A South Korean-based cryptocurrency platform has filed for bankruptcy, a local court has declared, after its customers were no longer able to withdraw their $1.75 billion worth of virtual funds.
The unfortunate circumstances facing Delio serve as a reminder that digital assets can offer tremendous growth, but they are also inherently volatile and high-risk investments.
Court Statement
The Seoul Rehabilitation Court has declared that cryptocurrency platform Delio has ceased operations, noting that the court declared the digital asset company bankrupt on Friday.
Since the middle of last year, the cryptocurrency platform has stopped allowing withdrawals of funds from virtual assets, leaving its customers unable to access their investments.
Around 2,800 cryptocurrency investors were affected and were unable to recover their cryptocurrency funds worth $1.75 billion.
[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
Analysts explained that the Corporate bankruptcy occurs when a court declares a company bankrupt because the company is no longer able to pay its debts.
This judicial procedure allows the company’s assets to be converted into cash and then distributed to creditors. The Delio case is a good example of corporate bankruptcy.
A ray of hope
According to reports, after the court declares bankruptcy, “a claim is filed and an explanation is given on the distribution of assets at the creditors’ meeting.”
This offers Delio’s customers a glimmer of hope, as the South Korean court has ordered its creditors to file their claims by February 21, 2025. The court has also set a date for the creditors’ meeting on February 19, 2025.
Why did Delio declare bankruptcy?
An official at the Seoul Rehabilitation Court said that the main reason for Delio’s bankruptcy is that “its inability to pay was recognized in light of the suspension of withdrawals, the circumstances of the suspension of operations, and the extent of the damage.”
The official added that the cryptocurrency platform operated as a custodian and management company in which it generated profits and paid interest by “operating virtual assets such as Bitcoin deposited by customers”.
“The debtor lent and entrusted the operator with the management of the virtual assets deposited by customers, but a significant part of them were deposited in the FTX account and were being managed,” he continued.
However, he said that the “virtual assets entrusted could not be recovered” after FTX filed for bankruptcy in November 2022, which led Delio to suspend withdrawals on the platform.
Delio executive hits back at authorities
In September 2023, the cryptocurrency company accused South Korean authorities of misinterpreting the law after the state-run Financial Intelligence Unit (FIU) proposed the dismissal of Delio CEO Jeong Sang-ho.
The government also suspended the cryptocurrency platform’s operating license and ordered the company to pay a fine of $1.34 million.
The cryptocurrency platform’s CEO is currently facing charges of “fraud, embezzlement and breach of trust.” However, the Delio executive defended himself by saying that investors’ deposits on the platform were not “protected.”
Delio was founded in 2018 and received Virtual Asset Service Provider (VASP) status from the FIU in 2022, becoming the first South Korean company to achieve such recognition.