CoinFLEX creditors sue ex-CEO for helping Roger Ver avoid $84M debt

CoinFLEX creditors are suing the defunct digital asset exchange’s former CEO while seeking to reclaim millions owed by CoinFLEX investor/customer Roger Ver.

On Wednesday, CoinDesk reported on a new civil action filed in Hong Kong by CoinFLEX creditors against Ver and the exchange’s former CEO, Mark Lamb. The suit targets Lamb for assisting the launch of a rival exchange, OPNX, which debuted earlier this year with help from Su Zhu and Kyle Davies, founders of the collapsed ‘crypto’ hedge fund Three Arrows Capital (3AC).

CoinFLEX halted withdrawals in June 2022 and filed for restructuring that August. This January, Lamb and fellow CoinFLEX co-founder Sudhu Arumugan announced a plan to team up with Zhu and Davies on a new exchange—originally titled GTX, later rebranded as OPNX—that would trade the bankruptcy claims of other collapsed ‘crypto’ projects. GTX/OPNX would be run by Lamb’s wife, Leslie Lamb.

3AC’s demise in July 2022 left a $3.5 billion hole in the digital asset sector and was one of the key contributors to a wave of major insolvencies. The initial GTX/OPNX announcement caused an outcry from those who thought the unrepentant Zhu and Davies were trolling their former investors with this new project.

CoinFLEX halted “all trading for good” on April 28, 2023, “as part of our evolution from CoinFLEX to OPNX.” CoinFLEX told customers that those “looking for continuity” should migrate their account balances to OPNX. The CoinFLEX website currently features a warning that it will be “officially ceasing operations and shutting down on October 31, 2023.”

CoinDesk reported that the CoinFLEX creditor lawsuit accuses Lamb of making dodgy licensing and purchasing deals with OPNX’s parent companies, Open Technologies Holding LTD and Open Technology Markets LTD.

The creditors claim the deals were “manifestly uncommercial and detrimental to CoinFLEX’s interests … and/or plainly for the benefit” of Lamb and OPNX. The creditors are asking the court to invalidate these agreements and to place all OPNX assets and profits into a trust while the matter is ongoing.

A tangled web

News of the lawsuit was accompanied by the launch of a new X (Twitter) account (@CoinFLEXreal), which immediately posted a lengthy thread accusing Lamb, Zhu, and Davies of having “used creditor assets as their personal piggy bank.” The account is asking for digital asset donations to help “investigate wrongdoing.”

In September 2022, CoinFLEX creditors approved a restructuring agreement that eliminated the equity of Ordinary and Series A shareholders—the founders among them—while giving creditors a 65% stake in the dormant exchange and control of its board of directors.

In March, CoinFLEX announced that courts in the Seychelles had approved this restructuring plan. CoinFLEXreal notes that OPNX’s launch preceded this court approval despite there being “no mandate to develop this new business.” OPNX “relied entirely on CoinFLEX tech, funds, staff, and [the exchange’s in-house] FLEX token.”

CoinFLEXreal accuses Zhu, Davies, and Lamb of keeping creditors “in the dark” regarding the status of CoinFLEX’s remaining funds. Lamb reportedly conducted “only a single call” with creditors despite repeated requests for more information. When creditors finally got a second call, they found themselves speaking with Davies while Lamb was AWOL.

Davies allegedly told creditors that he himself had “no relationship with CoinFLEX” and was only there to “provide a face” for OPNX. CoinFLEXreal called bullshit on Davies’ ‘no relationship’ argument, claiming to have “found his contract.” CoinFLEX funds were also allegedly used to pay 3AC’s liquidation-related legal fees.

In May 2023, OPNX debuted its governance token OX, a rebranded FLEX with a 1:100 conversion rate. CoinFLEXreal claimed OPNX paid influencers “with creditor assets to continue pumping OX” and “took proceeds from the sale of creditor assets” to pump the tokens while freezing account withdrawals “for users with large FLEX balances to prevent holders from cashing out.”

Late last month, Zhu was arrested at the Singapore airport while reportedly trying to flee the city-state. The detention order was issued after Zhu failed to comply with a court order to cooperate with 3AC’s liquidators. (Davies has similarly failed to cooperate but remains at large.) The value of OPNX’s OX token quickly fell off a cliff.

Two weeks later, a different X account claimed 11 OPNX/CoinFLEX staff had been “terminated without notice.” Lamb reportedly offered these staffers severance payable only in locked OX tokens, but to date, nothing has been paid. “Numerous invoices to certain third party suppliers” have also gone unpaid.

Let’s make a deal but tell no one

When CoinFLEX first halted withdrawals, Lamb blamed “a long-time customer” whose account had failed to meet a margin call. This account had been granted non-liquidation privileges, leaving the exchange with a $47 million hole that the account holder refused to recognize as their responsibility.

Roger Ver owes CoinFLEX $47 Million USDC. We have a written contract with him obligating him to personally guarantee any negative equity on his CoinFLEX account and top up margin regularly. He has been in default of this agreement and we have served a notice of default.

— Mark Lamb (@MarkDavidLamb) June 28, 2022

As rumors circulated that Ver was the deadbeat in question, Lamb eliminated all doubt in a tweet stating plainly that “Roger Ver owes CoinFLEX $47 million USDC.” Ver replied with his own tweet denying that he’d “defaulted on a debt to a counter-party” and claiming to be owed an even larger sum from CoinFLEX than the shortfall in his account.

In July 2022, with Ver’s CoinFLEX debt nearly doubling due to asset value changes, the exchange launched an arbitration proceeding against Ver in Hong Kong. In August 2022, CoinFLEXreal claimed that Lamb sought over $850,000 from creditors to fund “the HK arbitration.” Lamb added that he would require “compensation” to offset the “personal risk” of his coming to Hong Kong to testify.

At some unspecified date, CoinFLEXreal claims Lamb “secretly met with Roger Ver to settle the $84M lawsuit, despite the arbitration lawyers telling the CoinFLEX team that they had an extremely strong case.” Lamb allegedly “submitted forged evidence and ultimately dropped the case to deprive us of any value in the company.”

Publicly, Lamb appeared to be keeping up the pressure on Ver. On April 4, 2023, Lamb tweeted an open letter to Ver in which Lamb emphasized Ver’s need to “agree on a payment plan for the $84 million USD.” In exchange, Lamb offered Ver “two years of free trading” on OPNX.

On April 18, Lamb tweeted a lengthy video titled “How Roger Ver chose greed over his own community.” Ver was a known early investor in CoinFLEX, but Lamb claimed in the video that Ver “had invested in CoinFLEX to a point that he owned more equity than I did, and he would communicate with our team every single day.”

Roger dodger

Ver told CoinDesk that CoinFLEX’s Hong Kong arbitration claim against him was “bogus” and that he’d filed his own arbitration claim against CoinFLEX in June 2022, seeking $200 million in damages. Ver alleged that CoinFLEX shared his financial positions on the exchange with “certain third parties” who proceeded to trade against him “to my detriment.”

Ver said the out-of-court settlement he reached with CoinFLEX and Lamb included “further legal proceedings that are now being contemplated” against these third parties. The settlement would entitle Ver to the first $100 million of any damages collected via these proceedings.

This isn’t Roger’s only attempt to avoid paying significant debts to digital asset entities when his market bets go bad. In January, a unit of Digital Currency Group’s (DCG) bankrupt lending platform Genesis Global Capital accused Ver of avoiding a $20.9 million debt stemming from Ver’s “failure to settle cryptocurrency options transactions that expired on December 20, 2022.”

On the topic of #Genesis: https://t.co/2a0fYu5P3E pic.twitter.com/a6tA0HISMo

— Roger Ver (@rogerkver) January 25, 2023

At the time, Ver responded by tweeting that he was totally good for the money but claimed Genesis had failed to honor its end of their agreement, which allegedly required the lender “to remain solvent.” Ver said he’d requested proof of solvency in June 2022, but the data Genesis supplied at the time “has been called into question by recent events.”

Genesis was indeed cooking its books and filed for bankruptcy only days before outing Ver as a deadbeat, but we’d really like to get a look at this ‘agreement’ Ver claims to have had. It’s unclear if this dilemma was ever resolved, but two things leap out: Ver appears to be a lousy bettor, and you’re a fool if you let him wager on credit.

The amoral of the story

If you’re wondering who’s lying here, the answer is probably everyone. If there’s any justice here—and there really isn’t much—it’s that OPNX has been an abject failure. CoinGecko data shows 24-hour trading volume hovering just over $10,000, about what changes hands every minute on some exchanges.

Despite its lack of activity, OPNX was nonetheless fined $2.7 million by Dubai’s Virtual Asset Regulatory Authority (VARA) for failing to register the exchange with VARA. Zhu, Davies, and the two Lambs were also personally fined $54,000 for violating local rules on marketing digital assets. Zhu may be in prison at the moment, but neither he nor Davies have yet to face the music for their corrupt stewardship of 3AC.

Ditto for Ver. While he might find it a little harder to convince other sites to accept his markers in the future, he doesn’t appear to have faced any significant sanctions for his welching ways. Which means he’s likely to try it again.

Ver was once nicknamed ‘Bitcoin Jesus,’ apparently for the zeal with which he would evangelize digital asset neophytes. Nowadays, the moniker seems based on Ver’s embrace of martyrdom. As he told CoinDesk this week: “I was, in fact, the largest victim of CoinFLEX.”

Anyone have 30 pieces of silver they’d like to donate for a good cause?

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of group—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.