Delio, a South Korean crypto lender, has suspended withdrawals.

The South Korean crypto lending platform Delio has announced the temporary suspension of deposits and withdrawals, following an investigation by financial regulators into the situation. Delio is a crypto lending service and wallet that holds an official virtual asset service provider (VASP) operating license. The firm said that deposits and withdrawals on the platform would be halted as of UTC 09:30 on June 14, citing “the aftermath” of domestic firm Haru Invest’s decision to suspend crypto deposits and withdrawals this week. Delio said Haru’s move had “dramatically increased market volatility and increased confusion among investors.”

Jeong Sang-ho, Delio’s CEO, was quoted by newspaper Herald Kyungjae as “admitting” that “some” of its customer assets had been invested on Haru’s platform. He added: “We have suspended withdrawals to calm down a rapid increase in withdrawals [of funds from the Delio platform] in the aftermath of the Haru Invest announcement. It is true that some of our [customers’] assets were managed [by] Haru Invest. We will try to proactively communicate more details to our investors.”

Some have accused Haru of attempting to execute a “rug pull” after its offices were found deserted, but the firm’s executives have denied the allegations. Haru offered customers annual interest rates of up to 12% for Bitcoin (BTC) deposits.

Delio Withdrawals Suspended: Repercussions for South Korean Crypto Community?

The nation’s biggest crypto exchange Upbit has responded by announcing that it will block all withdrawals to Delio-based wallets. In an official Upbit notice, the exchange said its “decision” was “made in the interest of investor protection.”

South Korean financial regulators began conducting on-site inspections of licensed VASPs earlier this year. Under South Korean law, two types of VASP licenses can be issued: Exchanges and wallet providers that offer crypto-to-fiat trading services need to secure banking partnership deals. But platforms that do not offer KRW trading, such as Delio, can apply for a permit that only allows them to trade crypto-to-crypto. Haru, meanwhile, has no permit because it claims to deal exclusively with overseas-based customers.

The South Korean media outlet GetNews said regulators had “confirmed that they have not yet conducted an on-site inspection of wallet operators like Delio.” A spokesperson for the Financial Intelligence Unit (FIU) said: “We will look into this matter. And if illegal activities, such as embezzlement or breach of trust, are discovered, we will cooperate with the investigating authorities. And we will help them take necessary measures.” The FIU spokesperson added: “There are allegations that Haru Invest […] may be connected to the Delio [announcement]. But we cannot confirm the veracity of these claims, so we need to investigate further.”