CoinFLEX Launches a $47 Million Recovery Token After Halting Withdrawals

Key Insights:

• RvUSD tokens are worth $1 each and include a 20% annual percentage rate.
• CoinFLEX is aiming to sell off bad debt, rectify liquidity shortages and restart user withdrawals.
• RvUSD will only be for sale to non-U.S-resident investors at a minimum subscription of $100,000 per investor.

Physical futures crypto exchange CoinFLEX has announced the launch of a Recovery Value USD (rvUSD) Token, with issuance likely to run from today until July 1.

RvUSD tokens are worth $1 each and buyers can convert their coins to USDC or a combination of USDC and FLEX Coins.

Outstanding Debt

The drivers behind this decision are plentiful. First, the company temporarily halted withdrawals on June 23 due to extreme volatility in the cryptocurrency market.

Then it was revealed that an unnamed high-net-worth customer owes the exchange an outstanding debt. The customer’s account went into negative equity during the crypto market crash but CoinFLEX described him/her as a “high integrity” individual who has “significant shareholdings in several unicorn private companies and a large portfolio.”

The customer’s equity and margin call obligations prevented their negative balance account from being liquidated, which would have been standard procedure in a normal scenario. In this instance, CoinFLEX opened a one-of-a-kind non-liquidation recourse account and agreed not to liquidate it.

The firm has since confirmed that it will be eliminating non-liquidation accounts as well as making positions public.

CoinFLEX did confirm that the counterparty in question is not Three Arrows Capital, the crypto hedge fund which was recently reported to be considering options, including the sale of assets and a bailout by another firm.

A 20% Annual Percentage Rate

The Recovery Value USD Token issuance includes a 20% annual percentage rate (APR) accrued and paid daily in rvUSD, offering a sizable return to potential investors.

Importantly, RvUSD will only be for sale to non-U.S-resident sophisticated investors at a minimum subscription of $100,000 per investor. A sophisticated investor is one who has an annual income of at least $200,000, a total net worth of at least $1 million and has performed Know Your Customer (KYC) procedures on CoinFLEX.

The company is essentially selling off bad debt through its new $47 million token offering, with additional goals of rectifying a liquidity shortage and restarting user withdrawals. RvUSD is designed to help CoinFLEX recover losses incurred by the account that reached negative equity without being liquidated.

Notably, tokens will be issued to high-income or high-net worth individuals, with fundraising expected to contribute to resumed withdrawals on June 30.

However, the timeline of when CoinFLEX resumes withdrawals and restores the platform to full functionality depends on how much it raises during the token sale. CEO Mark Lamb has expressed optimism that investors will buy the token.