Binance Secretly Sold Gopax Deposit Claims for Under 50% of Face Value

As a crypto investor who has closely followed the developments in the cryptocurrency space, I find the recent allegations against Binance deeply concerning. The report of Binance secretly selling claims held by Gopax users connected to the collapsed crypto lender Genesis Global is a serious accusation that needs to be addressed transparently and honestly.

The largest cryptocurrency exchange, Binance, is under investigation due to accusations that it clandestinely offloaded claims belonging to users of the failed crypto lender Genesis Global, which were previously associated with the South Korean exchange Gopax. The revelation emerged in a report published by Hankyung, a South Korean news outlet, on Monday, focusing on Binance’s acquisition of Gopax in 2023.

In the agreement, Binance pledged to compensate Gopax customers in full for the losses they sustained through GOFi, Binance’s crypto custody service, which previously stored funds with Genesis. The combined loss for GOFi users is roughly estimated to be around 70 billion Korean won (approximately $58 million).

As an analyst, I’ve noticed that both Gopax and Binance have reimbursed approximately half of the incurred losses according to recent reports. However, the methods employed by these platforms to calculate and compensate users raise some concerns.

Binance Secretly Sold GOFi User Claims

The report claims that in the first instance, Binance utilized its Industry Recovery Initiative (IRI) to make up for the 1.5 billion won repayments. However, for the second round, it’s alleged that Binance avoided using the IRI and instead adopted a more contentious method.

In August 2023, Binance reportedly clandestine sold off claims to GOFi users at a significantly reduced price, allegedly less than half their original worth, to an external party without prior notice or approval from the affected investors.

As a researcher, I’d express it this way: The timing of this reported sale raises additional red flags for me. Just last week, a New York bankruptcy court finalized a $2 billion settlement between Genesis and the state attorney general’s office. With this deal in place, Genesis will be able to distribute 77% of customer claims to their respective creditors.

As a researcher investigating the matter, I’ve come across reports suggesting that Gopax has yet to address the Genesis settlement issue. The implication being that this silence may be due to the fact that users claim they had already purchased tokens at discounted prices. With the recent escalation of Bitcoin prices, the worth of these claims has significantly increased, potentially leading to even more substantial losses for investors in GOFi.

Binance’s Retreat

Steve Kim, the Asia-Pacific business development head at Binance, hinted during a January 2024 roundtable discussion about potentially reducing Binance’s ownership stake in Gopax. He mentioned early-stage negotiations about becoming Gopax’s second-largest shareholder as part of a strategic plan to shield Binance from escalating legal and regulatory pressures.

According to local reports, Binance CEO Richard Teng traveled to Seoul in March for meetings with financial regulators. This indicates that Binance might be taking steps to minimize potential fallout as Korean authorities carry on their investigation.

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2024-05-28 11:06