dYdX founder alleges targeted attack, resulting in a $9M insurance claim
On November 17, dYdX, a decentralized exchange, faced a daunting challenge as it utilized its insurance fund to cover $9 million in user liquidations, a repercussion of what its founder, Antonio Juliano, has described as a "targeted attack" against the platform.
Antonio Juliano asserted that this incident also affected the Yearn Finance token (YFI). The dYdX team, communicating through X (formerly Twitter), reported that the v3 insurance fund was deployed to address issues arising from liquidation processes in the YFI market, which had witnessed a 43% drop on the mentioned date following a remarkable 170% surge in the preceding weeks.
Concerns within the crypto community intensified as the abrupt decline in the YFI token's price raised suspicions of a potential exit scam. The attack purportedly focused on long positions in YFI tokens on the dYdX exchange, resulting in the liquidation of positions valued at nearly $38 million. Antonio Juliano believes trading losses affecting dYdX, as well as the sharp decline in YFI, have been caused by market manipulation:
"This was pretty clearly a targeted attack against dYdX, including market manipulation of the entire $YFI market. We are investigating alongside several partners and will be transparent with what we discover."
Despite the incident, Juliano reassured the community that users' funds remained unaffected, with the v3 insurance fund retaining $13.5 million. Additionally, he committed to a comprehensive review of risk parameters, hinting at potential adjustments to both the v3 and the dYdX Chain software.
The fallout from the targeted attack extended beyond immediate financial losses, impacting the YFI token's market capitalization by over $300 million. This led to growing suspicions within the community, with some suggesting the possibility of an insider job in the YFI market. Claims were made that 50% of the YFI token supply resided in 10 wallets controlled by developers. However, scrutiny of Etherscan data suggested that some of these holders were associated with crypto exchange wallets.
