CoinFlex to re-open withdrawals soon but there is a catch. What is Locked Funds plan
2 min read 09 Jul 2022, 09:52 PM ISTIn discussion with creditors, investors, and others, CoinFlex is planning to create some temporary liquidity for its depositors. Last month, CoinFlex halted its withdrawals after a big investor failed to pay $47 million in margin calls.
PremiumCoinFlex is looking to allow withdrawals from their platform, however, with some limitations. Last month, CoinFlex halted its withdrawals after a big investor failed to pay $47 million in margin calls. In discussion with creditors, investors, and others, CoinFlex is planning to create some temporary liquidity for its depositors. On Saturday, the crypto exchange's co-founders Sudhu Arumugam and Mark Lamb announced a "Locked Funds Plan" for the withdrawal.
Sudhu and Mark in their joint statement today said, "the ongoing discussions with existing creditors, new investors, and others will take many weeks and so we wanted to come up with a plan to create some temporary liquidity for CoinFLEX depositors."
They added, "We will be looking to make available 10% (and more later) of balances available for withdrawal."
Here's what a Locked Funds Plan will be:
According to the CoinFlex founders, although you will see them in your balances as locked funds, they will not be available for withdrawals nor will they count as collateral. They said, "On the date, we implement this plan, we will temporarily close trading and will close off all long and short futures positions against each other. After this is done and verified we will then re-open for trading."
Further, as the outcome of the recovery plan is still uncertain and as we need to raise or recover funds in USDC, Sudhu and Mark said, "we will also likely ( subject to getting appropriate legal advice on this) need to sell all the locked assets, except FLEX and flexUSD, into USDC. As the funds we are looking to recover are in USDC, we need to dollarize the obligation to confirm the total amount of the liabilities. This will allow us to clearly determine the exact amount of obligations/liabilities for each user."
They gave an example. For instance, Bob had 1 BTC, 10 BCH, and 10,000 USDC in his account, with BTC priced at $20,000 and BCH priced at $100. After that, Bob’s withdrawable/available balance will become 0.1 BTC, 1 BCH, 1,000 USDC, and a locked balance of 27,900 USDC.
"If we do not sell the coins while BTC has moved from $20,000 to $100,000, we would have to recover 0.9 BTC for Bob which is worth $90,000, while the USDC debt that we recover might not be able to cover the BTC required," they explained.
The founders added that significant technology, operational and legal work are required to put all the above in place. They expect the implementation of the plan to take a week.
"We will also be calculating all the balance adjustments during the week and publishing our balance sheet alongside once that is done. Once this is fully verified and after the first withdrawal process is successfully implemented, we will look to make additional balances available for immediate withdrawal," the duo added.
Concluding they said, "there are several moving pieces in the plan and, as such, they are subject to changes as we get more information."
CoinFlex plans to recover $84 million through legal proceedings against this individual. The founders expect the arbitration process to take at least 12 months for completion. Further, CoinFlex is planning for a joint venture with a large US-based exchange/ATS platform.
