Withdrawals are unlikely to resume on Thursday

Bitcoin and other cryptocurrencies are in free fall.

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The embattled cryptocurrency exchange CoinFlex is unlikely to let customers withdraw funds again on Thursday as originally planned, CEO Mark Lamb said on Wednesday.

“We will need more time. And withdrawals are unlikely to be re-enabled tomorrow,” Lamb told CNBC.

However, CoinFlex is in talks with several large funds interested in buying the $47 million in debt it allegedly owes to investor Roger Ver, Lamb added.

CoinFlex is the latest victim of the cryptocurrency price crash that saw billions of dollars wiped out of the market during the last “crypto winter.” Bitcoin has lost more than 50% of its value this year and is about 70% below its all-time high set last November, while Ether is down 70% this year and more than 75% below its peak.

The cryptocurrency exchange last week suspended withdrawals for customers citing “extreme market conditions” and said a single investor owes it around $47 million. CoinFlex did not originally name the client, but on Tuesday Lamb claimed the investor is Roger Ver, who has been dubbed “Bitcoin Jesus” for his evangelical views on cryptocurrency in the industry’s early days.

Ver has denied that he owes the money to CoinFlex. Ver was not immediately available to comment on this story when contacted by CNBC.

CoinFlex claimed that Ver’s account went into “negative equity.” Normally, in this situation, the exchange would liquidate an investor’s position. But Ver had a special arrangement that meant that didn’t happen, the exchange said.

To plug the $47 million hole in CoinFlex’s balance sheet, the company is issuing a token called Recovery Value USD, or rvUSD, and luring investors with a 20% interest rate for holding the virtual currency. Lamb said the ability to pay that interest rate would result from repaying Ver’s funds plus a “financing fee” imposed on it.

Lamb said: “We don’t know what will happen after that if he doesn’t pay back or if he pays back. Our focus right now is on … raising those funds.”

He added that he was confident “that this recovery will happen one way or another”.

Lamb said the company is in talks with several funds that are buying corporate distressed debt and could potentially buy the entire $47 million.

“The good news is that the number of players who have come forward and are interested in this debt offering and this token offering is extremely well capitalized,” Lamb said, adding that some of the funds that have been in touch have more than $10 billion in assets under management.

Lamb said some of the inquiries came from traditional funds rather than crypto-focused funds, but declined to name any.

“We’re talking about tens of millions (dollars). It comes from a mix of distressed debt funds, existing users of the platform and investors in CoinFlex,” Lamb told CNBC.

Dispute between CoinFlex and ‘Bitcoin Jesus’

The altercation between Lamb and Ver marks the latest saga in the crypto market amid a plunge in digital coin prices.

Lamb said this week that Ver had been served with a notice of default. The CoinFlex CEO told CNBC the goal is to “continue to speak to him (Ver) and resolve this amicably.” However, Lamb said there are other avenues for legal action.

“We also have an obligation to take appropriate legal action,” he said.

The agreement between CoinFlex and Ver meant that if the investor fails to meet a margin call, their positions will not be automatically liquidated as would normally be the case.

A margin call is a situation where an investor needs to put up more funds to avoid losing on a trade with borrowed money.

Lamb said CoinFlex felt comfortable entering into such an arrangement based on the “data we had seen on its capitalization.”

But CoinFlex will now eliminate such arrangements, Lamb said.

“In hindsight, it definitely would have been better not to have had non-liquidation agreements,” Lamb said.