TLDR
GMX halted V1 trading after a $40M exploit on its GLP pool on Arbitrum.
Hacker returned $10.5M in FRAX after accepting GMX’s $5M bounty offer.
Exploit stemmed from a re-entrancy bug in the GMX V1 OrderBook contract.
GMX V2 operations remain unaffected as recovery and reimbursements continue.
GMX’s native token jumped 14% on Friday after the hacker responsible for this week’s $40 million exploit agreed to return the stolen funds. The move came after the decentralized perpetual exchange offered the attacker a $5 million white-hat bounty and promised not to pursue legal action.
The protocol was breached on Wednesday when its GMX V1 GLP pool on Arbitrum was exploited. GMX responded by halting trading and minting functions on both Arbitrum and Avalanche while continuing to operate GMX V2 without disruption.
GMX Funds Begin Returning After Onchain Agreement
Blockchain security firm PeckShield reported that the attacker responded to GMX’s bounty offer by posting an onchain message: “ok, funds will be returned later.” Hours later, the exploiter sent $10.5 million worth of FRAX stablecoin to the GMX deployer address in two transactions.
The first transfer contained 5.5 million FRAX, and the second sent 5 million FRAX. These developments followed GMX’s earlier message offering a 10% bounty—equal to $5 million—on the condition that the rest of the funds would be returned within 48 hours.
GMX had earlier published a statement on X addressing the hacker directly. “You’ve successfully executed the exploit; your abilities in doing so are evident… The white-hat bug bounty of $5 million continues to be available,” the protocol posted, noting that the offer was being covered by the project’s treasury.
Vulnerability in GMX V1 OrderBook Contract
In a post-mortem published Thursday, GMX explained that the exploit occurred due to a re-entrancy vulnerability in the V1 OrderBook contract. This allowed the attacker to manipulate BTC short positions and inflate the GLP token’s value. They then redeemed these inflated tokens for a profit.
The exploit drained over $40 million in assets, including USDC, FRAX, WBTC, and WETH. Following the discovery, GMX paused minting and redemption of GLP tokens and suspended trading on GMX V1. The team confirmed that GMX V2 and the GMX token were unaffected.
Going forward, GLP minting and redemption on Arbitrum will remain disabled. Affected users will be allowed to close their positions. GMX also announced it would allocate remaining protocol funds for reimbursements and warned other GMX V1 forks about the vulnerability to help prevent similar issues.
Token Price Recovers After Initial Drop
The GMX token fell sharply after the attack, dropping 28% to a low of $10.45. However, after news broke that the hacker had agreed to return funds, GMX rebounded by approximately 14% and was trading at $13.25 by Friday morning.
Market data from TradingView show renewed confidence among holders and traders as funds began to return to the protocol. The incident, though disruptive, did not impact GMX’s newer V2 infrastructure, which remains fully operational.
Background and Platform Activity
GMX launched in 2021 on Arbitrum One and has since handled over $306 billion in cumulative trading volume. The platform supports leveraged trading of assets like BTC, ETH, and AVAX with up to 100x leverage. It currently reports $265 million in open interest across more than 700,000 users.
The team is planning a DAO discussion on further user reimbursement and long-term protocol protection. GMX has not issued an official public statement since the return process began but continues to coordinate recovery efforts through onchain messages and community updates.
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