The company paused withdrawals in June, citing “extreme market conditions” and “continued uncertainty involving a counterparty.” CoinFLEX Chief Executive

Mark Lamb

later said via Twitter that the counterparty is

Roger Ver,

a prominent crypto investor often called “Bitcoin Jesus” for being one of the earliest investors in the cryptocurrency. 

Mr. Lamb initially said Mr. Ver failed to pay CoinFLEX $47 million denominated in the stablecoin USD Coin as part of a margin call. In a July 9 update, the company said the shortfall is $84 million due to the substantial loss in liquidating the customer’s “significant FLEX coin positions.”

FLEX Coin has plunged 48% in the past month, according to data provider CoinGecko. 

Mr. Ver has denied via Twitter that he defaulted on a debt to a counterparty. 

CoinFLEX, registered under Liquidity Technologies Ltd. and incorporated in the Seychelles, is now seeking to recover the funds through arbitration proceedings in Hong Kong. The company estimates that it will take about 12 months to receive a judgment in Hong Kong.

Since June, the company has allowed limited withdrawals and laid off a “significant number” of employees, according to CoinFLEX’s blog. It is planning to raise funds by issuing a new token called Recovery Value USD or rvUSD tokens to cover the shortfall in its books. 

“It has been our top priority to resolve the situation and resume normal business as soon as possible,” Mr. Lamb told The Wall Street Journal. 

Founded in 2019, CoinFLEX is among a string of crypto firms that have come crashing down in recent months along with a plunge in cryptocurrency prices that wiped out $2 trillion of market value since a peak in November. In July, crypto lender Celsius Network LLC, brokerage firm Voyager Digital Ltd. and hedge fund Three Arrows Capital Ltd. all filed for bankruptcy protection. Babel Finance, a Hong Kong-based crypto firm that suspended redemptions and withdrawals in June, has hired the law firm Kirkland & Ellis to advise on its restructuring options. Singapore-based crypto lender Vauld and exchange Zipmex filed for protections against creditors, too.

Write to Vicky Ge Huang at vicky.huang@wsj.com