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The Inside Story Of The Roger Ver Vs. CoinFLEX Conflict

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The infamous Roger Ver is back in the headlines for all the wrong reasons. Like many industry players, derivatives exchange CoinFLEX has recently run into financial troubles. Surprisingly, Roger Ver was blamed for everything and the circus began. Lucky for us Chinese journalist Colin Wu covered “All details of insider information through a source close to the situation” in his newsletter. However, as you can see, this is an anonymous source. So, take the story we are about to analyze with a grain of salt.

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Wu’s summary of the situation:

“On June 24, 2022, the CoinFLEX exchange announced that it had made the decision to suspend user withdrawals, and subsequently, the price of the FLEX platform token plummeted from $4.30 to less than $1.50 in four hours. At the same time, FlexUSD, the platform’s stablecoin, also began de-pegging and prices dropped to $0.23.”

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The funny thing is that both organizations were clearly doing business together. On May 14, Roger Ver tweeted: “CoinFLEX’s FlexUSD interest payment is on track to become the default stablecoin for the entire SmartBCH ecosystem if USDT and USDC don’t move fast.” How did everything go wrong so quickly? That’s what this article is about.

Roger Ver vs. CoinFLEX, game by game

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The story begins with CoinFLEX announcing to its partners that they have “opened a special account for Roger Ver.” The characteristics of the account ensured that Roger Ver “would not be immediately liquidated if he fell below maintenance margin, but rather given sufficient time to make a margin call”. There is nothing special here, this person is a wealthy person, such transactions are a dime a dozen in large finance.

Roger Ver offered a “BCH margin” of “about $400” as a guarantee. Then there was a collapse of Terra, and the entire crypto market collapsed. By the time CoinFLEX “faced a liquidity crunch”, Bitcoin Cash was worth around $120. It’s still in that price range at the time of writing. This is where things get crazy. The biggest revelation of Wu’s story is at the end of this paragraph.

“If that were all, CoinFLEX could cover its deficit. However, before that, CoinFLEX released its own stablecoin, FlexUSD, just like other exchanges. At this point, CoinFLEX used FlexUSD to buy a large amount of FLEX on the secondary market and went short to hedge the spot price. However, the counterparty to this short position was also Roger Ver!”

As we have seen, this has happened over and over again, “when the withdrawal limit announcement was made, CoinFLEX total funds began to fall cyclically.” And all hell broke loose.

BCHUSD Price Chart — TradingView

BCH price chart on Coinbase | Source: BCH/USD on TradingView.com

Total War on Twitter

June 27 CEO Mark Lamb tweeted“CoinFLEX made the decision to stop user withdrawals on June 23rd, shortly after longtime CoinFLEX client went negative. Immediately after this, a rumor began to circulate that Roger Ver was the very “old client”.

The Bitcoin Cash leader went on the offensive and tweeted a statement that was clearly written by a lawyer. “Recently, there have been rumors that I have not fulfilled my obligations on a debt to a counterparty. These rumors are false. Not only do I have no debt to this counterparty, but this counterparty owes me a significant amount of money, and I am currently seeking the return of my funds. How can these two statements be true? Remember that “the counterparty to this short position was also Roger Ver!”

However, Mark Lamb did not have this. Even though both sides were in talks, Lamb tweeted, “CoinFLEX also vehemently denies that we have any debt to it.” In addition, “Roger Ver owes $47 million to CoinFLEX. We have a written contract with him obliging him to personally guarantee any negative equity in his CoinFLEX account and replenish margin regularly.”

Even if CoinFLEX is right in this case, did they have to take their dirty laundry out in public?

Roger Ver vs. CoinFLEX, consequences

Back to Colin Wu’s newsletter:

“Eventually, Roger Ver’s position was completely worn out and turned into negative equity, while CoinFLEX was left with a lot of delisted FLEX. It appears that CoinFLEX suffered $120 million in real losses, including losses from depegging the FlexUSD stablecoin and withdrawal losses (less than $10 million) due to the collapse of the SmartBCH cross-chain bridge that was built from CoinFLEX.”

And the fact is, even if Roger Ver’s debt was the cause, CoinFLEX’s risk management team has a few questions to answer. “Roger Ver became almost the only counterparty on the exchange, and this single counterparty had the privilege of not replenishing the margin on time,” concludes Wu. It was an unfortunate sequence of events, but both parties signed these deals, and both parties took to Twitter to resolve what should have been a private matter.

Shame on everyone around.

Featured Image by Gerd Altmann from Pixabay | Charts by TradingView





Credit : www.newsbtc.com

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