Suspected Price Manipulation on Hyperliquid-Based Exchange Papertrade Nets Trader $1.28 Million

A trader appears to have earned about $1.28 million by artificially moving the price of Ether on Papertrade, a Hyperliquid-based perpetual futures exchange.

The trader used as much as 1,000x leverage on Papertrade, which launched on October 10, then generated profits by trading large amounts of Ether on Hyperliquid’s spot market, The Block reported on October 11. Papertrade uses the midpoint between Hyperliquid’s bid and ask quotes as its execution price.

After opening a large position on Papertrade, the wallet repeatedly bought and sold Ether on Hyperliquid. Between 6:01 p.m. and 6:02 p.m. on October 10, it bought about 6,060 ETH and pushed the price up 0.12%. It then sold about 5,210 ETH, sending the price lower again. At 1,000x leverage, a 0.1% move in the underlying asset is enough to generate profit or loss equal to the margin posted.

According to trading records analyzed by The Block, the wallet traded about $231 million worth of Ether on Hyperliquid that day. On Papertrade, it posted total volume of $3.18 billion and made about $1.28 million in profit. The wallet deposited about $1.2 million and withdrew about $2.48 million. It later lost about $450,000 after an Ether short position opened with 660x leverage was liquidated.

Papertrade said it would tighten its open interest, or OI, limits after the controversy grew. The exchange said the attempted price manipulation did not stem from a flaw in the trading system’s design. Instead, it attributed the issue to loose position limits set to handle early demand after launch. It added that it was lowering limits on both the on-chain side and the trade relay system.

Papertrade also claimed the trader later returned most of the profit to the liquidity pool through another account. The Block said it could not independently verify that claim. Public transaction records still showed the wallet’s net withdrawals at about $1.28 million, according to the report. Meanwhile, the liquidity pool balance fell from about $5 million to around $2.4 million during the incident before recovering.