Home / Markets / Cryptocurrency /  Crypto exchange CoinFlex to issue new recovery token after withdrawal freeze
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Cryptocurrency exchange CoinFlex plans to raise funds by issuing a new token that will offer a 20% annual return, in an effort to resume withdrawals after a client failed to repay a $47 million debt. 

The platform said it will start to issue $47 million of what it calls “Recovery Value USD" tokens. The resumption of withdrawals, targeted for June 30, will depend on the level of demand for the new tokens. 

“During the recent market volatility, a long-time customer of CoinFLEX’s account went into negative equity, meaning the Individual’s account currently holds a negative balance. In response, CoinFLEX made the decision to halt user withdrawals starting from June 23rd, 2022," the company informed in a blog post.

The token sale is eligible only to non-US, sophisticated investors, according to the statement. Founded in 2019, CoinFlex is a smaller cryptocurrency exchange focusing on derivatives trading. 

“We are still targeting withdrawals for Thursday, June 30th 2022; however, this will be subject to receiving funds pursuant to the rvUSD issuance. If the rvUSD token issuance is fully subscribed, CoinFLEX will re-enable withdrawals and restore the platform to full functionality in an orderly manner," the company added.

CoinFlex paused withdrawals last Thursday after an unnamed counterparty, a high-net-worth individual with “substantial shareholdings in several unicorn private companies and a large portfolio" experienced liquidity issues and failed to repay debt. 

The pause comes amid liquidity problems and contagion throughout the industry. Major lenders Celsius Network and Babel Finance have frozen withdrawals, and Three Arrows Capital, a crypto hedge fund, is also facing liquidity troubles that rattled investors. 

CoinFlex has said the counterparty at issue isn’t Three Arrows Capital or any lending firm. While it would typically liquidate any negative equity account, the user had a non-liquidation recourse account, according to CoinFlex. No other accounts are in negative equity, it added. 

Cryptocurrencies have suffered this year amid Federal Reserve rate hikes and stubbornly high inflation. The collapse of the Terra/Luna ecosystem and continued concern about hedge fund Three Arrows Capital Ltd. have further rattled investors.

(With inputs from Bloomberg)

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