Binance is reportedly finalizing negotiations with South Korean cloud service provider Megazone to sell a majority stake in the local exchange Gopax.
The crypto giant is preparing to reduce its 72.6% stake in Gopax to as low as 10%, according to a July 11 report by South Korea’s news agency The Chosun Ilbo.
An anonymous industry insider related to Gopax suggests that Binance is pushing the sale to improve its governance structure as requested by local financial authorities.
Binance’s acquisition of Gopax has faced regulatory hurdles. The initial acquisition of a 72.26% stake was announced in February 2023, but the South Korean financial authorities blocked the capital injection. Regulatory issues in the United States and a lawsuit from the US Securities and Exchange Commission have also contributed to skepticism from South Korean regulators.
The sale comes ahead of Gopax’s expected renewal of its real-name account contract with Jeonbuk Bank in August. The current two-year contract expires on August 11, 2024. As of April 2024, Gopax’s total debt was 118.4 billion South Korean won ($86 million).
The Seoul-based trading platform, which is among South Korea’s five fully licensed crypto exchanges, saw its net losses decrease to 51.3 billion Korean won ($37 million) in 2023 from 90.6 billion won in 2022.
The exchange saw a massive 97% boost in revenue, hitting 3.1 billion won. Also, its net operating loss shrank by 78% down to about 17 billion won. This uptick in Gopax’s financial health is thanks to a bullish sentiment in South Korea’s crypto markets, which are among the busiest in the world.
However, the financial health of Gopax was still impacted by its involvement with Genesis Global Capital. Genesis, which operated Gopax’s crypto custody service GoFi, suspended withdrawals in November 2022 following a liquidity crisis tied to the collapse of FTX. Genesis’ parent company, Digital Currency Group, was Gopax’s second-largest shareholder and a key business partner.
This situation left Gopax owing its users 63.7 billion won. But Binance’s intervention in February 2023, which involved acquiring a 72.26% stake in GOPAX, helped resolve these liquidity problems. However, the transition has faced regulatory delays in South Korea, primarily due to ongoing legal scrutiny of Binance in the U.S.
In December, GOPAX revealed progress in securing funds to normalize its operations and restore lost deposits. The revised plan was expected to help GOPAX renew its registration with the Financial Services Commission (FSC) in South Korea. However, the FSC has delayed approving GOPAX’s registration change for over a year due to concerns related to Binance’s legal challenges in the US.
