On November 17, the decentralized exchange (DEX) dYdX had to use its insurance money to pay $9 million in user liquidations, which put it in a difficult situation. The creator of dYdX, Antonio Juliano, has claimed that the exchange is the victim of a “targeted attack” in relation to these losses.
The event occurred when dYdX addressed the fallout from a significant decline in the price of the Yearn. Finance (YFI) token by using its v3 insurance fund. The fund was used “to fill gaps on liquidations processes in the YFI market,” according to reports from the dYdX team. Concerns about a possible exit scam were sparked by the abrupt and sharp drop in YFI, a token that had earlier had an incredible spike of over 170%. This caused suspicions within the cryptocurrency community.
The purported hack primarily targeted long bets on the exchange in YFI tokens, wiping out positions worth about $38 million. Antonio Juliano acknowledges that dYdX and the YFI market have suffered losses, but he thinks that market manipulation has been a major factor: “This was a targeted attack against dYdX, including market manipulation of the entire $YFI market.” We are conducting this investigation with multiple partners, and we will be open about the results.
Juliano assured customers that no user funds were touched by the incident and that the v3 insurance fund still contained $13.5 million. Additionally, he promised to carry out a thorough analysis of risk parameters and, if required, make changes to v3 and the dYdX Chain program.
The YFI token’s market capitalization fell by more than $300 million as a result of the profitable deal that caused the liquidations. Some questioned if insiders could have been involved in the YFI market after this turn of events. There have been claims that 10 developer-controlled wallets contain half of the total supply of YFI tokens. However, Etherscan data indicates that some of these holdings are connected to wallets used for cryptocurrency exchanges.
Following these events, the crypto community is keeping a careful eye on the situation and asking questions in order to acquire clarity on the targeted attack’s nature and its effects on dYdX as well as the larger DeFi scene.