According to reports, a price manipulation attack on the decentralized exchange (DEX) GMX allowed an exploiter to steal $565,000 from the Avalanche (AVAX)/USD market.
The exploit, which affected GLP token holders who contributed liquidity to GMX in the form of AVAX tokens, is believed to have been carried out by an anonymous exploiter who profited from GMX’s minimum spread and zero price effect characteristics.
GMX acknowledged the price manipulation exploits and added that the platform set a $2 million cap on long positions and a $1 million cap on short positions, and the AVAX/USD market would continue to be active.
Joshua Lim, the head of derivatives at Genesis Trading, claimed that the perpetrator successfully extracted profits from GMX’s AVAX/USD market by opening large positions at 0 slippages before transferring the AVAX/USD to centralized exchanges at a marginally higher price.
The first cycle of this exploit method, according to Lim, began at 1:15 AM UTC on Sunday and was repeated five times. Approximately $4 to $5 million worth of AVAX were transferred during each cycle, and the exploiter profited by about $565,000 after paying spread to market makers on other exchanges.
However, Lim pointed out that since GMX was functioning as intended, this wasn’t an exploit.
While GMX quickly limited short and long open interest for AVAX/USD to safeguard the DEX from further manipulation, Lim stated that GMX may have to do away with its “zero price effect” feature despite having signed up a lot of users thus far.
Ironically, Taureau, the founder of layer-2 DEX ZigZag, expressed worry about the long-term viability of GMX’s exchange platform in a video chat on September 2, saying a trader with the correct approach might wipe out GLP token holders.
The GMX community’s reactions to the announcement were conflicting and users queried if any compensation will be given to GLP holders who were impacted.
At the time of writing, the GMX token is trading at a price of $40.75.
Also Read: $371K Worth USDC Stolen in Avalanche Smart Contract Exploit
