The decentralised exchange and the Yearn.Finance token (YFI), according to dYdX founder Antonio Juliano, are the targets of a deliberate attack.
On November 17, decentralised exchange (DEX) dYdX was compelled to pay $9 million in user liquidations out of its insurance fund. Antonio Juliano, the founder of dYdX, claims that the losses were the consequence of a “targeted attack” against the exchange.
The dYdX team reported on X (previously Twitter) that the v3 insurance fund was utilised “to fill gaps on liquidations processes in the YFI market.” On November 17, the Yearn.Finance (YFI) token experienced a 43% decline following a prior week of over 170% growth. The abrupt drop in price sparked worries about a potential exit scam among cryptocurrency enthusiasts.
The purported assault went after long positions in YFI tokens on the exchange, wiping out holdings valued at almost $38 million. Juliano thinks that the dramatic drop in YFI and trading losses impacting dYdX are the result of market manipulation:
“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.”
Juliano claims that there is still $13.5 million in the v3 insurance fund and that the incident had no effect on user funds. “Even though user funds were not impacted, we will also be reviewing our risk parameters in-depth and, if needed, making the necessary adjustments to both v3 and the dYdX Chain software,” he wrote on X.
The community became suspicious of a potential insider job in the YFI market after the profitable trade destroyed over $300 million in market capitalization from the YFI token. According to certain users, ten wallets under the control of developers held half of the total supply of YFI tokens. But according to Etherscan data, some of these holders appear to be cryptocurrency exchange wallets.