Korean cryptocurrency startup Uprise lost 99% of its client funds by shorting LUNA during its catastrophic price crash and getting caught on the bounces. The report first appeared in Seoul Economic on Wednesday.
Uprise sold itself as a revolutionary platform that used AI-based automatic trading strategies to buy and sell cryptocurrency on behalf of its users. Uprise took crypto assets from customers and traded them in the cryptocurrency futures market. Uprise’s AI-enabled trading technology was supposed to minimize the risk associated with leveraged crypto trading.
The idea of AI-enabled trading on cryptocurrency exchanges has become increasingly popular, garnishing much attention from both VC firms and traders.
However, the AI system could not successfully predict LUNAs crash and subsequent bounce, which caused the firm to be be liquidated out of its LUNA futures trading position and losing 26.7 billion won ($20 million) in the process. LUNAs price plummeted to $0.68, but during a four-hour window it bounced to $7.88 during a pump, though fell back down soon after.
The lost funds represent 99% of the assets that Uprise were managing on behalf of their users. According to the report, many of the clients are advanced traders, corporate entities, and high-net-worth individuals. In the trade, Uprise also lost $3 million of their own funds.
On the loss, Uprise 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 the virtual asset business soon,”
Among the backers of Uprise are VC giant Kakao Ventures and major Korean commercial lender Hana Bank. In December, the firm raised over $18 million in Series C funding.
Uprise were not the only victims in LUNAs crash in May, which also affected its sister token TerraUSD. The crashes have caused financial headaches for hedge funds and lenders alike including Three Arrows Capital and Celsius.
Uprise is the latest crypto business to be impacted by the LUNA collapse. The token’s death spiral in May — along with its sister token TerraUSD (UST) — has triggered serious financial problems for
Risks of Trading Luna: More Victims Than Uprise
Many in the wider cryptocurrency space, including FURUs(‘Financial Gurus’) and well-respected individual traders took a hit from LUNA. Youtuber KSI lost nearly $3 million. Unlike Uprise, KSI wasn’t shorting the position, but bought late expecting a better bounce and didn’t exited early enough.
Leveraging low market cap altcoins such as LUNA is one of the riskier moves when can take in the already volatile world of cryptocurrency. Experienced traders, investment funds, and trading robots have all suffered at the hands of market volatility with coins such as LUNA.
As of July 7th, Terra Classic (LUNC) is trading at a price of $0.00011 and the new hard forked LUNA coin at $2.12 (also crashing from over $10 since its launch on Crypto.com and other exchanges).
Terraform Labs CEO Do Kwon is under investigation for fraud and other financial crimes in the both the US and South Korea. Do Kwon has denied he withdrew $2.7 billion of LUNA and algorithmic stablecoin TerraUSD (UST) to private wallets prior to the May crash.
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