Two crypto lenders with links to South Korea halted withdrawals in quick succession, a reminder of lingering risks even after regulators around the world tightened oversight of the industry.
Token prices appeared to shrug off the statements from Delio and Haru Invest, underlining the relatively small corner of the crypto lending market affected by the trouble at the two companies. Still, the freezes highlight the dearth of investor protections that persist among digital-asset lenders, almost a year after a wave of failures took down firms from Celsius Network to Vauld.
There was a “sudden surge of withdrawals on our end in the aftermath of Haru Invest’s withdrawal suspension,” said Delio Chief Executive Officer James Jung via LinkedIn. “We have thus temporarily suspended withdrawals to calm the situation.” Jung said it’s too early to say when his firm may resume withdrawals, and couldn’t give an estimate of the size of Delio’s crypto deposits.
Delio and Haru both advertise double-digit yields for investors who lend crypto on the platforms. That business model came under heavy scrutiny last year, as operators that made risky investments with client money to deliver promised returns unraveled when prices crashed, costing investors billions of dollars.
“The source of the issue is centralized platforms offer superficial yields to attract investors, and by doing so, they have to leverage up their positions,” said Cici Lu, founder of blockchain adviser Venn Link Partners. “Centralized platforms who run on unsustainable business models are not out of the woods.”
Haru Invest earlier cited a problem with a service provider for its suspension and subsequently tweeted that it’s taking legal action against a company for allegedly providing management reports containing false information. Haru Invest CEO Hyungsoo Lee didn’t respond to requests for comment.
This article was provided by Bloomberg News.