Binance, the largest shareholder of the South Korean cryptocurrency exchange Gopax, recently sold off the asset claims of Gopax victims at less than half of their face value, leading to significant financial losses for investors. This move comes as a stark contrast to Binance’s initial promise to fully compensate victims of the virtual asset deposit service ‘GoFi’ after acquiring a majority stake in Gopax. The discounted sale occurred amid rising cryptocurrency prices, exacerbating the losses for Gopax’s creditors.
Despite earlier commitments to compensate investors for the approximately KRW 70 billion lost due to suspending fund withdrawals in the ‘GoFi’ service, Binance chose to sell the victims’ asset claims at heavily discounted rates instead of using its own funds. As a result, the debt to GoFi has now surged to an estimated KRW 100 billion, excluding existing repayments, creating further financial strain for investors.
An anonymous source familiar with the transaction revealed that Binance offloaded the claims as part of its strategy to manage Gopax’s liabilities. While the company initially promised to cover the Gopax victims’ funds with its Industrial Recovery Fund (IRI), only the first damage was covered using IRI. Subsequent payments were made by selling the Genesis claim at a low price to a third party, delaying the payment of the remaining 50% of the damage until after the completion of the Gopax acquisition.
The sale of Genesis asset claims at discounted rates has sparked discontent among investors and raised regulatory scrutiny. The Financial Services Commission of South Korea is reviewing Gopax’s executive change report, particularly the appointment of Binance personnel as directors. Additionally, the FSC has requested further information from Binance regarding allegations of money laundering and other concerns surrounding the sale of asset claims.
In a similar case involving the bankrupted FTX exchange, a leading creditor criticized the sale of assets at discounted prices, arguing that these assets should have been returned to investors rather than sold off at a loss. The lack of transparency surrounding the source of funds used to compensate victims and the 50% discount at which the Genesis claims were sold have further fueled investor frustration and distrust.
Genesis, the virtual asset deposit service associated with Gopax, recently had its bankruptcy compensation plan approved by a U.S. court, with the commitment to return 77% of the bond funds to creditors. In contrast, Gemini, another cryptocurrency exchange with funds tied up in Genesis, announced plans to compensate 97% of its affected customers using bankruptcy compensation, highlighting the differing approaches taken by various exchanges in addressing investor losses. Gopax, however, has remained silent on its compensation plans and the sale of Genesis asset claims, leaving investors in limbo.
