Haru Invest declared bankrupt amidst alleged $1b investor fraud

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As a researcher with a keen interest in the intersection of finance and technology, I find the saga of Haru Invest both intriguing and disheartening. Having closely followed the rise and fall of several digital asset platforms, I must admit that this case stands out as one of the most complex and high-stakes I’ve encountered.

In simple terms, the Bankruptcy Court located in Seoul has formally declared that Haru Invest, a cryptocurrency income platform, is bankrupt. This decision came following allegations of a cryptocurrency scam involving up to one billion dollars.

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.

Newsis reports that the Seoul Rehabilitation Court declared Haru Invest bankrupt on November 20th, making the company financially unable to fulfill its obligations to customers because it couldn’t pay back their damages. The court maintains jurisdiction over the company, even though it was established in the British Virgin Islands, as most of its business activities are conducted within Korea.

The court has decided that the initial creditors’ meeting is set for February 11, 2025. During this meeting, the bankruptcy administrator will evaluate Haru Management’s financial situation and plan for the distribution of assets, which should be sufficient to compensate some of the outstanding losses owed to investors.

As an analyst, I can share that, according to the findings, we had recommended corporate rehabilitation measures to investors around mid-2023. However, unfortunately, these attempts were unsuccessful as the court declined our petition. Subsequently, we found ourselves in a more challenging situation and opted for filing bankruptcy, which we did in April 2024.

On November 15th, Haru Invest expressed their reluctance towards filing for bankruptcy, as they felt that such a move would restrict their available strategies and weaken their bargaining power during ongoing attempts to reclaim assets connected to the downfall of FTX.

As a crypto investor, I recently learned from a company announcement that the CEO of Haru Invest, Hugo Lee, stated that our company’s creditor, B&S Holdings, holds assets linked to FTX. Furthermore, Lee alleged that the CEO of B&S Holdings, Bang Jun-Ho, has claims on assets totaling $165 million, which he sold without giving prior notice to Haru Invest executives.

Moreover, he corrected that the reported cryptocurrency debt of 1.4 trillion won was not entirely accurate. The initial figure included assets that had already been returned to customers. He asserted the actual outstanding debt owed to customers is roughly 460 billion won or about $467.1 million.

Dear Haru Invest members, please check our announcement.

— Haru Invest (@haruinvest) November 15, 2024

Lee stated in the announcement that a significant amount of digital assets, which were kept safe following the halt of deposit and withdrawal activities last year, are now under the custody of prosecutors in a ‘cold wallet’.

In February, officials in South Korea detained the heads of Haru Invest, along with two other executives, for allegedly deceiving more than 16,000 investors. The accused promised safe returns on cryptocurrency deposits made between March 2020 and June 2023 by assuring principal security, which they did not deliver.

In June 2023, the scheme was exposed after the platform suddenly halted withdrawals, causing a lot of alarm among users. At the same time, depositing digital assets became impossible, and approximately 100 employees were let go from Haru.

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2024-11-20 11:00