Ahmet Bedirhan Arvas 
dYdX, its v3 platform experienced a “targeted attack” in November, and it has released a post-mortem report on the incident. As a result of this attack, the platform suffered a loss of approximately $9 million from its insurance fund, representing around 40% of the total.
In the post-mortem report, dYdX stated, “Research findings have identified the attacker, and we are currently in communication with them.” The platform is evaluating legal options regarding the attacker.
According to dYdX, the attacker opened leveraged long positions, with 5x leverage, on YFI, the native token of the DeFi protocol Yearn Finance, across more than 100 wallets. Using different addresses, the attacker bought spot YFI tokens, which, according to dYdX, increased the price of YFI by 215%.
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The attacker multiplied the gains by folding them into more YFI-USD positions, reaching a point where the exchange limited these positions to approximately $50 million, as specified by the platform. On November 17, the platform increased the starting margin requirement for the YFI-USD market and limited the size of the base and increase position, effectively restricting the attacker.
The next day, the price of YFI dropped by nearly 30% per hour, and the attacker could not close their positions. As the attacker’s assets fell into negative territory, the insurance fund automatically compensated for the losses, as stated by dYdX.
The platform mentioned that a week before the YFI incident, the attacker used the same strategy to target SUSHI-USD, making approximately $5 million in profit. However, the attack did not affect the v3 insurance fund because dYdX increased the starting margin requirement to 100%.
The company stated that no customer funds were impacted by the attacks and argued that the attacker did not profit from manipulating the YFI market.
To prevent further organized attacks using similar strategies, dYdX mentioned that it has updated its v3 trading platform for better open interest monitoring and alerts.
The exchange added that the upgraded v4 chain was already designed to prevent similar risks. The upgrade chain comes with a new software feature that automatically adjusts the initial margin fraction in case of abnormal price movements.