Decentralized exchange GMX reportedly suffered from a price manipulation exploit that targeted the AVAX/USD pair. The platform's estimated losses exceed $500K.
At the beginning of September, ZigZag’s Founder Taureau claimed that GMX’s no slippage liquidity pools made the platform vulnerable to flash crashes. Taureau contrasted GMX with centralized exchanges such as FTX, stating that GMX’s “bad pricing mechanisms” could cause it to get wiped out in a single day.
Twitter user @derpaderpederp added to Taureau's claims by stating that a whale familiar with GMX could manipulate the price of ETH and drain the DEX’s liquidity pools within minutes as $AVAX trading does not incur any price impact on GMX.
According to technical analyst Duo Nine,
“If you long or short any size on GMX, there is no price impact!
So the trader takes both a long & a short on GMX and then manipulates the price on CEX like Binance/Coinbase.
Once done, he pockets the profits..”
Blockchain security firm PeckShield was the first to notice that GMX was hit by an exploit that drained $565K from the exchange.
PeckShield, however, soon deleted the post, while GMX tweeted that it was notified of the AVAX/USD price manipulation.
The perpetrator opened large positions on the AVAX/USD market at zero slippage using GMX, and moved the AVAX/USD to other venues, thus switching from long to short positions five times before extracting a profit ranging between $500-700K.
GMX has since capped the open interest for Avalanche at $2M long/ $1M short while continuing the GLP and GMX markets’ operations.
Additionally, MM Finance has temporarily suspended trading on MadMex to prevent further loss of funds.