Update: Addressing the most frequently asked questions
Here is a brief update answering common questions from CoinLoan users. We will provide more information as soon as it becomes available.
How did CoinLoan get to this point? Where did the money go?
This situation has resulted from a steep market decline – the longest and still ongoing crypto winter. A massive bank run in 2022 triggered by a string of high-profile bankruptcies (Celsius, 3AC, Voyager, FTX, BlockFi, and others). It affected CoinLoan's liquidity, causing an imbalance between the inflows and outflows of users' funds for 300 days in total.
Previously, the company had sought additional yield generation means through investment and trading activities — providing a stable high yield with profits from crypto-backed loans alone was impossible. Virtually all other crypto lending platforms with earn programs engage in providing uncollateralized loans to institutions, trading, or both. This is a common and globally followed industry practice in this market.
Unfortunately, the crypto market, and therefore the assets accumulated for this purpose, had not recovered their value by April 24, 2023, when we received the Notice of restraint on disposition. This notice followed a lawsuit connected to the withdrawal limitations we had to impose in 2022 to help our business survive the bank run.
As a result, by that point, the company had accumulated losses, both unrealised PnL (around 74%) and realized PnL (around 26%), collectively accounting for the entire balance sheet deficit. "Unrealized" means that the assets have not been sold. These figures are verifiable through order and trade histories on the crypto exchanges used. Those histories reflect the full picture of the fund/cash flow and asset trading, making any allegations of fraud or other criminal offenses literally baseless. Solid proofs dispelling any possible reasonable doubts or similar ungrounded speculations will be provided to the trustee in bankruptcy.
Unlike many of its competitors, CoinLoan has never provided uncollateralized or under-collateralized loans or engaged in DeFi. Theoretically, in the absence of the above-mentioned court ruling, CoinLoan would have better chances of survival as it was still possible to attract additional investment. If the market had reversed later on and the investment climate improved, the gap between assets and liabilities would have decreased or even vanished.
Filing for bankruptcy is the simplest and quickest option for businesses that find themselves in similar situations in this rapidly changing industry. Instead, our team continued searching for alternatives in the interests of all clients, working hard to stay afloat and believing we could do it. Even now, we are considering restructuring options to propose at the creditors’ meeting and sources of capital for the most favorable outcome for our clients.
Where are the assets now?
As of this writing, the assets are being held by CoinLoan. In compliance with the request received from the trustee in bankruptcy, Mr. Pärn, we are preparing a procedure and instructions for their secure transfer under his control and disposal acting as an authorized legal representative on behalf of the company.
From our end, we are doing everything in our power to transfer the assets to the trustee as safely and smoothly as possible. Single-handed control over all assets entails additional security concerns. We are in constant contact with Mr. Pärn, and we are ready to share our blockchain knowledge and technical capabilities to facilitate this process.
Why do we have to send our claims to the trustee's Gmail address in the Estonian language and without a standard form?
All these requirements have been passed on from the trustee in bankruptcy. Our team has informed him of the users' concerns but has not received a response yet. It has also proposed using our company's email domain instead of Gmail. We are ready to help with streamlining the form filling process by creating an approved auto-fillable template in the Estonian language.
What’s next?
Following the court decision on June 14, 2023, the trustee in bankruptcy has taken over the decision making for the company. We are doing everything in our power to facilitate the return of users' assets to the highest extent possible. As mentioned above, we are still considering restructuring options and other alternatives in the interests of all our clients. Next week, a member of our in-house legal team is planning to hold an in-person meeting with Mr. Pärn in Tallin.
Will Alex Faliushin be present in court on June 19, 2023?
Alex Faliushin is in constant contact with our team and the trustee in bankruptcy. However, he is currently unable to enter Estonia due to paperwork issues – his residence permit has recently expired. He is discussing alternative ways of certifying the accuracy of the information concerning assets and debts as required by the Notice of declaration of bankruptcy through lawyers.
Update 22.06.2023: 19.06 is the date included in the official Notice of declaration of bankruptcy. However, this is a typo, and we are now waiting for the court to issue a correction order.
Alex Faliushin and CoinLoan Team
Without prejudice disclaimer. Nothing contained in this Blog (or published by CoinLoan otherwise) shall be interpreted and used against CoinLoan or be detrimental to any of its rights. All information publicly disclosed by CoinLoan herein or elsewhere shall be without prejudice to (i) any CoinLoan's rights or interests, whether addressed in this Blog or not, and (ii) any position that CoinLoan may take in legal or administrative proceedings.