The warning follows Papertrade’s recent launch on HyperEVM, the smart contract environment connected to the Hyperliquid blockchain.

Papertrade faces allegations involving $20 million ETH trades

According to Boblob, two wallets allegedly executed trades worth approximately $20 million each on Hyperliquid, briefly moving ETH prices by 10 to 20 basis points.

A basis point equals 0.01%, meaning the reported price movements represented changes of roughly 0.1%–0.2%.

The researcher claimed that the wallets simultaneously established long positions on Papertrade with a combined nominal value reaching hundreds of millions of dollars.

Long positions generally benefit when the price of an asset rises. Papertrade’s pricing system allows traders to open or close positions using prices derived from Hyperliquid’s order book. Boblob alleged that the traders exploited this connection by moving the reference price on Hyperliquid while maintaining much larger positions on Papertrade.

The researcher described Papertrade as “getting actively exploited by two wallets” and called for the suspected weakness to be addressed. The statement remains an allegation. No independently verified transaction analysis has established the identities of the wallet operators or confirmed that their trades generated profits through price manipulation.

TokenPost reported on October 11 that the alleged transactions involved positions worth nine figures on Papertrade alongside the reported $20 million orders on Hyperliquid. The report did not provide verified wallet addresses, transaction hashes or an independently established loss calculation.

Papertrade’s pricing system raises manipulation concerns

The allegations focus on Papertrade’s decision to use the midpoint of Hyperliquid’s best bid and best offer as its reference trading price.

The best bid represents the highest price a buyer is prepared to pay, while the best offer is the lowest price a seller is willing to accept. Papertrade’s official documentation explains that its smart contracts read the midpoint between those prices to determine the entry and exit prices of positions. Unlike an exchange that directly matches buyers and sellers, Papertrade uses synthetic trades between customers and its liquidity pool.

When a user opens a position, the contract records the current reference price. When the position closes, the protocol calculates the resulting profit or loss using the updated price. The platform offers leverage of up to 1,000 times on supported markets, including Bitcoin and Ethereum.

Its documentation describes trading without conventional order-book slippage or funding payments, subject to limits on the amount of open interest allowed for each market. Rune argued that the arrangement creates a potential weakness because the best available buying and selling prices can change as orders enter or leave the Hyperliquid order book.

The trader pointed to Papertrade’s published risk disclosures, which identify possible manipulation of the best bid and offer as an unresolved concern.

According to the documentation excerpts discussed by Rune, a trader could potentially influence the midpoint by placing an order at a new best bid or offer, even if the order is not executed.

If Papertrade accepts the resulting price without an independent check, a position might be opened or closed using a quotation that does not represent the prevailing market value. The platform’s documentation identifies related concerns involving contract economics, limits on trading exposure, operational protections and permission management.

However, the existence of a documented risk does not establish that a successful exploit has occurred or that users have suffered losses.

Hyperliquid uses different prices for its own trading safeguards

Papertrade’s use of the order book midpoint differs from Hyperliquid’s native approach to calculating prices for perpetual futures.

Hyperliquid’s official documentation describes separate oracle and mark prices intended to reduce the effect of abnormal trading activity.

The oracle price uses a weighted median of prices from centralized exchanges. Hyperliquid validators update this value approximately every three seconds. For its mark price, the exchange combines several inputs, including its own market prices and prices from other trading venues.

Hyperliquid uses the mark price to calculate unrealized profits and losses, assess margin requirements and trigger liquidations. Papertrade’s documentation describes a different arrangement in which its synthetic trading contracts directly reference Hyperliquid’s best bid and offer midpoint.

Consequently, Papertrade’s reported exposure concerns its own pricing design. The allegations do not establish that Hyperliquid’s blockchain, native trading engine or oracle system was compromised. The distinction follows earlier problems involving price references used by applications connected to Hyperliquid.

In July, a Hyperliquid-linked SK Hynix perpetual contract experienced a 17.9% price drop after an unusual transaction in South Korea affected the external price used by the contract. The operator, Trade.xyz, investigated the incident after positions were affected by the sudden movement.

Following the investigation, Trade.xyz said it would cover qualifying liquidation losses associated with the pricing anomaly.

The incident involved a separate contract and pricing method. It does not establish the validity of the allegations involving Papertrade.

Papertrade loss claims remain unconfirmed

Papertrade’s trading structure places its liquidity pool on the opposite side of customer positions, with profits and losses calculated directly through the protocol. According to its documentation, the pool begins without deposited liquidity and grows as traders realize losses.

The system uses a token called PAPER, which is issued in connection with eligible trading losses. Holders can stake the token to participate in distributions under the protocol’s rules. If the liquidity pool lacks sufficient funds to cover profitable withdrawals, winning settlements can enter a payment queue until funds become available.

An independent description of the protocol’s mechanics confirms that Papertrade positions involve real funds, with payouts depending on the pool’s available liquidity.

The latest manipulation allegations have not established whether the suspected transactions affected that pool, created unpaid claims or resulted in realized withdrawals. Reports circulating on October 11 have focused on the reported trading pattern and pricing concerns without confirming the amount of money allegedly extracted.

The case differs from verified incidents where investigators have identified affected funds and reconstructed transaction records. For example, Float Protocol lost approximately $28,000 in an August pricing attack, according to an investigation by blockchain security company SlowMist.

The firm attributed the exploit to manipulated spot prices that affected how the protocol calculated liquidity-provider share values.

Vesu reported $3 million in affected collateral after incorrect price data triggered liquidations across several lending pools. Vesu attributed the incident to a faulty external pricing feed and began coordinating with other organizations to address the affected positions.

For Papertrade, the available October 11 reports do not include an independently verified assessment of affected positions, confirmed withdrawals or user compensation.

No confirmed public response from Papertrade addressing the two-wallet allegations was identified in the sources reviewed. The platform has not announced a verified loss total, compensation arrangement or timetable for changing its BBO-based pricing system.