Trader exploited Papertrade's price feed reliance on Hyperliquid to net $1.28M via ETH price manipulation, prompting the exchange to implement tighter open interest caps.
DeFi & Yields ·
A trader generated $1.28 million in profits on Papertrade, a recently launched exchange offering up to 1,000x leverage, by manipulating Hyperliquid's ETH price feed. The exchange acknowledged overnight manipulation attempts against its price infrastructure and responded by implementing tighter open interest caps on directional positions.
Papertrade's price feed relies on Hyperliquid data, creating a vulnerability when traders can move the underlying best-bid-offer pricing. The exchange identified these best-bid-offer pricing vulnerabilities as the mechanism enabling the exploit, whereby shifting ETH prices on Hyperliquid allowed profitable positioning on Papertrade despite the extreme leverage available.
The episode highlights operational risks for new exchanges building atop established venues' price feeds. It remains unclear whether the newly implemented caps will prevent similar manipulation attempts or whether additional structural changes to Papertrade's price methodology are planned.