According to a recent report, the risk of unauthorized liquidation of its collateralized tokens triggered Dohrnii Labs, a blockchain-based learning and earning platform, to file a police complaint against Blynex. The firm complained to the UAE Police and is contemplating additional legal measures to pursue accountability from Blynex.
Dohrnii Labs made deposits of 12,649.99 DHN Tokens, valued at over $500,000, to Blynex. On March 23, the company used 8,650 of those tokens as collateral for a 30-day loan in exchange for 80,000 USDT. Dohrnii Labs says, however, that there was no loan after all, and Blynex liquidated the whole collateral on Uniswap and got 149,151 USDT. This event allegedly caused the sharp decline in the value of DHN.
Dohrnii Labs could not take out the remaining 4,000 DHN tokens, forcing the company to take legal action. The representatives from Dohrnii Labs said that the liquidation was illegitimate. Further, in the absence of a loan, Blynex liquidated assets worth almost double the amount.
Mike Baskes, the co-founder of Blynex, stated that their automated risk management system also initiated the liquidation process to counteract any potential accusations. Baskes stated that the system identified a significant risk of loss due to the limited liquidity of DHN tokens, which he believed was around $315,000 at the time. He argued that selling the collateral would stop bigger losses from happening.
According to Dohrnii Labs, Blynex’s explanation may justify some liquidation, but it is misleading. It argues that Blynex acted in bad faith by liquidating more than the loan value and not delivering USDT at all.
Dohrnii Labs has taken the first legal step by filing a police complaint, and it intends to notify UAE regulators, including the Virtual Assets Regulatory Authority (VARA) and Abu Dhabi Global Market (ADGM), as well. The firm is speaking with other harmed projects for possible unified action together on it.
According to reports, Blynex offered Dohrnii Labs 80,000 USDT in addition to access to the remaining 4,000 DHN tokens, provided that they drop all legal actions against Blynex. Blynex’s offer of 80k USDT and the remaining 4k DHN to Dohrnii Labs to drop all legal action was rejected by the latter, as the 4k DHN tokens belong to the users and are non-negotiable assets.
As the regulators begin looking into the matter, Dohrnii Labs is adamant regarding its pursuit of justice and accountability within the crypto space. Blynex has been defending itself, insisting that it followed the risk management procedures in the first place. The result of this legal battle may have wider repercussions for the token collateralization space within the crypto sector.
