A major South Korean cryptocurrency platform, Delio, has filed for bankruptcy. This leaves roughly 2,800 investors unable to access their crypto, totaling a staggering $1.75 billion.
The Court’s Decision
The Seoul Rehabilitation Court officially declared Delio bankrupt. The court cited Delio’s inability to allow withdrawals since mid-2024 as the primary reason. This means thousands of investors are locked out of their funds.
A Glimmer of Hope?
While the situation is dire, there’s a small chance of recovery. The court has ordered creditors to submit their claims by February 21, 2025, with a creditors’ meeting scheduled for March 19, 2025. This process will hopefully lead to some distribution of Delio’s remaining assets.
Why Did Delio Collapse?
The court attributed Delio’s bankruptcy to its inability to repay debts, largely stemming from the collapse of FTX in November 2022. A significant portion of Delio’s customer deposits were held in FTX accounts and were lost when FTX went bankrupt. This inability to recover these assets forced Delio to halt withdrawals, ultimately leading to its downfall. The platform operated by taking customer deposits of cryptocurrencies like Bitcoin, lending them out, and paying interest.
Delio’s CEO Fights Back
Adding to the drama, Delio’s CEO, Jeong Sang-ho, is facing charges of fraud, embezzlement, and breach of trust. He claims that investors were aware their deposits weren’t “principal protected,” meaning there was always a risk of loss. This counters the government’s actions, which included suspending Delio’s license and imposing a hefty fine. The government had previously attempted to remove the CEO.
Despite being the first South Korean firm to receive virtual asset service provider (VASP) status in 2022, Delio’s story serves as a cautionary tale about the risks involved in cryptocurrency investments.
