Crypto yield firm Haru Invest was declared bankrupt by the Seoul Rehabilitation Court on November 20th, 2024.
The bankruptcy comes after the South Korean company was linked to a $1 billion rug pull scam draining most of its money.
Haru Invest Bankruptcy: What Happened?
According to local media reports, On the 20th of November, HaruInvest, a virtual asset (coin) deposit service provider, filed for bankruptcy after a rug pull incident.
The platform has been accused of tricking clients into accepting 1.4 trillion won in coins before abruptly ceasing withdrawals, which led to the infamous “rug pull” incident.
The operator of HaruInvest, Haru Management Limited, was declared bankrupt by the 14th Rehabilitation Division of the Seoul Rehabilitation Court which had the Presiding Judge Lee Yeo-Jin.
How Will The Repayment Happen?
As mentioned in the reports, taking into account that the business was founded in the British Virgin Islands but had offices in Korea, the court determined that the domestic courts had jurisdiction over the case.
It was also determined that taking into account the conditions in which the amount of the harm, or the obligation, was not paid, the court acknowledged the cause of the inability to pay and declared bankruptcy.
The court intends to proceed with the process of evaluating and reporting Haru Management’s financial position through the bankruptcy administrator, as well as to arrange the first creditors’ meeting on February 11 of the following year.
Previously, Hugo Hyungsoo Lee, the CEO of Haru Invest, and other top executives were arrested in February of this year in relation to the same fraud and the laundering of $1 billion in customer funds.
Crypto Bankruptcy On Rise: What is Happening?
In the last couple of years, multiple crypto firms have been declaring bankruptcy making investors worried about the credibility the firms have.
Previously, two significant cryptocurrency trading platforms, Celsius and Voyager, filed for bankruptcy in July 2022. After experiencing a significant liquidity difficulty in November 2022, cryptocurrency exchange FTX filed for Chapter 11. The result of the FTX bankruptcy caused the industry to see a surge in bankruptcies.
These bankruptcies have a variety of causes, such as FTX Trading Ltd.’s alleged fraud. However, the collapse of the Terra Luna coin and its associated “stablecoin,” TerraUSD, in May 2022 marked the beginning of a wider crypto sell-off in the market.
Many cryptocurrency investors started looking to remove their digital assets from different cryptocurrency exchanges and brokerages after Terra Luna and TerraUSD both saw significant value declines in a matter of days. As a result, Three Arrows Capital (also known as 3AC), a cryptocurrency hedge fund with substantial exposure to Terra Luna, failed as well.