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Home/Markets & Investing/INSIDER TRADING SEC CHARGE · PAYMENT FOR ORDER FLOW SEC

Upstart Model 22 Calibration Error Reduced FY 2025 Fee Revenue by $44 Million

DF

Dana Fletcher

insider trading SEC charge · Apr 16, 2026

Upstart Model 22 Calibration Error Reduced FY 2025 Fee Revenue by $44 Million

Source: DojiDoji Data Terminal

Upstart shares fell 9.71% after the company disclosed that its Model 22 AI underwriting system overreacted to macroeconomic signals. The decline represents a loss of $4.49 per share.

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Upstart Investors Can Seek Damages for Model 22 Credit Failures

Purchasers of Upstart securities between May 14, 2025 and November 4, 2025 may be entitled to compensation. The Rosen Law Firm has filed a securities fraud class action lawsuit against Upstart Holdings, Inc. The lawsuit claims defendants made false or misleading statements between those dates. Specifically, the suit alleges that Model 22 overreacted to negative macroeconomic signals during its risk-separation processes. This caused Model 22's accuracy and its propensity to increase loan approval rates to be overstated. The conservative credit assessments of the model negatively impacted Upstart's revenue results, rendering the company's full year 2025 revenue guidance unreliable. Investors suffered damages when the true details of Model 22 entered the market.

This result followed a 330-basis-point collapse in the conversion rate, which fell from 23.9% in Q2 2025 to 20.6% in Q3 2025. The drop in conversion reduced funded loan volume, causing Q3 2025 revenue of $277 million to miss company guidance of $280 million by $3 million. The company subsequently reduced its FY 2025 fee revenue outlook by $44 million, from $990 million to $946 million.

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Upstart and Affirm Rallies Signal Fintech Re-rating as Growth Investors Return

Upstart stock rose 14% to $33.63 and Affirm stock rose 7% to $59.66. These moves represent a coordinated fintech re-rating as investors reassess growth names. Upstart's rally is driven by Q4 2025 revenue of $296 million, a 31% year-over-year increase, and loan originations that surged 86% to 455,788 transactions. For the full year 2025, the company generated $1.044 billion in revenue and swung to a GAAP net income of $53.6 million from a loss of $128.58 million in 2024. Upstart has guided for approximately $1.4 billion in total revenue in 2026. Affirm's gain is supported by Q2 fiscal 2026 revenue of $1.123 billion, up 30% year-over-year, and gross merchandise volume that surged 36% to $13.8 billion. For the full fiscal year 2026, Affirm guided for revenue between $4.086 and $4.146 billion.

The failure originated with Model 22, launched in early May 2025. The model was overly responsive to macroeconomic signals and tightened credit approvals beyond what borrower repayment data justified. Management later admitted the model's conservatism was the dominant driver of reduced conversion despite robust application volume throughout Q3 2025.

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Crypto Exchanges Seek AI Models Capable of Autonomous Smart Contract Hacking

Simulated damage worth millions of dollars resulted from AI agents using the Claude Mythos Preview model to autonomously hack smart contracts. The model, released by Anthropic in early April, can scan millions of lines of code to identify vulnerabilities in seconds. It can identify and exploit zero-day vulnerabilities across major operating systems and web browsers. During tests, the model discovered a 27-year-old vulnerability in OpenBSD and a 16-year-old bug in FFmpeg. Binance and Coinbase are negotiating access to the model to bolster cybersecurity. Binance is currently experimenting with AI to identify vulnerabilities in its internal systems. Coinbase CSO Philip Martin stated the model will accelerate digital threats as well as defense. Regulators in the United Kingdom are holding emergency talks with the government cybersecurity agency and major banks.

insider trading SEC chargepayment for order flow SECUpstartSEC ESG enforcementSEC enforcement actionSEC crypto enforcementSEC retail investor ruleRipple XRP SEC

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