South Korea’s GOPAX Exchange Faces Challenges as Acquisition Attempt ‘Halts’

A takeover agreement for the South Korean cryptocurrency exchange GOPAX has “essentially fallen apart,” raising concerns about its long-term viability.

Chosun Ilbo reported that negotiations have stalled on a deal that would allow Megazone, a cloud service provider, to acquire GOPAX. The latter is among South Korea’s five fiat-trading cryptocurrency exchanges.

The complexity of the deal is heightened by the fact that GOPAX is currently predominantly owned by the global cryptocurrency exchange leader Binance.

GOPAX: Takeover Deal at Risk?

Binance acquired a controlling interest in GOPAX in early 2023 as part of its strategy to enter the high-volume South Korean market.

GOPAX trading volumes over the past 12 months. (Source: CoinGecko)

However, South Korean financial regulators have intervened. They have instructed Binance to reduce its stake in GOPAX from approximately 67% to 10%.

The media outlet noted that “crypto industry” insiders indicated on December 24 that “discussions between Megazone and Binance” regarding the sale of GOPAX “have not advanced since October.”

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‘Nothing Has Been Confirmed’

Chosun reported that Megazone “asserted that nothing has been confirmed concerning the acquisition talks with GOPAX.”

The company stated that discussions are “still ongoing.” However, it also implied that “there are currently no concrete discussions or plans in place.” Chosun added:

“Megazone and Binance have not communicated directly in recent times. And industry sources have concluded that Megazone has essentially abandoned the acquisition deal.”

Additionally, GOPAX faces challenges due to its debt to creditors stemming from the failure of its GOPAY crypto staking services.

Binance has indicated its readiness to settle the debt using its own funds if it is permitted to finalize the takeover.

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Megazone: Buyer Hesitating?

Megazone, for its part, had reached a preliminary agreement to purchase the majority of Binance’s shares.

However, since most of the GOPAY debt is denominated in cryptocurrency, the challenge of satisfying creditors has become increasingly formidable.

Bitcoin (BTC) prices have surged since the October discussions, climbing from just over $60,000 to an all-time high exceeding $106,000 in recent weeks.

Bitcoin prices in 2024. (Source: CoinMarketCap)

GOPAX’s GOPAY difficulties began in 2022, following the collapse of the FTX exchange. This led to Genesis, GOPAY’s partner, filing for bankruptcy, leaving GOPAX with the associated debt.

GOPAX has informed creditors that it intends to settle outstanding balances “in cash based on the price at the time of the collapse.” However, dissatisfied creditors are demanding their Bitcoin back “in its original form.”

Chosun noted that if Megazone “withdraws from the deal, the exchange will not fulfill financial authorities’ requirements. It explained:

“Not only is it highly improbable that a new buyer will emerge, but it is also clear that GOPAX’s debt will pose a significant obstacle during takeover discussions.”

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On-site Inspection

GOPAX is one of only five domestic exchanges authorized for crypto-to-fiat trading. However, its status may also be at risk.

The exchange has recently applied for a renewal of its Virtual Asset Service Provider (VASP) registration, with regulators conducting an on-site inspection last week.

The firm received a positive assessment, but the newspaper reported:

“If the authorities reject the renewal application, citing the change in major shareholders as an issue, GOPAX will face the process of shutting down. Consequently, repaying its debts will become even more challenging.”

Chosun quoted an unnamed industry insider as stating:

“GOPAX has met all the legal requirements it could. All that remains is obtaining regulatory approval. Fortunately, Binance is still prepared to settle GOPAX’s debts and is in communication with the authorities. Thus, there remains some hope.”

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