Shorting LUNA Backfires! South Korean Crypto Platform Uprise Loses 99% of Customer Assets

Since the UST unpegging incident, it has been reported that multiple institutions and venture capitalists have suffered significant losses due to holding a large amount of related tokens. However, recently, a crypto startup incurred massive losses by shorting LUNA, even losing 99% of customer funds.

Uprise Shorting Losses

According to a report from Seoul Economic Daily, the South Korean crypto asset financial platform Uprise incurred losses of hundreds of billions of Korean won during the plunge of LUNA by shorting it through contracts.

The company's operations are divided into two parts, one being the platform Heybit that trades cryptocurrencies for users using AI automated trading strategies, and the other being an ETF investment platform called Iruda, with the incident primarily occurring on Heybit.

Under Heybit's leadership, Uprise obtained custody of clients' crypto assets and engaged in contract trading in the market, shorting LUNA. Despite the seemingly continuous drop in LUNA's price, several sharp increases, known as "short squeezes," led to the liquidation of their positions, resulting in a loss of 26.7 billion Korean won, approximately 20 million USD, which accounted for 99% of the client's custodial funds. Additionally, Uprise lost 3 million USD of its own funds during the process.

Reportedly, investors who poured significant funds into Heybit's trading service were mostly high-income individuals and professional investment firms in South Korea. Major Korean venture capital firm Kakao Ventures and commercial bank Hana Bank also made substantial investments in the platform. Furthermore, since the implementation of the Specific Financial Information Act in South Korea last September, Uprise has not submitted a report to authorities as a Virtual Asset Service Provider (VASP) to comply with legal requirements. In response, Uprise stated that they did not receive any Korean won for cryptocurrency investments, hence there were no legal issues.

Following the discovery of the loss event, a Uprise executive responded:

"Indeed, due to unexpected and drastic market fluctuations, client assets suffered damages. We plan to promptly submit the report as an operator of virtual asset business."