portfolio” experienced liquidity issues and was unable to repay loans. failed.
The pause comes amid the liquidity problem and the contagion across the industry. Major lenders Celsius Network and Babel Finance have halted withdrawals, and crypto hedge fund Three Arrows Capital is also facing liquidity problems that plagued investors.
CoinFlex has stated that the issue is not with counterparty Three Arrows Capital or any lending firm. According to CoinFlex, although this would typically eliminate any negative equity accounts, the user had a non-liquidating prop account. It states that no other account is in negative equity.
Cryptocurrencies have suffered this year amid a hike in Federal Reserve rates and extremely high inflation. The collapse of the Terra/Luna ecosystem and continued concerns about hedge fund Three Arrows Capital Ltd. have further upset investors.
(with inputs from Bloomberg)