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Korean crypto lender Delio halts withdrawals amid contagion fears

Korean crypto lender Delio halts withdrawals amid contagion fears
Delio is the second Korean crypto lender in two days to pause withdrawals.
  • Major Korean crypto lender Delio has stopped withdrawals on its platform.
  • The pause comes a day after Haru, another Korean crypto yield platform, also stopped withdrawals.

Delio, a leading Korean crypto lender, has abruptly suspended all withdrawals, marking the second such suspension within the country following crypto yield platform Haru Invest’s withdrawal freeze yesterday.

Delio’s move underscores the escalating concerns of a possible contagion in Korea’s crypto industry, reminiscent of last year’s global collapse, primarily fuelled by undisclosed counterparty risks.

In a statement, Delio cited the troubles facing Haru Invest as the principal reason for halting its operations.

The price of Delio DSP, the token associated with the lending company

“Recently, confusion and complications have arisen among Haru Invest customers,” according to an automated translation of the statement said. “We apologise for causing concern to our valued customers and investors due to the unavoidable temporary suspension of withdrawals.”

“Delio will make every effort to promptly assess the facts and consequences related to this situation while ensuring the protection of our customers’ assets,” the statement said.

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Although Delio has previously denied any financial exposure to Haru, Korean media outlet Block Media quoted Delio CEO Jung Sang-ho as saying today that “there is a transactional relationship with Haru Invest but the amount cannot be disclosed.”

‘The trust has been severely broken, and it will be very difficult for CeFi service providers in Korea to recover.’

Haru Invest ceased operations yesterday amid complications with its brokerage partner, B&S Holdings. Today, Haru levelled accusations against the brokerage for producing fraudulent management reports and deceiving the company and announced its intention to take legal action against the brokerage firm, as conveyed in a notice to investors.

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Jun Hyuk Ahn, a Korean blockchain consultant, told DL News that Koreans tend to see Delio “as a safer and guaranteed option” than other CeFi platforms and that “customers did not expect” Delio’s exposure to another CeFi company like Haru.

CeFi, or centralised finance, refers to part of the crypto industry that’s run by centralised entities, like centralised exchanges and crypto lending companies, unlike DeFi, which consists of protocols deployed on the blockchain.

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The exact extent of Delio’s financial predicament remains unclear. Delio’s website claims the lender holds $1 billion worth of Bitcoin and $8 billion in crypto.

Analysts like Ki Young-ju, CEO of blockchain analytics firm CryptoQuant, have disputed these figures, suggesting that Delio might be factoring in funds held by its parent company Bithumb in its calculations. DL News could not independently verify the figures.

The validity of Delio’s $8 billion claim has also been questioned, as the figure remains unchanged even when the website’s language is switched from Korean to English, leading to speculation that Delio may only hold $6.45 million in crypto assets.

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“Regardless of the amount of loss, the trust has been severely broken, and it will be very difficult for CeFi service providers in Korea to recover from these events,” Jun said.

Delio’s issues mirror the undisclosed counterparty risks that prompted last year’s CeFi lending collapse.

The collapse of the Terra ecosystem in May 2022 triggered a contagion, impacting Three Arrows Capital, a crypto hedge fund, and causing it to default on loans taken from CeFi lenders like Voyager Digital.

Other CeFi lenders which deposited customer funds in DeFi protocols for high yields, were also hit hard when the crypto prices sharply fell last year, losing customer deposits in the process.

Delio did not immediately respond to DL News’ request for comment.

This is a developing story and will be updated when more information is available.