Without creditor approval, Binance, one of the world's largest cryptocurrency exchanges, is facing accusations of selling user claims from its South Korean subsidiary Gopax. This move potentially caused significant financial losses for creditors. According to a report According to South Korean news outlet Hankyung, the sale was carried out at a significant discount and may have cost creditors tens of millions of dollars.
Looking back at Binance's South Korean venture
Binance acquired a large stake in Gopax last year. This exchange was among the top five in South Korea. Binance's move coincided with the financial turmoil following the collapse of Genesis Global Capital in 2022, which severely affected Gopax's crypto custody service, GOFi. Investors in GOFi collectively faced losses of 70 billion Korean won, approximately $57 million.
In an effort to limit these losses, Binance promised to fully recover the lost assets. This commitment was part of the purchase agreement in which Binance purchased Gopax shares at a discount. Initially, Binance used its Industry Recovery Initiative [IRI] to cover the first round of repayments, amounting to 1.5 billion won.
According to reports, it was revealed that Binance has chosen to sell GOFi user deposit claims at a significant discount. This was less than 50% of their face value to a third party in August 2023. This sale was carried out in secret, without informing investors or obtaining consent. The undisclosed transaction not only violated Binance's previous promises, but also deprived creditors of potential profits as prices later soared.
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The current situation
Adding to the controversy, a New York bankruptcy court recently approved a $2 billion settlement between Genesis and the attorney general's office. This settlement is intended to return 77% of customer claims to creditors. However, Gopax has already sold its user claims at a heavily discounted rate. This means that the investors would not benefit from this settlement.
The revelation comes at a time when transparency and trust in the cryptocurrency market are of paramount importance. Selling user claims without consent raises serious ethical and possibly legal issues.
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