The South Korean crypto startup Uprise, while trying to take advantage of the Terra ecosystem crash, got caught on the bounces and lost $20 million.
In a report by the Korean local media on Wednesday, Uprise in May, while trading futures, using artificial intelligence (AI) enabled automatic trading strategies to trade crypto on behalf of its clients, was shorting Luna using funds custodied by clients on its platform, a risk taken by the firm that eventually led to losing 99% of clients’ funds.
This trading desk is one-half of the Uprise service called Heybit while the other half is a global exchange-traded funds platform called Iruda.
Uprise however took custodied crypto assets from customers under Heybit and traded with those assets in the crypto futures market, the AI-enabled trading machine was supposed to limit the risk associated with leveraging.
The system could not prevent the firm from getting liquidated out of its Luna futures trading position and losing $20 million in the process.
This event happened during the crash of the Terra ecosystem. Uprise was reportedly shorting Luna — while its price plunged — but got caught out during a surprising price pump along the way.
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Uprise in response to this event, is reportedly looking to compensate the clients involved, “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,” said a spokesperson for the company, according to Seoul Economic daily.
Korean venture capital giant Kakao Ventures and major Korean commercial lender Hana Bank are among some of the backers of Uprise. The firm raised about $18.3 million in a Series C funding round in December 2021.
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