According to a report by Sedaily, the trading arm of Korean startup Uprise has lost all of its clients’ funds. The platform was used by wealthy individuals and institutions to trade crypto futures contracts through an artificial intelligence (AI) tool.
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According to the report, Uprise advertises its AI trading tool as a high operational stability and high risk management option. In addition to losing its clients’ funds, the company was reported to have recorded a loss of approximately $30 million from its capital.
Uprise operates an AI trading platform and a crypto exchange platform. Users are encouraged to earn an annual percentage rate (APR) by depositing cryptocurrency or holding assets on an exchange to trade with Uprise’s tools.
Local news media claim that the platform is yet to inform its customers about the alleged major loss. The report claimed that Trading AI held multiple short positions on the failed cryptocurrency LUNA and was negatively affected by the market volatility.
LUNA was a former native token of Terra that operated with a burning/issuance mechanism involving the failed algorithmic stablecoin UST. Through the Anchor Protocol, Terra users were able to receive 20% APR on their UST deposits.
UST and LUNA both fell, losing over 99% of their value in less than two weeks. Rebellion isn’t the only firm to be negatively impacted by the collapse of the Terra ecosystem.
The result forced crypto hedge fund manager Three Arrows Capital (3AC), crypto lending company Celsius, BlockFi and others to liquidate their LUNA positions, losing millions of dollars. As a result, the crypto market has experienced a sharp decline.
The report said that Uprise “explained” and “informed” its users in advance about the high-risk nature of its products and the “high potential for loss of principal”. However, South Korean regulatory and law enforcement agencies may increase their scrutiny of the digital asset class.
Crypto Market Still Recovering From LUNA Collapse
The South Korean startup apparently failed to register as a Virtual Asset Service Provider (VASP). Thus, it may have taken an illegal action.
At the time of writing, there has been no official statement from the South Korean authorities. Uprise confirmed Sedaily’s report. A spokesperson for the forum said:
It is true that the asset of the client has been damaged due to the unexpected large volatility in the market. We are planning to finalize the report on Virtual Asset Business soon.
The report claims that the company may need to compensate its customers for losses. South Korean officials are investigating the events that led to the fall of Luna. Thus, why might a startup take some heat if it is unable to make its customers perfect.
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At the time of writing, BTC and the larger cryptocurrency are still trying to reclaim higher levels. As other companies like Uprise come to the fore, the failure of Terra could put more pressure on the digital asset.