Binance, the major shareholder of Gopax, a South Korean cryptocurrency exchange, caused significant financial losses for investors by selling the asset claims of Gopax victims at a steep discount. This move contradicted Binance’s previous promise to fully compensate victims of the virtual asset deposit service called ‘GoFi.’ The sale took place during a period of rising cryptocurrency prices, which further exacerbated the losses for Gopax’s creditors.
Binance had acquired a majority stake in Gopax and had committed to compensating investors for the approximately KRW 70 billion ($52 million) lost due to the suspension of fund withdrawals in the ‘GoFi’ service. However, instead of using its own funds to cover these losses, Binance sold the victims’ asset claims at heavily discounted rates.
Following the sale, the prices of major cryptocurrencies, including Bitcoin, experienced a surge, widening the financial gap even more. The debt owed by GoFi has now increased to an estimated KRW 100 billion ($75 million), excluding any existing repayments.
An anonymous source familiar with the transaction revealed to the local news agency Hankyung that Binance sold the claims as part of its strategy to manage Gopax’s liabilities.
Initially, Binance had promised to cover the Gopax victims’ funds using its Industrial Recovery Fund (IRI), but the IRI was only used to pay the first damages, which amounted to about KRW 15 billion. From the second payment onwards, Binance used Bitcoin obtained from selling the Genesis claim at a low price to a third party, thereby delaying the payment of the remaining 50% of the damages until after the Gopax acquisition is completed.
Investors are discontented with this situation, and regulatory authorities are scrutinizing Binance’s actions. Genesis, the virtual asset deposit service associated with Gopax, had its bankruptcy compensation plan approved by a U.S. court, committing to returning 77% of the approximately $3 billion in bond funds to creditors. In contrast, Gemini, another cryptocurrency exchange affected by Genesis, announced plans to compensate 97% of its affected customers through bankruptcy compensation.
Gopax, however, has not made any official statements regarding its compensation plans or the sale of Genesis asset claims. This lack of transparency, along with the sale of assets at discounted prices, has fueled investor frustration and distrust.
The Financial Services Commission (FSC) of South Korea is currently reviewing Gopax’s executive change report, which includes the appointment of Binance personnel as directors. The FSC has also requested additional information from Binance regarding allegations of money laundering and other concerns.
