The founder of Decentralized finance (DeFi) protocol dYdX, Antonio Juliano, took to X (formerly Twitter) to share the findings of the investigation into the loss of $9 million in insurance funds on Nov. 17 in what many suspected was an exit scam.
Juliano noted that the dYdX chain wasn’t compromised, and the insurance claims of $9 million took place on the v3 chain. The v3 insurance fund was used to fill gaps in liquidation processes in the Yearn.finance (YFI) token market.
The protocol co-founder also stressed that dYdX has no plans to negotiate with the exploiters behind the attack and will instead pay bounties to those most helpful in aiding the investigation:
“We will not pay bounties to, or negotiate with the attacker. We and others have made significant progress into identifying the attacker. We are in the process of reporting the information we have to the FBI.”
Juliano added that the exploited v3 chain has central components that could be responsible for the compromise. The security incident caused the YFI token to drop by 43% on Nov. 17. The sudden price crash raised concerns within the crypto community about a possible exit scam.
To be very clear: the recent insurance fund incident on dYdX was on v3 and not the dYdX Chain
v3 has central components, dYdX Chain does not. We help to operate v3, we do not help to operate dYdX Chain. This is important to understand why we have taken the actions we have
— Antonio | dYdX (@AntonioMJuliano) November 20, 2023
The exploit targeted long positions in YFI tokens on the exchange, liquidating nearly $38 million of positions. This was one of the key catalysts behind the price drop of the YFI token. The trade-in question wiped out over $300 million in market capitalization from the YFI token, further fueling the insider job theory.
Security breaches in DeFi are nothing new; however, dYdX has taken a novel path by focusing on finding the culprit using the community rather than paying a direct bounty to the exploiter.
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