dYdX lost $9 million as a result of a "targeted attack"

19.11.2023 10:57
On November 17, about $9 million from the insurance fund of the decentralized derivatives exchange dYdX was used to cover the liquidations of users' positions in the Yearn Finance (YFI) token market.

Last night about $9m from the dYdX v3 insurance fund were used to fill gaps on liquidations processed in the YFI market. The v3 insurance fund remains well funded with $13.5m in funds remaining

No user funds were affected and our team is working to investigate the event

— dYdX (@dYdX) November 18, 2023

The team assured that the fund with a balance of $13.5 million is "still well funded," user funds have not been affected, and the incident is being investigated.

According to dYdX founder and CEO Antonio Giuliano, the losses resulted from a "targeted attack" on the exchange, which included "manipulation of the entire YFI market."

This was pretty clearly a targeted attack against dYdX, including market manipulation of the entire $YFI market

We are investing alongside several partners and will be transparent with what we discover https://t.co/djWHaaPIua

— Antonio | dYdX (@AntonioMJuliano) November 18, 2023

"We are conducting an investigation together with several partners and we will be frank about what we find," he added.

Arkham Intelligence specialists noticed that the YFI price drop of about 40% that occurred the day before led to the liquidation of positions on dYdX in the amount of $50 million.

YFI's price collapsed by almost 40% last night.

As this occurred, $50M of YFI Open Interest on dYdX was wiped out. Before that, dYdX made up almost half of the total open interest on YFI. pic.twitter.com/qZBDOeELGX

— Arkham (@ArkhamIntel) November 18, 2023

Experts noted that YFI is usually very rarely traded on dYdX, however, a sharp jump in prices over the past few days has led to the fact that the open interest peaked at $60 million. The value was half of the cumulative indicator for the asset.

Giuliano confirmed this data in a message. According to him, the attack was launched by "well-capitalized entities" in order to siphon funds from the insurance fund. Two weeks ago, a similar attempt was made to manipulate the SUSHI market, this time they managed to withdraw a significant amount to the USDC before the price collapse, the head of the exchange said.

Here are the main points we know about the $YFI incident on dYdX so far:

Reminder no user funds have been lost, but it is critical we understand what happened and adjust accordingly

- in the part few days $YFI open interest on dYdX spiked from $0.8m -> $67m
- basically all of…

— Antonio | dYdX (@AntonioMJuliano) November 18, 2023

As a measure against potential incidents in the future, the dYdX team has increased the initial margin requirements for a number of low-liquid tokens like EOS, RUNE, AAVE and YFI.

Recall that on November 13, the platform launched a beta version of the main L1 network dYdX Chain based on Cosmos for testing.

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