Gopax, a prominent South Korean cryptocurrency exchange, has found itself in the spotlight for selling its users' deposit claims at half their original value. The exchange, which is majority-owned by Binance, ranks among the top five in South Korea by market share.

According to a recent report by Hankyung (Korea Economic Daily), Gopax owes its users 70 billion South Korean won ($51.4 million) due to its exposure to the failed crypto lending firm Genesis Global. The exchange has managed to pay out 50% of the total amount owed to its users, but the remaining unpaid digital assets, valued at 35 billion won during the crypto market's lowest point in November 2022, have since surged in value, now estimated to be worth approximately 100 billion won, given Bitcoin's current price at $69,000.

Gopax's financial troubles are closely linked to Genesis Global, which operated Gopax's crypto custody service GoFi. Genesis halted withdrawals after suffering a $1.2-billion exposure to the ill-fated hedge fund Three Arrows Capital. A source interviewed by Hankyung revealed that Gopax paid with Bitcoin obtained by selling the Genesis claim at a discounted price to a third party and is delaying payment of the remaining 50% of the damage, stating that they will pay it after the acquisition of Gopax is completed.

In February 2023, Binance announced its acquisition of a "meaningful" equity position in Gopax, aiming to re-establish its presence in the South Korean market. However, the terms of the deal were not disclosed. The acquisition faced significant hurdles when, on June 7, 2023, the U.S. Securities and Exchange Commission (SEC) filed a lawsuit against Binance, prompting South Korea's Financial Service Committee to review the acquisition and causing further delays.

Amid these challenges, Genesis secured a $3-billion approval in U.S. bankruptcy courts earlier this month to return cash and cryptocurrency to its creditors. This decision, overseen by Judge Sean Lane, overruled objections from Digital Currency Group (DCG), the parent company of Genesis, who had argued that its bankrupt subsidiary should not pay its customers and creditors more than the value of the crypto assets.

The controversy surrounding Gopax highlights the precarious nature of the crypto exchange industry, especially when intertwined with high-risk lending firms like Genesis. The decision to sell users' deposit claims at a significant loss has drawn criticism, reflecting the broader financial instability and regulatory challenges facing the sector. As Binance navigates its legal and regulatory challenges, the future of Gopax and its users' financial recovery remains uncertain.