Binance Eyes Stake Reduction in South Korean Crypto Exchange Gopax, Reports Say

• Binance is set to reduce its stake in Gopax, a move that would make it the second-largest shareholder in the exchange. 

• Some sources have disclosed that the move is influenced by local compliance concerns and plans to resolve the liquidity challenges of the South Korean exchange. 

Binance is reported to be considering reducing its stake in South Korean crypto exchange Gopax, after less than a year of acquisition. According to sources close to the story, the decision is purely based on local compliance concerns and to some extent meant to resolve the liquidity issue of Gopax. This whole “Gopax drama” began in November 2022 when it abruptly suspended customer withdrawals from its DeFi service, GoFi.

Official documents cite the bankruptcy effects of the Digital Currency Group (DCG) subsidiary Genesis Global Trading, as the reason for this decision. DCG had invested in Gopax in April 2021 and became the second-largest shareholder of the company. Genesis was offering yields on crypto lending to the South Korean crypto exchange. 

In December 2022, it announced that it was securing funds to normalize its deposit lost in Genesis. It also announced a discussion with a company to enable investors to withdraw. 

Currently, the completion is taking longer than expected due to issues outside of our control, such as delays in procedural inspections due to the participation of foreign investors and delays in consultations with some minority shareholders. And we would like to make it clear that the ongoing negotiations include the entire repayment amount of the Go-Pay amount. There has been a lot of progress in discussions between the two companies, and internally, we have prepared guidelines such as repayment procedures and procedures, which we would like to share with our customers as soon as possible.

Binance Acquired Gopax Through the Industry Recovery Initiative (IRI)

The timely acquisition of Gopax by Binance gave customers the bailout to make withdrawals and interest payments. According to reports, Gopax had more than 600,000 users as of March 2021. One interesting revelation is that the capital for the acquisition came from the Binance-led co-investment program, the Industry Recovery Initiative (IRI). The then-CEO of Binance Changpeng Zhao commented:

The Industry Recovery Initiative (IRI) was created to support promising companies that were negatively impacted by the events of last year. We hope that taking this step with GOPAX will further rebuild the Korean crypto and blockchain industry.

It is important to note that the stake size was not disclosed by Binance, however, it was disclosed by local news outlets that the exchange was in advance negotiation to purchase a 41.2 percent stake in the company from the largest shareholder, GOPAX CEO Junhaeng Lee. Other reports also state that Binance’s resolution of the liquidity issue was under the condition that it acquire a 72.26% stake in the exchange. 

The recent stake reduction news was broken by a local news agency, which says that the Asia-Pacific BD director, Steve Kim, made that revelation in a roundtable meeting on Tuesday. According to the report, Kim disclosed that Binance plans to convert its loan to Gopax into equity and sell the shares to another company. The idea is to resolve the debt issue with Gopax. This implies that Binance would move from being the largest shareholder to the second largest shareholder.