Korean startup Sunrise lost $20 million on attempts to shorten LUNC
The cryptocurrency storage service and the AI trading platform managed to lose almost all of their clients' assets on the short positions of LUNC, the native token now Terra Classic.
It is reported that the South Korean startup platform for crypto investments Sunrise lost about 99% of its assets worth about $ 20 million when it was liquidated due to the sale of the Luna Classic token (LUNC).
The Sunrise Heybit trading table uses an artificial intelligence (AI) system, which was developed to reduce the risks associated with trading using leverage.
Local news outlet Seoul Economic Daily reported on Wednesday that the artificial intelligence Sunrise, which it calls a robot advisor, made catastrophic mistakes on LUNC in May, as it plummeted from $60 to a fraction of a cent. The system shorted LUNC, but was liquidated during strange price spikes for the token, which led to $20 million in customer losses and $3 million in its own losses. In total, Sunrise lost about 99% of its assets.
Most users of the Heybit service from Sunrise are wealthy individuals and corporations who bet their cryptocurrency on income generated by AI trading on futures markets. The firm was supported by crypto investment companies Hashed, Kakao Ventures, as well as several banks and venture capital firms.
The company suspended the provision of services, but did not officially inform its customers about the losses. An Uprise representative confirmed to Seoul Economic Daily that:
"Due to the large unexpected volatility in the market, the assets of clients were damaged. We plan to complete a report on our virtual asset business in the near future."
It is reported that in addition to the official notification of its users, representatives of Sunrise are working on a compensation plan for their customers so that the company can continue to work.
Seoul Economic Daily noted that Sunrise also found itself in the spotlight due to the fact that it is not registered as a virtual asset service provider (VASP). It is reported that Sunrise officials believe that the firm can circumvent the law requiring it to register as a VASP, since it does not collect Korean won and does not invest directly in virtual assets, but only in futures.
Registration helps to maintain crypto exchanges in accordance with the notorious travel rule from the Financial Measures Development Group to Combat Money Laundering.
Thus, Sunrise is another centralized cryptographic service provider that has suffered significant losses related to the Terra incident and the subsequent domino effect. He joins BlockFi, Celsius and Voyager Digital on the list of firms that had to take drastic measures to try to stay afloat. The US exchange FTX is considering buying BlockFi, Celsius is closing loans, and Voyager declared bankruptcy on Tuesday.
https://coin-signal.com/cryptonews/korean-startup-sunrise-lost-20-million-on-attempts-to-shorten-lunc/
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