Web3 Trading AI SaaS platform permissibility?


I have come across a SaaS platform in the web3 space. That are offering liquidity pools for their users. From my understanding of how the mechanics works. They use the deposits into these liquidity pools to then take out equity loans on those deposits which they then use to trade on using AI based systematic/algorithmic trading operating as a hedge fund on ETH and BTC pairs. They don’t trade on the deposits directly and claim it is capital protected.

The users of the platform are then paid a yield as a profit share. The yield is variable dependent on the volatility of the markets and how much profits they make.

Is partaking in something like this permissible?

More in depth details below:

It is a SaaS platform that uses a profit share scheme for their investors through liquidity pools.

The way is works is:

  1. X dollar gets deposited into a pool by the retail user
  2. X dollar is transferred to a corporate CEX sub-account for that strategy i.e Binance or OKX
  3. The sub account has an API code that proves the funds in account (example, the sub account has 1M, there is an API “code” that says there is 1M in this account as proof of funds
  4. The API code is shared with a partnering hedge fund
  5. Hedge fund uses the API code to borrow funds against the deposited funds (and they are the ones to post collateral, so funds deposited are never traded with, and that’s how principal can be secured)
  6. They take the X dollar (or 1M, any value) and borrow against it using an equity loan
  7. Normally, to make 35% on 1 dollar would take a 35% ROI trade, BUT they borrow (call it 10x leverage for easy math). So the dollar you put in is a nominal 10 dollars.
  8. They then make leveraged trades on ETH and BTC pairs using AI based systematic/algorithmic trading. Let’s say they make 5%, they pocket the 1.5% and pay out the 3.5% to the depositors.
  9. Funds are transferred back from Sub account in Binance back to DEX wallet to distribute the profit share after a fixed time period. The quoted yields can change depending on the volatility of the markets and the arbitrage opportunities available…

Hello , is this with TradeAi? I was also looking into this as I have invested with them!

I am also interested about their syndicate pool which profit shares from their trades?