Binance Offloads Gopax’s Genesis Asset Rights at Major Discount, Resulting in Substantial Losses

On May 27, Binance, the primary stakeholder of the South Korean cryptocurrency exchange Gopax, sold the asset claims of Gopax victims for less than half of their original value.

This discounted transaction has resulted in considerable financial setbacks for investors, contradicting Binance’s previous commitment to fully reimburse victims of the virtual asset deposit service ‘GoFi.’ The sale took place during a period of rising cryptocurrency prices, further intensifying the losses for Gopax’s creditors.

Initial Commitments and Surprising Actions Regarding Gopax Victims’ Asset Claims

Upon acquiring a majority interest in Gopax, Binance pledged to compensate investors for the estimated KRW 70 billion (approximately $52 million) lost due to the suspension of fund withdrawals in the ‘GoFi’ service. Rather than utilizing its resources to cover these losses, Binance opted to sell the victims’ asset claims at significantly reduced prices.

[Exclusive] Binance, following its acquisition of the Korean exchange GOPAX, engaged in ‘debt rollover’… Evidence suggests concealment of losses totaling hundreds of billions of won. https://t.co/lLbFrNCI1K

While Genesis Capital’s bankruptcy compensation plan has received court approval, unlike Gemini,…

— 블루밍비트 (@bloomingbit_io) May 27, 2024

After the sale, the value of major cryptocurrencies, including Bitcoin, rose sharply, widening the financial disparity. The debt related to GoFi has now escalated to an estimated KRW 100 billion (around $75 million), not accounting for existing repayments.

An anonymous source familiar with the transaction informed the local news outlet Hankyung that Binance divested the claims as part of its strategy to address Gopax’s liabilities.

“Binance initially vowed to cover the Gopax victims’ funds through its Industrial Recovery Fund (IRI), but the IRI was only utilized to settle the first damage (approximately 15 billion won),” the source stated. “For subsequent payments, we utilized Bitcoin acquired by selling the Genesis claim at a low price to a third party, and we are postponing the payment of the remaining 50% of the damage, claiming we will settle it after the Gopax acquisition is finalized.”

Investor Discontent and Regulatory Examination

Significantly, Genesis, the virtual asset deposit service linked to Gopax, had its bankruptcy compensation plan sanctioned by a U.S. court last week. Genesis has pledged to return 77% of the nearly $3 billion in bond funds to its creditors.

In contrast, Gemini, another cryptocurrency exchange with funds entangled in Genesis, revealed plans to reimburse 97% of its affected customers through bankruptcy compensation. However, Gopax has not issued any official statements regarding its compensation strategies or the sale of Genesis asset claims.

In a related case involving the bankrupt FTX exchange, Sunil Kavuri, a prominent creditor within the FTX creditor community, criticized the sale of assets at discounted rates, asserting that these assets should have been returned to investors. Kavuri remarked,

“Sullivan & Cromwell has trampled over our property rights,” Kavuri stated. “They have liquidated billions of dollars of crypto assets. There’s a token S&C sold at 11 cents; it’s now trading at two dollars. FTX had $10 billion in Solana tokens — they sold it at a 70% discount.”

The board of directors at Gopax, which includes Binance representatives, has faced accusations of withholding information regarding the source of funds used to compensate the second group of victims last August. The lack of transparency and the 50% discount at which the Genesis claims were sold have heightened investor dissatisfaction and mistrust.

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 sought additional information from Binance concerning allegations of money laundering and other issues.

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