Binance secretly sold user deposit claims of its South Korean affiliate Gopax in Genesis Global for less than half their value last year.
According to a person familiar with the situation, South Korean news outlet Hankyung revealed on Monday that the cryptocurrency exchange had covertly sold its South Korean affiliate Gopax’s user deposit claims in Genesis Global for less than half their face value last year.
Among the top five cryptocurrency exchanges in South Korea, Gopax saw Binance take over as its largest stakeholder last year. In exchange for acquiring Gopax shares at a reduced price, Binance agreed to reimburse investors for all losses incurred by Gopax’s cryptocurrency custody service, GOFi, compromised by Genesis Global Capital’s bankruptcy in 2022.
GOFi members lost assets worth a total of 70 billion Korean won, or $57 million. Gopax and Binance have reimbursed approximately half of the damages thus far.
According to the local article, which cited the person with knowledge of the agreement, Binance first pledged to use its Industry Recovery Initiative (IRI) to cover GOFi-Genesis’s losses in full. However, Binance only fulfilled this promise for the first batch of payments, totaling 1.5 billion won.
According to the source, Binance paid the second batch of repayments in August 2023 by selling GOFi customer deposit claims to a third party at a significantly discounted value of less than 50%, rather than through the IRI.
The investigation revealed that Binance and Gopax had hidden this transaction, executed without the investors’ consent.
A bankruptcy court in New York granted a $2 billion settlement between Genesis and the state attorney general’s office earlier this month. Creditors would use the money to reimburse 77% of consumer claims.
The insider told Hankyung that Gopax had not released any information regarding Genesis’ settlement because it had already sold user claims at a “giveaway price.” Hankyung asserts that the liquidation of the claims would have resulted in greater losses for GOFi investors, particularly considering the recent surge in bitcoin prices during the bull cycle.