Previously, the Korean exchange GoPax was affected by the collapse of FTX and Genesis, resulting in the inability to redeem funds deposited in Genesis. As a result, it owed its customers approximately 70 billion Korean won for its financial product GoFi. According to Korean media reports, in early 2023, Binance announced the acquisition of nearly 41.2% of GoPax shares from Lee Jun-haeng, the CEO of GoPax, at an extremely low price, becoming the largest shareholder. As a condition of the exchange, Binance promised to compensate GoFi investors for their losses using its “Industry Recovery Fund” in full.
However, the latest report reveals that Binance did not use its own funds to compensate the victims. Instead, it used the victims’ Genesis asset claims, which were sold at a low price, to pay the compensation. This practice is considered a “debt transfer”. Specifically, Binance initially promised to compensate GoFi victims using its Industry Recovery Fund. However, after paying the first compensation (approximately 15 billion Korean won), Binance redirected the funds intended for subsequent compensation to Bitcoin obtained through the sale of victims’ Genesis asset claims. This practice has led to two main issues:
1. Low-price sale of asset claims: Binance sold GoPax’s Genesis asset claims at a significantly lower price (reportedly less than half of face value), resulting in potential huge losses as virtual asset prices rise. If the amount already repaid is not taken into account, the remaining debt of GoFi (approximately 50%) is estimated to have risen to 100 billion Korean won due to the increase in Bitcoin.
2. Delayed payment of victim compensation: Although Binance promised to fully compensate the victims, they linked the payment conditions for the remaining 50% of the compensation to the completion of the GoPax acquisition agreement. This has resulted in victims being unable to recover funds from the Genesis bankruptcy claim approved by the US court.
In addition, since February of this year, GoPax has also requested GoFi investors to convert their claims into shares. This has been criticized as Binance transferring its own debt obligations to the victims.
When asked about the sale of Genesis asset claims, GoPax responded to the media:
