Binance sold user deposit claims from its South Korean affiliate Gopax to Genesis Global at a significantly reduced value, as reported by South Korean news outlet Hankyung on Monday, citing an insider.

Last year, Binance acquired a major stake in Gopax, one of South Korea's top five cryptocurrency exchanges. As part of the deal, Binance agreed to restore investors' losses from Gopax's crypto custody service, GOFi, which suffered due to Genesis Global Capital's collapse in 2022. The losses amounted to 70 billion Korean won or $57 million at the time. While Gopax and Binance have compensated about half of the damages, Binance initially pledged to cover the losses entirely through its Industry Recovery Initiative (IRI). However, the source revealed that Binance sold GOFi user deposit claims at a steep discount of less than 50% to a third party in August 2023 without investor consent, a move concealed by Binance and Gopax.

A recent $2 billion settlement approved by a New York bankruptcy court between Genesis and the state attorney general's office will return 77% of customer claims to creditors. However, Gopax had already sold user claims at a reduced price, potentially resulting in further losses for GOFi investors due to the recent surge in bitcoin prices. The remaining 50% of GOFi debt, initially valued at 35 billion won, is now estimated to be worth over 100 billion won due to bitcoin's appreciation.

Despite inquiries from The Block, Gopax did not comment immediately, and Binance redirected queries to Gopax. Additionally, regulatory hurdles in South Korea have delayed the transfer of ownership of Gopax to Binance, mainly due to concerns about Binance's legal issues in the U.S. However, Binance is reportedly considering reducing its shares to become the second-largest shareholder in Gopax to alleviate compliance pressure.