Mohammad

Setting the Record Straight on Recent Exploit Attempts Against the Gigavault Paradex would like to transparently share with our community details of multiple incidents involving a single actor between October and November 2025. We want the full picture, including key details from prior incidents that they are omitting, to be available to our users. The user is now framing this as “your market maker lost money against a good faith trader and now you’re censoring them.” This is a convenient narrative that ignores the pattern of past behaviour and, in several instances, relies on false claims that we “deleted trades” or that the GV did not lose money, to make their story sound credible. That is not what happened here. The Gigavault (GV) is a public good funded by Paradex users, not some prop desk that benefits the team. The team does not financially benefit when users lose money, not from negative PnL and not from liquidations which are distributed as yield to the GV depositors. The actions described below were taken to protect good-faith GV depositors from an actor who has a clear and repeated pattern of exploit attempts. The first two incidents in October 2025 followed the same repeated pattern: 1. Actor deposits a large amount of USDC 2. Immediately builds a large long position against the OMM in illiquid, in-the-money options. 3. Actor placed a very high-priced sell order, which distorted the mark price and generated unusually large unrealized PnL. 4. Actor withdrew funds while the mark price remained distorted. 5. After liquidity returned and the mark normalized, the position moved against the actor, triggering partial liquidation, but still closing in a net realized profit. This behaviour caused significant losses to the GV / insurance fund (which they are denying). Despite clear indication of what appears to be ill-intended market exploitation, especially withdrawing profits during artificial mark-price distortions on low-liquidity options, Paradex did not restrict this user’s access or seek any recovery of their PnL at that time. We even had a call with the user asking them to explain the pattern described above but they provided no detail and kept deflecting suggesting “they were just simply buying options”. In November 2025, the same actor again generated a temporary profit of approximately $172k by purchasing options at prices trading outside of reasonable market bands during an unrelated GV mispricing incident. Once the mispricing was identified, a forced settlement of options reverted the incorrect PnL generated by these trades. Following the forced settlement, the actor’s account retained a positive PnL of over $7,600 related to this transaction. Collectively the actor has profited nearly 28k across all three incidents. Why This Violates Paradex’s TOS Incidents #1 and #2 (and the pattern we observed) appear to be a clear violation of our Terms of Service. Paradex is still in its early stages, especially for products not widely available elsewhere such as perp options. Our Terms of Service (“TOS”) exist, among other things, to protect the protocol and its users from actors attempting to exploit that infancy. Our TOS: - Prohibit abusive behaviour and market manipulation (Section 3), including any activity that distorts prices/mark prices or compromises the safety of other users’ funds. The actor’s apparent behaviour is exactly what this section is designed to prevent. - Allow Paradex to modify or restrict account access, including force-settling positions, when these obligations are breached (Section 1.3). - Grant us the right to seek indemnity/recovery for losses resulting from such behaviour, including past exploits (Section 5). - Exclude responsibility and liability for Force Majeure events outside our reasonable control (Section 10.9). The user’s behaviour does not appear to be “normal trading where a MM took the other side and lost.” If that had happened, that would be fine. There are many cases where this has happened in the past and we have never and will never intervene. Instead, what happened here appears to be a repeated, intentional attempt to manipulate prices/marks in thin markets, and withdraw during distorted valuations, with losses pushed onto GV depositors. This activity is in breach of our ToS, and it triggers our right to modify access to the platform or force settle trades which we used to protect the Gigavault depositors (who are also our users). Other protocols have taken similar actions before to protect their users. Why Paradex is Declining to Make Payments to the User (And is Already Being Lenient) Given the observed repeated pattern of apparent market manipulation or taking advantage of developmental protocols, we are fully within our rights under the TOS to: - Decline any refund or compensation, - Seek clawback and recovery of exploit-derived profits and GV losses from past incidents, and - Force settle any transactions Instead: - Paradex did not claw back profits from the two October exploits - Paradex did not "block" the account. They have always been ablet to trade freely - Paradex force-settled mispriced options in November and the actor still ended with positive PnL, both on that day and across all three incidents (~28K total). This already represents a more favourable outcome for the actor than what our TOS require. Providing the user additional payments on top of this would, in effect, mean rewarding an apparent repeat exploiter. We’d also like to note that we also have a long history, first at @tradeparadigm and now at @paradex of putting our users first and compensating them for any platform errors during the normal course of trading even if that means it comes at our expense. What happened here isn’t compensating a user - it’s a user attempting to benefit from apparent exploits. Our Responsibility Going Forward Paradex is acting responsibly and ethically to protect our users and their funds and to safeguard the integrity of the platform, including the GV and the insurance fund. The TOS are designed to allow us to carry out this responsibility effectively especially in the early stages of the protocol’s development, including taking protective action where necessary, until community governance takes over and we are no longer in a position to intervene directly. We are sharing these details now so that our community has access to the full context, not a selective narrative stripped of key facts.