Binance’s Gopax Offloads Genesis Creditor Claims at Significant Discount

Key takeaways:

• The Gopax crypto exchange is said to have sold its members’ deposit claims in August 2023 for half of their face value.
• The company went bankrupt in November 2022. Users have apparently received 50% of that total payment from Gopax.

The majority-owned Gopax crypto exchange, which ranks among the top five in South Korea by market share, is said to have sold its members’ deposit claims in August 2023 for half of their face value. 

According to a report published on May 27 by the Korea Economic Daily, a local news outlet, Gopax is obligated to pay its consumers 70 billion South Korean won ($51.4 million) because of its involvement with the defunct institutional crypto lending firm Genesis Global. 

The company went bankrupt in November 2022. Users have apparently received 50% of that total payment from Gopax.

Nevertheless, the remaining outstanding digital assets, valued at 35 billion at the November 2022 peak of the crypto market, are said to have increased to a total of 100 billion Won at a Bitcoin price of $69,000. 

According to a March Korean Times article, Gopax’s increased debt obligations have left the company in a “state of complete capital impairment.” 

Gopax’s crypto custody service, GoFi, was run by Genesis, which stopped withdrawals because of a $1.2-billion exposure to the doomed Singaporean hedge fund Three Arrows Capital. According to a source that Korean Economic Daily spoke with: 

“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.”

Without disclosing the agreement’s specifics, Binance acquired a “meaningful” equity stake in Gopax in February 2023, bringing the crypto exchange back to the South Korean market. 

However, by June 7, 2023, a lawsuit brought by the US Securities and Exchange Commission against Binance had put the acquisition on hold. This prompted the Financial Service Committee of South Korea to review the agreement. 

Genesis received $3 billion in bankruptcy court approval earlier this month to repay its creditors using cash and crypto. 

The parent company of Genesis, Digital Currency Group (DCG), objected, claiming that its bankrupt subsidiary should only pay its creditors and customers the value of the crypto assets. However, presiding judge Sean Lane overruled DCG’s argument. Following the transfer, DCG will not get any compensation from Genesis’ bankruptcy case.