Crypto exchange CoinFlex probably won't resume withdrawals Thursday as planned, says CEO

Embattled cryptocurrency exchange CoinFlex will probably not be able to let customers withdraw money again on Thursday as it originally planned, CEO Mark Lamb said on Wednesday.

“We will need more time. And it’s unlikely that withdrawals will be re-enabled tomorrow,” Lamb told CNBC.

However, CoinFlex is in talks with several large funds interested in buying the $47 million in debt allegedly owed by investor Roger Ver, Lamb added.

CoinFlex is the latest victim of the cryptocurrency price crash that has seen billions of dollars wiped off the market in the latest “crypto winter.” Bitcoin has lost more than 50% of its value this year, and is off about 70% from its all-time peak last November, while ether is down 70% this year and more than 75% from its peak.

The cryptocurrency exchange paused withdrawals for customers last week citing “extreme market conditions,” and said an individual investor owed it around $47 million. Initially, CoinFlex did not name the customer, but on Tuesday, Lamb claimed the investor is Roger Ver, who has been dubbed “Bitcoin Jesus” for his evangelical views on cryptocurrency in the early days of the industry.

Ver has denied that he owes CoinFlex the money. Ver was not immediately available for comment on this story when contacted by CNBC.

CoinFlex claimed that Ver’s account went into “negative equity.” Normally, the exchange would liquidate an investor’s position in this situation. But Ver had a particular agreement that meant this did not happen, the exchange said.

To fix the $47 million hole in CoinFlex’s balance sheet, the company is issuing a token called Recovery Value USD, or rvUSD, and enticing investors with a 20% interest rate for holding the virtual currency. Lamb said the ability to pay that interest rate would come from recouping the funds from Ver plus a “financing charge” that has been imposed on him.

Lamb said “we don’t know what’s going to happen after if he doesn’t repay or if he does repay, our focus right now is on … getting … these funds raised.”

He added he is confident “that one way of another, this recovery is going to happen.”

Lamb said that the company is talking to multiple funds that buy distressed debts of companies, and that could potentially buy the entire $47 million.

“The good news is that the number of players that have reached out that are interested in this debt offering and this token offering are extremely well capitalized,” Lamb said, adding that some of the funds that have gotten in contact have more than $10 billion in assets under management.

Lamb said that some of the inquiries have come from traditional funds rather than crypto-focused funds, but declined to name any of them.

“We’re talking about tens of millions (of dollars). It’s coming from a mixture of distressed debt funds, existing users of the platform, and investors in CoinFlex,” Lamb told CNBC.

The spat between Lamb and Ver marks the latest saga in the crypto market amid a slump in digital coin prices.

Lamb said this week that Ver has been served with a notice of default. The CoinFlex CEO told CNBC that the goal is to “continue to talk with him (Ver) and resolve this amicably.” However, Lamb said there are other routes for legal recourse.

“We also have an obligation to go through the appropriate legal channels as well,” he said.

The agreement between CoinFlex and Ver meant that if the investor failed to meet a margin call, then his positions would not be automatically liquidated as would normally be the case.

A margin call is a situation in which an investor must commit more funds to avoid losses on a trade made with borrowed cash.

Lamb said that CoinFlex felt comfortable to go into such an agreement because of the “data we’d seen around his capitalization.”

But CoinFlex will now be eliminating such agreements, Lamb said.

“In hindsight, having no non-liquidation agreements would have definitely been better,” Lamb said.