South Korean crypto lending firm Delio is facing an investigation by the country’s Financial Services Commission (FSC) for alleged fraud, embezzlement, and breach of trust, according to a report by local news outlet Digital Asset.
The investigation stems from Delio’s unilateral decision to suspend users’ deposits and withdrawals on June 14.
Delio’s CEO, Jung Sang-ho, addressed concerned investors during an extraordinary meeting on June 17, stating that the company would resume withdrawals, albeit without a fixed schedule at that time.
Partial withdrawals for certain staking services were opened by the company on June 27. Sang-ho assured stakeholders that Delio would secure sufficient capital to compensate affected users.
As one of South Korea’s largest crypto lenders, Delio currently holds an estimated $1 billion worth of Bitcoin (BTC) and $8.1 billion in various altcoins.
The company’s CEO and management staff have been reportedly prohibited from leaving the country while the investigation is ongoing.
The suspension of withdrawals and deposits by Delio’s sister firm, Haru Invest, on June 13, citing issues with a “consignment operator,” likely triggered Delio’s decision to take similar action the following day due to counterparty exposure.
Following the announcement, Haru Invest has reportedly downsized its workforce significantly and is pursuing legal action against its service partner.
While Delio is a registered virtual asset provider (VASP) regulated by the country’s Financial Intelligence Unit, Haru Invest is allegedly not a VASP and thus falls outside the regulators’ jurisdiction.
It has been alleged that Delio management denied any exposure to Haru Invest shortly before the decision to suspend withdrawals.
The investigation by the FSC signifies a serious turn of events for Delio, a prominent player in the South Korean crypto lending industry.
The outcome of the investigation will determine the extent of the firm’s culpability and any potential consequences for its management.
The affected users and investors will be eagerly awaiting the resolution of this case to ascertain the fate of their assets and seek appropriate compensation.
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