Binance Faces Scrutiny: Allegedly Sold Creditors’ Claims at 50% Discounts During Gopax Deal
Crypto News- Binance has acquired a major stake in the South Korean cryptocurrency exchange Gopax, becoming its largest shareholder. Gopax had faced a financial crisis last year when its cryptocurrency custody service, Gopay, suspended withdrawals, freezing around 70 billion won (approximately $51.5 million).
Controversial Compensation Strategy
In response, Binance promised to fully compensate the affected investors and purchased Gopax shares at a reduced price. However, rather than using its own funds for compensation, Binance sold the victims’ asset claims at less than half their value. This decision was made just before a significant rise in cryptocurrency values, including Bitcoin (BTC), exacerbating the financial losses for the victims. The debt related to Gopay has now escalated to about 100 billion won (around $73.6 million), excluding the amounts already repaid.
An insider with knowledge of the Binance-Gopax deal revealed that Binance sold the asset claims of Genesis Global Capital last August to finance the second tranche of compensation for Gopay investors. Genesis Global Capital had played a key role in the financial operations tied to Gopay.
Impact on Gopax
This strategy has left Gopax in a challenging situation. The remaining 50% of compensation for victims is contingent on the completion of Binance’s acquisition of Gopax.
Gemini’s Contrasting Approach
In contrast, the US-based Gemini exchange has started disbursing 97% of its tied-up funds after a US court approved Genesis’ bankruptcy compensation plan.
Gopax’s Silence and Use of Recovery Funds
Gopax has remained silent on the matter. Previously, the exchange had indicated that it used the Binance Industry Recovery Fund (IRI) for the initial compensation payments, while subsequent payments were funded by the proceeds from asset claim sales.
FSC’s Investigation
During the 2022 crypto market crash, former Binance CEO Changpeng Zhao announced the IRI to assist projects facing liquidity crises despite being otherwise strong. However, South Korea’s Financial Services Commission (FSC) is now scrutinizing the documents related to Binance’s acquisition of Gopax. An FSC official stated, “The executive change report under the Specific Financial Information Act is assessed based on objectives like preventing money laundering, establishing legal order, and preventing illegal activities. We are examining whether the transaction between Binance and Gopax meets these criteria.
Frequently Asked Questions (FAQ)
Why did Binance acquire Gopax?
Binance acquired Gopax to enter the South Korean market and strengthen its presence in the region. Gopax is seen as a strategic move in Binance’s expansion plans.
How did the financial crisis at Gopax begin?
Gopax’s cryptocurrency custody service, Gopay, faced a financial crisis last year when it suspended withdrawals, freezing around 70 billion won (approximately $51.5 million) in investor funds.
How did Binance plan to compensate affected investors?
Initially, Binance promised full compensation to the affected investors and bought Gopax shares at a reduced price. However, instead of using its own funds for compensation, Binance sold the victims’ asset claims at less than half their value. This decision was made just before a significant rise in cryptocurrency values, worsening the financial losses for the victims.
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