South Korean Crypto Lender Faces Fraud Charges For Suspensions

South Korean Crypto
  • Delio, a registered and regulated crypto lending firm, faces charges of fraud and embezzlement.
  • In cahoots with its sister firm, Delio suspended the withdrawals and deposits of many users.

It’s been more than a decade since the first crypto was launched. However, no country implemented a regulatory framework that could tell crypto firms what to do and what not. And this leads to entities dealing with digital assets often touching the grey area willy-nilly. 

Going down the investigative route

The South Korean crypto lending firm Delio has recently gained regulatory attention on the same grounds. As per the local news outlet Digital Asset, the Financial Services Commission (FSC) is investigating Delio’s operations. On June 14, the FSC alleged that the company indulged in fraud, embezzlement, and breach of trust. 

According to the reports, the regulator got a whiff of it with Delio’s autonomous decisions to suspend users’ deposits and withdrawals. Responding to the action, Delio CEO Jung Sang-ho mentioned that the firm would resume withdrawals shortly. He made the announcement on June 17 at the investors’ meeting. The company started opening withdrawals of its staking services on June 27. 

Making the company’s stance clear, Sang-ho said that it would safeguard as much capital as possible. He asserted that Delio is one of the biggest crypto lenders in South Korea. It has an assorted portfolio and massive holdings that go to the tune of $8.1 billion in altcoins, $200 million in Ether, and $1 billion in Bitcoin. 

In the wake of investigations, the authorities have barred management staff and the CEO of Delio to fly out of the country.  Reportedly, Haru Invest, the sister company of Delio also suspended withdrawals and deposits of its users’ wallets. Purportedly, the latter took the same step a day after to avoid any conflicts in decision-making. 

Since the suspension incident, Haru Invest has laid off most of its staff. Moreover, the company is in the process of dragging its service partner to court. It should be duly noted that Delio is a registered virtual asset service provider (VASP). The Financial Intelligence Unit itself regulates the platform. But, Haru Invest does not come under the regulatory lens. Allegedly, Delio management denied any association with Haru Invest before suspending withdrawals and deposits on its platform.

South Korea’s Stance on crypto regulations

Talking about the crypto enterprise from South Korea, one must know its government’s stance on this technology. Recently, the country took an essential step towards bringing digital assets to the forefront of its economy. South Korea’s national assembly approved the Virtual Asset User Protection Act. The said bill will safeguard the interests of cryptocurrency investors in the country. 

The draft combines 19 different proposals aiming to set a transparent and competitive ecosystem for all the participants. It specifies the guidelines that service providers and their customers must adhere to. It also decrees the crypto firms to maintain insurance for the users by creating a reserve of tokens in cold wallets.

In addition to that, the bill talks about penalties if the firms engage in price manipulation, false promotion, or fail to provide the required information.  The bill comes into effect next year. Until then, South Korea will have to keep a close eye on the activities of its crypto companies. 

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