- Binance-backed cryptocurrency exchange Gopax reportedly sold its users’ deposit claims for half of their face value in August 2023.
- Gopax owes its users a total of 70 billion South Korean won ($51.4 million) due to exposure to the failed crypto lender Genesis Global, which collapsed in November 2022.
- A source commented: “We paid with Bitcoin obtained by selling the Genesis claim at a low price to a third party, and we are delaying payment of the remaining 50% of the damage, saying we will pay it after the acquisition of Gopax is completed.”
Gopax, a Binance-backed crypto exchange, sold users’ deposit claims at half value, highlighting ongoing financial challenges and market volatility.
Gopax’s Financial Struggles and Genesis Exposure
Gopax’s financial health has been significantly impacted by its exposure to Genesis Global Capital. Genesis, which operated Gopax’s crypto custody service GoFi, suspended withdrawals in November 2022 following a liquidity crisis tied to the collapse of FTX. This has left Gopax with substantial liabilities, amounting to 70 billion South Korean won ($51.4 million). In an effort to mitigate these losses, Gopax sold its users’ deposit claims for half their face value in August 2023, paying out 50% of this amount to users.
Impact of Market Fluctuations on Gopax’s Liabilities
The remaining unpaid digital assets, valued at 35 billion won during the crypto market’s nadir in November 2022, have since surged to a total of 100 billion won, with Bitcoin prices reaching $69,000. This increase in asset value has further complicated Gopax’s financial situation. In March, the Korean Times reported that Gopax is in a “state of complete capital impairment” due to the increase in debt liabilities. The Seoul-based trading platform, which is among South Korea’s five fully licensed crypto exchanges, saw its net losses decrease to 51.3 billion Korean won ($37 million) in 2023 from 90.6 billion won in 2022.
Binance’s Acquisition and Regulatory Challenges
In February 2023, Binance acquired a majority stake in Gopax without disclosing the deal’s terms, marking Binance’s return to the South Korean market. However, a lawsuit by the United States Securities and Exchange Commission against Binance stalled the acquisition, prompting South Korea’s Financial Services Committee to review the deal. This regulatory scrutiny has added another layer of complexity to Gopax’s efforts to stabilize its financial situation and fulfill its obligations to users.
Genesis Bankruptcy Proceedings and Implications for Gopax
Earlier this month, Genesis secured a $3-billion approval from U.S. bankruptcy courts to return cash and cryptocurrency to its creditors. Presiding judge Sean Lane overruled an objection by Digital Currency Group (DCG), Genesis’s parent company, which argued that its bankrupt subsidiary should limit payments to customers and creditors to the value of the crypto assets. This decision leaves DCG with no recovery from Genesis’ bankruptcy proceedings. For Gopax, this development could mean a potential pathway to recovering some of its lost assets, although the exact implications remain uncertain.
Conclusion
Gopax’s financial struggles underscore the broader challenges faced by cryptocurrency exchanges in navigating market volatility and regulatory scrutiny. The exchange’s efforts to manage its liabilities through the sale of deposit claims and the ongoing acquisition by Binance highlight the complex interplay between market dynamics and regulatory frameworks. As the situation evolves, stakeholders will be closely watching how Gopax addresses its financial obligations and what this means for the broader crypto market in South Korea and beyond.
