The Financial Intelligence Unit (FIU) in South Korea has resumed reviewing GOPAX’s executive change report nearly two and a half years after Binance acquired a 67% stake in the firm. Local financial authorities have been cautious in accepting the acquisition, fearing its implications for the domestic anti-money laundering system.
The financial authorities stated that they are closely monitoring Binance’s eligibility to enter the South Korean market following the indictment of the exchange by the U.S. Treasury Department and the Department of Justice. The exchange was sued by the U.S. SEC for providing services to U.S. users illegally and misusing customer funds. It was also fined $4.3 billion for breaching anti-money laundering regulations.
South Korea’s media house Newsis reported that the FIU is assessing the executive change report favorably, with approval expected by the end of the year. However, Newsis pointed out that the South Korean legal framework does not provide a separate qualification review for major shareholders of crypto exchanges. Only executives and representatives of businesses seeking to offer crypto-related services and products are required to report to the FIU.
Binance’s fate hinges on domestic regulatory interpretations
The criteria for rejecting GOPAX’s executive change report under South Korean law include the exclusion of any crypto business that has been convicted of financing terrorism or hiding criminal proceeds from operating a business. Businesses that receive heavy penalties or fines under the Capital Market Act or the Foreign Exchange Transactions Act are also excluded.
However, the resolution of regulatory-related cases for Binance in the U.S. will reportedly influence the review of its eligibility as a major shareholder in GOPAX. In May, the U.S. SEC dropped its lawsuit against Binance and its founder, CZ (Changpeng Zhao). Prosecutions by the U.S. Departments of Justice and Treasury also ended after the exchange paid a fine.
A South Korean financial industry official, who Newsis anonymously interviewed, explained that executive changes are simply a matter of reporting. However, they are conducted on the same level as major shareholder eligibility reviews for financial companies, consistent with the financial authorities’ policy.
The official pointed out that the risk of Binance becoming a major shareholder in GOPAX disappeared after U.S. authorities withdrew all lawsuits against the exchange. He also believes the executive change report will be approved before the end of the year. FIU’s effort appears to be influenced by the resolution of compliance issues for Binance.
FIU maintains a cautious stance
The FIU is reportedly cautious about Binance’s entry into South Korea because its laws prohibit individuals from operating cryptocurrency businesses. However, the executive change report can be viewed as a de facto suitability review for Binance, given that it is the majority shareholder of GOPAX.
Meanwhile, the FIU is concerned about whether South Korean financial authorities will investigate Binance after allegations claimed that the exchange underreported liquidations on its platform. A massive digital asset liquidation occurred last Friday when over $19 billion was liquidated in 24 hours following President Donald Trump’s announcement of new tariffs on China. Nearly $706.2 million was liquidated in Binance alone.
Jeff Yan, the CEO of Hyperliquid, accused exchanges like Binance of underreporting actual liquidation statistics. Yan pointed out that only one out of thousands of liquidation orders is reported. He added that cases of underreporting sometimes go as far as 100x under some conditions.
“For example, on Binance, even if there are thousands of liquidation orders in the same second, only one is reported.”
–Jeff Yan, CEO of Hyperliquid
According to South Korean law, the FIU must approve or decline the executive change report within 45 days, but the Binance-GOPAX case has been delayed for over 24 months. The FIU has repeatedly requested additional documentation, which has led to a stalled review.
Binance stepped in to rescue GOPAX in 2023 after an estimated $47 million in GoFi customer funds were frozen, leading to a withdrawal crisis for GOPAX’s customers. Binance acquired a majority stake in GOPAX, injecting capital to help repay affected GoFi users.
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Source: https://www.cryptopolitan.com/south-koreas-fiu-resumes-review/