Roger Ver has returned to the news for the wrong reasons. CoinFLEX derivatives exchange ran into financial troubles recently, just like many other players in this industry. They blamed Roger Ver, the circus that started it all. Surprisingly. We were fortunate to be able to help. Chinese journalist Colin Wu covered “the entire insider details through a source close to the situation” in his newsletter. However, as you can see, it’s an anonymous source. So, take everything we’re about to analyze with a grain of salt.
Wu summarised the situation as follows:
“On June 24, 2022, the exchange CoinFLEX announced that it made the decision to halt user withdraws, and the price of the platform Token FLEX subsequently plummeted, from $4.30 to less than $1.50 in four hours. At the same time, FlexUSD, the platform’s stablecoin, also began to de-peg, with prices dropping as low as $0.23.”
It’s funny to note that the entities had been in business together. On May 14th, Roger Ver tweeted, “Inflation payment FlexUSDBy CoinFLEX It is well on its way towards becoming the standard stable coin in the world SmartBCHIf ecosystem USDT & USDC don’t move quickly.” How did everything deteriorate so fast? That’s what this article’s about.
Interest paying #FlexUSD by @CoinFLEXdotcom is on its way to being the default stable coin for the whole @SmartBCH ecosystem if #USDT & #USDC don’t move quickly.https://t.co/HG14Ik6U0o
— Roger Ver (@rogerkver) May 14, 2022
Roger Ver vs. CoinFLEX, The Play By Play
The story starts with CoinFLEX announcing to their partners that they “opened a special account for Roger Ver.” The account’s characteristics guaranteed that Roger Ver “would not be liquidated immediately if it fell below the maintenance margin, but rather that he would be given sufficient time to make a margin call.” Nothing special here, the man is a high-net-worth individual, deals like this are a dime a dozen in high finance.
As a guarantee, Roger Ver offered “a margin of BCH,” valued “at around $400.” Then, the Terra collapse happened and the whole crypto market crashed. By the time CoinFLEX ”faced a liquidity crisis,” Bitcoin Cash was worth around $120. It’s still at that price range at the time of writing. Here is the point where it gets crazy. The biggest revelation of Wu’s story is at the end of this paragraph.
“If that were all, CoinFLEX would have been able to cover its shortfall. CoinFLEX, however, had previously issued FlexUSD as a stablecoin. To hedge the spot market price, CoinFLEX opened a short position using FlexUSD at this time. However, the counterparty to this short position was also Roger Ver!”
As we’ve seen happen again and again, “when the withdrawal restriction announcement was made, CoinFLEX’s total funds began to fall in a cyclical fashion.” And all hell broke loose.
BCH chart price on Coinbase. Source: BCH/USD tradingview.com| Source: BCH/USD on TradingView.com
Twitter War: All Out
On June 27th, the company’s CEO Mark Lamb tweeted, “CoinFLEX made the decision to halt user withdrawals on June 23, shortly after a long-time customer of CoinFLEX went into negative equity. ” Immediately after, the rumor that Roger Ver was that “long-time customer” began circulating.
Recent rumors are circulating about a possible rumor.
It is spreading the news that I have fallen behind on my obligations to a
A counter-party may owe debt. These are some rumors
These are false. I do not have a loan.
to this counterparty, but this counterparty
Party owes me substantial amounts of
Money is what I’m currently looking for.
Return of funds— Roger Ver (@rogerkver) June 28, 2022
Bitcoin Cash’s leader took to Twitter and posted a statement clearly written by a lawyer. “Recently some rumors have been spreading that I have defaulted on a debt to a counter-party. They 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.” How could those two statements be true? Remember that “the counterparty to this short position was also Roger Ver!”
This agreement was based on his long-standing track record of topping up and fulfilling margin requirements. This situation has been a subject of frequent calls with him. We are trying to resolve it. This is something that we still want to fix.
— Mark Lamb 💪 (@MarkDavidLamb) June 28, 2022
Mark Lamb wasn’t having any of it. Even though both parties were negotiating, Lamb took to Twitter and stated, “CoinFLEX also categorically denies that we have any debts owing to him.” Plus, “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.”
CoinFLEX may be right, but did CoinFLEX have to let their dirty laundry out in the open?
Roger Ver vs. CoinFLEX. The Aftermath
Back to Colin Wu’s newsletter:
“In the end, Roger Ver’s position was completely worn out and turned into negative equity, while CoinFLEX was left with a lot of delisting FLEX. It was revealed that CoinFLEX had a real loss of $120 million, including losses from the de-peg of the stablecoin FlexUSD and the loss of withdrawals (less than $10 million) due to the collapse of the SmartBCH cross-chain bridge, which was built by CoinFLEX.”
And the fact of the matter is that, even if Roger Ver’s debt caused this, CoinFLEX’s risk management team has a few questions to answer. “Roger Ver became almost the only counterparty to the exchange, and this only counterparty had the privilege of not replenishing the margin in time.” It was an unfortunate sequence of events, but both parties signed those deals and both parties took to Twitter to resolve what should’ve been a private matter.
Shame everywhere.
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