CoinFLEX Update: July 14, 2022

Dear CoinFLEX Community,

The following statement details the specifics outlined in our last update from July 9, which you may find here. CoinFLEX.US users may find the latest corresponding update here

We will enable limited withdrawals for all users this week and continue to work with a laser focus on our recovery plans. Please read through the following information to understand how CoinFLEX will handle the process of re-enabling limited withdrawals. 

 

Subaccount Transfers and Change to Terms of Service 

Many accounts have subaccounts with open Perp positions that would need liquidating when the FLEX Perp mark price is updated. A subset of these accounts will go into negative equity. To protect other creditors on the platform, we must merge the balances and positions in all subaccounts with their respective main accounts.

We strongly recommend that users close any existing (non-FLEX Perp) positions before the end-of-week pause if that is preferable.

Please read our updated Terms of Service. You will need to agree to the new terms to continue accessing your CoinFLEX account via desktop site, mobile app or API.

 

Timing of Actions

Starting at 5am UTC (1pm HKT/SGT) on Friday, July 15,  we will cancel all current pending withdrawals and return all funds to the respective account balances. Thereafter, we will shut trading and system access before beginning the process of re-enabling withdrawals described below. We expect this to last a few hours and will notify you once we are back online for both trading and withdrawals.

 

The Implication of Locked Funds for Bridge Users

  • Any new smartBCH deposits on CoinFLEX will have 90% of the deposit amount locked, leaving 10% available for use on the platform and withdrawal as BCH.
  • As mentioned in our previous statement, withdrawing BCH on the smartBCH network (SEP20) will not be possible until further notice.

 

The Implication of Locked Funds for flexUSD

  • The existing flexUSD balances on the platform will be locked the same as other assets.
  • Any new flexUSD deposits on CoinFLEX (i.e., transferred from a cold storage wallet to CoinFLEX for redemption purposes) will see 90% of the deposit amount locked. flexUSD will only be redeemable on platform and so in order to benefit from being able to redeem 10% of the assets, we strongly urge you to deposit flexUSD held off platform back on as soon as possible.
  • flexUSD redemptions can only be made from your available balance (10% of your total balance on CoinFLEX.)
  • As all open futures positions must be closed out, flexUSD will no longer hold short perp positions, and therefore holders will not earn interest for the time being. flexUSD may earn interest in the future.
  • New flexUSD minting will be suspended until further notice.

 

Open Futures Positions Plan

  • FLEX Perps: We will open the FLEX-USD spot market to determine a fair market price. All FLEX Perp positions will be matched at the fair market price. FLEX Perps and Repo will no longer be available because the FLEX LTV ratio will be set to 0, and as such, a user that buys FLEX repo will be instantly liquidated on their FLEX Perp position. We will reassess opening the FLEX Perp market at a future date.
  • Other futures positions (including Perp Swaps & Quarterly Futures): Because of the expected loss of collateral value from ONLY accounting for 10% of user balances AND an inevitably lower FLEX Coin price, we will also need to close any non-FLEX Perp and Futures positions to avoid full liquidations. (Note we will be removing FLEX Coin from being used as collateral). We will net all longs and shorts at a mark price point determined by CoinFLEX at the time; longs and shorts will be matched against each other. After that, we will re-open for trading, and you may re-enter any positions you wish.
  • AMM+ Positions: Open positions will be closed, and the corresponding balances will be transferred to the main accounts.

 

FLEX Coin

  • The existing FLEX Coin on the platform will be locked the same as other assets.
  • Anyone who buys FLEX Coin on the exchange will see their new balance fully usable on the platform and withdrawable.
  • Your VIP fee tier continues to count both the available and locked balances in aggregate.
  • FLEX Coin will no longer count as collateral (LTV of 0%).

 

CoinFLEX.US

  • flexUSD balances held by CoinFLEX.US users will be subject to a 90% lock. Users can redeem the 10% available balance.
  • All currently pending flexUSD redemptions will be processed to account balances as USDC and will also be subject to the same 10/90 lock ratio, with 10% of the USDC available for spending and withdrawals.
  • All currently pending flexUSD mints will be processed to users’ balances as flexUSD and will also be subject to the same 10/90 lock ratio, with 10% of balances being fully redeemable without any lock. As all open futures positions must be closed out, flexUSD will no longer hold short perp positions, and therefore holders will not earn interest on the remaining locked balance for the time being. flexUSD may earn interest again in the future.
  • New flexUSD minting will be temporarily suspended.
  • All remaining assets remain fully available and withdrawable.

 

Dollarization

We are still considering the implications of dollarization from user demand and legal perspectives. Please note that we will NOT be doing this as the first step. We may need to look at initiating this process in the near future and will make any announcements separately to this when we have more information.

 

Further Announcements

We are continuing to work on all avenues to resolve this situation. This ranges from possible further withdrawals and potential new equity investors to the acquisition of CoinFLEX and combinations in between. We continue to work closely with the significant creditor group. 

We will further update everyone on next steps by Friday, July 22.

 

Sudhu Arumugam and Mark Lamb,

CoinFLEX Co-Founders

 

 

FAQ

 

How is CoinFLEX treating limited withdrawals? 

We will be making 10% of user balances available for withdrawal with the exception of flexUSD, which cannot be withdrawn until further notice. 

 

What are locked funds?

The remaining 90% of your balance will be considered locked funds.

Locked funds will appear in your balance, but they will not be available for withdrawals, trades, nor be counted as collateral on CoinFLEX. 

 

When will CoinFLEX close trading activity on the platform?

Starting at 5am UTC (1pm HKT/SGT) on Friday, July 15,  we will cancel all current pending withdrawals and return all funds to the respective account balances. Thereafter, we will shut trading and system access before beginning the process of re-enabling withdrawals described below. We expect this to last a few hours and will notify you once we are back online for both trading and withdrawals.

 

How is CoinFLEX dealing with subaccounts?

Many accounts have subaccounts with open Perp positions that would need liquidating when the FLEX Perp mark price is updated. A subset of these accounts will go into negative equity. To protect other creditors on the platform, we must merge the balances and positions in all subaccounts with their respective main accounts.

We strongly recommend that you close any existing (non-FLEX Perp) positions ahead of the end-of-week pause if that is preferable.

 

What are the implications of locked funds for the smartBCH bridge?

  • Any new smartBCH deposits on CoinFLEX will have 90% of the deposit amount locked, leaving 10% available for use on the platform and withdrawal as BCH.
  • As mentioned in our previous statement, withdrawing BCH on the smartBCH network (SEP20) will not be possible until further notice.

 

What are the implications of locked funds for flexUSD?

The existing flexUSD balances on the platform will be locked the same as other assets.

  • Any new flexUSD deposits on CoinFLEX (i.e., transferred from a cold storage wallet to CoinFLEX for redemption purposes) will see 90% of the deposit amount locked.
  • flexUSD redemptions can only be made from your available balance (10% of your total balance on CoinFLEX.)
  • New flexUSD minting will be suspended until further notice.

 

What happens to flexUSD interest?

As all open futures positions must be closed out, flexUSD will no longer hold short perp positions, and therefore holders will not earn interest for the time being. flexUSD may earn interest again in the future.

 

What are the implications of locked funds on FLEX Coin?

  • The existing FLEX Coin on the platform will be locked the same as other assets.
  • Anyone who buys FLEX Coin on the exchange will see their new balance fully usable on the platform and withdrawable.
  • Your VIP fee tier continues to count both the available and locked balances in aggregate.
  • FLEX Coin will no longer count as collateral (LTV of 0%).

 

How will CoinFLEX treat open futures positions?

  • FLEX Perps: We will open the FLEX-USD spot market to determine a fair market price. All FLEX Perp positions will be matched at the fair market price. FLEX Perps and Repo will no longer be available because the FLEX LTV ratio will be set to 0, and as such, a user that buys FLEX repo will be instantly liquidated on their FLEX Perp position. We will reassess opening the FLEX Perp market at a future date.
  • Other futures positions (including Perp Swaps & Quarterly Futures): Because of the expected loss of collateral value from ONLY accounting for 10% of user balances AND an inevitably lower FLEX Coin price, we will also need to close any non-FLEX Perp and Futures positions to avoid full liquidations. (Note we will be removing FLEX Coin from being used as collateral). We will net all longs and shorts at a mark price point determined by CoinFLEX at the time; longs and shorts will be matched against each other. After that, we will re-open for trading, and you may re-enter any positions you wish.
  • AMM+ Positions: Open positions will be closed, and the corresponding balances will be transferred to the main accounts.

 

Updated as of July 14, 2022

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