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The Seoul Rehabilitation Court officially declared bankruptcy on crypto yield platform Haru Invest, after it was implicated in a crypto fraud worth up to $1 billion.
Investigations by South Korean law enforcement revealed that Haru Invest, a crypto yield firm operating under Haru Management Limited, allegedly defrauded investors of 1.4 trillion won or equal to $1 billion in a “rug pull” scheme that left creditors reeling.
According to local news outlet Newsis, the Seoul Rehabilitation Court announced Haru Invest’s bankruptcy status on Nov. 20, effectively declaring the company insolvent due to its inability to repay customer damages. Despite establishing itself in the British Virgin Islands, the South Korean courts still hold jurisdiction over the company due to most of its operations taking place in Korea.
The court determined that the first creditor’s meeting will be held on Feb. 11, 2025. The bankruptcy administrator will assess the financial status of Haru Management and how the assets will be liquidated. The liquidation process will be enough to at least cover some of the unpaid damages owed to investors.
Based on the report, investors applied for corporate rehabilitation procedures in court around June 2023, but the court rejected it. They proceeded to file for bankruptcy in April 2024.
On Nov. 15, Haru Invest announced that it was opposed to declaring bankruptcy because it believed doing so would limit the firm’s options and decrease its negotiation standing in ongoing efforts to recover assets related to the collapse of FTX.
In the company notice, Haru Invest CEO Hugo Lee claimed Haru’s creditor company B&S Holdings owned assets related to FTX. Lee claimed that B&S Holdings CEO Bang Jun-Ho has asset claims worth $165 million, which he sold without prior notice to Haru Invest executives.
In addition, he also stated the current amount of cryptocurrency actually owed to customers was not 1.4 trillion won, as the number still includes assets previously returned to customers. Instead, he claimed the true amount owed to customers sits at around 460 billion won or approximately $467.1 million.
“A substantial portion of the virtual assets recovered after the suspension of deposits or withdrawals last year is being securely held by prosecutors in a cold wallet,” Lee wrote in the company notice.
In February, South Korean authorities arrested three Haru Invest executives, including two of its CEOs, on charges of defrauding over 16,000 investors by guaranteeing principal safety and offering significant returns on crypto deposits occurring from March 2020 to June 2023.
The scheme was reportedly uncovered in June 2023 when the platform abruptly suspended withdrawals, triggering widespread panic. Around the same time, customers also could not deposit digital assets on the service and Haru fired around 100 of its employees.
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