South Korea’s financial regulator, the Financial Services Commission (FSC), has suspended its review of Binance’s executive change report for Gopax submitted on March 7. Binance was seeking the appointment of three Binance officials as inside directors at Gopax, a move linked to its action to acquire a majority stake.
SEC Lawsuit Challenges Binance-Gopax Deal
The FSC decided to closely monitor the Binance case, and the likelihood of postponing Binance’s application to acquire Gopax, a local crypto exchange, seems very high. The Commission had previously decided in April to postpone Binance’s application to probe “money laundering suspicions.” This period saw a lawsuit from the US Securities and Exchange Commission (SEC) against Binance and CEO Changpeng Zhao (CZ) for alleged securities law violations and a move to seize their US assets, further complicating the process.
The SEC’s request in federal court to seize assets by accusing Binance of embezzling customer assets reveals that the assets of two US-based companies linked to Binance are at risk. Binance faces serious allegations, including inflating trading volume, secretly transferring customer assets to other companies, and investing in cryptocurrencies traded on these companies.
The FSC, reacting to this situation, suspended the review of Gopax’s authorization change application. It is being emphasized that reconsidering and processing the application due to alleged securities law violations and asset seizures seems very challenging to result in favor of Binance. The application requested the appointment of three individuals from Binance as executives at Gopax, including Binance Asia Pacific President Leon Singh Fung.
Officials from the FSC stated that they need to act cautiously about accepting or rejecting the application as their internal review continues. They will evaluate what supporting materials are needed, considering the SEC’s requests. Current laws in South Korea do not specifically address the issue of major shareholder suitability violation, but a proposed bill suggests changing the law to include the examination of major shareholders.
Fate of Gopay’s Customer Assets Still Uncertain
FSC officials mentioned that they aim to finalize the application within 45 days after evaluating it, but the review could take longer if data completion is needed. Therefore, a delayed decision is expected on Binance’s executive change application for Gopax. Concerns are being raised about possible complications in refunding customer assets in Gopay if Binance’s acquisition of Gopax does not occur. Gopay, a product that paid interest on cryptocurrencies deposited into Gopax, and Gopax’s deposits were managed by the crypto credit company Genesi, but customer assets were frozen following FTX‘s bankruptcy.
On the other hand, if Binance’s US assets are seized, payments for customer funds remaining in Gopay are expected to remain unaffected. Gopax representatives clarify that the rescue fund is not part of Binance and is financed by contributions from business partners and initial investors. The fund’s source is also reported to be a company based in Ireland.
