Key Points:
- Binance sold Gopax’s Genesis asset rights at a steep discount to compensate investors, causing significant losses for Gopax.
- Genesis’ bankruptcy compensation plan was approved, with creditors to receive 77% of their bond amount.
- Regulators are investigating Binance’s acquisition of Gopax due to legal and money laundering concerns.
According to local news, Binance, the largest shareholder of Gopax, has come under scrutiny for selling Gopax’s Genesis asset rights for less than half their face value.
Binance’s Discounted Gopax’s Genesis Asset Rights
Initially, Binance pledged to fully compensate investors for their losses, estimated at around KRW 70 billion, following the closure of Gopax‘s cryptocurrency deposit service, GoFi, in 2022. However, rather than using its own funds, Binance compensated investors by selling Gopax’s Genesis asset rights at a significant discount.
Genesis, a cryptocurrency brokerage for institutional investors operated by Gopax, had its funds tied up with GoFi investors. Recently, a US court approved Genesis’ bankruptcy compensation plan, allowing for the return of 77% of the bond amount, approximately $3 billion (about 4 trillion KRW), to creditors.
Gemini, another virtual asset exchange, announced plans to pay 97% of victims’ funds once the compensation process begins. In contrast, Gopax has yet to issue an official statement regarding its compensation plans.
An anonymous source familiar with the Binance-Gopax transaction disclosed that the board of directors hid the source of the compensation funds distributed to investors last August. It was revealed that Binance sold the claims on Gopax’s Genesis assets for less than half their value, amounting to around KRW 70 billion at market price.
The strategy led to significant financial losses for Gopax as virtual asset prices soared subsequently. It is estimated that the amount of GoFi’s debt, after deducting the repaid portion, is about KRW 100 billion, causing Gopax to lose at least tens of billions of won.
Regulatory Authorities Investigate Binance’s Gopax Acquisition
The source also noted that Binance initially used the Industrial Recovery Fund (IRI) to compensate Gopax victims but only for the first round of payments, totaling around KRW 15 billion. Subsequent payments were made using Bitcoins obtained from selling Genesis claims at low prices to third parties. The remaining 50% of damages is delayed, with promises of payment once the acquisition of Gopax is finalized.
In March of the previous year, Gopax submitted a report to the Financial Services Commission (FSC) appointing a Binance representative as an internal director. However, the FSC has questioned the suitability of this appointment due to Binance’s legal issues with the US Securities and Exchange Commission (SEC).
The acceptance of this report is pending further clarification on suspected money laundering activities. Financial authorities are closely examining the documents related to Binance’s acquisition of Gopax to prevent any illegal activities, including money laundering.