Binance urged to compensate GoFi victims after gov't approval of GOPAX takeover

Financial Services Commission Chairman Lee Eog-weon attends a parliamentary audit session at the National Assembly National Policy Committee meeting, Monday. Yonhap

Calls are growing for Binance, the world’s largest crypto exchange, to compensate victims of GoFi, a deposit service of Korean cryptocurrency exchange GOPAX, after a lawmaker raised the issue during a parliamentary committee, market watchers said Tuesday.

Rep. Min Byung-dug of the ruling Democratic Party of Korea questioned Financial Services Commission (FSC) Chairman Lee Eog-weon Monday, citing the financial authority’s recent approval of Binance’s move to take over GOPAX.

GoFi is an interest-paying product from GOPAX for investors who deposited cryptocurrencies. However, following the 2022 bankruptcy of the FTX crypto exchange, customer funds were frozen. Around 3,000 investors have a combined 150 billion won’s ($106 million) worth of funds frozen.

The lawmaker said full compensation to victims was a key condition of the acquisition, but Binance has not yet submitted a plan.

“This is a merger not backed by capital,” Min said during a National Policy Committee hearing.

Binance had initially sought to enter the Korean market by acquiring GOPAX on the condition of assuming GoFi’s liabilities.

However, the FSC-supervised Korea Financial Intelligence Unit (KoFIU) opposed the acquisition and withheld approval due to Binance’s violations of anti-money laundering regulations in the U.S.

The acquisition was only approved this month after Binance reportedly resolved its issues with U.S. regulators.

Many opposition party lawmakers questioned the timing of the approval, since the long-stalled deal was swiftly approved just four months after the new administration took power.

Issues of alleged political connections were also mentioned. They center on claims that a GOPAX senior executive is the son of a high-ranking public servant in the Lee Jae Myung administration, suggesting influence peddling facilitated the approval.

A GOPAX creditor group said the victims have yet to receive a clear answer from Binance or GOPAX.

“It has been a long time since the compensation issue first emerged. We are awaiting their response,” the group said.

Also under scrutiny was Binance’s alleged connections to Cambodia’s Prince Group, a conglomerate suspected of involvement in money laundering and human trafficking.

Rep. Kim Jae-sub of the main opposition People Power Party (PPP) said Binance had been used to launder illicit funds for the Prince Group, as cited by U.S. Treasury and Justice Department reports.

He also highlighted that Binance founder Zhao Changpeng was fined $4 billion and banned from the U.S. market, with additional sanctions imposed on Binance in France and India for anti-money laundering violations.

Rep. Kang Min-kuk of the PPP called for a thorough investigation into five Korean financial institutions that reportedly had business dealings with the Prince Group involving 3.96 billion won in overseas remittances.

Lee said that the FSC is currently working with the foreign and finance ministries to review potential sanctions.

GOPAX said it is fully committed to fulfilling all compensation obligations and protecting its users' assets.

"We will provide detailed guidance on the specific timeline and process for repayment once they are finalized," a GOPAX official said.