CoinFLEX Lenders Disappointed With Structure To OPNX: Report

Some creditors accuse CoinFLEX of using CoinFLEX's assets without their permission to create a new crypto exchange, OPNX, founded by Three Arrows Capital (3AC) co-founders Kyle Davis Capital (3AC).

According to a subpoena filed in Hong Kong's High Court and seen by Cointelegraph, CoinFLEX's creditors claim that OPNX founder and former CEO Mark Lamb is “misappropriating and/or misappropriating its assets, personnel, intellectual property.” […] Trade Secrets and Other Technologies” Transferring CoinFLEX to OPNX. Lam claims that during his tenure, he committed these actions contrary to his responsibilities to CoinFLEX lenders.

Citing the document, lenders said Lamb, who was employed as CoinFLEX's CEO at the same time, devoted “time, attention, talent and/or effort” to establishing OPNX.

The document alleges that the former CEO transferred customers and business opportunities to a rival exchange, misappropriated assets belonging to lenders, falsely represented that OPNX was affiliated with CoinFLEX lenders, disclosed confidential trade secrets to third parties, and solicited the relocation of employees and contractors. OPNX created a false non-disclosure agreement between itself and a third party and engaged in other acts detrimental to creditors.

According to a lender who spoke to Cointelegraph, CoinFLEX's terms of service require users to arbitrate disputes in Hong Kong, which is why lenders filed legal action in Hong Kong instead of the company's domicile, Seychelles. The case was not upheld by the Hong Kong High Court.

The plaintiffs listed in the document are two companies: Liquidity Technologies and Liquidity Technologies Software. According to Crunchbase data, the original CoinFLEX is a Seychelles-based entity where it initially operates. The document names Lamb, crypto investor Roger Ver, Open Technologies Holdings and Open Technology Markets as defendants. The document claims Open Technology Holdings and Markets are two companies associated with the OPNX crypto exchange.

In January, the pitch deck for OPNX was released to the public and later verified by the founding team. The deck lists Davies and Zhu, Lamb and Sudu Arumugam as co-founders of OPNX. In September, Zhou was arrested at Singapore's Changi International Airport for disobeying a Singapore court order regarding 3AC's bankruptcy. Davies was sentenced to four months in prison for contempt of court but was not in Singapore's jurisdiction at the time of the sentencing. It has since been reported to have been spotted in Bali, Indonesia.

Critics — including BitMEX co-founder Arthur Hayes, TechCrunch founder Michael Arrington and finance and macroeconomics executive Nick Bugalis — have previously argued that investors shouldn't give OPNX founders more money because they've already lost millions, if not billions, of dollars. In customer properties.

However, OPNX pushed back against this criticism. When the exchange opened in April, he argued, it would allow creditors to sell their claims for quick cash, which was to their advantage, and therefore good for creditors of insolvent companies. Davis said he will donate a portion of the profits to 3AC creditors.

In February, OPNX CEO Leslie Lamb, who owns Mark Lamb, said on LinkedIn, “We are very excited to announce that CoinFLEX will officially transition to an open exchange (OPNX).” Contrary to this statement, the subpoena filed with the court claims that OPNX is a separate exchange that CoinFLEX's creditors never authorized.

Kirill Gurov, another CoinFLEX creditor and board member, told Cointelegraph in an interview that he and other creditors have assembled a “temporary creditor committee” to figure out what to do with the now-insolvent company after the disbursement has been halted. They also involved some of CoinFLEX's original investors. After months of delay, the committee decided to restructure the organization and open the exchange.

Gurov revealed that at this time he learned that Mark Lam was in talks with Davis & Zhu about investing in the newly restructured company. He said they were skeptical about involving the founders of 3AC in the project. However, they say there was no formal way for CoinFLEX to accept or accept them as investors, as the company was still undergoing restructuring in the courts. The restructuring was approved on March 7, according to a CoinFLEX blog post.

According to Gourov, after the restructuring was approved, CoinFLEX's creditors discovered that Mark Lam acted against the creditors' interests in the ways described in the subpoena.

RELATED: CoinFLEX CEO Roger Ver Denies Claims That He Owes The Firm $47M USDC

After learning of these activities, creditors filed the subpoena, a first step Gurov said was necessary to obtain an order against Mark Lam to take control of the company away from him. After that, they submitted to the order, Gurov was allowed by the court. The order states that Mark Lam “may not hold himself out as a decision maker for Coinflex without the approval of a majority of the board.”

On October 31st, OPNX's official X (formerly Twitter) account posted a “credit tender offer” to CoinFLEX stakeholders. The offer states that CoinFLEX's lenders accept this “will receive a total of 25% equity in OPNX, divided by the amount.” In addition, each will receive a portion of the exchange's initial Token Ox, but these tokens will be issued for 10 years. In response, Gurov stated that this tender offer was legally invalid:

“How is Mark going to make the offer? You need the shares [to be] Passed by boards. They are not transmitted by third parties. Mark is not on the CoinFLEX board in Seychelles. It has no power to transfer shares.

Gurov also said that the auction did not have the financial information for investors to make an informed decision. In his opinion, this is not reasonable for an investor to accept the offer. “One important aspect of Mark's offering is that it has no information,” Gorov said. “No reasonable trustee would ever approve such an offer.”

Cointelegraph also obtained an order from the Seychelles Supreme Court that sheds some light on Ver's role in the legal dispute. According to the order, CoinFLEX accused “a large individual client (Roger Ver)” of reneging on a “hand written margin agreement.” According to CoinFLEX's claim in the court order, this default caused the exchange to fail to process the withdrawal in the first place.

Cointelegraph has reached out to Vere for comment. CoinFLEX has made third parties aware of its trading position – disclosing knowledge that they were trading to its detriment, denying that it deviated from the actual margin agreement. CoinFLEX said it agreed to an arbitration that would allow it to recover its money from these third parties.

“I was never in default and I never owed CoinFLEX the $82 million they originally claimed,” Ver said. The truth and CoinFLEX now agreed that I was the one who owed and I am the biggest victim.

An OPNX spokeswoman declined to comment on the lawsuit. Since its launch in April, OPNX has developed a credit currency called “oUSD” for margin trading and has received a Lithuanian license for spot trading across the EU.

According to CoinGecko, OPNX currently processes more than $32,000 in spot trading volume and more than $82 million in output volume daily. Criminal and civil charges against OPNX co-founders Davis and Zhu are ongoing.

Update Nov 24 2023, 17:17 UTC. This article has been edited to better reflect the interviewer's comments and feedback.