A report published yesterday, May 27, by a news agency, Hankyung, claims that a Binance-backed crypto exchange Gopax sold its users’ deposit claims for half of their face value last year in August.

Thanks to this move, Gopax now owes 70 billion South Korean won, or $51.4 million, to its users. The amount is due to exposure to failed crypto lender Genesis Global, which previously collapsed in November 2022.

Meanwhile, reports also claim that Gopax paid out 50% of this amount to its users. What remains is 35 billion won worth of digital assets. However, this assessment was made during the crypto market’s lowest point in November 2022.

Since the market recovery, the amount that the exchange owes to the users has skyrocketed to 100 billion won, with Bitcoin price reaching $69,000 per coin.

The increase in debt liabilities that the price increase had produced has put Gopax in a state of complete capital impairment, according to a Korean Times report published in March of this year.

Gopax’s financial health was further impacted by its dealings with Genesis Global Capital, which operated the exchange’s crypto custody service known as GoFi. In November 2022, Genesis suspended withdrawals after a liquidity crisis previously caused by the collapse of FTX exchange.

In other words, the FTX collapse caused a chain of events that still ripples throughout the crypto industry and its companies to this day, showing just how far-reaching the consequences of the fraudulent exchange’s actions can be.

Gopax Sees 40 Billion In Net Losses

As for Gopax, a source that Hankyung interviewed explained what happened by saying:

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.

The platform is based in Seoul, and it is one of the top five fully licensed crypto exchanges in South Korea. However, the consequences of its actions and dealings had a strong impact on it. Coupled with the crypto market drop, the platform saw its net losses go down from 90.6 billion won in 2022 to 51.3 billion won in 2023, which is around $37 million.

Binance swooped in in February 2023, purchasing a majority stake in Gopax without revealing the exact terms of the deal. This allowed the exchange to return to the Korean market, but the acquisition was stalled due to the exchange’s legal problems with the US SEC.

This gave the South Korean Financial Services Committee enough time to review the deal before it was concluded.