CoinFlex Issues New Token by Offering 20% Annual Return amid Halting Withdrawals
CoinFlex has announced plans to raise funds by issuing a new token that will offer a 20% annual return, according to a report from Bloomberg.
The new token is part of an effort to resume withdrawals following an individual's account holds a negative balance and fails to repay a $47 million debt.
The cryptocurrency exchange platform plans to issue $47 million of «recovery Value USD» tokens on Tuesday as a solution to re-enabling withdrawals. It said that the resumption of withdrawals is targeted for June 30 and will depend on the demand for the new tokens.
According to Bloomberg News, Mark Lamb, chief executive officer of CoinFlex, said, «we've spoken to a significant amount of private investors such that we think that at least half of the issuance is going to be subscribed for.»
Currently, the token sale is eligible only to non-US sophisticated investors, according to CoinFlex.
Last week, the company halted withdrawals following an unnamed counterpart's inability to repay debt after experiencing liquidity issues. CoinFelx shared that the user was a high-net-worth individual with «substantial shareholdings in several unicorn private companies and a large portfolio.»
«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 23, 2022, „CoinFlex said in a blog post.
The individual had consistently met every margin call before this incident, CoinFlex said in its blog post. It further added that this incident indicates that crypto markets may move too sharply for manual margin arrangements to be effective.
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