Haru Invest declared bankrupt amidst alleged $1b investor fraud

Seoul Rehabilitation Court has officially declared crypto yield platform Haru Invest bankrupt after it was involved in crypto fraud worth up to $1 billion.

Investigations by South Korean law enforcement have revealed that Haru Invest, a crypto yield firm operating under Haru Management Limited, allegedly defrauded investors of 1.4 trillion won, or the equivalent of $1 billion, in a “carpet pulling” scheme that stunned creditors.

Seoul Rehabilitation Court announced Haru Invest’s bankruptcy on November 20, declaring the company effectively bankrupt due to its inability to repay customer losses, local news outlet Newsis reported. Although incorporated in the British Virgin Islands, South Korean courts still have jurisdiction over the company because most of its operations occur in Korea.

The court determined that the first creditors meeting will be held on February 11, 2025. The bankruptcy administrator will evaluate Haru Management’s financial condition and how assets will be liquidated. The liquidation process will be enough to cover at least some of the losses not paid to investors.

According to the report, investors applied to the court for corporate rehabilitation procedures around June 2023, but the court rejected this request. They filed for bankruptcy in April 2024.

On November 15, Haru Invest announced its opposition to declaring bankruptcy because it believed it would limit the firm’s options and reduce its negotiating standing in ongoing efforts to recover assets related to FTX’s collapse.

In the company announcement, Haru Invest CEO Hugo Lee claimed that Haru’s creditor company, B&S Holdings, owns FTX-related assets. Lee claimed that B&S Holdings CEO Bang Jun-Ho claimed assets worth $165 million and sold them to Haru Invest executives without prior notice.

In addition, he noted that the current amount of cryptocurrency owed to customers is not 1.4 trillion won, as this figure still includes assets previously returned to customers. Instead, it claimed that the actual amount owed to customers was about 460 billion won, or about $467.1 million.

“A significant portion of the virtual assets recovered following the suspension of deposits or withdrawals last year are being held securely in a cold wallet by prosecutors,” Lee wrote in the company announcement.

In February, South Korean authorities arrested three Haru Invest executives, including two CEOs, on charges of defrauding more than 16,000 investors by offering significant returns on cryptocurrency deposits from March 2020 to June 2023 and guaranteeing primary security.

The scheme was reportedly uncovered in June 2023, when the platform suddenly suspended withdrawals, triggering widespread panic. During the same period, customers were also unable to deposit their digital assets into the service, and Haru laid off approximately 100 employees.