Paper trader exploits pricing mechanism to earn $1.28 million in 8 hours

Huo Xing Finance reports that on October 11, according to Butler monitoring, Papertrade was exploited for approximately $1.28 million in profit within just eight hours of launch. A trader with over $13 million in cumulative historical profits and $14 billion in trading volume on Hyperliquid repeatedly established large long and short positions on Papertrade while simultaneously buying and selling ETH on Hyperliquid, briefly manipulating the price upward or downward before closing positions for profit. Data shows the trader executed 305 trades total, with 296 profitable trades—a win rate of approximately 97%—and an average holding time of just 98 seconds, with cumulative trading profits peaking at $1.73 million.

However, the attacker subsequently opened 30 short positions on Papertrade at $2,507.35, with a notional value of approximately $297 million, while selling around 6,600 ETH on Hyperliquid, driving the price down to $2,504.40. This time, however, the closing attempt failed. Subsequently, ETH’s price rose to $2,509.95, triggering full liquidation of all 30 short positions and resulting in a loss of approximately $450,000, leaving a net profit of $1.28 million. The Papertrade team may have prevented the attacker from closing these positions to halt the attack, though this remains speculative and unconfirmed.

Analysts note that if the platform continues to rely directly on Hyperliquid’s BBO (best bid and offer) for pricing, the risk of underlying manipulation persists. They recommend adopting Hyperliquid’s official oracle price, which aggregates quotes from multiple exchanges to reduce the risk of manipulation via a single order book.