Zhiyuan Sun8 hours agoCEO of defunct yield protocol says user deposits weren’t "principal protected"The South Korean platform Delio collapsed last year due to counterparty exposure to Haru Invest, another South Korean crypto yield giant.1794 Total views7 Total sharesListen to article 0:00NewsOwn this piece of crypto historyCollect this article as NFTJoin us on social networksJung Sang-ho, CEO of South Korean crypto yield platform Delio, which collapsed last year and owes creditors an estimated 250 billion won ($181 million), has blatantly told investors that their deposits were not “principal protected” when they transferred their assets to the platform.
According to a report by local news agency Etoday Korea, during the second hearing of the first criminal trial held on June 25 at the Seoul Southern District Court, Jung told the audience: “I never promised a guarantee of principal. It was clearly stated in the terms and conditions, and FIU [Korea Financial Intelligence Unit] required us to notify investors of this through our website.”
However, creditors quickly shot back: “Why are deposits and staking considered investments?” The prosecution has also alleged that the principal guarantee is a duty of care to customers.
Meanwhile, Jung’s legal team argued that the prosecution and creditors’ claims were “factually incorrect,” arguing that the assets lent by the platform were without collateral and their operational handling constituted “only 5% of their assets” following the collapse of FTX.
Jung is currently charged with fraud, embezzlement, and breach of trust over the collapse of the Delio platform. The next hearing for the CEO is scheduled for July 23.
In 2022, Delio became the first Korean company in the crypto lending and depositing field to obtain Virtual Asset Service Provider (VASP) approval from the FIU. "Delio obtained its Information Security Management Systems (ISMS) certification last year and has built and operated a high-level information security system at the caliber of financial institutions such as Hana Bank. With VASP approval, Delio plans to provide services based on reliability, security, and safety," the firm wrote at the time.
On June 13, 2023, Delio’s sister firm, Haru Invest, suspended withdrawals and deposits, citing an issue with a “consignment operator.” The move prompted Delio to do the same the following day, likely due to counterparty exposure. Since the announcement, Haru Invest has reportedly cut most of its staff. The company says it is currently taking legal action against its service partner.
Prosecutors alleged that Haru Invest collapsed due to its executives misappropriating most of its customers’ crypto deposits by reinvesting the assets from March 2020 to June 2023. The execs allegedly falsely advertised Haru as operating a stable business using “risk-free diversified investment techniques.”
During an investors’ meeting on June 17, 2023, Delio CEO Jung Sang-ho explained that the firm would resume withdrawals, albeit with no fixed schedule at the time. On June 27, 2023, the company began opening withdrawals for a portion of its staking services.
Related: Haru Invest execs arrested in South Korea on embezzlement charges# Blockchain# Cryptocurrencies# Business# South KoreaAdd reaction