Antonio Juliano, the founder of decentralized exchange dYdX, has pointed to a "targeted attack" on the exchange, leading to the employment of $9 million from its insurance fund to cover user liquidations on Nov 17.
According to statements from the dYdX team on platform X (formerly Twitter), the funds from the v3 insurance fund were utilized "to fill gaps on liquidations processes in the YFI market." This action was triggered by the Yearn.Finance (YFI) token's significant price drop of 43% on Nov 17, following an over 170% surge in the preceding weeks. The abrupt decline fueled speculation about a possible exit scam within the crypto community.
Juliano states that the supposed attack focused on long positions in YFI tokens, which liquidated positions nearly amounting to $38 million. He suggested market manipulation as a possible cause for the trading losses affecting dYdX and the sharp fall in YFI:
"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 extensive utilisation of the insurance fund, Juliano assured that it still holds $13.5 million and users' funds were not impacted by the incident. He added that a comprehensive review of risk parameters would be carried out, along with changes to both v3 and potentially the dYdX Chain software, if deemed necessary.
This incident led to over $300 million in market capitalization being wiped off the YFI token, sparking suspicions of an insider job. Some claims suggest that half of the YFI token supply is controlled by just ten developer wallets. Still, Etherscan data indicates that these alleged holders might be crypto exchange wallets.
