As trouble brews with custody partner in South Korea. From Moneyweb.
Crypto investment platform Revix announced on Wednesday that it was suspending withdrawals on 24% of customers’ crypto assets following a freeze on withdrawals by one of its custody partners called Haru Invest, based in South Korea.
Revix placed a portion of customer assets with Haru Invest as part of a custody diversification strategy.
Read: Crypto yield platform Haru pauses withdrawals and deposits
“Regrettably, we write to you under challenging circumstances,” says Revix in a statement.
“On 13 June 2023, Haru Invest, one of our primary service providers, unexpectedly suspended all deposits and withdrawals on its platform. Haru Invest is based in South Korea and is a regulated virtual asset service provider (VASP) in the European Union, and is licensed as a Money Service Business (MSB) in the United States.”
Other assets immediately accessible
Revix CEO Sean Sanders says while a freeze has been placed on withdrawals of 24% of crypto assets, the remaining 76% and 100% of fiat currency deposits are unaffected and immediately accessible.
“We did extensive due diligence on Haru and what impressed us was that they are regulated in the US, Europe and Singapore.
“What we were unable to foresee was that one of their partners may have been supplying false information to them,” says Sanders.
“Obviously, we are monitoring this daily and will take legal action if necessary to recover customer assets.”
Sanders says it remains uncertain when and what percentage of assets will be returned to customers. “The Revix team is maintaining an ongoing, active dialogue with Haru Invest and will pursue every possible course of action within our legal purview to reclaim these assets.”
‘Necessary action’
According to Haru’s official communication, the company’s withdrawal suspension is a necessary action pursuant to discovering irregularities in respect of one of its service partners.
Haru announced on its website that it is prioritising legal action “to recover damages for our users as soon as possible”.
“To prevent any further damages to users, we have taken necessary steps to protect company-owned assets and minimise operations, and we sincerely apologise for the frustration many users have experienced during this process.”
Read:Get your cryptos off exchanges now
Bitcoin jumps to $28 000 on boost from BlackRock ETF filing
Institutions’ newfound love of Bitcoin pushes it past $30 000
In a further statement, Haru says it is trying to assess the extent of losses at (asset management partner) B&S.
“Assets entrusted to internal asset management teams and other asset managing partners are being returned. We have yet to find that any assets managed by the internal asset management team and other asset managing partners have incurred losses. We can provide an approximate percentage of losses once we have returned all assets under management and the credits and debts have been finalized.”
It’s been reported that South Korean prosecutors have placed a travel ban on a number of Haru executives, including partner companies Delio and B&S.
Delio, a virtual asset manager and lending platform based in South Korea, has also suspended customer withdrawals in response to the situation at Haru.
Customer assets
The statement from Revix says customer assets are diversified and distributed across several platforms and mechanisms, each independent of the other.
This includes self-custody (such as cold storage), exchange custody, and collaboration with reputable and vetted third-party platforms like Haru. Haru is part of this system and holds a portion of Revix-controlled customer assets.
Read: Moneyweb Crypto glossary
The freeze on 24% of crypto asset balances held on the Revix platform as at Tuesday, 13 June, at 14h00 represents the proportion of the crypto assets controlled by Revix that are held with Haru.
“At Revix, we’re committed to safeguarding your investments, and to ensure their security, we have taken rigorous measures to protect your assets by securely moving all of them into protected internal custody.
“Your assets – comprising 76% of your crypto holdings and 100% of your fiat cash balances – are fully accessible to you whenever needed,” says the statement.
Sanders adds that as a result of the halt on withdrawals by Haru, all other assets have been moved to cold storage (offline, to eliminate risks of hacking), with minimal balances being maintained on crypto exchanges (hot storage).
“We are engaging with multiple custodial services, including some of the major banks.
“That will mean higher custody fees, but we will absorb those costs from our operating revenue,” says Sanders.
“The task ahead is to rebuild trust with customers, and that is why we decided to be upfront about the situation with Haru, and explain what we are doing about it.”
By way of example, Revix says a customer holding one bitcoin and R100 on the platform as of 13 June would now have access to 0.76 bitcoin and the entire R100. However, the remaining 0.24 bitcoin would be classified as ‘reserved’ until such time as Haru Invest releases the assets it holds.
