Binance, a major cryptocurrency exchange, is close to finalizing a deal with South Korean cloud service provider Megazone. The deal involves selling a large portion of its shares in the local exchange Gopax.
According to a report from South Korea’s news agency, The Chosun Ilbo, on July 11, Binance is preparing to cut its 72.6% stake in Gopax to as low as 10%. An anonymous insider connected to Gopax stated that Binance is making this move to improve its governance structure as required by local financial authorities.
This planned sale follows earlier reports about Binance’s intentions to reduce its stake in Gopax. Binance had initially acquired a 72.26% stake in Gopax in February 2023, aiming to re-enter the South Korean market after ceasing several operations in 2021.
Regulatory Hurdles
However, the South Korean financial authorities blocked the capital injection, denying the change of the largest shareholder. Binance’s regulatory issues in the United States, including a lawsuit from the US Securities and Exchange Commission, also led to increased scrutiny from South Korean regulators.
The sale details come just weeks before Gopax is due to renew its real-name account contract with Jeonbuk Bank in August. The two-year contract, signed in August 2022, is set to expire on August 11, 2024.
Impact of FTX Collapse on Gopax
Gopax was one of the many firms affected by the collapse of Sam Bankman-Fried’s FTX exchange in November 2022. Shortly after FTX’s collapse, Gopax had to stop withdrawals of principal and interest payments in its decentralized finance service, which included products from the now-bankrupt crypto lending firm Genesis Global Capital.
Before the bankruptcy, Genesis’ parent company, Digital Currency Group, was Gopax’s second-largest shareholder and a key business partner, providing its GoFi product. As of April 2024, Gopax’s total debt was reported to be 118.4 billion South Korean won ($86 million).
