Just a week after introducing a new trading platform and several significant updates, prop firm Karma unexpectedly announced the cessation of its operations. Founder Eshan Balapatabendi claims he "had good intentions" but encountered "roadblocks" that made his business "unsustainable."

The End of Karma Prop Traders

Karma's rise and fall in the market was remarkably swift. Despite garnering positive reviews, the prop firm existed for only two months. Finance Magnates reported just a week ago that the company had partnered with Match-Trade Technologies to provide its clients with a new version of Match-Trader integrated with TradingView.

In addition, the firm had announced five significant updates that were either being implemented or planned for the near future. This makes the decision to cease operations all the more surprising.

"I started Karma to build something transparent and sustainable," Balapatabendi commented on the official Discord channel. "Unfortunately, there were a lot of roadblocks in the way which has caused us to be unsustainable."

Another firm gone, @karmaproptrader...

Website no longer operating, Discord chats are closed.

Drop your thoughts in comments 👇 pic.twitter.com/MS4JViTegP

— TheTrustedProp (@TheTrustedProp) August 11, 2024

What led to the firm's unsustainability? According to the Founder, there were two main reasons. The company initially relied on a promised tech solution from an unnamed provider, which failed to materialize. This delay drained costs for about four months.

Secondly, after launching, Karma discovered that their risk checks were not implemented correctly. This oversight allowed traders who should have been denied to pass through Phase 1 and Phase 2, including potential cheaters. As a result, the company faced solvency problems.

"We did not catch the cheaters that were on our system," Balapatabendi added. "This caused cashflow issues which has now left us with no liquidity."

This is not the only prop firm that has announced a closure recently. In mid-July, Funded Engineer reported its closure despite attempts at "strategic restructuring" to stay in the market.

Allegedly, external entities expressed interest in acquiring Karma, but the founder declined. Currently, efforts are underway to ensure payouts to traders who generated their profits legitimately.

"I know people will hate me or think negatively. However, I truly did have good intentions. Sorry to everyone involved. I wish everyone the best in their trading journey ahead," Balapatabendi concluded.

Why Prop Firms Are Closing

In recent months, several other companies have also suspended their operations. In May, True Forex Funds decided to take a similar step as it struggled to stabilize its financial position, and in March, SI World exited the market.

According to FunderPro, more than 50 proprietary trading firms might 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.

Many firms operate on a virtual trading system where:

1. Funded traders' trades never reach the real market, generating no actual profits.
2. Firms can potentially manipulate markets to make traders fail challenges.
3. Payouts come solely from challenge purchase fees, not real trading profits.

“The issue plaguing the industry is the ‘sell as much as you can’ approach, often coupled with the promise of easy money. The reality is that trading requires hard work and time to master, and not everyone will succeed. Just as not everyone can qualify for the Olympics, not everyone is meant to be funded,” Zanutto commented.