Phemex Potential Manipulation of ETH Prices in $20M Papertrade Incident
Article Content
- •Two wallets reportedly manipulated ETH prices on Hyperliquid with $20 million trades.
- •The Papertrade protocol's pricing mechanism is vulnerable to manipulation via BBO.
- •A trader profited $1.28 million by exploiting the pricing mechanism within eight hours.
On October 11, 2026, two wallets allegedly manipulated Ether (ETH) prices on the Hyperliquid platform by executing $20 million in trades, potentially affecting Papertrade's synthetic pricing. The trades moved ETH prices by 0.1% to 0.2%, raising concerns about the vulnerability of Papertrade's pricing mechanism, which relies on Hyperliquid's best bid and offer (BBO). Reports indicate that a trader exploited this mechanism to earn approximately $1.28 million in profit within eight hours by manipulating prices through large trade volumes. Despite community accusations and the acknowledgment of risks in Papertrade's documentation, there is no confirmed proof of the wallets' identities or losses incurred. As of now, the situation remains unresolved, with no official response from Papertrade and no compensation plans announced. The incident has led to increased trading volume for ETH, surpassing Bitcoin's, indicating heightened market activity linked to the exploit.
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