The firm allegedly denied having any exposure to troubled sister lending firm Haru Invest before suspending transfers earlier this month.
According to a report by local news outlet Digital Asset, South Korean crypto lending firm Delio is under investigation by the country’s Financial Services Commission (FSC) as of June 30. The FSC alleges fraud, embezzlement and breach of trust related to Delio’s unilateral decision to suspend users’ deposits and withdrawals on June 14.
During an extraordinary investors’ meeting on June 17, Delio CEO Jung Sang-ho explained that the firm would resume withdrawals, albeit with no fixed schedule at the time. On June 27, the company began opening withdrawals for a portion of its staking services.
“[Delio] will secure as much capital as possible to compensate,” Sang-ho said. Delio is currently one of South Korea’s largest crypto lenders, holding an estimated $1 billion in Bitcoin BTC $30,587, $200 million in Ether ETHtickers down $1,921 and $8.1 billion in various altcoins. Its CEO and management staff have been reportedly barred from leaving the country pending an investigation by prosecutors.
On June 13, Delio’s sister firm, Haru Invest, suspended withdrawals and deposits, citing an issue with a “consignment operator.” The move prompted Delio to do the same the day after, likely due to counterparty exposure. Since the announcement, Haru Invest has reportedly cut the majority of its staff. The company says it is currently taking legal action against its service partner.
As a registered virtual asset provider (VASP), Delio is regulated by the country’s Financial Intelligence Unit. However, Haru Invest is reportedly not a VASP and therefore does not fall under regulators’ jurisdiction. It was alleged that Delio management denied exposure to Haru Invest shortly before its decision to suspend withdrawals.