South Korean crypto yield platform Delio, which collapsed last year due to its exposure to Haru Invest, another major South Korean crypto yield firm, left creditors without the principal protection they expected.
Jung Sang-ho, the CEO of Delio, which owes creditors an estimated 250 billion won ($181 million), admitted to investors during a hearing that their deposits were not “principal protected” when they transferred assets to the platform. According to local news outlet Etoday Korea, during the second hearing of the first criminal trial on June 25 at the Seoul Southern District Court, Jung stated: “I never promised a guarantee of principal. It was clearly stated in the terms and conditions, and the Korea Financial Intelligence Unit (FIU) required us to notify investors of this through our website.”
Creditors quickly responded, questioning why deposits and staking were considered investments. The prosecution argued that Delio had a duty of care to customers to guarantee their principal.
Jung’s legal team countered that the claims from the prosecution and creditors were “factually incorrect,” explaining that the assets lent by the platform were without collateral and constituted only 5% of their assets after the collapse of FTX.
Jung faces charges of fraud, embezzlement, and breach of trust related to the Delio collapse. His next hearing is set for July 23.
In 2022, Delio became the first Korean company in the crypto lending and depositing sector to obtain Virtual Asset Service Provider (VASP) approval from the FIU. The company highlighted its compliance and security measures, aiming to provide reliable and safe services.
On June 13, 2023, Delio’s sister company, Haru Invest, suspended withdrawals and deposits due to issues with a “consignment operator.” This prompted Delio to suspend its operations the following day, likely due to their interconnected exposure. Since then, Haru Invest has reportedly cut most of its staff and is pursuing legal action against its service partner.
Prosecutors have alleged that Haru Invest executives misappropriated most of their customers’ crypto deposits by reinvesting them from March 2020 to June 2023, falsely advertising their operations as stable and using “risk-free diversified investment techniques.”
During an investor meeting on June 17, 2023, Delio CEO Jung Sang-ho stated that the firm would resume withdrawals, though no fixed schedule was provided at the time. On June 27, 2023, the company began allowing withdrawals for a portion of its staking services.
Summary Review: The collapse of Delio highlights significant issues around the lack of principal protection and transparency in the crypto yield sector, underscoring the need for better regulatory oversight and investor education.
Disclaimer: Remember that nothing in this article and everything under the responsibility of Web30 News should be interpreted as financial advice. The information provided is for entertainment and educational purposes only. Investing in cryptocurrency involves inherent risks and potential investors should be aware that capital is at risk and returns are never guaranteed. It is imperative that you conduct thorough research and consult with a qualified financial advisor before making any investment decision.
