CoinFLEX Wants $4.3 Million Back From Blockchain.com

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Cryptocurrency exchange CoinFLEX has said that it will start legal proceedings if Blockchain.com fails to refund $4.3 Million worth of FLEX tokens, according to a demand notice on February 24. The demand comes after the crypto exchange lent the Luxembourg-based financial services company a cumulative 3,000,000 FLEX coins in 2022. The amount consists of four separate loans allegedly issued between March and June.

CoinFLEX Claims https://t.co/FyOohiuiti Owes Over $4.3M in FLEX
► https://t.co/oYQ93NHc1H https://t.co/oYQ93NHc1H

— Decrypt (@decryptmedia) February 26, 2023

In the demand notice, CoinFLEX gives Blockchain.com until March 7 to confirm refund plans. According to the crypto exchange, failure to do so will compel them to commence legal proceedings, including “a formal demand for payment dubbed statutory demand. Blockchain.com will only have an extra three weeks to return the funds if the latter takes effect.

In a letter to Blockchain.com, CoinFLEX’s legal representative said:

“You have failed, refused, and/or neglected to repay the 3,000,000 FLEX coins that are long overdue to be repaid. If our client is compelled to enforce its legal rights against you […] it will naturally look towards you for the maximum amount of interest and costs that is recoverable at law.”

CoinFLEX Deal With Blockchain.com

The demand is based on an AMM+ (automated market maker) Participation Agreement that the two parties reportedly entered o April 12, 2022, when Bitcoin (BTC) was struggling below the $40,000 threshold. Nevertheless, the very existence of the agreements has been put into doubt, with Blockchain.com saying:

“This is completely false.”

According to the financial services company, “CoinFLEX has provided no evidence, documentation, or on-chain data to support their claims.” Blockchain.com also said that the crypto firm’s claim is without merit, calling it a “work of fiction from an insolvent company currently being sued by its customers for dissolution.”

Allegedly, the letter sent to Blockchain.com was from Nine Yards Chambers LLC, a Singapore-based law firm that lists CoinFLEX as its client in the notice.

Blockchain.com Changes Narrative

Blockchain.com has also changed the narrative saying that CoinFLEX owed them for “services rendered, which remain unpaid at this time, and we will soon initiate collection.”

CoinFLEX, a 2019 exchange co-founded by Sudhu Arumugam and CEO Mark Lamb, commenced restructuring proceedings in a Seychelles court in August, seeking to raise $84 million to settle its debts. Commenting on the matter, Lamb said:

“We hope that common sense will prevail and that we will be repaid the FLEX we are owed.”

Blockchain.com In Its Own Financial Troubles

On its side, Blockchain.com is also in its own financial troubles. The company has been trying to dispose of some of its assets to fill a $270 million hole in its balance sheet. One among these holes stems from cash and crypto loaned to bankrupt cryptocurrency hedge fund Three Arrows Capital (3AC), whose cofounders recently emerged as Arumugam and Lamb’s business partners. The CoinFLEX executives have joined 3AC’s Su Zhu and Kyle Davies to set up a new venture called Open Exchange (OPNX).

In a leaked pitch deck in January, there were revelations that the four were planning to raise $25 million as capital for the new company. The pitch deck described OPNX as a customers’ hub for trading bankruptcy claims, with a particular focus on those related to numerous crypto companies that collapsed in 2022 alongside FTX.

A cohort of CoinFLEX members in the official Telegram channel enraged the leak, with one user saying, “You don’t want to be associated with 3AC. Think about this carefully.” Three Arrows Capital was among the largest crypto-focused hedge funds to collapse last summer. It filed for Chapter 11 bankruptcy protection after sustaining hefty losses following the collapse of Terra’s UST stablecoin and the ecosystem’s governance token, LUNA.

Several weeks after the pitch deck began to spread, Zhu officially declared OPNX, stating that the FLEX coin would be the “primary token of the new exchange.”

13/ it is with humility that we announce the claims waitlist is now open, with site UI/UX beta testing coming very soon: https://t.co/uFZUNn9PBq

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

— 朱溯 🐂 (@zhusu) February 9, 2023

Although the latest letter to Blockchain.com was reportedly sent privately, Lamb has a history of publicly airing a dispute concerning CoinFLEX’s lending practices. In June, a month after the exchange suspended withdrawals, the executive claimed on Twitter that renowned Bitcoin evangelist Roger Ver owes CoinFLEX $47 million worth of the USDC stablecoin. Citing “uncertainty involving counterparty,” Lamb noted that a default notice had been served.

Roger Ver owes CoinFLEX $47 Million USDC. We have a written contract with him obligating him to personally guarantee any negative equity on his CoinFLEX account and top up margin regularly. He has been in default of this agreement and we have served a notice of default.

— Mark Lamb (@MarkDavidLamb) June 28, 2022

Nevertheless, Ver denied the allegations, saying he was the one owed “a substantial sum of money” and was in the process of getting the funds returned,

Recently some rumors have been
spreading that I have defaulted on a
debt to a counter-party. These rumors
are false. Not only do I not have a debt
to this counter-party, but this counter-
party owes me a substantial sum of
money, and I am currently seeking the
return of my funds.

— Roger Ver (@rogerkver) June 28, 2022

As Roger Ver’s conflict with Mark Lamb continued, CoinFLEX announced in July that customers could withdraw some of the funds from the exchange. However, this would be controlled and limited to 10% of the users’ funds. The conditions also excluded the platform’s FlexUSD stablecoin.