How This Company Lost 99% Of Its Clients Funds Shorting LUNA
July 06 2022 - 1:57PM
NEWSBTC
Per a report from Sedaily, the trading arm of Korean startup Uprise
has lost of all its clients’ funds. The platform was used by
wealthy individuals and institutions to trade crypto futures
contracts via an artificial intelligence (AI) tool. Related Reading
| Altcoins Take The Lead As Bitcoin Struggles To Hold Above
$20,000 According to the report, Uprise advertised its AI trading
tool as high operational stability and a high-risk management
alternative. In addition to losing its clients’ funds, the company
was reported to record a loss of around $30 million from its own
capital. Uprise operates an AI trading platform and a crypto
exchange platform. Users are encouraged to deposit cryptocurrency
to trade with Uprise’s tool or to earn an annual percentage rate
(APR) by holdings the assets on the exchange. The local news media
claims the platform is yet to inform its clients about the alleged
massive loss. The report claims the trading AI placed several short
positions on the failed cryptocurrency LUNA and was negatively
impacted by the market volatility. LUNA was Terra’s former native
token which operated with a burning/issuance mechanism linked to
the failed algorithmic stablecoin UST. Via the Anchor Protocol,
Terra users were able to receive a 20% APR on their UST deposits.
Both UST and LUNA collapsed losing over 99% of their value in less
than two weeks. Uprise is not the only firm negatively impacted by
the collapse of the Terra ecosystem. The fallout forced crypto
hedge fund manager Three Arrows Capital (3AC), crypto lending
company Celsius, BlockFi, and others to liquidate their LUNA
positions recording millions of dollars in losses. As a
consequence, the crypto market has experienced a steeper downside.
The report adds that Uprise “explained” and “informed” their users
“in advance” about the high-risk nature of their product and about
the “high possibility of a loss of principal” capital. However,
South Korean regulators and law enforcement agencies could increase
their scrutiny of the digital asset class. Crypto Markets Still
Recovers From LUNA Collapse The South Korean startup apparently
failed to register as a Virtual Asset Service Provider (VASP).
Thus, it might have incurred an illegal action. At the time of
writing, there are no official statements from South Korean
authorities. Uprise did confirm Sedaily’s report. A spokesperson
for the platform said: It is true that damage to customer assets
has occurred due to unexpected great volatility in the market. We
plan to finalize the report on virtual asset business soon, The
report claims the company might need to compensate its customers
due to their losses. South Korean authorities have been
investigating the events that led to the LUNA collapse. Thus, why
the startup could take some heat if it is unable to make its
clients whole. Related Reading | Bitcoin Approaches 2018 Like
Drawdown, Why $20,000 Is A Crucial Level At the time of writing,
BTC’s and larger cryptocurrencies are still trying to reclaim
higher levels. The Terra fiasco might put more pressure on digital
assets as other companies like Uprise come to light.
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