A trader nets $1.28 million from a new 1,000x crypto exchange on day one by nudging ether's price on Hyperliquid

A trader made about $1.28 million from Papertrade within hours of the exchange's launch on Saturday, by moving the price of ether on another venue, according to an analysis of trading data by The Block.

Papertrade went live at 10 a.m. Eastern on HyperEVM, the smart contract layer of Hyperliquid's blockchain. It offers up to 1,000 times leverage and prices each trade at the midpoint of Hyperliquid's best bid and offer, with a shared pool of USDC taking the other side. At that leverage, a 0.1% price move equals a position's entire margin.

The Block found that one wallet bought about 6,060 ether on Hyperliquid just after 6 p.m., lifting the price about $3, then sold about 5,210 a minute later. It traded about $231 million of ether there that evening and paid roughly $52,000 in fees. Papertrade's records show a $1.28 million profit for the wallet. A later round went wrong: 30 short positions were liquidated at a loss of $450,000.

Papertrade said on X on Sunday that the manipulation attempts were "not an oversight in the mechanism design we spent six months working on" and were possible only because its launch limits on open interest were very loose. The Block reported that the exchange is tightening those caps and says the trader later returned almost all of the gains, a claim The Block could not verify. It has asked Papertrade and Hyperliquid for comment.