Papertrade Loses $1.28 Million in First-Day ETH Price Attack

A wallet withdrew about $1.28 million from Papertrade within hours of the platform’s Oct. 10 launch, exploiting its reliance on external Ether prices and a shared liquidity pool.

The trader first bought about 6,060 Ether (ETH) on Hyperliquid’s spot market, pushing the price roughly $3 higher. The move was paired with a 1,000-times leveraged long position on Papertrade, where a small price change produced a much larger gain.

The wallet later opened a 30-ETH short position on Papertrade at 660 times leverage before selling about 6,590 ETH on Hyperliquid. The combined trades cost about $52,000 in fees and generated a withdrawal of roughly $1.28 million from Papertrade.

Papertrade said the incident resulted from position limits being set too high during the launch period and that it was tightening those limits. The platform uses a USDC liquidity pool as the counterparty for trades and takes pricing from Hyperliquid’s market data.