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South Korean startup Uprise: lost $20 million shorting LUNC

 


South Korean crypto investment startup platform Uprise is said to have lost around 99 percent of its assets, worth around $20 million, because its short positions on Luna Classic (LUNC) were liquidated.


Heybit, Uprise's trading division, uses an artificial intelligence (AI) trading system designed to reduce the risks associated with leveraged trading.


Local news outlet Seoul Economic Daily reported Wednesday that Uprise's AI robo-advisor made a catastrophic misjudgment on LUNC in May, when the price plummeted from $60 to well under a cent. The system opened short positions on LUNC, but these were liquidated during the token's unpredictable price surges. Customers lost $20 million as a result and the platform itself lost $3 million. Overall, Uprise lost about 99 percent of its wealth.


Most Heybit users are wealthy individuals and corporations who stake their cryptocurrencies against returns generated by AI trades on the futures markets. The company has received financial backing from crypto investment firm Hashed, Kakao Ventures, and several banks and venture capital firms.


The company has discontinued this service, but has not officially informed its customers about the losses. A spokesman for Uprise confirmed to Seoul Economic Daily:


"Due to the large unexpected volatility in the market, there was a loss of client assets. We will finalize the report on our virtual assets business soon."

In addition to officially notifying its users, Uprise is also said to be working on a compensation plan for its customers so that the platform can continue to operate.


Uprise is also said not to have registered as a virtual asset service provider, according to Seoul Economic Daily. According to the news outlet, Uprise officials believe the company can circumvent the law requiring registration as a virtual asset service provider because it neither receives Korean won nor directly invests in virtual assets, only futures.


The registration is intended to ensure that crypto exchanges comply with the so-called Travel Rule of the Financial Action Task Force.


Uprise isn't the only centralized crypto service provider that has seen significant losses due to the Terra situation. Several companies have had to take drastic measures to stay afloat, including BlockFi, Celsius, and Voyager Digital. The exchange FTX US could take over BlockFi , Celsius paid off loans and Voyager filed for bankruptcy on Tuesday .

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