Prop Firm Karma Ceases Operations
Just a week after launching a new trading platform and several major updates, prop firm Karma suddenly announced the cessation of operations. Founder Eshan Balapatabendi claims he "had good intentions" but encountered "insurmountable obstacles" that made his business unsustainable.
Karma's rise and fall in the market was unusually rapid. Despite receiving positive reviews, the prop firm only existed for two months.
According to recent foreign media reports, Karma had just updated its partnership with Match-Trade Technologies, providing clients with a new version of Match-Trader integrated with TradingView.
Moreover, the company had announced five major updates that were either being implemented or planned for the near future, making the decision to cease operations even more unexpected.
Balapatabendi stated, "I founded Karma to build something transparent and sustainable. Unfortunately, many obstacles stood in our way, leading to our unsustainability."
What led to the company's unsustainability? According to the founder, there were two main reasons:
- The company initially relied on a technological solution promised by an anonymous vendor, which ultimately failed to materialize, and this delay cost about four months of expenses.
- Secondly, after launch, Karma discovered that their risk checks were not properly executed. This oversight allowed traders who should have been rejected to pass the first and second stages, including potential cheating traders, leading to cash flow issues and solvency problems for the company.
Balapatabendi added, "We didn't catch the cheaters in the system, which caused cash flow problems, and now we have no liquidity."
This is not the only prop firm to announce closure recently. In mid-July, Funded Engineer reported its closure despite attempts at "strategic restructuring" to stay in the market.
There are reports that external agencies had expressed interest in acquiring Karma, but the founder declined. Currently, efforts are being made to ensure payments to traders who legitimately earned profits.
Balapatabendi finally stated, "I know people will hate me or think poorly of me. However, I really had good intentions. I apologize to all involved. I wish everyone all the best in their future trading journeys."
Why Are Prop Firms Closing?
In recent months, several other companies have also suspended operations. In May, True Forex Funds decided to take similar steps as it struggled to stabilize its financial situation, while in March, SI World exited the market.
According to FunderPro, over 50 prop trading firms may have disappeared from the market this year alone. FunderPro's Alex Zanutto points out that the traditional prop trading model is fundamentally flawed and unsustainable in the long term.
Many Prop Firms Are Virtual Trading Systems
- Funded traders' trades never actually enter the real market and don't generate real profits
- Companies may manipulate the market to prevent traders from passing challenges
- Payments to funded traders come from challenge purchase fees, not real trading profits
Zanutto states, "The problem plaguing this industry is the 'sell as much as possible' approach, often accompanied by promises of easy money. The reality is that trading requires hard work and time to master, and not everyone can succeed, just as not everyone is destined to qualify for the Olympics, not everyone is destined to be funded.
Reference：Another Prop Firm Shuts Down, Founder Blames “Cheaters” for Liquidity Issues
