GMX Plummets After $40 Million Hack on V1 Platform

GMX Plunges After $40 Million Hack on V1 Platform

Decentralized exchange GMX experienced a significant downturn on Wednesday after a hacker exploited its V1 platform on Arbitrum, resulting in a loss of $40 million. The attack also impacted GMX V1’s liquidity provider, GLP. Fortunately, the upgraded V2 platform, its native token, associated markets, and liquidity pools remained unaffected.

GMX confirmed the incident in a statement, assuring users that “The exploit does not affect GMX V2, its markets, liquidity pools, or the GMX token itself. Based on available information, the vulnerability is limited to GMX V1 and its GLP pool.”

Data from Lookonchain reveals that the hacker moved $9.65 million of the stolen funds to the Ethereum network, exchanging them for DAI and ETH. In response, GMX has disabled trading on GMX V1, along with the minting and redemption of GLP on the Arbitrum and Avalanche networks to prevent further exploitation.

“Our primary focus is on recovery and identifying the root cause of the issue,” GMX stated.

Root Cause Identified as Design Flaw

Blockchain security firm SlowMist has identified a design flaw in GMX V1’s architecture as the primary cause of the security breach. The vulnerability lies in how GMX V1 handles short position operations, creating a weakness that was exploited to manipulate token prices and drain funds from the protocol.

SlowMist explained, “The root cause of this attack stems from the design defect of GMX V1 where short position operations immediately update global short average prices.”

White Hat Bounty Offered

GMX has offered a 10% white hat bounty to the exploiter, urging a “swift and ethical resolution.” The team has stated that if the stolen funds are returned within 48 hours, they will not pursue further legal action.

GMX Joins List of Exploited Exchanges

GMX joins a growing list of cryptocurrency exchanges that have suffered losses due to hacking incidents. Other notable attacks include Bybit, which lost $1.4 billion in February, and Cetus DEX on Sui, which was victimized by a $220 million theft in May.

Market Reaction

Following the news of the exploit, GMX has fallen by 15% in the last 24 hours, trading near $12 at the time of reporting.