Korean Lawmakers Urge Binance to Compensate Victims of GOPAX’s Frozen GoFi Funds
Pressure is mounting on Binance, the world’s largest cryptocurrency exchange, to compensate victims of GOPAX’s GoFi deposit program after a South Korean lawmaker raised the issue during a parliamentary hearing. The lawmaker, Rep. Min Byung-dug, questioned regulators about whether Binance intends to fulfill its alleged promise to compensate investors who have had their funds frozen since FTX collapsed in 2022.
Key Takeaways and Background
The issue at hand involves around 3,000 investors who have had their funds totaling approximately $106 million frozen since FTX’s collapse. GoFi was a high-yield deposit product launched by GOPAX, allowing users to earn interest on their crypto holdings. However, following FTX’s demise, customer funds linked to GoFi were frozen, leaving investors without access to their money.
Binance had agreed to acquire GOPAX in 2023 as part of its push into the South Korean market. However, the acquisition was initially blocked by the Korea Financial Intelligence Unit (KoFIU) due to Binance’s previous anti-money laundering (AML) violations in the United States. The deal was only approved this month after Binance reportedly addressed compliance concerns with US authorities.
Controversy and Allegations
The timing of the approval has sparked controversy, with opposition MPs questioning why the long-stalled takeover was suddenly approved just four months after the new government took office. Some have even suspected political influence, pointing to reports that a senior GOPAX executive was related to a senior official in the Lee Jae Myung administration.
Furthermore, Rep. Kim Jae-sub of the People Power Party raised allegations linking Binance to Cambodia’s Prince Group, a conglomerate cited by US authorities for alleged money laundering and human trafficking activities. Kim referred to reports from the US Treasury Department that Binance’s platform was used to transfer illicit funds for the group.
In response, Rep. Kang Min-kuk called for an investigation into five Korean banks that reportedly processed foreign transfers totaling 3.96 billion won related to the Prince Group. Financial Services Commission (FSC) Chairman Lee Eog-won confirmed that the commission is coordinating with the ministries of foreign affairs and finance to assess possible sanctions.
Regulatory Environment and Future Directions
In August, South Korea’s financial regulator decided to curb risky lending practices in the digital asset space by ordering local exchanges to suspend all crypto lending services until an appropriate regulatory framework is in place. The move came amid South Korea’s broader focus on introducing regulated cryptocurrencies, with authorities lifting restrictions on institutional trading and preparing to approve the country’s first spot crypto ETFs.
President Lee Jae Myung’s government is also working on a stablecoin framework pegged to the Korean won, signaling a more open approach to digital finance despite recent restrictions. As the regulatory environment continues to evolve, it remains to be seen how Binance and other cryptocurrency exchanges will navigate these changes and address concerns around investor protection and compliance.
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