Papertrade Tightens Trading Limits After Price Manipulation Allegations

Papertrade responds to manipulation claims with tighter trading limits

Papertrade, a decentralized perpetual futures exchange (a type of trading platform that lets users speculate on asset prices without owning the assets), announced on October 11 that it had begun tightening trading-exposure limits both onchain and through its transaction relayers. The team described the changes as a response to overnight attempts to manipulate the Hyperliquid prices that its exchange relies on for its synthetic Bitcoin and Ethereum positions.

The adjustments apply to how much new exposure traders can open on the venue, which offers up to 1000x leverage. Papertrade's synthetic positions trade against a protocol-owned pool that uses Hyperliquid's best-bid-and-offer midpoint — the price halfway between the highest buying quote and lowest selling quote — rather than matching against another trader. The pool, not an opposing trader, bears the cost of winning positions.

Key details from the team's statement

• Papertrade said it began the process of "tightening up oi caps both onchain and at the relayer level" as congestion rolled off after the alleged manipulation.
• The team attributed the alleged manipulation attempts to unusually permissive launch exposure limits.
• The statement does not confirm claims that a particular wallet was blacklisted or prevented from closing positions.
• Some users reportedly opted to "undo" trades the team characterized as manipulated in exchange for farmed PAPER tokens, though accounts were not identified.

Unconfirmed claims about wallet blocking and liquidations

Pseudonymous observer ManaMoon speculated that a trader accused of price manipulation could not close positions, suggesting the wallet "might be blacklisted at the relayer level." ManaMoon also claimed a second wallet's long positions had been liquidated after being profitable. These wallet-specific claims remain unconfirmed by Papertrade or The Defiant.

During its restricted launch, Papertrade required all transactions to pass through its website and approved relayers — systems that submit users' trading instructions to the blockchain. The rollout plan stated that transaction ordering was "always indiscriminate of user/account," while allowing priority weightings to change.

What is confirmed

Papertrade confirmed it is tightening trading-exposure limits onchain and at the relayer level. The team confirmed that its exchange uses Hyperliquid's midpoint pricing and that its synthetic positions trade against a protocol-owned pool. The team also confirmed that some users exchanged farmed PAPER tokens to undo manipulated trades.

What is still unclear

Whether any specific wallet was blocked from closing positions remains unconfirmed. The mechanism for reversing trades that users were encouraged to undo was not explained. The accounts involved in the alleged manipulation and any associated losses were not identified. A wallet ending in 840e, linked to the alleged strategy by pseudonymous observer El33, showed about $1.28 million in cumulative realized trading profit with no open positions on PaperDash — down from approximately $1.73 million reported earlier. These figures alone do not establish manipulation or reconcile with the team's claim that one user lost almost all earlier profits through new accounts.

Administrative controls and pool status

Papertrade's published controls give a two-of-three multisig (a security mechanism requiring two out of three authorized parties to approve actions) — comprising accounts @izebel_eth, @blurr, and @UngusTrade — powers to pause new positions, freeze markets, configure relayers, and adjust opening headroom. The market-freeze mechanism allows existing positions to close against the paused midpoint; it is not described as a wallet-specific ban on closing positions.

Trader losses enter the pool, while unpaid profits can enter a payout queue, according to administrator @izebel_eth. PaperDash's October 11 snapshot showed about $4.30 million in the pool and an empty payout queue, compared with $3.14 million and no queued payout debt in the earlier report.

Sources

• The Defiant

Read also: Trader Makes $1.28 Million on New 1,000x Exchange Papertrade by Moving ETH Prices on Hyperliquid