Learn-to-earn platform Dohrnii Labs has filed a police report in the United Arab Emirates, accusing local crypto exchange Blynex of liquidating its tokens without authorization and failing to deliver a promised loan.
According to a statement shared with Cointelegraph, Dohrnii Labs deposited 12,649.99 Dohrnii (DHN) tokens — valued at more than $500,000 — with Blynex. On March 23, the company said it used 8,650 of those tokens as collateral for a 30-day loan in exchange for 80,000 Tether’s USDt (USDT).
Dohrnii claims the exchange never delivered the USDT. Furthermore, the team said Blynex liquidated its entire 8,650 DHN position on Uniswap, receiving 149,151 USDT and causing a drop in the token’s market value.
Attempts to withdraw the remaining 4,000 DHN tokens were unsuccessful, the company said.
Blynex claims it was automated risk management
Blynex co-founder Mike Baskes told Cointelegraph the incident was part of their “automated risk management system.” Baskes claimed their system detected a high risk that the collateral would drop significantly in the event of liquidation.
The Blynex executive said that when the tokens were sold, it only generated 145,000 USDT instead of its original amount. He noted that DHN token liquidity was limited, estimating just $315,000 available at the time of the transaction.
The executive claimed Blynex took action to prevent financial losses:
“Given this liquidity constraint, the system recognized a high risk of further loss if the collateral wasn’t liquidated immediately, as the tokens would be difficult to sell at a favorable price in the current market.”
Dohrnii Labs has challenged that explanation, calling Blynex’s justification “misleading” and alleging that the exchange liquidated collateral worth nearly double the value of the loan.
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Dohrnii Labs threatens legal action against Blynex
In response, Dohrnii Labs filed a police report in the UAE and threatened to take legal action against the crypto exchange.
A Dohrnii Labs representative told Cointelegraph that the police report was only a “first step.” The representative said if Blynex ignored their communications, they would legally escalate the matter:
“Since the project and the individuals responsible are based in the UAE, we are also getting in touch with local regulators, including VARA, ADGM, and other relevant authorities. Furthermore, we’re in contact with other affected projects and are actively exploring the possibility of joint legal action.”
The team said they want to ensure accountability through the legal system and regulatory oversight.
Dohrnii told Cointelegraph that Blynex attempted to settle the matter by offering them 80,000 USDT and allowing the withdrawal of 4,000 DHN tokens.
However, the exchange added a condition that the platform would drop all legal action. “That is unacceptable,” Dohrnii Labs said.
“The 4,000 DHN tokens in question are user deposits — not negotiable assets. The right to withdraw these funds should never be up for discussion,” Dohrnii Labs added.
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