Decentralized exchange (DEX) dYdX was forced to tap into its insurance fund to cover $9 million in user settlements on November 17. According For dYdX founder Antonio Juliano, the losses were due to a “targeted attack” against the exchange.
According to reports from the dYdX team at X (formerly Twitter), the v3 insurance fund was used “to fill gaps in settlement processes in the YFI market.” The Yearn.Finance token (YFI) fell 43% on November 17 after soaring more than 170% in the previous weeks. The sudden price drop raised concerns within the crypto community about a possible exit scam.
The alleged attack targeted long positions in YFI tokens on the exchange, liquidating positions worth nearly $38 million. Juliano believes that the trading losses affecting dYdX, as well as the sharp drop in YFI, are due to market manipulation:
“This was clearly a targeted attack against dYdX, including market manipulation of the entire $YFI market. “We are investigating along with several partners and will be transparent with what we discover.”
According to Juliano, the v3 insurance fund still has $13.5 million and user funds were not affected by the incident. “While user funds were not affected, we will also conduct a thorough review of our risk parameters and make appropriate changes to both v3 and potentially the dYdX Chain software if necessary,” he noted on X.
The profitable trade wiped out over $300 million in market capitalization from the YFI token, leading the community to raise eyebrows about a possible inside job on the YFI market. Some users claimed that 50% of the YFI token supply was in 10 developer-controlled wallets. However, Etherscan data suggests that some of these holders are cryptocurrency exchange wallets.
Cointelegraph has reached out to the dYdX and Yearn.Finance teams for comment and is awaiting a response.
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