- The leading Korean cryptocurrency lending platform, Delio, is under the microscope of the Financial Services Commission (FSC) amidst claims of deceit, embezzlement, and faith breach.
- Delio’s sudden freeze on all deposits and withdrawals sent shockwaves through its user base, creating a climate of doubt and concern.
- Delio’s sister firm, Haru Invest, which isn’t subject to similar regulations, could potentially be a key player in the ongoing investigation.
South Korean crypto lending company Delio is currently in hot water. The firm found itself facing heavy scrutiny following allegations of fraudulent activity. The country’s financial overseer, the Financial Services Commission (FSC), has launched an inquiry into Delio’s dealings, based on concerns around fraudulent behavior, potential embezzlement, and a breach of faith.
Delio, managing roughly $1 billion worth of Bitcoin and an even more significant $8.1 billion in various other digital currencies, caused ripples of uncertainty amongst its users when it abruptly shut down deposits and withdrawals on June 14th. This abrupt move seemed to be a ripple effect from Delio’s sibling company, Haru Invest, which halted its operations due to some “consignment operator” problems the day before.
To pacify the growing unrest among his stakeholders, Jung Sang-ho, Delio’s Chief, called an emergency meeting on June 17. Sang-ho expressed Delio’s intent to restart the frozen withdrawal services but hesitated in giving a fixed date. On June 27th, Delio reinstated partial withdrawals for a few of its staking services, with Sang-ho pledging to raise the necessary funds to cover the affected users.
Delio operates as a regulated virtual asset service provider (VASP) and is thus under the watch of the financial intelligence unit. However, Haru Invest, not enjoying the same regulated status, stays free from such stringent oversight.
Interestingly, before the freeze, Delio’s executives had reportedly distanced themselves from any connection to Haru Invest. Given the recent turn of events, this denial now casts a more significant shadow on Delio’s operations and trustworthiness. The ongoing FSC investigation is likely to bring further clarity to the situation.
The combination of halted withdrawals and travel restrictions on Delio’s top brass has escalated the unease among its users and investors. The impending outcome of this investigation will unravel Delio’s liability and dictate the future of the users’ assets.
South Korea Advances in Crypto Regulation
To strengthen investor protection, South Korea has undertaken a significant step in 2023 by enacting a comprehensive law concerning digital assets. This proactive move follows a series of cryptocurrency market downturns and scandals, which triggered an urgent need for a structured regulatory framework. The new law, consolidating 19 related bills, aims to provide clear definitions for digital assets and set penalties for violations. Oversight responsibilities have been entrusted to the Financial Services Commission and the Bank of Korea.
They will ensure cryptocurrency operators adhere to measures such as insurance coverage and proper record keeping. Although some critics fear the legislation may slow industry growth, it unmistakably signals South Korea’s recognition of the cryptocurrency sector’s potential and its commitment to regulate this burgeoning field.
