Comments on CoinFLEX’s Restructuring Proposal
The CoinFLEX’s restructuring proposal will be voted on very soon. After reviewing the documents provided by CoinFLEX and consulting with our lawyers, SmartBCH Alliance decides to support this scheme of the arrangement upon certain conditions which have been verbally agreed by CoinFLEX. Our lawyers are working with CoinFLEX to reflect the following conditions into the formal agreement:
- Since the CoinFLEX’s depositors did withdraw 10% of their deposit assets in July, shortly after it closed the withdrawal channel, SmartBCH Alliance requests to have the same right and to be traded fairly as the other creditors. That means in addition to the pro rata distributions to be received by SmartBCH Alliance as a creditor of CoinFLEX, SmartBCH Alliance will also receive 10% of its claim in BCH.
- CoinFLEX still controls 33K SBCH on smartBCH chain. SmartBCH Alliance is asking CoinFLEX to formally promise to burn these SBCH to the bridge address(0x8c 4F85 ec71 C966 e45A 6F42 91f5 271f 8114 a7Ba 15). If these SBCH are burnt, the SmartBCH Alliance will only need to bail out approximately 68K SBCH.
- CoinFLEX burns the fees on the main chain side as promised since the beginning of the CoinFLEX bridge.
If it gets 75% support and is approved by the courts, the SmartBCH Alliance can get the following assets as a creditor:
- Shares of the new restructured company
If this scheme of arrangement is approved by the court, then the new board of the restructured company cannot impede it. The SmartBCH Alliance will be entitled to appoint one (out of five) director to the new board. Our lawyers have confirmed this.
The restructuring proposal takes away the deposited mainchain BCH in the CoinFLEX-maintained bridge to compensate for the loss of all creditors of CoinFLEX. This is against our opinion: these BCH were in the custodian for the sidechain users, and were not assets of CoinFLEX. However, we decided to make a compromise because the lawsuit will take a lot of time, money, and, the community’s attention. If the CoinFLEX issue remains unsolved, it will always be the dark clouds haunted around smartBCH’s ecosystem. The discussion of the smartBCH community will keep focusing on this and it will be hard to move on.
If the vote fails to get the 75% support as required, we have given up nothing of our rights on behalf of any sBCH holder, which will be able to claim that 100% BCH in the bridge should be returned by CoinFLEX.
SmartBCH Alliance will be able to bail out the 68K SBCH if the scheme of arrangement works out as planned.
- Around 20% of the 68K SBCH will be distributed from CoinFlex, which is around 13.6K BCH.
- rvUSD and the equity of CoinFlex distributed will be sold into sBCH, which we can safely estimate as around 10K BCH.
- Our donors already hold more than 20K sBCH ready for donation.
- We’ve got more than 75K main chain BCH donation commitments from donors.
If the scheme of arrangement works out, we are confident that we have enough resources to maintain the peg in the near future. After SHA-Gate v2 is ready, all the distributed BCH from CoinFLEX will be put into the new decentralized bridge and donated sBCH will be locked. By concept, the sidechain’s SBCH can be divided into two parts: one part is backed with 100% BCH on the mainchain and the other part is not backed at all. After the non-backed SBCH are locked, all the SBCH will be backed with 100% mainchain BCH.