Decentralized Exchange GMX Suffers $565,000 Price Manipulation “Exploit”

A founder of a GMX DEX competitor said on September 2 that an exploit could be performed on GMX that could leave short GLP holders. 16 days later, it happened.

Decentralized exchange (DEX) GMX allegedly suffered a price manipulation exploit from an exploiter who managed to grab approximately $565,000 from the Avalanche (AVAX)/USD market.

The unidentified exploit is believed to have capitalized on GMX's "minimum spread" and "zero price impact" features to pull off the exploit, which impacted GLP token holders who provided liquidity in the form of AVAX (the Avalanche token) to GMX.

GMX confirmed the price manipulation exploit in a Twitter post on Sunday, but said the AVAX/USD market would remain open despite the imposition of a $2 million cap on long positions and $1 million cap on short positions.

We have been made aware of AVAX/USD price manipulation on benchmark exchanges by monitoring systems and community members .

While we review the event, open interest in AVAX has been capped at $2 million long / $1 million short.

The GLP and GMX trading markets continue to operate normally.

Genesis Trading Head of Derivatives Joshua Lim was one of the first to analyze the exploit, stating that the exploiter "succeeded in extracting profits from GMX's AVAX/USD market by opening large positions at 0 slippage" before transferring the AVAX/USD to centralized exchanges at a slightly higher price.

Lim said this mining method was repeated five times, with the first cycle taking effect at 01:15 UTC on Sunday. Each round transferred over 200,000 AVAX, or about $4-5 million per round, with the miner making about $565,000 in profit after paying the spread to market makers on other exchanges.

3/ let's look at the first cycle w...