Previously, the Korean exchange GoPax was affected by the collapse of FTX and Genesis, resulting in the inability to redeem the funds stored in Genesis and owing approximately 70 billion Korean won to the clients of its financial product GoFi. According to Korean media reports, in early 2023, Binance announced the acquisition of nearly 41.2% of the shares from the CEO of GoPax, Lee Jun-haeng, at an extremely low price, becoming the largest shareholder. As a condition of the exchange, Binance promised to compensate GoFi investors for their losses with 100% of its “Industry Recovery Fund.”
However, the latest reports reveal that Binance did not use its own funds to compensate the victims, but instead used the claim rights of the victims’ Genesis assets to pay compensation at a low price. This practice is considered a form of “debt shifting.” Specifically, Binance initially promised to compensate GoFi victims using its “Industry Recovery Fund,” but in reality, after paying the first compensation (approximately 15 billion Korean won), Binance redirected the funds intended for subsequent compensation towards the Bitcoin obtained through the sale of the victims’ Genesis asset claim rights. This approach has led to two main issues:
1. Low-price sale of asset claim rights: Binance sold the Genesis asset claim rights of GoPax at a price far below face value (reportedly less than half), resulting in significant potential losses in the context of rising virtual asset prices. If we do not consider the already repaid portion, 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 compensation for victims: Despite Binance’s promise to fully compensate the victims, they have 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 program approved by the US court.
In addition, since February of this year, GoPax has also requested GoFi investors to convert their debt claims into shares, which has been criticized as Binance shifting its own liabilities onto the victims.
When asked about the sale of Genesis claim rights by the media, GoPax responded:
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