$43 Million in Minutes: How Two High-Frequency Traders Exploited an Exchange Loophole
In an exclusive interview with Wu Blockchain, the market maker operating under the pseudonym qntxxx detailed their perspective on the incident, claiming to have legitimately profited $43 million through standard trading practices. Bitget, however, has labeled the activity as illicit, alleging that a professional arbitrage syndicate exploited the situation to gain over $20 million.
Market Makers Account: Fair Trading and Order Book Interaction
qntxxx, who operates as part of a two-person high-frequency trading team, explained that they began their journey in early 2022 and found success as contract market makers on Binance following the LUNA collapse. They transitioned to exploring smaller exchanges like Bitget and Gate in late 2024, eventually becoming spot and contract market makers on Bitget.
According to qntxxx, the opportunity arose during a period of low market volatility. Their strategy involves placing orders across numerous trading pairs, and significant price movements trigger an increase in position size and the deployment of more sub-accounts. Observing high trading volume in VOXEL, they initially engaged with the token. When profits began to scale dramatically, they ramped up their operation to approximately 100 sub-accounts.
qntxxx drew a parallel to the LUNA incident, where their team utilized hundreds of accounts simultaneously amidst chaotic price action. They stated that the chaotic candlestick movements in VOXELs order book perfectly aligned with their high-frequency trading strategy, ultimately leading to the $43 million profit.
Addressing Bitgets claim of $20 million in withdrawals by flagged accounts, qntxxx stated their team withdrew around $10 million, while Binance froze several hundred thousand from their accounts. They acknowledged the possibility of other market makers being involved but emphasized the short trading window.
qntxxx firmly denied exploiting any vulnerabilities or attacking Bitgets servers. They argued that their profits were a result of fair trading practices through interaction with the order book, asserting that the $43 million rightfully belongs to their team. They believe the incident was a case of Bitgets internal market makers losing out to their strategy.
Bitgets Response: Illicit Profits and Fund Recovery
In a contrasting statement, Bitget identified eight accounts associated with a professional arbitrage syndicate as the primary instigators of the VOXEL incident, claiming they illicitly profited over $20 million. The exchange has pledged to airdrop all recovered funds back to affected platform users.
Bitget stated that for retail users who traded VOXEL between 16:00 and 16:30 on April 20th and had already withdrawn funds (amounting to approximately $19 million), their accounts were restored by Wednesday, and no further action would be taken against them.
Regarding the total amount withdrawn before risk controls were triggered, Bitget reported it to be $38.31 million in abnormal profits. They clarified that beyond the $20 million linked to the eight flagged accounts, they would not pursue other already-withdrawn funds.
Legal Battle Brewing
The dispute has escalated to legal action. qntxxx confirmed that they have hired legal counsel and intend to sue Bitgets Singapore entity for unauthorized fund seizures. They criticized Bitgets rollback process as chaotic, citing instances of mismatched balances and incorrect fee deductions from users accounts, even including wealth management accounts. While Bitget claims to have refunded overcharged fees and that users principal and fees were unaffected, qntxxx maintains that the initial rollback caused significant inconsistencies.
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The Bug Argument
Bitgets perspective seemingly leans towards the idea that the rapid price movements constituted an anomaly or a bug in the market, drawing a comparison to accidentally receiving millions from a bank, which legally requires the return of the funds.
However, qntxxx vehemently rejected this analogy. They argued that Bitget has never publicly positioned itself as a counterparty to users, implying that trades are simply matched between participants. The profits, according to qntxxx, came from other traders losing to their strategy through legitimate trading activity, not from exploiting any system flaw. They challenged Bitget to provide evidence of a bug if they are making such claims, stating that if it were truly a bug, the trades should not have been executed at all.
qntxxx concluded by labeling Bitgets accusations of theft as absurd, emphasizing that they made profits and withdrew them normally, without hacking any systems. They also pointed out that Bitgets own risk control and compliance teams did not halt the withdrawals.
The VOXEL incident highlights the complexities and potential conflicts that can arise in the dynamic world of cryptocurrency trading, particularly concerning high-frequency trading strategies and the interpretation of market anomalies. As legal proceedings commence, the industry will be closely watching the outcome, which could have significant implications for how exchanges and market participants define and address such events in the future.
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Text source: Coindoo
