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South Korean crypto deposit platform Delio has officially been declared bankrupt by a Seoul court as of November 22, following a tumultuous year marked by halted withdrawals and escalating financial woes.
With liabilities amounting to 245 billion won ($1.75 billion), the company is set to undergo liquidation proceedings.
A Ripple Effect of FTX Collapse
Delio’s downfall is closely tied to its exposure to the 2022 collapse of crypto exchange FTX. According to court reports, Delio had entrusted customer-deposit virtual assets to a management company that subsequently deposited a major portion into FTX accounts. When FTX declared bankruptcy in November 2022, Delio was unable to recover its assets, leaving it incapable of fulfilling withdrawal requests since June 2023.
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Approximately 2,800 customers have been affected by the bankruptcy, though there remains a glimmer of hope for recovery. Creditors have until Feb. 21, 2025, to file claims, with the first official meeting scheduled for March 19, 2025.
Delio Leadership on Trial
Delio’s troubles extend beyond financial mismanagement. In September 2023, the South Korean Financial Intelligence Unit (FIU) recommended the dismissal of Delio CEO Jeong Sang-ho, citing regulatory violations. This led to a fine of 1.83 billion won ($1.34 million) and a temporary suspension of Delio’s business license.
Jeong, who is now on trial for charges including fraud, embezzlement, and breach of trust, has argued that customer deposits on the platform were not guaranteed as “principal protected.” In a controversial move earlier this year, Delio proposed transferring its debt to a new entity while selling itself to a buyer seeking Virtual Asset Service Provider (VASP) status, an accreditation it was the first to achieve in South Korea back in 2022.
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Adding to the company’s woes, Delio’s sister firm, Haru Invest, has also faced collapse. Haru ceased operations on the same day as Delio and was declared bankrupt on Nov. 20. Haru’s CEO, Hugo Hyungsoo Lee, was embroiled in legal troubles before being physically attacked by a disgruntled customer during bankruptcy proceedings in August.
Fallout for South Korean Crypto Landscape
The twin collapses of Delio and Haru Invest highlight the vulnerabilities in South Korea’s crypto ecosystem. Once hailed as innovators, both firms now stand as cautionary tales in an industry grappling with regulatory challenges and the lingering effects of global crypto failures like FTX.
As the liquidation process unfolds, impacted customers and industry stakeholders will be closely monitoring how South Korea navigates this high-profile collapse and its implications for the future of crypto regulation.
