Yes i have noticed that on highly compressed flac it seems to struggle.
Honestly I am okay with that, I like how it sounds. I just wished colorfly offered modding service for their current caps to be repaced with black-gates and perhaps improve the quality of the 3.5. There has been a few modders in china who modded the C4 and they found that their mods improved battery life and sound greatly. Perhaps this should be something colorfly to look into for their current customer.
I for one love to have my caps upgraded to black-gate caps with a reasonable fee.
I find the treble just a bit bright but I am sure it will change.