According to local media reports, Binance, the world’s largest cryptocurrency exchange, is embroiled in a controversy involving the alleged mishandling of victims’ assets and the unauthorized sale of crypto lender Genesis’ claims. 

The allegations suggest that Binance used these assets to offset the debts of Gopax, a South Korean crypto exchange, potentially hiding significant losses amounting to billions of won.

It is alleged that Binance had initially pledged to compensate the victims of the virtual asset deposit service ‘GoFi’ for the damages incurred during the suspension of fund withdrawals. 

However, instead of using its funds, Binance reportedly acquired Gopax shares at a discounted rate, becoming the company’s largest shareholder. It has since come to light that Binance compensated the victims by selling their asset claims at “lower-than-face-value” prices, effectively transferring the debt burden onto them.

Local media reports suggest that the aftermath of these transactions has been particularly damaging for the victims. Following the sale of their asset claims, the prices of virtual assets, including Bitcoin, experienced significant surges, exacerbating the losses suffered by Gopax. 

According to current estimates, Gopax’s debt, excluding previous repayments, is now about 100 billion won, or about $73 million.

Although Binance had initially promised to compensate for the damages with its Industrial Recovery Fund (IRI), it appears that only a portion of the damages was covered, with the remainder being delayed until the Gopax acquisition was finalized.

The acquisition of Gopax by Binance in February 2023 has faced scrutiny, with questions raised about its fairness and legality. Financial authorities in South Korea have launched investigations into the transaction, focusing on potential money laundering concerns and other illegal activities. 

The Financial Services Commission is reviewing Gopax’s management change report, considering the acquisition’s impact and compliance with regulatory standards.

Meanwhile, Gopax has remained “tight-lipped” about the matter, with no official statements addressing the sale of Genesis claim rights. 

Critics argue that Gopax’s request for GoPay investors to convert their debt into stock investments is an attempt to shift the responsibility for the debt onto the victims rather than holding Binance accountable.

As the investigations unfold, Binance faces increasing pressure to clarify the circumstances surrounding the alleged misuse of victims’ assets and the sale of Genesis claims. 

Financial authorities are known to be determined to prevent illegal activities and protect the interests of investors in the cryptocurrency market. The outcome of these investigations will have far-reaching implications for Binance, Gopax, and the broader ecosystem in South Korea. 

At press time, the exchange’s native token BNB was trading at $598, down nearly 2% in the past 24 hours and 3% in the past seven days after failed attempts to consolidate above the $600 mark. 

Featured image from Shutterstock, chart from TradingView.com

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