Emily Walker
A South Korean cryptocurrency platform, Delio, has officially declared bankruptcy as determined by a local court due to its inability to allow customers to withdraw a total of $1.75 billion in virtual funds.
This situation highlights the potential for significant gains in digital assets, while also underscoring the volatility and risks involved in such investments.
Bankruptcy Announcement
The Seoul Rehabilitation Court announced that the cryptocurrency firm Delio has filed for bankruptcy, marking the firm’s official cessation of operations as of Friday.
Since the middle of last year, Delio has been unable to process withdrawals, preventing customers from accessing their investments.
Approximately 2,800 investors are impacted, with their collective crypto assets totaling $1.75 billion unreachable.
[단독] ‘2500억 사기’ 델리오 파산https://t.co/WcGeIDiaQd#델리오 #delio #가상자산예치업체 #회생법원 #하루인베스트 #haruinvest #법인파산 #암호화폐 #가상화폐 #디지털자산 #가상자산 #코인
— KCG(Korea Coin Group) (@kdisla) November 22, 2024
Experts indicate that corporate bankruptcy is declared by a court when a firm is unable to settle its debts, allowing for the transformation of its assets into cash to pay off creditors. Delio’s situation exemplifies this process.
A Ray of Hope
Following the bankruptcy declaration, there is an opportunity for creditors to submit claims, and details on asset distribution will be explained during a creditors’ meeting.
This development brings some optimism for Delio’s customers, as the South Korean court has requested that creditors file their claims by February 21, 2025, with a creditors’ meeting scheduled for March 19, 2025.
Reasons for Delio’s Bankruptcy
An official from the Seoul Rehabilitation Court identified that Delio’s bankruptcy primarily stemmed from its inability to repay debts, highlighted by the ongoing suspension of withdrawals and the operational challenges faced by the firm.
Furthermore, Delio, which functioned as a deposit and management service, made profits and paid interest through the management of customers’ virtual assets, like Bitcoin.
However, much of these entrusted virtual assets were at risk as they were placed into an FTX account, which became inaccessible after FTX declared bankruptcy in November 2022. This event resulted in Delio halting all withdrawals.
Delio’s Response to Regulatory Scrutiny
In September 2023, Delio pushed back against South Korean authorities after the Financial Intelligence Unit (FIU) proposed to dismiss CEO Jeong Sang-ho.
Additionally, the government suspended Delio’s operating license and imposed a $1.34 million fine on the firm.
CEO Jeong faces allegations of fraud and misappropriation, but defended the company by stating that the deposits were not guaranteed as principal-protected.
Founded in 2018, Delio achieved recognition as a virtual asset service provider (VASP) from the FIU in 2022, marking a significant milestone as the first South Korean company to attain this status.
Image credit: The Independent; Chart source: TradingView