Dohrnii Labs accuses Blynex of illegally liquidating token assets

Dohrnii Labs has escalated its dispute with Blynex, a local cryptocurrency exchange in the United Arab Emirates, by lodging a police report. The learn-to-earn platform allege that Blynex liquidated over $500,000 worth of its tokens without authorization and failed to provide a promised loan.

The conflict traces back to March 23, when Dohrnii Labs deposited 12,649.99 Dohrnii (DHN) tokens with Blynex. Out of this amount, the company used 8,650 DHN as collateral for a 30-day loan, expecting to receive 80,000 Tether’s USD (USDT) in return. Dohrnii claims they did not receive the promised loan and instead, Blynex liquidated their collateral on Uniswap, amassing 149,151 USDT, which led to a significant drop in the DHN token’s market value. The company also reported unsuccessful attempts to withdraw the remaining 4,000 DHN tokens.

Blynex, represented by co-founder Mike Baskes, responded by saying that the liquidation was a precautionary move made by their “automated risk management system.” According to Baskes, the system identified a high risk of collateral devaluation and decided to act swiftly to prevent further financial loss. He apologized for the situation but asserted that only 145,000 USDT was generated from the liquidation due to limited liquidity, emphasizing that just $315,000 was available at that time for DHN tokens.

Dohrnii Labs contested this perspective, claiming that Blynex’s justification was misleading and that the liquidation had occurred at nearly double the value of their loan. The learn-to-earn platform has not only filed the police report but is also considering legal action if Blynex continues to dismiss their communications. A Dohrnii Labs representative stated that pursuing solutions through local regulators such as VARA and ADGM is a key part of their plan going forward, and they are gathering support from other affected projects to explore potential joint legal action.

As a gesture to resolve the issue, Blynex proposed to provide the 80,000 USDT along with the option to withdraw the 4,000 DHN tokens but with the stipulation that Dohrnii Labs would have to cease all legal actions. This condition has been rejected by Dohrnii Labs, which firmly believes that the 4,000 DHN are user deposits and should be available for withdrawal without condition.

This tense situation reflects the broader challenges faced in the cryptocurrency industry, where trust and regulatory oversight are increasingly under scrutiny. The outcome of this dispute could set significant precedents for how similar cases are handled in the future.