A cryptocurrency platform based in South Korea has gone into bankruptcy as declared by a local court after its customers can no longer withdraw their virtual funds worth $1.75 billion.
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The unfortunate circumstances faced by Delio serve as a reminder that digital assets might offer tremendous growth, but they are also inherently volatile and high-risk investments.
Court’s Declaration
The Seoul Rehabilitation Court stated the cryptocurrency platform Delio has gone out of business, pointing out that as of Friday, the court declared the digital asset firm bankrupt.
Since mid-last year, the crypto platform no longer allows the withdrawal of virtual asset funds, leaving its customers unable to access their investments.
Around 2,800 crypto investors are affected, and they cannot get their crypto funds worth $1.75 billion.
Delio signboard. Source: Park Beom-su/Digital Asset
Analysts explained that corporate bankruptcy happens when a court declares the bankruptcy of a corporation because the firm can no longer repay its debts.
This court procedure allows the conversion of the company’s assets into cash and its succeeding distribution to creditors. The case of Delio is a good example of a corporate bankruptcy.
A Glimmer Of Hope
Reports said that after the court declares bankruptcy, “a claim is filed and an explanation of the distribution of assets is given at a creditors’ meeting.”
It offers Delio’s customers some gleam of hope as the South Korean court ordered its creditors to submit their claims by February 21, 2025. The court also set a creditors’ meeting date on March 19, 2025.
Why Delio Went Bankrupt
A Seoul Rehabilitation Court official said that the main cause of Delio’s bankruptcy is its “inability to pay was acknowledged in light of the suspension of withdrawals, circumstances of the suspension of operations, and the extent of the damage.”
The official added that the cryptocurrency platform operated as a deposit and management firm wherein it generated profits and paid interest by “operating virtual assets such as Bitcoin deposited by customers.”
“The debtor lent and entrusted the management of customer deposited virtual assets to the operator, but a significant portion of them were deposited in the FTX account and were being managed,” he continued.
However, he said that the “entrusted virtual assets could not be recovered” after the FTX went bankrupt in November 2022 which led to Delio suspending the withdrawals in the platform.
Delio Exec Counters Authorities
In September 2023, the crypto firm accused the South Korean authorities of misinterpreting the law after the state agency Financial Intelligence Unit (FIU) proposed the sacking of Delio’s CEO, Jeong Sang-ho.
The government also suspended the license to operate the crypto platform and ordered the firm to pay a fine worth $1.34 million.
The crypto platform’s CEO is currently facing charges of “fraud, embezzlement, and breach of trust.” However, the Delio executive defended himself saying that investors’ deposits in the platform were not “principal protected”.
Delio was established in 2018 and received the virtual asset service provider (VASP) status in 2022 from the FIU, making it the first South Korean firm to earn that recognition.
Featured image from The Independent, chart from TradingView