The Controversy Surrounding Binance and Gopax: A Closer Look

The Controversy Surrounding Binance and Gopax: A Closer Look

Binance, as the largest shareholder of the South Korean cryptocurrency exchange Gopax, made headlines when it sold the asset claims of Gopax victims at less than half their face value on May 27. This discounted sale resulted in significant financial losses for investors and went against Binance’s initial promise to fully compensate victims of the virtual asset deposit service ‘GoFi.’ The sale took place amidst a backdrop of increasing cryptocurrency prices, exacerbating the losses for Gopax’s creditors.

Following the sale of the asset claims, the prices of major cryptocurrencies, including Bitcoin, experienced a surge, further widening the financial gap for Gopax’s creditors. The debt owed to GoFi has now reached an estimated KRW 100 billion, excluding any existing repayments. An anonymous source familiar with the transaction revealed that Binance sold off the asset claims as part of its strategy to manage Gopax’s liabilities. Despite the initial promise to cover the victims’ funds, Binance used the Industrial Recovery Fund (IRI) to pay only a portion of the damages, opting to sell off the Genesis claims at a low price to a third party for the remaining payments.

Genesis, the virtual asset deposit service associated with Gopax, recently had its bankruptcy compensation plan approved by a U.S. court, with a commitment to return 77% of the bond funds to creditors. In comparison, Gemini, another cryptocurrency exchange with ties to Genesis, announced plans to compensate 97% of its affected customers. Gopax, however, has remained silent on its compensation plans and the controversial sale of Genesis asset claims. This lack of transparency has heightened investor frustration and distrust in the exchange.

In a similar case involving the bankrupted FTX exchange, Sunil Kavuri, a prominent creditor, condemned the sale of assets at discounted prices and argued that these assets should have been returned to investors. The board of directors at Gopax, which includes representatives from Binance, has faced accusations of withholding information regarding the source of funds used to compensate victims. The secrecy surrounding the sale of asset claims and the discounted rates at which they were sold have only served to fuel investor frustration and skepticism.

The Financial Services Commission (FSC) has taken notice of the allegations surrounding Binance and Gopax, requesting additional information on potential money laundering and other concerns. The regulatory scrutiny underscores the need for greater transparency and accountability in the cryptocurrency industry to protect investors and uphold market integrity.

The controversy surrounding Binance’s sale of Gopax asset claims highlights the complexities and challenges within the cryptocurrency sector. It serves as a reminder of the importance of ethical business practices, transparency, and regulatory oversight to ensure the trust and confidence of investors in the ever-evolving landscape of virtual assets.

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