Papertrade launched its HyperEVM perpetuals exchange on Oct. 10 with up to 1000x leverage, after DefiLlama tracked roughly $85.3 million in deposits ahead of the opening. The venue began trading at 10 a.m. ET following a planned HyperEVM network upgrade, with deposits paused 15 minutes earlier. The team required users to predeposit if they wanted to participate in the launch, and initially restricted direct public access to trading contracts to the frontend and approved relayers.
The protocol's design uses a synthetic trading model: it references the midpoint of Hyperliquid’s best bid and offer rather than placing matching trades on Hyperliquid. Papertrade’s own liquidity pool acts as counterparty, starts with no capital, and grows as traders realize losses. Profitable closes are subject to an asymmetric impact haircut on gains, while losing positions pay the realized loss without an additional charge. If the pool cannot cover a profitable settlement, the unpaid gain enters a payout queue. The PAPER token mints from realized losses, has no team or venture allocation, and initially disables transfers, though staking and unstaking are permitted. Eligible settled trades allocate a 1% share of realized profit and loss to stakers only when the payout queue is empty and the pool can cover distributions.
By Oct. 11, Papertrade faced allegations of price manipulation. Researcher Boblob (@Dr_bobo54) claimed two wallets executed trades worth about $20 million each on Hyperliquid, briefly moving ETH prices by 10 to 20 basis points—roughly 0.1% to 0.2%—while holding long positions on Papertrade with combined nominal value reaching hundreds of millions of dollars. Crypto trader Rune amplified the warning, arguing that Papertrade’s BBO midpoint pricing creates a possible weakness because quotes can be influenced by orders at the best bid or offer even if not executed. Papertrade’s own documentation lists manipulation of the best bid and offer among unresolved risks, but the existence of a documented risk does not establish that an exploit occurred.
Hyperliquid’s native perpetuals use separate oracle and mark prices to reduce abnormal trading effects, with validators updating oracle prices about every three seconds. The allegations do not indicate that Hyperliquid’s blockchain, trading engine, or oracles were compromised. As of Oct. 11, no verified loss total, wallet identification, transaction analysis, or platform response had been published. TokenPost reported nine-figure positions on Papertrade alongside the reported Hyperliquid orders but did not provide verified addresses or loss calculations.
The launch and subsequent manipulation claims are separate from Payward’s proposed regulated Hyperliquid perpetual markets for eligible U.S. customers via Bitnomial and Hyperliquid’s HIP-3 infrastructure, which remain subject to regulatory approval. The Papertrade case also differs from verified pricing incidents at Float Protocol and Vesu, where affected funds were identified and investigated.
