Papertrade Pricing Model Under Scrutiny Following Manipulation Allegations

The controversy centers on Papertrade’s mechanism for determining entry and exit prices. Unlike exchanges that utilize oracle-based mark prices to mitigate volatility, Papertrade relies on the midpoint of Hyperliquid’s best bid and offer. Researcher Rune and social media users noted that this design allows the reference price to be influenced by pending orders, even if those orders remain unexecuted. Allegations suggest that by artificially shifting the midpoint, operators of large, nine-figure positions could force the protocol to settle trades at prices detached from the broader market.

While the platform’s own documentation acknowledges that manipulation of the best bid and offer is a potential risk, there is currently no independent verification that an exploit occurred or that funds were drained. Reports surfacing on October 11 provided no transaction hashes, wallet addresses, or proof of realized losses. The platform operates by settling trades against a liquidity pool, meaning any successful manipulation would directly impact the pool's solvency. To date, Papertrade has issued no public response regarding the claims, leaving the validity of the alleged exploit unconfirmed.