Without creditor consent, Binance, one of the world’s largest cryptocurrency exchanges, is facing allegations of selling user claims from its South Korean affiliate, Gopax. This move potentially caused significant financial losses for creditors. According to a report by South Korean news outlet Hankyung, the sale was executed 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 major 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 impacted Gopax’s crypto custody service, GOFi. Investors in GOFi collectively faced losses amounting to 70 billion Korean won, around $57 million.
In a bid to mitigate these losses, Binance pledged to restore the lost assets fully. This commitment was part of the purchase agreement wherein Binance bought 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 disclosed that Binance opted 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 secretly, without informing or obtaining the consent of the investors. The undisclosed transaction not only breached Binance’s earlier promises but also deprived the creditors of potential gains as prices soared later.
Also Read: BNB June Forecast: Is $700 On Cards For Binance Coin?
The Current Situation
Adding to the controversy, a New York bankruptcy court recently approved a $2 billion settlement between Genesis and the state 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, its investors would not benefit from this settlement.
The revelation comes at a time when transparency and trust in the cryptocurrency market are paramount. The sale of user claims without consent raises serious ethical and potentially legal issues.
Also Read: Top Binance Chain Coins To Buy For 2X Gains In June