Delio CEO Found Guilty of Concealing Asset Shortfalls in Digital Asset Scam

Delio's board. Source: Park Beom-su/Digital Asset

"Currently, we're facing losses and our assets are insufficient. If this appears in the audit report, it will create significant risks for our company."

"If losses occur, performance deterioration could lead to customers withdrawing their funds, potentially causing the company's collapse."

Delio CEO Jeong Sang-ho made these remarks during a conversation with A, a department head. The court determined that Jeong recognized asset shortages and losses but intentionally concealed them from customers.

The Seoul Southern District Court's 11th Criminal Division (Presiding Judge Chang Chan) sentenced Jeong to 15 years in prison on August 13 for allegedly defrauding 1,078 customers of digital assets worth 70.3 billion won under the Specific Economic Crime Punishment Act (fraud).

The court found that Jeong was aware of increasing shortfalls between customer deposits and Delio's held digital assets, which led to a so-called "roundabout" operation method, yet continued attracting customers without disclosure.

Jeong, as Delio's CEO, exclusively controlled company operations, major decisions, and information about digital asset management. The court determined he knew the company lacked the ability to generate sufficient revenue to cover deposit interest or had proper professional staff and systems in place.

Even if Jeong did not know exact shortfall figures, the court concluded he recognized that operational returns were insufficient to cover deposits, causing continuous losses of original customer assets while holding digital asset shortfalls increased. This constituted awareness of "roundabout" operations.

On October 28, 2022, A reported a shortage of 721.79 BTC and other digital assets. Jeong asked whether outsourcing management could cover the loss, stating: "If we outsource to a capable manager, it might take years but could recover losses." He also questioned: "How can we generate revenue quickly through simple deposits?" The court viewed this as evidence of Jeong's awareness.

Jeong delayed addressing the shortfall until October 2022 when A reported it. The court determined he changed Delio's digital asset management to high-risk, high-return operations without disclosing these changes, while continuing to attract customers.

During discussions about audits, Jeong suggested hiding loss information from customers, stating: "If the audit shows a 10 billion won deficit, it would reveal that customer principal has been lost." The court concluded Jeong intentionally concealed Delio's digital asset shortages and operational changes from customers.