After Haru Invest suspended deposits and withdrawals on the platform, South Korean crypto company Delio began to implement home office for all employees and suspended withdrawals. Haru Invest was also suspected to be affected by the FTX explosion, and panic was spreading.

 

Written by Karen, Foresight News

 

Following Haru Invest’s suspension of deposits and withdrawals, Delio announced yesterday that it would suspend withdrawals in light of the sharp increase in market volatility. With the outside world questioning Delio’s deposit of customer funds with Haru Invest, many users were concerned about the risk of panic and a chain run.

 

Yesterday afternoon, Haru Invest stated that its commissioned operator B&S Holdings fraudulently provided management reports containing false information, and has filed a criminal lawsuit against B&S Holdings and plans to file a civil lawsuit. According to News1, B&S Holdings is a Korean company that has used FTX.

 

In addition, @ErgoBTC tweeted, “Haru Invest’s BTC balance has never been particularly high, and the highest trading volume was in the summer of 2022. The two fund transactions monitored by Haru Invest to FTX were the largest outflow transactions from its Bitcoin address.”

 

However, Haru Invest responded to the FTX issue in November last year, saying that it had detected the risk before the FTX risk spread and withdrew all assets managed on FTX without any losses or being affected by the price drops of FTX and FTT, and guaranteed to reallocate assets only on exchanges that have proof of reserves or publish guidelines on proof of reserves.

 

We do not yet know whether Haru Invest’s response to FTX’s questions is true, or whether Haru Invest and its entrusted operator B&S Holdings were affected by FTX and have only recently responded.

 

So what happened to Delio and Haru Invest these days? Who are the entities behind the two companies? What services do they provide? What business dealings do they have? How do regulators view this incident? I will take you to find out.

 

Who is Haru Invest?

 

Haru Invest is headquartered in Singapore, but has been mainly operating in South Korea, providing products or services such as Earn products (flexible savings and fixed deposits), crypto asset exchange, and also using certain trading strategies to generate returns on user deposited assets. As Foresight News previously stated in the article "We dug into Haru Invest, which "can't withdraw money", Haru Invest claims to provide an annualized return of more than 10% for deposits such as Bitcoin through trading strategies such as arbitrage.

 

Haru Invest was founded in 2019 by its parent company Block Crafters (a digital asset investment institution). Block Crafters completed a strategic round of financing in 2020. One of the investors was Chun Yang-Hyun, executive chairman of Web3 avatar and digital company Cocone Corporation and former president of LINE Japan. Other investors included DTN Investment and T Investment. In September 2022, Haru Invest completed a strategic financing of US$4 million at a valuation of US$284 million, led by Chun Yang-Hyun.

 

According to Haru Invest’s official website, Haru Invest currently has over 80,000 members in more than 140 countries/regions, with a total trading volume of more than US$2.27 billion and assets under management of less than US$1 billion.

 

Who is Delio?

 

Founded in 2018, Delio is a crypto-financial company that has completed virtual asset business declaration in accordance with South Korea's Special Financial Act in 2022 and obtained a US money service business (MSB) license. According to the official website, Delio provides deposit (depositing assets to earn income), lending, pledging, exchange and other services, and also provides asset custody services for enterprises, institutions and large households. The Delio official website states that its asset custody service can provide an annual return of up to 12%.

 

It is worth mentioning that in early June 2022, according to Edaily, Delio signed an asset supply contract worth about US$600 million with BlockFi and Three Arrows Capital. Delio will obtain a supply of Bitcoin, ETH and USDT assets worth US$600 million from the two companies. Delio plans to use this guaranteed fund to prioritize the expansion of the current loan services and increase the loan amount. In addition, Delio is also discussing ways to cooperate with BlockFi in crypto financial business.

 

Unfortunately, Three Arrows Capital suffered heavy losses in the market sell-off that month and was ordered to liquidate by a court in the British Virgin Islands (BVI) in mid-June, and then filed for bankruptcy. As a result, BlockFi, a lending institution that provided Three Arrows Capital with a loan of about $1 billion, was also affected by the shock wave of FTX's collapse and filed for bankruptcy in November last year. Of course, it is not clear what happened to Delio after the signing of the contract with BlockFi and Three Arrows Capital.

 

According to the official website, Delio's current Total Value Utilized is 41,740 BTC (approximately US$1.084 billion), 118,033 ETH (US$206 million), and nearly US$6.45 million in altcoins.

 

what happened?

 

June 13

 

  • Haru Invest announced that due to some problems encountered by a service partner recently, it is further investigating the matter and seeking contingency plans to correct the situation. In order to protect the user assets in custody, deposits and withdrawals are suspended.

  • According to Yonhap News Agency, Haru Invest’s office is suspected to be closed and social media accounts such as Instagram and LinkedIn have been cancelled.

  • Upbit and several other Korean exchanges have restricted withdrawals to Haru Invest.

  • Haru Invest tweeted, "The Haru Invest office is operating continuously. The so-called 'Rug Pull Controversy' mentioned in some articles is completely untrue. Haru Invest is doing its best to conduct on-the-spot investigations and respond to related work, and will do its utmost to protect investors."

  • Haru Invest explained and updated the suspension of deposit and withdrawal services, saying, "We recently discovered through internal inspections that a consignment operator provided suspected false information. In order to protect investors, it is necessary to suspend trading immediately. We are currently conducting a fact-finding investigation on the operator involved and plan to take necessary measures.

  • Delio said Haru Invest’s suspension of deposits and withdrawals had nothing to do with the company.

 

June 14

 

  • Delio issued a notice that all employees will work from home starting June 15 (Delio representatives said they will work from home until the end of June).

  • Delio announced that it will temporarily change the way its customer center operates. That is, the customer service center will only provide email and chat channels from June 15 to June 30, and will cancel the telephone communication channel.

  • Delio announced that it will suspend withdrawals from 18:30 local time today. Delio said the move was due to increased market volatility after Haru Invest suspended deposits and withdrawals.

  • Subsequently, several South Korean cryptocurrency exchanges said they would restrict withdrawals of assets to Delio.

  • Haru Invest issued another announcement stating that "its commissioned operator B&S Holdings (formerly Aventus) fraudulently provided management reports containing false information, thereby deceiving the judgment of the company and users, so we decided to take immediate legal action. In addition, Haru Invest has filed a criminal lawsuit against B&S Holdings today and plans to file a civil lawsuit.

 

However, Foresight News has not yet found any information about B&S Holdings. According to News1, B&S Holdings is a South Korean company. According to its website, it uses FTX, an exchange that went bankrupt in November last year. Currently, BNS Holdings is deleting the information listed on the homepage in real time. In a South Korean Telegram group, a user said that the website of B&S Holdings is suspected to be http://bangnsong.com/, and the website information has been deleted.

 

Haru Invest and Delio have business dealings

 

Regarding the connection between Haru Invest and Delio, although Delio clarified on June 13 that the suspension of deposits and withdrawals by Haru Invest had nothing to do with the company. However, as the outside world continued to question whether Delio deposited customer funds into Haru Invest, a representative of Delio responded to Block Media: "Delio has business dealings with Haru Invest, but it is not convenient to disclose the specific amount. The reason for the suspension of withdrawals is that after the Haru Invest incident, Delio's withdrawal requests surged. There are multiple wallets within the company, and it is common to transfer money between wallets."

 

After Delio suspended withdrawals, according to Bloomingbit, at the same time as Delio announced the suspension of customer asset withdrawals, the South Korean financial regulator said that due to the large number of embezzlement and breach of trust issues, it will cooperate with the financial regulator to discuss countermeasures. A person related to the Financial Intelligence Department of the Financial Services Commission of South Korea said, "Delio did complete the virtual asset business (VASP) declaration, however, after investigation, we found that the main problem seems to be embezzlement and malfeasance. The FIU's investigation focuses on money laundering and suspicious transactions."

 

"If that's the case, we will eventually have to work with the investigating authorities to understand the situation in terms of criminal penalties. We will discuss together how to deal with this issue. There are also rumors that the Delio incident is related to Haru Invest, which did not declare, but there is nothing to be confirmed at the moment, so we are still observing. The fact that Delio traded with the undeclared Haru Invest is not a problem in itself. What is more important is whether Haru Invest has committed any illegal acts. If this also involves embezzlement and fraud, not just money laundering, then it should be investigated together with the investigating authorities."

 

In this regard, many users are worried about the possibility of panic and chain runs. According to Edaily, currently, in a chat room initiated by victims related to Haru Invest, about 300 domestic users gather here every day to discuss countermeasures. On June 14, when Edaily visited Haru Invest Korea and Block Crafters in Gangnam District, Seoul, the office was empty. A visiting victim said, "I have about 20 million won in it, but I feel that I can't get it back."

 

Reference Links:

https://bloomingbit.io/news/7074697531690582080

https://www.edaily.co.kr/news/read?newsId=03286566635641720&mediaCodeNo=257&OutLnkChk=Y

https://www.blockmedia.co.kr/archives/324863