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South Korean crypto company Delio and Haru Invest suspend withdrawals, detailed explanation of the incident.

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Amid external doubts about Delio's decision to deposit customer funds into Haru Invest, many users are concerned about the possibility of panic and a chain of runs.

Original Title: "Building Collapse? Another Cryptocurrency Company in South Korea Suspends Withdrawals"

Source: Foresight News

Following Haru Invest's suspension of platform deposits and withdrawals, Delio announced yesterday that it will suspend withdrawals due to the sharp increase in market volatility. In light of external doubts about Delio depositing customer funds into Haru Invest, many users are concerned about the possibility of panic and a chain of runs.

Yesterday afternoon, Haru Invest stated that it has filed criminal charges against B&S Holdings, its commissioned operator, for providing management reports containing false information through fraudulent means, and plans to file a civil lawsuit. According to News1, B&S Holdings is a South Korean company that has used FTX.

In addition, @ErgoBTC tweeted that "Haru Invest's BTC balance has never been particularly high, and the highest trading volume was in the summer of 2022. It was observed that Haru Invest's two fund transactions with FTX were its largest outgoing transactions from its Bitcoin address."

韩国加密圈再起动荡？加密公司Delio与Haru Invest暂停提款风波始末

However, Haru Invest responded to the FTX issue in November last year, stating that "the risk was detected before the risk diffusion of FTX, and all assets managed on FTX were withdrawn without any losses. There was no impact from the price drop of FTX and FTT, and it was ensured that assets were only redistributed on trading platforms with proof of reserves or guidelines on proof of reserves."

It is currently unknown whether Haru Invest's response to the FTX issue is true, and whether Haru Invest and its commissioned operator B&S Holdings have been affected by FTX and only recently responded.

Who is Haru Invest?

Haru Invest is headquartered in Singapore, but has mainly operated in South Korea, providing products or services such as Earn (flexible savings and fixed deposits), cryptocurrency asset exchange, and using certain trading strategies to generate returns on user deposits. As previously reported by Foresight News in the article "We Investigated Haru Invest's "Can't Withdraw" Claims", Haru Invest claims to provide over 10% annualized returns on deposits such as Bitcoin through trading strategies such as arbitrage.

Haru Invest was established in 2019 by its parent company, Block Crafters, a digital asset investment firm. In 2020, Block Crafters completed a strategic round of financing, with investors including Chun Yang-Hyun, the Executive Chairman of Web3 avatar and digital company Cocone Corporation, and former President of LINE Japan, as well as DTN Investment and T Investment. In September 2022, Haru Invest completed a strategic financing round of $4 million at a valuation of $284 million, with Chun Yang-Hyun leading the investment.

According to the Haru Invest website, Haru Invest currently has over 80,000 members in more than 140 countries/regions, with a total trading volume exceeding 2.27 billion US dollars and managing assets of less than 1 billion US dollars.

Who is Delio?

Delio was founded in 2018 and is a cryptocurrency financial company. Prior to 2022, it completed virtual asset business under the Korean "Special Financial Law" and also obtained a Money Services Business (MSB) license in the United States.申报 According to its official website, Delio provides services such as deposits (earning income by depositing assets), loans, collateral, and exchanges, and also provides asset custody services for enterprises, institutions, and large account holders. Delio's official website states that its asset custody service can provide a maximum annual yield of 12%.

It is worth mentioning that in early June 2022, according to Edaily, Delio signed an asset supply contract worth about $600 million with BlockFi and Three Arrows Capital. Delio will receive Bitcoin, ETH, and USDT assets worth $600 million from the two companies. Delio plans to use this collateral to expand its current loan services and increase loan amounts. In addition, Delio is also discussing ways to collaborate with BlockFi in the cryptocurrency finance business.

Unfortunately, Three Arrows Capital suffered significant losses due to market sell-offs that month and was ordered to liquidate by a court in the British Virgin Islands (BVI) in mid-June, followed by a bankruptcy application. As a result, BlockFi, a lending institution that provided approximately $1 billion in loans to Three Arrows Capital, was also impacted by the FTX crash and filed for bankruptcy in November of last year. However, it is currently unclear what progress has been made in the handling of contracts between Delio, BlockFi, and Three Arrows Capital.

According to the official website, the current Total Value Utilized of Delio is 41,740 BTC (approximately 1.084 billion US dollars), 118,033 ETH (206 million US dollars), and nearly 6.45 million US dollars worth of altcoins.

What happened?

June 13th

Haru Invest announced that due to recent issues encountered by a certain service partner, they are conducting further investigations and seeking emergency plans to rectify the situation. In order to protect the assets of their users, deposits and withdrawals have been temporarily suspended.

According to a report by Yonhap News Agency, the office of Haru Invest appears to have been closed and its social media accounts on Instagram, LinkedIn, and others have been deleted.

Multiple Korean exchanges, including Upbit, have restricted withdrawals to Haru Invest.

Haru Invest tweeted that "Haru Invest's office is still operating continuously, and the so-called 'Rug Pull controversy' mentioned in some articles is completely untrue. Haru Invest is actively conducting investigations and response work related to the incident, and will do its best to protect investors."

Haru Invest has suspended its deposit and withdrawal services, explaining in an update that "recently, we discovered through internal checks that a consignment operator provided suspected false information. In order to protect investors, it is necessary to immediately suspend trading. Currently, we are conducting a factual investigation into the involved operator and planning to take necessary measures."

Delio stated that Haru Invest's suspension of deposits and withdrawals is not related to the company.

June 14th

Delio issued a notice that all employees will work from home starting from June 15th (Delio representatives stated that work from home will continue until the end of June).

Delio has announced a temporary change in the operation of its customer center. From June 15th to June 30th, the customer service center will only provide email and chat channels, and the phone communication channel will be cancelled.

Delio announced that withdrawals will be temporarily suspended from 18:30 local time today. Delio stated that this was due to increased market volatility following Haru Invest's suspension of deposits and withdrawals.

Later, several South Korean cryptocurrency trading platforms announced that they will restrict the withdrawal of assets to Delio.

Haru Invest has issued another announcement stating that "its commissioned operator B&S Holdings (formerly known as Aventus) provided management reports containing false information in a fraudulent manner, deceiving the company and users' judgments. Therefore, we have decided to take legal action immediately. In addition, Haru Invest has filed a criminal lawsuit against B&S Holdings today and plans to file a civil lawsuit."

However, Foresight News has not found any information related to B&S Holdings. According to News1, B&S Holdings is a South Korean company that, according to its website, used the FTX trading platform that went bankrupt in November last year. Currently, BNS Holdings is deleting information listed on its homepage in real time. In a Korean telegram group, some users have speculated that B&S Holdings' website may be http://bangnsong.com/, but the information on that website has already been deleted.

Haru Invest and Delio have business dealings

Regarding the connection between Haru Invest and Delio, although Delio clarified on June 13th that the suspension of deposits and withdrawals by Haru Invest was not related to the company, there have been ongoing doubts from the public about Delio depositing customer funds into Haru Invest. In response to Block Media's inquiry, Delio stated that "Delio has business dealings with Haru Invest, but it is not convenient to disclose specific amounts". The suspension of withdrawals was due to a surge in withdrawal requests from Delio after the Haru Invest incident. It is common for multiple wallets to transfer funds between each other within the company. "

After Delio suspended withdrawals, according to Bloomingbit's report, the South Korean financial regulatory agency stated that due to numerous cases of embezzlement and breach of trust, they will work with the financial regulatory agency to discuss countermeasures. A source from the Financial Intelligence Unit of the Financial Services Commission of South Korea stated that "Delio did indeed complete the declaration for virtual asset service providers (VASP), however, after investigation, we found that the main issue seems to be embezzlement and malfeasance. The FIU's investigation focuses on money laundering and suspicious transactions."

FIU officials explained that "if that's the case, we will eventually have to cooperate with the investigating authorities to understand the situation regarding criminal penalties. We will discuss together how to deal with this issue. There are also rumors that the Delio incident is related to Haru Invest, which did not declare, but there is currently nothing certain, so we are still observing. The transaction between Delio and undeclared Haru Invest itself is not a problem, but more importantly, whether Haru Invest has committed any illegal acts. If this also involves embezzlement and fraud, not just money laundering, then it should be investigated together with the investigating agencies."

Many users are worried that panic and chain runs may occur. According to Edaily, currently, about 300 domestic users gather in a chat room initiated by Haru Invest victims every day to discuss countermeasures. On June 14th, when Edaily visited Haru Invest Korea and Block Crafters in Gangnam-gu, Seoul, the office was empty. A visiting victim said, "I have about 20 million won in it, but I feel unable to recover it."